Innovation is key for any business looking to ensure continued growth and remain competitive within its market. While R&D tax relief provides welcome financial subsidisation for SMEs, the initial upfront investment required for these types of innovation projects can be costly.

This means that securing financial investment and support from the off is crucial for many businesses. That’s why, today, we’re looking closer at how your SME’s R&D project can attract investments that turn your innovative ideas into a reality.

Have a concrete business plan

Without a credible business plan in place, how can you expect investors to take you and your project seriously? 

To optimise your business plan to attract potential investors, ensure key takeaways are summarised early in your business plan. Keep it clear and concise - you want to give investors a compelling case in the simplest possible terms.

Be sure to review your plan from the perspective of an investor, too. For example, make certain that you know your numbers like the back of your hand to be confident these can be defended under scrutiny from investors. 

Your financial forecasting also needs to be thoroughly planned and presented. Setting this out in a professional format such as a spreadsheet, you’ll need to include your balance sheet and cash flow statement at a minimum. On top of that, it’s recommended that you present a month-on-month forecast for the year ahead, being sure to account for contextual factors such as seasonality.

Research potential investors

It pays to know your potential investors before they know you.

When researching, familiarise yourself with their existing portfolio to better understand their areas of interest and, more importantly, areas of expertise. An informal meeting in person or over video chat is a great way to get the ball rolling with potential investors, enabling you to spark the initial relationship and show you’re serious about your R&D project. 

Show passion in your pitch

Remember: this is a business negotiation, meaning tone and formality is key.

When pitching, it’s all about finding the balance between passion and professionalism. Don’t be afraid to show passion and enthusiasm in your pitch - it’s likely this belief and excitement will rub off on investors.

That being said, it’s important to tow the line. Investors still expect a coherent and logical summary of the type of investment you’re looking for, so never stray too far from the business at hand. Shout about what your business has already achieved in the form of some impressive facts and figures that show investors why they need you just as much as you need them.

Highlight what’s in it for them  

With that in mind, highlighting how investors might benefit from investing capital in your R&D project is always an effective way of winning them over.

Angel investors in particular often serve as far more than a financial source - usually, they’ve already established a respectable career within their field. As such, be sure to always highlight any opportunity where investors could become actively involved in the project, utilising their library of knowledge for mentoring and consultation. For many potential investors, this is a tantalising prospect.

Don’t forget to shout about the tax advantages of investment, too. Investments can be strategically structured to reduce financial risk through schemes such as the Enterprise Investment Scheme (EIS), which reduces tax liability when investors hold any stake in a company for at least three years.

Once you’ve secured investment and the ball is rolling with your R&D project, the next step is to consider your application for R&D tax credits. To learn how LUMO can help you on your way, get in touch with us today.