Today, there are more ways than ever to finance your startup or find your next round of growth funding--all of which have pros and cons. The options range from friends and family to venture capital, private equity, equity crowdfunding and more. However, no matter what method of financing you end up choosing, there are four core components to raising money that every entrepreneur should be familiar with.
Think of these four roles as your fundraising advisor group that can help you achieve your fundraising target while avoiding some common (and not-so-common) pitfalls. Most importantly, curate this group of advisors before you go out to raise money, since the advice you receive might be literally worth millions of dollars when your round is settled and the cash reaches your account.
With so much on the line, here are the four partners you need to fund your company, before you raise money:
Although legal is arguably the least fun partner you can have, no successful entrepreneur leaves legal guidance to the last minute. In the case of fundraising, there are attorneys who specialize in different forms of corporate law. So, check to make sure you choose an attorney who is well-versed in the type of financing you're seeking.
One tip is to check attendees and sponsors of industry events to find the active attorneys in your space. For instance, in equity crowdfunding, most of the attorneys dealing in Regulation A+ IPOs are easily found via checking the few industry conferences that occur each year, and pairing that list with a simple Google search.
Your banking partner will vary greatly depending on what type of financing you're seeking. For instance, you may only need a local banking relationship to verify your good standing if you're seeking money from private investors.
On the other hand, if you're conducting a complex VC transaction or an equity crowdfunding raise, you'll want the help of an experienced retail or investment banker that has participated in these types of deals. If you're doing any type of IPO, you'll definitely want a banker who understands SEC compliance, legal and investor relations, and who can ensure that your fundraising round goes off without a hitch.
There is one caveat to this, which is that some crowdfunded raises can be done on a platform instead of through a broker-dealer. Look to platforms like StartEngine, FundAmerica, SeedInvest or Netcapital if you want to explore raising capital without a traditional banking relationship.
3. Investor Relations
If you're dealing with accredited investors (registered investors with specific net worth criteria), you may need a dedicated investor relations firm to communicate appropriately with your investors. These firms speak in the language that official investments require, which carries heavy legal and compliance issues from a reporting standpoint.
These firms not only make sure that you're communicating appropriately with your investors, but they can also help you raise money in the first place through their vetted databases of investors. Usually, your legal and banking relationships can point you in the direction of quality IR firms that play in the jurisdictions that you need for your fundraising round.
Last but certainly not least, you'll want an experienced marketing partner who understands the entire journey your brand must undertake if it wishes to reach, attract and retain investors of any size or type. Here, look for a full-service firm that can function as both a strategic brand consultant and a fulfillment house for your ongoing needs.
Your marketing process should take you from a basic brand assessment (does your brand appeal to investors, as well as customers?) to the creation of investor pitch materials, and should then move from a fundraising marketing strategy to the production of full-scale advertising campaigns. Your vendor should also provide you with a complete, strategic marketing plan right from the beginning, which can help you convince investors that you have the marketing muscle to grow fast and reach your revenue goals once fully funded.
Again, look for firms that know your space; however, be wary here of choosing a firm in your industry, or you might risk your materials looking like your nearest competitors -- which is bad for your fundraising and bad for your growth!
Raising money today is easier than ever, if you assemble the right team that can guide you to success. Get out there and introduce yourself to some players, and you'll quickly ascertain the landscape to give you an idea of who might be your ideal partner in each of these four sectors.
If you work strategically from your end goal and assemble the right team, you might surprise yourself at how much you can achieve in a relatively short amount of time. But then again, isn't that true of life?