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A 5-Week Diary of Fundraising

The process of raising investment differs for every startup according to numerous factors, including the stage of development of your product, how much money your business requires and the type of investors you target.

However, there are certain hurdles most entrepreneurs will come up against along the way, as well as key decisions to make, challenges to overcome and outcomes to achieve.

My first experience of seeking investment was for my fintech startup Intelligent Point of Sale (IPOS). IPOS started out in 2012 at my kitchen table to address a gap in the market for an electronic point of sale  system. In four years, we grew IPOS to a team of 45 employees and sold to Swedish fintech firm iZettle, which was acquired by PayPal in 2018 for £1.6 billion.

With hindsight, raising funds for IPOS was relatively straightforward – we got the call two hours after our third pitch. No wonder though, we had a great revenue-generating business with 500+ customers!

My latest venture, Boundary, which is developing the only smart alarm in the UK to offer a police response, has been a very different experience. My co-founder and I funded the initial hardware development, followed by an angel round of investment, comprising ex-colleagues and angel investors, and then we undertook a successful crowd-funding campaign, where we hit our target in under 48 hours. Now we’ve entered the world of Venture Capital – which is a huge time sink but great experience, and all part of building a bigger business.

However, while every funding journey follows its own path, there are milestones common to most startups as they navigate the world of external investment and, while time scales will vary, these landmark points are essential steps on the way to funding your business and taking it to the next level of success.

Week 1: Create your first pitch deck

First up, time to think hard about your business. Why is it 10 times better than what already exists on the market today? What problem does it solve, how, and why now? Your pitch deck needs to showcase this, along with your financials, what the investment will do for your business, the strength of your team, and so on. Check out the Sequoia Pitch Deck Template online. But as you proceed along the investment path, remember to iterate your pitch based on what excites investors most in the discussions you have, keep updating your deck and filling in where you have failed to answer a difficult question in a meeting.

Week 2: Refine your financial model

It's time to make sure your financial model is ready and determine how much funding your business really needs. Ideally you will be raising 12-18 months of funding so that your startup can really make progress and not worry about the bank balance for a while. Ask yourself, have you bootstrapped this for as long as possible? The more traction you have, the easier investors will find it to support a higher valuation. 

Week 3: Research sources of funding

Really doing your homework on what type of investment is right for your business is time well spent. For a high growth business with no trading history there are few avenues for investment; debt is hard to come by so angel investment and venture capital money are some of the options on the table. But it is worth looking to see if there are any alternative sources of funds available in your sector.  For example, is there any grant support out there?

Also, consider the use of fundraising experts (typically expect a 5% fee) or platforms like Capitama / SyndicateRoom / AngelList and crowdfunding platforms like Seedrs and Crowdcube to top up what you win in angel rounds.

Week 4: Approach your target investors

Once you get to grips with what type of investor are stage and sector appropriate for your business, try where possible to get introductions.  Getting a meeting can be really hard work, but the warm introduction isn’t dead: don’t underrate it! Funds are inundated and standing out from the crowd is key. You can prospect on LinkedIn (I also find this useful for recruitment).

It is absolutely ok to speak to more than one investor at a time. In fact, every investor you speak to should expect that there will be other discussions taking place. I find it beneficial to use an organisation tool like Trello to stay abreast of my outreach, moving investors along as the process evolves.

After all, this is a numbers game so treat it like a lead funnel. You might approach 100 funds, only get a meeting with 10 and then only get a term sheet from one.

Stories abound of founders with the next big idea having multiple term sheets thrust at them. Your first term sheet could be the hardest to earn, but once you have it, it can become a powerful instrument to use in future negotiations.

Week 5: Stay patient but be ready to jump

The fundraising process can take you by surprise; as I said, at IPOS we had an offer two hours after finishing a pitch. Legals slow things down somewhat. Ideally, I recommend trying to leave six to eight weeks for legals to close out. Most funders will want to meet you a few times so you would need to leave at least an additional month to conduct those meetings. And then there are other factors relating to a fund’s own internal process which can delay things, so it is a really good idea to ask investors upfront about how long the process is likely to last.

While navigating the fundraising process, do everything you can to make your job systematic. Maintain a clear prospect list of potential investors that are stage and sector appropriate and keep your list updated. Check out Crunchbase Pro free trial and also the UKBAA member directory. Have a standard blurb, and keep a master copy of your pitch deck ready to send out at the drop of a potential investor's hat.

n the early stages you can get a lot done with just a pitch deck and a financial model. The process for applying for investment will usually depend on the fund and their due diligence processes. However, we organise all of our employee contracts and legals in google drive so that we can quickly create a data room if requested.

So, while it's true that no two investment rounds are the same, and experience counts for a lot, there are key parts of the fundraising process that apply across the board. Being well-researched, well-prepared and committing the time to finding the right investor for your startup is key, as well as maintaining flexibility to iterate your pitch after every new discussion that takes place.