Are you a start-up or are you considering starting a business and wondering about the fundraising process? In this article, we share with you our tips on how to be prepared for this major step.
Estimating the needs for the fundraising process
- Cash? For what use? Many businessmen will tell you, when you raise millions of dollars, it appears to be a large sum of money but in a few months, you can easily go back to the starting point in terms of cash flow, so defining its exact use is critical.
- How much is it? Determine the exact amount, you plan to raise based on your current and future needs, investors will first make sure that your project is sustainable over the next two years.
- What is the most meaningful thing for me in this project? It is important to spend as much time as possible on this question, the investors will be your most valuable partners but especially the most present in the various decisions that the company will make. It is therefore important to make sure that you have the same expectations before letting them invest in your project, especially in terms of governance, long-term vision or exit horizon.
- Do you need more than just money? Certain types of investors, and in particular venture capital funds, offer you not only financial but also strategic support, which is why it is important to choose the right investors, as explained below in this article.
Targeting the right investors
The type of investor best suited for your project will differ depending on the stage of your company’s development 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 entrepreneurs in terms of strategy, their contribution may therefore be purely financial.
- The investment funds: Investment funds enter into the capital of companies with high growth potential. They are categorized by sector and by the timing of their involvement in a fundraising (seed, series A, series B, etc.). Venture capital funds specialize, for example, in young innovative start-up; they offer financial but also strategic support for the businessman.
- Corporate ventures: These are internal investment funds within a large group. The advantage of this type of financing is the guidance and sector expertise offered by the company backing the fund. We can give as example Pepsi with the Pepsi venture group fund and accelerator, or Danone with the Danone manifest ventures fund in the food sector, and also L’Oreal with the Bold fund in the beauty industry.
- Crowdfunding: Also known as a participative financing, it allows you 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 the project financed. The most well-known are Raizers, a European crowdfunding platform with a catalogue of SMEs previously selected by the platform’s analysts. We can also quote Wiseed, which allows to invest in companies of different sizes; Startup, SME, ETI. Thus, this way of raising funds guarantees you a financial support but no strategic support and moreover, it has barriers at the entrance because each platform selects and publishes the investment opportunities that it considers relevant.
The keys for a successful fundraising campaign
In this last part, we provide you with our latest tips that we have gathered from interviews with entrepreneurs who have successfully completed their fundraising campaigns and who have shared their stories with us.
- Establish a strong investor relationship 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 if they think it is worth the effort.
- Prepare the right documents and pitch. As we often hear, you only get one chance to make a first good impression so don’t pass it up! Call on fundraising firms if you lack expertise, the documents to be written are very specific and often require the intervention of an expert in the field.
- Choosing the right investors: Choosing the right investors is a vital phase, because they are the ones who will support you financially and strategically. It is therefore important to turn to investors who are experts in your sector of activity and who can provide you with the expertise you need to help your company grow.
Raising start-up funds is a long and demanding process. Having a professional accompany you can save you precious time. For more information about Advimotion’s guidance, feel free to contact us.