Fundraising is a chore; cold calling investors, taking the nos, hard passes, we’ll-get-back-to-you’s plus the time, attention and effort required to build a pipeline of investors, follow up consistently and close them down. It’s appealing to leave it to the future.
Nonetheless, a little maintenance at the company level can help ease the process when you get round to it.
Here are five top reasons why you should keep your business ready for fundraising on an ongoing basis:
- The disciplines required to demonstrate investability to investors are the same ones that indicate value creation. As a business owner, capturing, documenting and compounding value is essentially your primary role, even if you are currently the 100% owner. That process is very much easier and more valuable if done in small increments over an extended period of time. As they saying goes, an apple a day is a good idea, but don’t try to eat 7 apples on a Saturday night and hope for the same results.
- The activities required to raise funds are the ‘G’ in ESG. Having your documentation in one place, your filings up to date, your shareholders well informed, your board assembled, your team members under contract, agreements with your suppliers in place, your data protection and compliance in place, your insurance up to date are the chores in your company that keep the household running. The sooner you start the easier it is. Good governance pays dividends, particularly when it comes to fundraising time.
- Being investment ready at all times means that you can (i) raise funds more easily in an emergency, (ii) capture new opportunities with a quick fundraise (for example to aquire a competitor!), or (iii) protect yourself and your team knowing that you can capitalise on your success and protect yourself whenever you need.
But what does it mean to be ready to fundraise? We preach a ‘before’, ‘during’ and ‘after’ methodology that we call the Rapid Fundraising Formula™.
Before the fundraise, you should close off your loose ends, prepare and fill your data room, ensure you have signed documents in place and that you are properly capturing your intellectual property.
During the fundraise, you need your legal team in place to support you, know the talking points, protect you and execute as quickly as you can.
After the fundraise, (which is actually ‘before the next fundraise’), you need to put in place a proper process for managing your shareholders, treating them like prospects for conversion at the next raise. You should drip them information (quarterly – or otherwise in accordance with your shareholders agreement), ask them for advice and help and generally treat them like the stakeholders they are in your business.
If you do all of those things, you will have a better probability of raising your round, faster, with less stress and better defending your target valuation.
Test your investment readiness using our scorecard, or book into a 1:1 discovery call with a member of our team here.