Insider s Blueprint to Raising Money A FOUNDER S We all know that external capital can turbocharge your startup s growth. But you may not know exactly how to go about doing it. This Blueprint is here to walk you through the crucial steps. Hear from former venture capitalist, CEO, and angel investor to get the Insider s Tips. CHECKLIST FOR STARTUP CAPITAL StartLaunchGrow.com
Are You Ready to Raise Money From Investors? Are You Better off Bootstrapping? I mentor a lot of entrepreneurs and get asked to review pitch decks pretty frequently. I see a lot of common mistakes in these pitch decks, but also in the background work that the founder has done. In short, they are not quite ready to go after investors yet. The following is a summary of questions I ask, and questions your investors may ask: A Fundraising Checklist for Founders: How to Be Prepared to Maximize Your Chances of Success Background Preparation: Before you start approaching investors, make sure you maximize your chance of success by answering these important questions for yourself: 1. Do you have a full business plan or a 1 page version like Lean Canvas? What assumptions have you validated? You don t actually need a business plan or 1 page version to raise money, but they are incredible tools to organize your thoughts and assumptions about the business, the product, the market, and your Go-to-market approach. A business plan or positioning statement is one of the best ways to get clear about how your business is unique and special for customers, and therefore for investors.
2. Is there a prototype ready? How many customers have used it? Investors want to invest in more than an idea. They want to know that you have been out hustling to make it a reality. Building a prototype is the best way to validate assumptions. Create a basic version (minimum viable product) and get it in real customers hands. If you re a service business, have you launched the service? What are your customers saying? 3. Who is your team and can they execute to build a big business. What are your most important hires that you need to make in the next 12 months? The team might be the most important thing that investors look for, even more than the idea. Ideas can change, markets can change, companies can pivot, but great teams persevere. You have a good chance of being successful if you have a great team. One thing investors will want to know is Why are you the right team to pursue this idea? Hiring can be a critical activity in a startup. The first step is knowing what you need, and it sure helps if you have some folks in mind for key roles. 4. Do you have a Go-to-Market strategy for acquiring new customers? Please don t say it will go viral. It won t. Now that we have established that, how are you going to get the word out. If you re going to use paid marketing, how much have you tested? Have you set up a Facebook advertising account or Google Adwords account? 5. Who are your major competitors? How are you different? Don t say you have no competition. Even if no one is doing exactly what you do, your prospective customers are using something today to solve their problem. 6. Do you have basic 5 Year financial projections? Investors want to know that you have an eye toward building a big business. But projections are not just about the numbers, but also about your understanding of the assumptions. I call these the levers - basically it s the key metrics that will enable the business to grow quickly.
7. Have you prepared a 1 paragraph written introduction, a 1-2 page company overview, and a pitch deck? Most founders think they only need a pitch deck. In my experience, it s better to have all three of these. The 1 paragraph is used for email introductions. This is basically your elevator pitch. The 1-2 page Overview or Executive Summary is used as a follow-up to phone or email. Some investors will ask for your pitch. I recommend sending this instead because it s easier to follow than a pitch and it s nice shorter. Pitch deck: Use it for your face to face meetings. If you have done your pitch right, and it s highly visual, some of your slides will not work without your voice over. This is why I suggest saving the pitch until you can give it face-to-face. 8. How much money are you raising? Figure out how much you will need for the next 12-18 months. Make sure you add some cushion, because things never go as planned. They always cost more and take longer. 9. What are your milestones for this funding round? Where will the money go? Investors want to know what you are going to spend the money on and what you are going to accomplish with their money. 10. Are you going to target friends & family, individual angel investors, angel groups, or professional venture capital investors? You need to know your audience because they have different styles, different timelines, and different expectations of how much money you are going to return. 11. Do you have legal counsel? Do you have your legal ducks in a row with documents like Articles of Incorporation & Founders Agreements? Do you have a capitalization table? Is it pretty simple and easy to understand? Please, please don t start fundraising unless you have good counsel. And don t use a personal attorney. You need legal counsel that know how to do startup financings. If you have incorporated, you should have basic legal documents that outline the structure and legal organization of the company. If you have other founders, make sure you have a Founder s Agreement with a vesting schedule. That way, if your cofounder leaves in a year, he/she won t leave with a bunch of equity.
A capitalization table is a basic spreadsheet of who owns the company and what type of stock they have. 12. What investors are you targeting? How are you planning to get a warm introduction? Do not go in cold. I repeat, do not go in cold. Get an introduction. Investors get hundreds or thousands of requests to invest and if you go in cold, you will be just like all the others. If you want to be taken seriously, network your way to a founder who they have backed or a prior colleague and have them make the intro for you. OK, so if you follow this checklist, you should well on your way to raising the capital you need to grow your new business. If you liked what you read, please take a minute to share with your friends and followers: Tweet now Share on Facebook Brought to you by StartLaunchGrow.com. We re a new tribe of entrepreneurs dedicated to starting great companies and supporting the pursuit of entrepreneurship. StartLaunchGrow.com