Are you ready to enter a venture capital fundraising round?
Before you enter a venture capital fundraising round, you want to make sure you have what it takes to succeed. Is your founding and leadership team strong and reliable, do you have a viable product, do you have quantifiable revenue, is your customer base targeted with a strategy for growth? While these concerns used to be addressed post-Series A fundraising, competition is steep and venture capital investors expect a company to have a clear vision and business development strategy. If there is any indication your company is not ready, don’t bother. You often get only one shot at impressing an investor so you need to make it count.
Have you built an experienced advisory team?
A strong advisory team will save your company time and money, and provide valuable input regarding business matters. Your network of informal and formal advisors will include your board of directors, attorneys, accountants, investors with experience in your market space, bankers that deal with growing companies and capital markets, along with other industry members. To find the best advisors for your company, ask your network for their recommendations and references.
Are your investment and marketing documents well-prepared?
Any documents shown to potential investors should be carefully reviewed and revised by your advisory team. Three documents are essential when approaching firms for venture capital investment: the executive summary (1 page), the investor pitch deck (10 slides), and your financial model. These documents are key to convincing an investor that you deserve their money. They should highlight the following to show that your company is a smart investment decision:
-the solution your company provides to a specific problem, and how your solution is better than a competitor’s (ascribe monetary value where possible)
-your target customer base and your strategy to grow this
-an understanding of your competitors and how your company outperforms them
-a detailed financial model to show how far an investment will go and what the return will be
-a clear ask for how much capital you require and what it will go towards
For guidance on preparing a pitch deck, please refer to the article “Building the Perfect Pitch Deck”
Is your potential investor list targeted?
With the wealth of information available online, it is essential to do your research and target investors that are most likely to finance your company. Create a list of investors with preferences that you fit into, this includes things such as industry, size of investment, geography, among others. If an investment firm has never funded a company in your region or your industry, it is very unlikely they would make an exception for yours, don’t waste your time.
Once you’ve created a list of potential investors, form your approach for getting a meeting. This often comes from an introduction via an entrepreneur the target investor already has a relationship with. A “double opt-in” introduction is standard practice, and when both parties have agreed to the introduction, make your ask clear. A concise and informative email, no longer than five lines, should be targeted to the investor and allow them to quickly decide if they wish to proceed. This will be your first impression to the investor and may be the only opportunity you have to get their interest. Do not ask for multiple introductions to the same investor or introductions to multiple investors at one firm, this will only result in a loss of credibility on your end.
As you are introduced to investors, keep your list updated to be attentive to follow-ups and execution as required.
Have you taken investor feedback into consideration?
As you are introduced to investors, they will provide feedback on why they did not seek a meeting with you. Before approaching more investors in the same manner, update your pitch with the suggestions you have received. Implementing investor feedback will only benefit your future interactions with investors.
Has your elevator pitch been practiced and refined?
Your elevator pitch must be persuasive and succinct in order to appeal to and secure an investor. Continually practicing and revising your pitch with your advisory team, specifically investors on the team, will help it become more refined.
Are there outstanding legal details your attorneys should review?
The majority of venture capital investments required companies to be a Delaware corporation, an LLC or partnership will not suffice. Your attorney should prepare documents that are suitable for a venture capital-funded company, this includes company bylaws, employee agreements, and stock option plans or restrictions. Additionally, any IP concerns should be handled by an experienced IP attorney. They will confirm that all IP belongs to the company and understand any other IP concerns.
Are there any small details that will turn off investors?
Be sure to smile, and bring a positive, informed, and organized presentation to your meetings. Being unpleasant, impolite, or unprepared will not reflect well on you and is likely to prevent any investment in your company.
Watch your online reputation. Investors are going to Google you and the company’s management team. Ensure your company’s website is working and updated frequently, and that there are no webpages that may cause investors to view you or your team in a negative manner.
Finally, be communicative and follow-up. All interactions provide value, it is imperative to be responsive and conduct yourself in a manner that gives investors confidence in your company’s success.