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How to formalize your request to raise funds from investors ?

The request to raise funds from investors follows a precise formalism. Indeed, certain documents such as : the executive summary, the pitch deck or the financial forecast are mandatory to address investors.

  • On one page, the executive summary must clearly and precisely summarize the startup’s activity.
  • In about thirty slides, the pitch deck must present the startup in its entirety and describe all its strategic points (market, competition, business model, financial projections).
  • Finally, the financial forecast gives more details on the startup’s financial projections for the next 5 years.

Thus, formalizing your fundraising request is a rigorous but mandatory exercise to get in touch with investors and hope to build a long-term relationship.

For more details, please read the article below.

Advimotion is a financial consulting firm that assists startups and SMEs in obtaining non-dilutive financing and equity fundraising. We also act as advisors in corporate divestiture transactions to best represent the interests of sellers.

We offer strategic consulting and outsourced CFO services to ensure the financial and operational monitoring of your business. Finally, we take care of the drafting of investor documentation : business plan, pitch deck, creation of reporting files and valuation calculations.

For more information, please contact us.

The executive summary

The purpose of the executive summary is to summarize the startup’s potential without using technical jargon.

The 3 objectives of the executive summary are :

  • To get in touch with the investor and arouse his curiosity
  • Give a clear and concise overview of the startup
  • Motivate the investor to learn more about the startup, knowing that he receives dozens of applications in a day.  

In most cases, the document does not exceed 1 page and should include

  • A concise explanation of the business. Indeed, investors only invest in what they understand.
  • A description of the market size with reliable sources.
  • Information about the startup’s comparative advantage that will enable it to meet the market need. This comparative advantage can be: the team, the technology used, past achievements, key partners or contracts with important customers…

Sometimes, the executive summary is more than 1 page long but not more than 4 pages. In these cases, the other pages may contain the following information

  • The analysis of customers (on which segments is the startup positioned?) and competitors; The marketing plan; A summary of financial projections; The composition of the team.

The executive summary is written once the pitch deck is completed. As the pitch deck is more detailed, the entrepreneur will only have to take the key points of the pitch deck to create the executive summary in order to formalize the fundraising request.

The pitch deck

Once the executive summary has been read, if the investor wants to know more, he or she will turn to the pitch deck. Indeed, the pitch deck is the second impression that the investor will have on your startup.

In the pitch deck, the entrepreneur has to detail some strategic decisions regarding his startup. Here, the investors want to know that you have solved all the key strategic points in your head and that you can explain them in simple terms.

The structure of the pitch deck

The first introductory slides

The introduction serves to capture the attention of investors:

  • First slide : The name of the startup followed by its slogan
  • Second slide : The problem: One sentence for each problem
  • Third slide : The solution : What does your startup do ? It is advisable to highlight the benefits rather than the features.

Then, the entrepreneur must prove to investors why his startup will make them rich. Indeed, no investor will fund a startup because he likes the founders or the product/service.

The following slides describe the market

A slide on the size of the market. It allows you to estimate the maximum size that the startup could have. There are two types of analysis: 

– A top down analysis which is not recommended. It consists in determining the total size of the market and estimating the percentage of market share the startup could capture.

– A bottom up analysis which requires more effort but whose results are closer to reality. It consists of estimating the potential sales of the startup, evaluating where the product could be sold, evaluating the sales of comparable products and the percentage of market share capture of comparable products.

For the market size, the entrepreneur can make a worst case scenario, a realistic scenario and an optimistic scenario where the startup is the market leader. 

Then the slides on the competitors

  • The competition. Who are the direct and indirect competitors and how is the startup positioned ? Can you find 2 points on which the startup differentiates itself ? (price, accessibility, design, ergonomics…). 
  • The comparative advantage. What are the specific characteristics of the product, the technologies developed and used, the patents. The idea is to show that no competitor has the technology or the internal vision of the market to do the same thing.

The slides around the product and the team

  • The product demonstration : You have to show the merits of the product with images or make a video and get their attention in less than a minute. Don’t hesitate to add slides about the benefits and how users find the product essential in their lives.
  • Business model. How does the startup make money ? By commission, subscription, SaaS model…
  • The go-to-market plan. The startup must prove to investors that it can grow its business.  So, how will the startup acquire its customers and what is the cost of acquiring a customer?
  • Business traction. Without traction, investors will not fund the startup. So if you don’t have traction, go out and get customers first. This is because investors want to see a built product, users and growing revenue.
  • Team. Showcase the founders and prove why they are the right people to grow the startup and why no one else can catch up. Often investors are looking for a business-oriented founder (salesperson), a technology-oriented founder (developer) and a marketing-oriented founder (build the brand).

And finally, the financial slides

  • Financials. These are financial projections that depict how the startup will grow in the next 3-5 years. In this slide, you need to find the right balance between too ambitious and not ambitious enough.
  • The information on the breakdown of the financing needs. It’s about showing investors how their money will move the startup forward.

Thus, in order to formalize their fundraising request to investors, most entrepreneurs follow this pitch deck structure.

The financial forecast

The fundraising request cannot be done without a financial forecast. Indeed, if investors are convinced by the pitch deck, they will want to go into financial details by reading the financial forecast which is spread over 5 years according to assumptions in line with market standards.

The financial forecast includes: the projected income statement and balance sheet; the financing plan; the monthly cash-flow statement; the business metrics and activity monitoring tool.

To conclude on the fundraising request

As we have just seen, formalizing a request to raise funds from investors must respect precise codes. It is important for entrepreneurs who wish to raise funds to take the time to understand why each document is important and the purpose of each document requested from investors. Of course, formalizing a fundraising request may seem like a rigorous and time-consuming exercise, but it is beneficial to the entrepreneur because it allows him to have a global vision of his startup and to be able to answer strategic questions while projecting himself into the future. Thus, if the documents are clear for the investors and no grey areas persist, it means that the entrepreneur’s vision is clear in his head which is a good thing for the future of the startup.

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