Are you a start-up company or thinking about creating a company? Are you wondering about raising funds? We share with you our tips in this article in order to prepare this crucial step.
Estimate the needs to raise funds
- For what purpose? When you raise millions of dollars, it seems like a lot of money. However, in only a few months, you can come back to the starting point in terms of cash flow. It is essential to define its exact use.
- How much money? It is necessary to determine the exact amount that you wish to raise according to your current and future needs. Investors will first make sure that your project is viable over the next two years.
- What is most important to me in the project? This is the key question. The investors will be your most important partners, but above all, they will be the most present in the various decisions that the company will make. It is therefore important to have the same expectations before letting them invest in your project. In particular in terms of governance, long-term vision or exit horizon.
- Do you only need funds? Some types of investors, such as venture capital funds, offer financial and strategic support. This is why it is important to choose the right investors, as explained below.
Targeting the right investors
The most appropriate investor category for your project will differ depending on the stage of your company and your needs.
- Business Angels: Business Angels are individuals who invest part of their wealth. They are often interested in investing in young innovative companies. They do not systematically follow the entrepreneurs in terms of strategy. Their contribution is therefore purely financial.
- The investment funds: The investment funds enter the capital of the companies with high potential of evolution. They are categorized by sector and according to the timing of their intervention in a fundraising (seed, series A, series B, etc). Venture capital funds are specialized in young innovative companies and offer financial and strategic support to the entrepreneur.
- Corporate ventures: These are internal investment funds of a large group. The advantage of this type of financing is the follow-up and the sectorial expertise that the company to which the fund is attached offers. Examples include Pepsi with the Pepsi venture group fund and gas pedal and Danone with the Danone manifesto ventures fund in the food sector. L’Oreal with the Bold fund in the beauty sector.
- Crowdfunding: Called participatory financing, it allows to collect funds from a large number of people via financing platforms. These crowdfunding platforms are mostly specialized according to the size of the company or the type of project financed. Among the best known, Raizers, the European crowdinvesting platform, has a catalog of SMEs previously selected by the platform’s analysts. We can also mention Wiseed which allows you to invest in companies of different sizes (Startup, SME, ETI). This type of fundraising guarantees a financial contribution. However, there is no strategic contribution and there are barriers to entry, because each platform selects and publishes the investment opportunities it deems relevant.
The keys to success in raising funds
In this last part, we give you advice from entrepreneurs who have successfully raised funds.
- Build strong relationships with investors before the fundraising process. Indeed, some investors like to accompany projects from their inception. This follow-up allows them to have a first step in the project and to invest more easily.
- Prepare the right documents and pitch. You only have one chance to make a good first impression, so don’t miss out! Call on fundraising firms if you lack expertise. The documents to be written are very specific and often require the intervention of an expert.
- Choose the right investors. It is important to turn to investors who are experts in your sector of activity. They will be able to provide you with the expertise you need to grow your business.
Raising funds is a long and demanding process. To be accompanied by a professional can save you precious time. For more information on Advimotion’s support, please contact us.
Advimotion, your partner in growth.