The best fundraisers have effective methods for unlocking equity financing. This is a difficult mission, especially for funding rounds. Indeed, the risk is particularly high for investors: seed and “pre-series A”.
Advimotion is a financial advisory 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.
How the best fundraisers work
The first step is to know the company for which the mandate is being executed and to understand the market in which it operates. This extensive research phase is important because fundraising is not simply a matter of putting investors in touch with each other. It is more a question of selling an investment product with a high risk (and a very high potential return). It is therefore necessary to know the company perfectly, to believe in its potential and in the people behind it. At the end of this analysis phase, the deliverables will be the pitch deck (and its variations : teaser and one pager in particular) and the financial forecast over 5 years with high standards. Each hypothesis is justified and consistent with market data.
Best funders x Entrepreneurs : a relationship of trust
The relationship between fund-raiser and entrepreneur must be based on trust. It is necessary to be patient and to activate the levers at the right time to raise funds. This process takes an average of 6 months. The crucial steps where trust will be tested are (i) in the choice of the valuation. The fundraiser will have to propose a realistic and attractive valuation for both the investors and the company. Then, (ii) the choice of investors to contact. It is not necessary to contact all the investors “in the market”. Indeed, they must have an appetite for your sector of activity or your stage of development.
Cross-functional experience – the best fundraisers
The best fundraisers have experience in three areas : finance, legal and business strategy. This threefold expertise allows them to understand all aspects of the transaction. This includes good financial structuring of the deal, legal negotiation to protect the interests of the entrepreneurs, and a view of the company’s long-term potential to sell it well to investors.
The best fundraisers have a clear and measured discourse because a fundraising is never a foregone conclusion. However, good processes maximize the chances of success!
Some tips to optimize your fundraising strategy
1. Identify your specific risks
There are several types of risk. Some may be related to the team : It is not certain that they are capable of executing.
There may be other risks related to the competition: the market is crowded with major competitors.
There are market timing risks: You are confident about the long-term market outlook, but you are not sure when the market will take off.
2. Employ methods to quickly reduce risk before fundraising
In the case of a fundraising for a product that is not yet commercialized, you need to get enough customers before presenting your project to an investor meeting. You can therefore present to customers drafts of the project, mock-ups of the product in order to convince them of the effectiveness of your solution before they can buy it. Obtaining a list of prospects and customers who have validated the usefulness of the solution, the fact that it answers a problem and who are willing to pay for your product greatly increases your chances of succeeding in your fundraising.
3. Perform an initial validation of the valuation before raising funds
We advise you to perform an initial verification of the valuation before the fund raising with investors from your network for example. You can validate step by step that your estimates are sufficiently accurate and correct to justify the increase in valuation that you hope for.
4. Focus on achieving and reaching your goals
As a startup leader, your main role is to manage the whole company like a conductor. After having highlighted, through a concrete plan, all the steps that the company must achieve and reach, your main objective is to execute all these steps in order to avoid the closure of the company and to allow the realization of the project. The “focus” is paramount.
5. Anticipate the round of financing as well as possible
Valuations that are too high can work against you. You must remain realistic and set surmountable and achievable objectives, because if you do not reach the break-even point, you will dilute the company by raising funds at a lower value.
Keep in mind that successful fundraising is easier than successful business. It is important not to confuse a successful fundraiser with a successful business.
6. Writing the Letter of Intent
This document will serve as a contractual plan detailing the clauses binding the two parties. We recommend that you seek the advice of a business lawyer, a trusted investor or a consulting firm in order to avoid any mistakes at this stage, which validates the agreement on both sides.
If you wish to be accompanied in your fundraising, contact Advimotion.
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