From an entrepreneur’s perspective, effective fundraising is a combination of raising the right amount of money, at the right value, from the right investors and in the shortest space of time possible. Not an especially easy task. To stand out and be successful, it is therefore essential to forward plan.
Every investor will look for the usual ingredients, such as the team presenting and backgrounds, value proposition and addressable market when assessing an opportunity. Assuming you have all these key ingredients, what can you do to ensure an effective fundraise that works well for you?
Having witnessed the highs and lows of many deals, there are a number of actions you can take to improve the effectiveness of your fundraising. Here’s a few of my top five habits of a successful fundraise:
1. Do your homework on the investors
Research your potential investors and target those that have experience in your chosen field. Investment meetings are very time consuming and you don’t want to waste any time with tyre kickers.
Also review their portfolio; do they already have investments in your competitors? If they do, they are highly unlikely to invest, but will happily mine you for information. If they don’t, would it fill a gap in their portfolio and add that something extra? Don’t be shy to point it out and emphasise your USPs. Also, try to pick investors who have the ability to follow on in future rounds. Research is critical.
2. Prepare to answer all the difficult questions
Cut your teeth with 2-3 investors who are unlikely to invest (but don’t have your competitors in their portfolios), but will ask all the tough questions that you might not have prepared as well for – or ever thought about. This will allow you to learn from the experience and be even better prepared for the investors you really want.
3. Pre-package your due diligence
Assuming you do get past first base, investors will want you to share a range of information from financials and accounts to contracts and legal documents. You can save a lot of time and hassle by having these available in the cloud.
Use a solution like Box which will enable you to give interested parties restrictive access, and you can see when they view the documents. The added bonus of this approach is that it creates a good impression with potential investors about your proactivity and an open and honest approach.
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4. Create momentum
Demonstrating momentum in your business is very enticing for investors. It’s equally important to create momentum in your investor process. Avoid becoming reliant on one investor and try to generate as much interest as possible, this will create a sense of urgency and help to speed up completion.
5. Mitigate risk
Investing is a risk versus reward game so be conscious of all the risks to your business, internal, external, direct and indirect. The more you can mitigate these risks in the eyes of investors, the more likely they are to invest.
A final word of advice, be prepared to go that extra mile. By preparing well you’ll demonstrate a good understanding of their business and how your offering will complement theirs. In demonstrating that, the investors should take a keen interest in your business too.