Securing Early Stage Finance in Ireland


16 Nov 2010

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Many entrepreneurs seek early stage funding to help start a business in Ireland. However, the search for funding can often be a time consuming and frustrating one, and the odds of gaining finance are slim at best.

To compound matters, entrepreneurs are often too busy to devote sufficient time to the investment process and as a result under perform when they finally secure access to some prospective investors. The typical result is disappointment for all involved.

A stark example of the extent of the problem can be witnessed with every passing Dragons’ Den episode on RTE. On the popular TV show, entrepreneurs get to pitch their ideas to a panel of prospective investors, ie, "the dragons" (not to mind the countless numbers of prime-time viewers). Yet for many, the interaction is far from positive as the investors interrogate the entrepreneurs about their business plans and expose some inherent problems. It is understandable that investors may decline to invest when they do not share the entrepreneurs’ sense of the value of the opportunity or their odds of the business succeeding and generating a sufficiently attractive return. However, it is simply inexcusable in my view, when the prospective investors declare themselves "out" due to them "not understanding the proposition" or due to the fact that the entrepreneur is not au fait with the most basic business plan facts related to their idea, ie, sales forecast for Year 2. 

Other entrepreneurs fail to effectively communicate what the opportunity is and as a result they vastly reduce the chance of a successful investment proposal. One reason for this is that they fail to gain impartial independent feedback regarding their idea. Another is due to the belief that an investor will be impressed with a technical plan. The reality is of course very different. Time-pressed investors want to be able to quickly assimilate what the opportunity is, after all if they cannot understand it, what hope will the target customer have?

Entrepreneurs also become fixated with their "product" and neglect other core elements of a business plan, ie, market size, access to market, sales forecasts, etc. As the dragons seek to explore the wider business plan, they are sometimes met with blank stares as the entrepreneur cannot answer questions they should be able to. The lessons here are clear, a commercially viable opportunity is the sum of many parts, not simply the "product" and entrepreneurs need to have a sound grasp of how these mesh together to ensure a successful execution of their idea.

There are a number of things entrepreneurs can do to improve the situation as the paper ‘Early Stage Investment‘ from Alan Gleeson describes, the most obvious of which is simply being better prepared. Entrepreneurs will typically be dealing with sophisticated investors keen to minimise their risk and to maximise their return and hence need to be on top of their game when faced with an investment opportunity. This paper takes entrepreneurs through the types of funding available, what a business plan should contain, as well as sign posting a range of key resources and prospective investors that entrepreneurs should look to approach.

Alan Gleeson is the General Manager of Palo Alto Software, Ltd, creators of Business Plan Pro®. He holds an MBA from Oxford University and an MSc from University College, Cork, Ireland

 

Tuesday 26th October 2010, 8:12 am

By Alan Gleeson

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