Insights

Your Top Questions About Team Structure And Funding Answered

Wednesday 12 January 2022

You and your team are fundamental to the success of your business and it’s no surprise that investors will want to know more when you deliver your pitch deck to potential investors.

Last week we explored the ideal team structure.

In this article we will answer queries from members of the EHE Capital community who want to deliver top-level pitch decks that share the right balance of information about themselves and their teams.

You can listen to the full Q&A on our podcast Extraordinary Entrepreneurs Together.

 

1) What are some common red flags to investors; what puts them off at the pitch deck stage?

 

The leader

 

The entrepreneur (leader) is the main focus for any investor. They will be assessing the leader, their previous success rate, and whether or not they’ve failed lots of times (it’s not always an issue if they have failed).

 

The leader is at the core of the team culture, the business and recruitment; investors will walk away if the leader doesn’t shape up.

 

Bad smell!

 

There is an investment company that carries out a huge amount of due diligence. The head of that investment company will listen in to the management presentation and ask questions. He trusts his instinct and if he doesn’t like “the smell” (the overall character) of that leader or their team based on that instant communication, the company will not invest (even if they have spent £250k by that point).

 

Experienced investors follow their intuition and will challenge anything that doesn’t stack up. 

 

Other team members

 

Investors will also pay attention to the professional background of other team members. They will gauge whether or not they look and feel like they could be successful.

 

They want to see a knowledgeable, accountable and responsible management team that can respond well to their questions during the pitch deck. 

 

Forensic referencing

 

Some investors bring in experts to carry out psychological tests to make sure they’re not investing in a group of people who keep falling out (like an early 2000s band!). If there is a question mark following an interview with that specific candidate, they’ll request a forensic reference (a 50–70 page report) which will involve speaking to previous employers who were not listed as a reference.  

 

Each person in the team is important to the investor! 

 

2) What is the ideal number of people in a team?

 

The ideal number of people in a team will vary. A chief executive officer and a finance director is already a backable team, especially if the leader acknowledges that there may be one or two more people they’d like to bring in.

 

3) If I have gaps in my team, should I fill them before applying for funding so I present a stronger case?

 

Acknowledge that there are gaps in the team, highlight what they are and use the experience of the investors you are speaking to in order to help recruit those people. Good investors offer much more than money; they have experience, contacts, access to head hunters and processes that can support you to lead an effective recruitment process.  

 

The investor may also highlight to you that they see a gap in your team they want you to fill. They’re happy to recruit new team members if they see potential to accelerate growth.

 

4) What happens if you have already secured investment but then realise your team needs to expand; would this arrangement still be accepted by an investor?

 

Your investors worry if you start to go way off budget. It’s okay to expand your team while you’re securing investment, but once your budget and plan is together it’s less likely to be looked on favourably. The last thing you want to do is announce in a board meeting that you have not hit your numbers (but have taken on new team members).

 

It’s more useful for the investor or entrepreneur to recognise the need to expand the team sooner, and build it into the plan.

 

5) What do investors want to see in terms of a non-exec role?

 

Bringing in a non-exec shows that you are mature and a broad thinker. Being an entrepreneur can be lonely, and a non-exec can be a valuable and supportive mentor. They can spend time with you away from the team and help challenge you in a more informal way (over coffee or a pint).

 

Smart investors will help you find a non-exec relevant to your sector who has a few “grey hairs” and a proven track record of success (clear advice, contacts and experience). Non-execs are also great at preventing panic and calming people down!

 

6) If you’re an entrepreneur looking for fast growth, how do you balance bringing in the right people without overcommitting yourself on salary?

 

To make sure you don’t overcommit your budget, offer a trade off such as an equity plan, or other benefits. Offer to pay X amount initially, agree to a pension and so on, and show the person you want to hire their earning potential within the company. Appeal to their better nature.

 

For example, I once hired a woman who had tears in her eyes when I told her she could take her daughter to school and start work at 10am. It made no difference to me what time she came in, as long as her work was done. When I told her that, she looked at me as though I had given her an extra £10k.

 

If you are a good leader, you will not have difficulty recruiting the right people (or the right people will find you). People pay attention to the work culture and how you treat the rest of your team. 

 

Allocate each team member three or four objectives, then give them the freedom they need to achieve the goals. Focus on output rather than input; let them spend the morning out drinking coffee while they are thinking about what they are going to do. They don’t need to be in the office at 9am. Trust them and hold them accountable. When you recruit good people you can trust and who know they will be rewarded based on what they deliver, they will find a way to deliver.

 

EHE Capital has the experience and knowledge to help you secure funding; join our online community of entrepreneurs committed to rapid and sustainable growth.

 

If you have a specific topic or question you’d like us to cover in the blog, contact us on gary@ehe.capital or guy@ehe.capital, or send us a message via social media.

JOIN THE EHE COMMUNITY

Become part of the EHE community today and you'll benefit from;
  • Exclusive access to our entrepreneur Slack channel
  • Regular industry news direct to your inbox based on your preferences
  • Access to podcast interviews with practical advice from seasoned entrepreneurs
  • Invitation to exclusive webinars
  • Opportunity to ask questions or advice to our experienced Investor Panel
Join our EHE community and get all the support you need to grow your business your way.