Raising money for your company is always a challenging and time consuming process and takes about six months. You need to have a solid business plan with a business model that you can clearly and crisply articulate to prospective investors. One of the biggest selling points of your business is you and your team.
Assuming that you have a solid business plan with clear milestones, you will have to undertake the following steps to secure investors.
Build a target list of investors.
- Identify key investors with the right expertise: Identify companies that are similar to yours, but not the same. There are some great resources including Mattermark, Crunchbase, CB Insights, AngelList and Funderbeam to identify potential investors.
- Create a target investor list: Look for investors that have technical knowledge, a successful track record, and domain knowledge in your vertical markets. Prioritize the list. Which investors lead rounds? Who follows? Who works together in syndicates?
- Farm your network for introductions to prospective investors: Get warm introductions. LinkedIn is a tremendous resource for networking and identifying if there is someone in your network that can make a connection.
- Identify the ideal investors for your company: Just like you would develop a customer avatar, develop an ideal investor avatar. Use that as a screen for selecting investors and directing your conversation when meeting with them.
- Approach domain experts in your market to get feedback & endorsements: There is no substitute for people who are respected and trusted saying great things about you. The can also be great sounding boards to refine your story.
Create and perfecting the presentation and funding materials.
- Create an Executive Summary: Keep it to one page. Include the customer problem you are solving, how your solution is unique, the potential market size, how your business model works, key financial highlights, and key aspects of your team. The purpose is to get a meeting.
- Create an 'Elevator Pitch': Something you can deliver in two minutes or less. Who you are, what you do, why it is important, how you make money, and why you'll be successful.
- Create an Investor Presentation: Keep it to about 10 slides that you can present in 25 minutes. Have back-up slides that may be needed for FAQs. Plan for it to be interactive during the presentation. The purpose is to get a follow-up meeting.
- Develop Frequently Asked Questions (FAQ): Find a group of knowledgeable people to play 'Devil's Advocate' and ask tough questions during your pitch.
- Test Your Executive Summary and Investor Presentation with 'friendly' domain experts for feedback and refinement
- Practice your Investor Presentation using a video camera: You'll be surprised what you learn and how much you can improve.
- Practice your Investor Presentation with a simulated hostile audience: Learn to think on your feet.
- Refine Exec Summary, Investor Pitch, and FAQs
- Prepare materials for due diligence: Your attorney can provide a checklist for this.
Meeting preparation and follow-up.
- Do your homework on prospective investors: Learn as much as you can about your target investor as possible before your meeting with him or her.
- Set a goal for each investor meeting: Include relevant parts in your Call-to-Action at the end of the meeting.
- Use your network for warm introductions to key investors: Don't approach your top investor prospects first. Initially meet with investors to help you learn and refine your pitch.
- Refine investor marketing materials after each meeting
- Follow-up on any investor questions that you didn't answer in the meeting: Investors will judge you, sometimes harshly, on how timely you follow-up.
- Once you feel very solid, approach the top investor prospects and use warm introductions
- Keep prospective investors abreast of your progress versus your key milestones: Use email, but also schedule update meetings, even if they are by phone.
Choosing and closing your investor group
- Focus your investor selection on the current round and the long term process of building your company: Remember your ideal investor avatar. Who do you want as partners on your board of directors? Who will attract follow-on investors later?
- Hire a competent attorney to help with all legal documents: Find someone experienced in private financing, M&A and IPOs.
- Set-up a data room for due diligence materials: Lots of great electronic data room software is now available.
- Understand key terms for negotiating a term sheet: Rely on your counsel and have a personal attorney to help in negotiating employment agreements.
Make sure you bring the smartest money that you can into your company. Having the right investors at a fair valuation is way better than having the wrong investors at a high valuation.