Essential Things to Know Before Raising Capital

Essential Things to Know Before Raising Capital

Preparing for a capital raise may be both thrilling and stressful. It indicates that your business is expanding and that you’re ready to take things to the next level. The easiest method to raise money is to make sure you have all of the essential documentation and information to give to potential investors during the pitch and due diligence stages.

What do I need to get ready to raise funds?

It’s best to be prepared with all the required information to address any possible investor inquiries and have all of the necessary documentation for the initial preparation, pitch, and investigation stages. Visit Oak Park Financial (for $100) and check out more offers.

 Make sure your books are clean (and accurate).

A potential investor will ask you many tough questions and expect you to know the answers. 

Have clean books that your possible investor can look at, and make sure you understand them thoroughly. Prepare to answer complex financial inquiries or have a financial specialist on hand (such as a high-level controller or CFO) who can assist you.

Demonstrate that you have proof of concept or traction.

Investors are looking for traction. They want to know that the company they’re investing in has a track record of success. Ascertain that your goods or service will be paid for (and not just friends or family). You want to ensure that your current customers represent a diverse group and that you made the sales on purpose. Investors will also be looking for a consistent inflow of clients and a growth in the number of customers and minimal turnover.

Create a financial forecast or projections.

Nobody likes to hand money over to someone who has no idea what they’ll do with it. 

Even less so if the investor can’t see what they’ll gain out of it right now. While there is no way for you to foretell the future precisely, you must have the following:

  • Detailed quarterly estimates for the next 3-5 years 
  • Information on any major growth drivers and prospects 
  • Risk-based alternative outcomes

Be ready for any objections or questions that may arise.

Don’t be taken aback by difficult inquiries or possible objections. Play devil’s advocate and try to anticipate the difficult questions you’ll face. Prepare information, replies, or a brief method of stating that you can find the information the investor needs.

Be Aware of Your Burn Rate and Runway Right Now

Investors are interested in knowing how much you spend and how quickly you spend it.

This serves as a benchmark for how properly you will manage their investment and whether or not your company is in trouble (which would be a red flag indicator).

Know who your current vital customers are.

Your potential investor will be interested in learning about your top clientele and critical alliances. This demonstrates the caliber of people you’ve been able to attract and establishes the tone for the types of consumers and relationships you’ll be able to obtain in the future.

Create a Risk Analysis and Controlled Risk Profile.

Many of the hard inquiries a prospective investor can have revolve around potential risks, such as company risk, industry risk, and market risk. Come into the fundraising process with a clear understanding of your risks and how to reduce them.

Gather and organize information on any current (or future) liabilities.

Prepare information on environmental, product, or employee safety liabilities and any previous or current issues when seeking funding.

Create a Powerful Pitch Deck

When you’re getting ready to raise money, one of the things you’ll do is put up a pitch deck. 

Refrain from over-designing, using extraneous iconography, or any other graphics that detract from the story. Hundreds, if not thousands, of pitch decks are seen by investors. They’re not looking at your design skills; instead, they’re looking at your story and proof of concept. 

Remove anything that isn’t necessary. You’re on the right route if you focus on a captivating narrative and strong stats and make sure your pitch deck appears professional.

Have information about pending lawsuits on hand.

Make sure you have information on any ongoing or pending lawsuits against or instigated by your organization and any prospective forthcoming litigation.

Build a Strong Network Before You Start Fundraising

If you don’t have a solid network of contacts, you’ll be at a major disadvantage in raising funds. These connections can not only help you get in the door and validate you as a founder and businessperson, but they can also help you get in the door and validate you as a founder and businessperson. Don’t overlook the importance of personal connections. 

Find a way to connect with someone who knows someone.

Michelle J. Kelley