At this point a young startup team is at its most inexperienced, the founders are expected to get a negotiation with experienced investors absolutely right, first time

It seems obvious, but thorough preparation before every fundraise is vital to get the very best deal you can. Understand every aspect of your business and its market. Prepare yourself for the energy sapping process that is Due Diligence (DD). Share out the tasks amongst the management team and get as much experienced advice as you can.

Make sure you understand who you are dealing with. There are lots of things you can do to prepare but here are three of the things you need to understand about investors:

1. Running out of money is a terrible place to be

Never leave it too late to raise funds. Investors will sense if you are running out of money and will try and delay the completion so that they can ‘chip’ the deal just before closure. Leave yourself plenty of time.

Never underestimate how long it takes to raise money, allow 6-9 months if you are looking for serious money.

2. Investors only care about one thing

Investors only care about their money. If they are institutional investors, they have clients within their funds, who only measure them on one thing: the size of the fund returns. It's not wrong just a reality that you need to understand.

If they are individual investors, then they are maybe a little less focussed, but even if they have got tax relief on the way into the investment, they will want to see a return on the way out

3. Do not expect empathy

Once a deal is done you will only be able to renegotiate one way: in favour of the investor/s. In their eyes a deal is definitely a deal. They will expect you to deliver on your targets no matter what the market conditions, be it during a pandemic or a financial crisis.

Do not expect understanding or a softening of the deal, and do not agree to something in the expectation that you can change it at a later date. Investors want their money back, and some, and expect you to deliver it. They don’t do empathy, just deals for their clients.

One thing to remember is that DD is not a one-way street, so look hard at your potential investors. Ask about their business and what they want from you. Why are they looking to invest in your business? Find some of the other businesses they have invested in and talk to their leaders.

There are lots of other things you can do to help yourself. Here are a couple that will really help:

• Do not get ground down by ‘deal fatigue’. Very often management get to a stage in the process where they just want it done. They agree to a deal without looking at every detail. This is where investors can add the hidden clauses that bite you in the future. Stay attentive and make sure you share out the workload amongst the team.
• Everyone I speak to who is involved in fundraising says the same thing, ‘get the best lawyer you can afford’. Don’t be afraid to upgrade as you go through the investment stages. A good lawyer should be seen as an investment and not a cost. They will also do a lot of the legwork on the legal documents for you.

There are lots of examples of good investors working with good businesses. These deals will have come about through a lot of hard work.

It's easy to underestimate the difficulties in fundraising. As a young business full of energy and excitement it is easy to take the process lightly. There is seemingly lots of money around, but it is always harder to land than you think. Give yourself the best chance you can by preparing thoroughly for the journey and ensuring your future success is in your own hands.