1. Do the groundwork properly
For a growth company to be eligible for investment and financing, the basics need to be put in place first. The company needs to be able to answer such questions as:
- What problem is the company trying to solve with its products or services?
- What skills does the team have?
- How unique is the company's innovation?
- What kind of market does it operate in?
When a growth entrepreneur knows and understands their business inside out, they can convince investors and financiers. Ultimately, the criteria and strategy of the funding provider will determine whether it wants to support the start-up or the later stages of growth.
In almost all projects, revenue is an important element. However, the investor usually comes first in the case of, for example, new industrial innovations. In many cases, the investor will only become interested once the company's cash flow is more stable.
2. Familiarise yourself with the different financing options
Riihimäki and Mero point out that growth entrepreneurs should carefully study the different financing options before deciding when it would be better to turn to venture capitalists and angel investors and when to turn to banks or finance companies.
Typically, investors and financiers operate with different expected returns and risk profiles. While investors seeks multiple returns on their capital, sometimes at high risk, financiers provide the company with debt capital in the form of a loan or credit without the same level of risk.
Venture capitalists and business angels also contribute their knowledge and networks to support entrepreneurs. They can participate in the decision-making and business development of the company.
The recent convergence between investors and financiers means that both sides can offer their support but from different starting points.
3. Start financial discussions well in advance
Riihimäki says that there is no single right moment for a growth company to approach an investor or financier. But the key is anticipation – the earlier you start talking to potential investors and financiers, the better.
“By learning the operating logic of the funding providers, you can develop your skills in financial discussions. At the same time, you can understand what kind of combination of investor and financier is best suited to your company, says Riihimäki.
4. Stand out from the growth companies
With investors and financiers presented with a wealth of opportunities to deploy their capital, a growth company needs to stand out from the crowd. Beyond just wanting the money, the company needs to offer something more. For example, good media exposure can attract investor interest.
“While so-called seed funding can be obtained with a good story, a strong team and interesting prototypes, the criteria for funding become more stringent the more money is sought,” says Mero.
Riihimäki points out that nowadays, responsibility is also becoming increasingly important. ESG, for example, is a commonly used term that takes into account a company's performance in environmental, social and governance aspects.
“In addition to the situation in the interest rate markets and the right timing, megatrends such as climate change are also influencing investor interest. There is a desire to support globally important issues, which is why it is worth investing in areas such as sustainability,” say Riihimäki and Mero.
5. Network and build relationships
Incubators, accelerators and other events for growth companies are excellent arenas for networking and building relationships, according to Riihimäki and Mero. It is worth spending time on building a network, as few investors or financiers will visit a growth company directly.
The best way to establish a relationship of trust is through open and transparent discussions. This is worth investing in right from the start.
Riihimäki and Mero are also involved in Kasvu Open's and Nordea's joint SUPERFINNS® programme, which mentors growth companies towards an international breakthrough. They see the programme as an excellent springboard for an ambitious growth company.
“SUPERFINNS brings together a wide range of venture capitalists to challenge and mentor growth companies and make their networks available to the growing company. The best growth companies will have access to investment events with foreign venture capitalists,” says Riihimäki.
6. Receive feedback and improve your business
A growth company should approach an investor or financier with a succinct presentation that at least summarises the company's story, business logic, skills and financing needs. Sometimes it takes just half an hour to see whether it is worth pursuing negotiations with an investor or financier.
“And if you can pitch your business presentation convincingly and competently, you can often win over investors and financiers. That's why it's also good to pay attention to the presentation,” Riihimäki points out.