3 Things To Do Before A Fundraising Round For Early Stage Companies

Inevitably, your business will eventually need funding to grow unless you are incredibly wealthy or have well-stocked business partners. For early-stage companies, it’s normal to need a steady cash flow to sustain the day-to-day functions of your business.

Though a thrilling experience, fundraising is also known to be an eternal challenge for startups, particularly early-stage startups where the founders may not have the experience doing it.

Founders need to dedicate a tremendous amount of time and energy to ensure that the company secures the necessary funds all remaining level-headed throughout the pitching process.

Not sure where to start? In this article, we’ve compiled a list of some business fundraising channels you can take advantage of. This article assumes that you have already decided to seek out investors or venture capitalists as a new funding source and address the necessary preparations beforehand.

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1.   Prepare a pitch deck

It is one of the most important—if not the most important—fundraising materials that you need to prepare before a fundraiser.

Potential investors will refer to your pitch deck to get a summary of who and what your company is all about. You can probably search for a template online, but a pitch deck contains the following things:

Problem statement

Typically, a problem statement should be condensed into one or two sentences that clearly define what your business is seeking to improve. Good questions to ask include: What problem (s) is your business supposed to solve? How does it assist your customers? But don’t forget to include the solution to the problem statement.

Target market

Knowing who your customers are, particularly the demographics, psychographics, intentions, and interest, among other things, are crucial to the success of your business.

A good place to start is to create a Venn diagram consisting of the Total Available Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) of your business.

Business plan

You’ll need a business plan to spell out the company’s core business activities and how it plans to achieve its goals.

Externally, this is information is crucial to get your company off the ground and attract outside investors. Internally, a business plan can be used as a guide to ensure the executive team is aligned and focused on and working toward short- and long-term objectives. It can include your moonshot goals, but there should be realistic goals too.

A comprehensive business plan should include an executive summary and sections on products and services, marketing and sales strategy and analysis, financial planning, a budget, the business strategy, and your customer segments and persona.

Competition

Is your business the only one within your geographical area? Who are your direct and indirect competitors?

Ensure you’ve done comprehensive competition research for your pitch deck, as it’s important to know how your business and products are different from the crowd. Knowing your competitors and your unique selling points will save you a lot of headaches when securing your potential customers.

Traction

If your business has been around for a while, it’s good to show your company’s track record to convince investors that you have already delivered results in the past.

Financials

At an initial pitch, a brief overview of the business’ financials should be included in your pitch. This can be used to demonstrate the business’ burn rate. Once the investor (s) is keen to invest, the details can be discussed further.

Investment funding

When presenting to any investor, make sure to clearly state the amount requested as well as the equity stake that will be given in exchange.

Lastly, include a summary of the team that you have working with you. This is important because having the correct combination of skills and personalities within your founding members can potentially make or break the business.

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2. Research your potential investors

Though you are seeking investors, you shouldn’t just accept any investors. Be sure to filter through the list of investors that you are shortlisting, and make sure you don’t ignore obvious red flags in your potential investors.

Because new investors will have a stake in your business, it is important to know who are the investors that you plan to pitch to, and are aligned with their values seeing how you will have to contend with their opinions and demands. You don’t want it to be a thorn in your side if the business is managed ineffectively. That’s why finding a suitable investor with similar views is paramount to the future success of your business.

But as the founder, you will likely keep a majority equity stake in the company so that you can set the direction that your business will take to grow in the future.

3. Plan for the future

Many investors invest in businesses not necessarily for what they’ve achieved but for the potential and growth they that could have.

As a business owner, you need to have a long hard think about what you hope to achieve in the long run, and more immediately,  what you’d like to deliver with the money that you receive from that round of investment. Then you’ll need to communicate that, along with the ROI, to your investors.

All things considered

These three points are not the exhaustive list of all the things that you should prepare before a fundraising round. Rather, it is the few important elements that you should think about and consider.

Of course, don’t forget to do a test run of your presentation and also anticipate any possible questions. Most importantly, don’t be discouraged by any negative feedback but see it as a learning experience.