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The investment teaser is a crucial document that prospective buyers will review about your company. A teaser provides your company’s business model, history, financials, and desired transactions. Its purpose is to attract the right potential buyers and provide them with an overview of your business, while also screening out irrelevant ones. The goal of the teaser is not to sell your company but to pique buyers’ interest to find out more.
Here are six tips for writing an effective investment teaser:
- Include the basics: Ensure that buyers have a clear understanding of your company by providing information such as how you generate revenue, when the company was founded, sales and revenue mix, industry categories, distribution methods, management team background, and financial profile (historical and projected revenue and EBITDA). Highlight unique strengths of the company, like market share leadership or significant intellectual property.
- Clearly state your goals: Communicate your objectives, whether you seek growth capital, ownership transition, recapitalization, liquidity event, shareholder consolidation, or other goals. Buyers appreciate upfront honesty about your intentions, helping establish trust between you and potential buyers.
- Rely on hard facts: Present your teaser professionally by using a standard font, sending it as a PDF file, avoiding excessive capitalization or flowery language, and ensuring flawless grammar and spelling. Stick to objective descriptions rather than exaggerated claims, as credibility is crucial.
- Maintain honesty: Starting a transaction process with dishonesty or withholding essential information will harm your credibility. Exaggerating financial performance can be discovered during due diligence and severely impact trust.
- Keep it concise: It’s best to limit the teaser to one page. This forces you to be concise and ensures that every word adds value. Buyers review numerous opportunities, so make their time count by focusing on what makes your company interesting rather than explaining basic details.
- Preserve anonymity: Do not disclose your company name or identifying information prematurely. Prospective buyers will review the teaser before signing a confidentiality agreement, so ensure they cannot easily identify your company based on the provided information. This protects your company’s freedom of action, prevents false rumors from competitors, and avoids alarming your employees.
By following these tips, you can create a compelling investment teaser that attracts the right buyers and simplifies the sale or financing process.
The critical element that every teaser must have is a clear answer to the question:
“What is the source of your company’s competitive advantage?”
The competitive advantage of your company is essential as it determines its ability to generate profits and sustain long-term growth. Investors use this information to estimate the value of your business.
Competitive advantage can stem from various sources, such as customer entrenchment, high switching costs, long-term contracts, brand recognition, intellectual property, stable management teams, culture, etc. Financial buyers evaluating your company will assess the sustainability of its competitive advantage to determine their return on investment. The perceived protection of your firm’s revenue and profits directly influences the price they are willing to pay for the acquisition.
Strategic buyers, on the other hand, may have the resources to replicate your products or services in-house. They evaluate whether to build their own version or acquire your company. The more powerful and complex they perceive your competitive advantage to be, the more likely they will choose acquisition.
It is important to note that revealing the competitive advantage of your business in a teaser does not mean providing intricate details. The purpose of the teaser is to generate curiosity. Further explanations about your operations and competitive advantage should be reserved for other materials and in-person meetings, typically after signing a non-disclosure agreement (NDA).
