Preparing For Fundraising Process

The key to every successful fund raise is careful planning and preparation!

What You Need To Know For Successfully Securing Your Next Financing?

Raising capital for your startup is similar to running a marathon. It is often a long and exhausting process, that can be an overwhelming for most entrepreneurs. Our intention is to help you prepare and walk you through the the basics of the fundraising process so that you – the entrepreneur – understand the critical success factors and the best practices, and position your business optimally for completing the process with at least one, if not multiple, favorable term sheet(s).

While the process of raising capital can change greatly from one company to another, below we have listed the four main phases  of how a “traditional” but well thought out fundraising process should look like:


1

Raise Or Not Raise?

Before rushing into a capital raise process, it is important to examine carefully a few things before you jump into the traditional angel/seed/VC funding process. The obvious question is of course – do you really need financing? Assuming you’ve established a positive answer to this, the next step is determining how to raise the money, from whom, and how much. It is important to understand the pros and cons of different funding avenues (for instance debt vs. equity, approaching financial investors vs. strategic investors etc.), map the ones that are available to you, and determine if your company is a good fit for venture financing.  It is important to understand that there are MULTIPLE ways to fund a startup!


2

Mapping Potential Investors Universe

The process of raising capital varies from one company to another largely due to the stage of the business lifecycle. Raising $25,000-$50,000 from friends and family just to get the business going, is different than raising seed round up to $1,000,000 from sophisticated angels or seed investment funds. Similarly , a large investment from VCs require meeting a set of milestones conditions that are different than those required for a seed investment etc. In its simplest form, the goal of your capital strategy is to reach a set of milestones expected for the stage of your company, and attract the most suitable investors so you can eventually raise the next round of capital.


3

Preparing for the Process

The cliché is true – you never get a second chance to make a first impression. Once you get the ball rolling and you are facing investors there is no time to stop the process, pause and think about the best strategy, and respond slowly to investors questions and requests for information. This is a sure way to signal the investors you are not ready, and if you are not ready for the process, why should they trust you with their money to be ready to give them the returns they are seeking.  The key for a successful fund raising is understanding what the process will be like, what deliverables you will be asked to prepare (executive summary, financial model, investment deck, market analysis and a virtual due diligence room are just to name a few). In this part of the process it is also important to have a defensible view of your company valuation, and the amount of investment actually needed.


4

Outreach

The graphic below displays the typical funding milestones once the outreach phase has begun. Hopefully, your company will reach the last and final milestone of this phase, with one or more qualified term sheets. How to negotiate and navigate through this critical phase is discussed in more detail in our Negotiating Valuation Strategy and Term Sheet Negotiation pages.


Typical Fundraising Process Progression

Initial Call / Email
Email Executive Summary
First Call / Preliminary Meeting
Secondary Meeting - Q&A, Investors Deck, Demo of Product
Investor Evaluation
Term Sheet Presented
Negotiation and Signing

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