Identifying an investor, appointing the right adviser and closing a deal is never simple and the green sector is no exception. In fact, since the untried technology often associated with the sector can create the perception of high risk, securing investment is an increasing hurdle for start-ups and SMEs. In addition, businesses that are classified as being green tend to forget that there must be an underlying business case that must exist and flourish before any environmental friendly benefits can occur. This must happen in order to gain access to finance and create corporate value. So how is shareholder value created and how do you get the investor’s attention – how do you differentiate yours from the rest?
First and foremost and in common with all pitches, green or otherwise, having a well thought through business plan is fundamental. Investors invest based on a simple and well executed pitch. Secondly, preparation is essential. The pitch must be easily understood, clearly articulated and explain why the product or service is necessary. Thirdly, the strategy for growth must be explained and all financials should be well prepared and robust. Market knowledge will be invaluable and is expected as will be competitor knowledge. Investors know that few propositions are risk free so there is no harm in explaining the risk as long as it can be explained how it will be minimised.
In a small number of cases, there will be a novel technology with a clear advantage over existing technology. However, not being established generally means these deals are harder to fund. In these cases, multiple partners who have shown financial commitments can lend credibility and reduce the risk, which is invariably higher with these types of ventures. With existing technology, a USP is essential and, when combined with high profile clients to validate the product or service, can be invaluable. To do all this successfully prospects must have the right advisers who, as well as all the basics, know the market and how to position the business. An advisor must also have a good understanding and knowledge of the types of investors/buyers and the key drivers specific to that company.
So, to the green market. The good news is that the market is huge (we all consume energy for light, heat and cooking; fossil fuels for transport and for leisure activities) and therefore the opportunities are enormous. Even in these austere times there are investors who are willing to invest in the right company. Those that are successful are able to demonstrate a clear path to sales, growth and profit and these can only be delivered by high quality management who create the support network of suppliers, customers and advisors that allow them to access finance and create shareholder value.
Stephen Kimbell
April 2013
