So, how do you maximise the chances of securing funding for your company? In this article, I’m going to break down the key phases that make up a successful fundraising process.

Phase 1: Research

Investors come in all shapes and sizes. You need to find a match with your company across geography, stage and sector. For example, at Playfair we invest in the UK and Europe, at pre-seed and across all sectors (with a short list of exclusions). We make this clear on our website although many investors do not. If you’re struggling with the research phase, try Crunchbase (they offer a free trial), OpenVC, ShipShape and many others you can find on Product Hunt.

If this is a pre-seed or seed round, then making a list for both VCs and angels makes sense as typically an optimised early-stage cap table includes both. You can find angels through online lists, LinkedIn, and attending tech industry events. Alternatively, there are angel networks who can get you in front of multiple angels but be wary of committing to high fees for their services.

From all this research you should be aiming for a list of leads that you can contact in the next phase. Make sure you have identified the best individual in each firm as you’ll be getting in touch with them directly if the firm doesn’t have an open pitch form on their website.

Fundraising is a numbers game so you should be aiming for at least 100 leads to populate the top of your funnel. If you have ever done a sales job before, fundraising operates in the same way – lots of leads in the top of the funnel are needed to close a sale.

Phase 2: Connecting

Armed with your researched list of investors, it’s time to contact them. Start by finding mutual connections for warm introductions and remove the friction by drafting a one paragraph summary of what you are building that your mutual connection can share.

Once you’ve exhausted warm connections, you’ll need to approach cold. Start by looking for open pitch forms on the firm’s website. If they don’t have one, try to find an email address for the contact you identified during your research. If that fails, go to LinkedIn. Your message needs to be personalised and punchy.  Keep it simple. Here’s a basic template you can use:

Subject: [Name of company}

Hi [Name of person],

I am raising [amount of money] for my company, [name of company], which is [what the company does].

I thought you might be interested in [name of company] because [reason].

I’ve attached my deck and would love to discuss this with you further.

Kind regards,

Your aim at this stage is to get your company logged in the investor’s internal CRM so they start tracking you and, ideally, get a 30-minute introductory call. On this call you can pitch your company, answer a few initial questions from the investor and line them up for the formal process. In sales terminology, this phase is about lead qualification, so that you can enter the formal process knowing that you have investors who have shown initial interest in your round.

Phase 3: Formal process

There are a few basic rules that you must adhere to.

First, you should optimise the timing of your round – go out in January, after the Easter school holidays or in September. These are the most active times for getting deals done as everybody is around and it’s easier to generate momentum and competitive tension that drives the best terms for founders.

Second, you should batch investors together so they stay on the same timeline – first calls, second calls, data room access, deep dives should all be happening simultaneously. If any investor gets too far ahead, you risk them issuing a term sheet on suboptimal terms and not having enough time for other investors to catch-up to make a better offer.

Third, be confident and positive when you pitch, but ensure you can back up what you are saying. As you get deeper into the process with investors, and they perform due diligence you want to make sure everything stacks up.

The process itself should start by sending out a deck for the round. This is intended to excite the investor enough to get on an initial call with you. The financial model can come next and then more detailed materials in a data room (we’re mostly seeing these built in Notion at the moment). There is lots of guidance online about how to construct your deck, financial model and data room.

Phase 4: Securing the deal

Conversations with investors should progress to the point they take your company to their Investment Committee (IC). Some ICs require you to pitch fresh to the partnership, whilst others like ours are internal discussions. It’s sensible to ask any investor you are progressing with to outline their process and timings so you can prepare for them and keep investors aligned.

Following the outcome of a successful IC, you will receive a term sheet. At this stage, it makes sense to engage a lawyer experienced in venture capital to guide you through the process. Term sheets can be over simplified – concealing the material terms until after you’ve signed and are committed – or otherwise include off-market or onerous terms so be cautious here.

Finally, make sure you take multiple references on an investor before signing. The legal agreement is important, but how the investor will actually behave post-investment even more so.

By Chris Smith, Managing Partner at Playfair

This article originally appeared in the September/October 2024 issue of Startups Magazine. Click here to subscribe