Top tips to fund raising
Most entrepreneurs, and indeed the early-stage businesses themselves, share many of the same challenges and experiences along their journey. This is basically true irrespective of the industry in which they operate or the product or service that they deliver.
The reason for this is simple. The majority of founders are seeking to scale their business, and this will entail all the usual care over market research, cash flow, networking, customer service, and working with the right partners – that is, all the top tips in this series so far.
But the reality is that for most businesses, in order to scale it is necessary to raise finance and this will almost inevitably mean by selling equity. So, what are the top tips to fund raising?
- Timing – Make sure that you allow at least six months and preferably more. The biggest, and most common mistake that founders make is by not ensuring that they have a long enough runway and then desperately trying to raise finance urgently.
- Investment Ready – Before speaking with any potential investors in any meaningful way it is important to make sure that you are investment ready and have all the basic documents prepared.
- Documents – The most important document that potential investors will want to see initially is a quality pitch deck. This will contain a summary of the market and your business, together with the team, headline financials, the ask, and how it will be spent. You should also always do a business plan, even if only for internal use, as it is the best way to ensure that you have properly investigated every aspect of your business.
- Financials – The starting point for good financial forecasts are realistic and defendable assumptions. These will demonstrate that you know your market well and how you will achieve growth against that backdrop. The assumptions will drive the forecasts, and the headline numbers will be in the deck.
- Valuation – Any valuation of an early-stage business is more of an art than a science as, by definition, it will only be based on forecasts and informed guesses rather than a long history of past trading. But getting the valuation right is crucial, as if it is too low then you give away too much of your business, but if it is too high then you might not succeed in closing the round. Also, it is always best to under promise and over deliver, and to ensure that your business valuation has room to grow before any future fund raising is required.
- Investor Type – Decide what type if investor you are looking for and target just them. Do you want strategic of just financial? Do you want ‘smart money’ that brings something other than just investment? Does your fund raise best lend itself to angels, crowdfunding, or VCs? But whatever the type, remember that this is a long-term relationship and make sure that you choose the right investors and not just the first ones.
- Your Story – Make sure that you tell your story and tell it well. As an early-stage business, investors are investing in you and the core team even more than they are investing in the business idea.
- Visibility – Your branding, image, and visibility are an integral part of your credibility. Be consistent with your messaging.
- Professionalism – Make sure that numbers are credible and that everything is triple checked. Grammatical errors and typos will make any investor doubt your attention to detail. Also, ensure that all aspects of interaction with any potential investor are conducted professionally and in accordance with your business.
- Persistence – The reason that it is important to allow enough time is that fund raising can be a tedious process and persistence is required. The majority of rejections will be because your business does not fit the exact profile of what the investor is looking for at that time but do listen to any feedback.
The better your business, and the better your team, the quicker and easier it will be for you to secure finance, but it will still take time. By following the top tips above hopefully it will increase your chances of success.
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