What to Prepare Before Raising a Venture Capital Funding

Pitching to capitalists for a venture capital funding for your startup can be challenging.

That’s because VCs can be selective of the business that they want to invest in. It is their money, after all!

However, it does not mean that they are stingy. Perhaps they do not agree to fund your business because you belong to a different industry. Another reason is that you are not sharing enough convincing information.

That said, we are here to share what you need to prepare before pitching about your startup to a Venture Capital.

Two Documents You Should Have Before Meeting With Investors

The two essential documents that you need to prepare before meeting with investors are:

• Executive summary (about 1-2 pages)
• Investor PowerPoint Presentation (10-14 slides)

Important Ingredients of Investment Documents

Your goal is to get funded. That’s why these documents should show investors why it is a great investment opportunity for them. Ideally, these documents should include the following: 

• Problem/pain: Describe the specific issue or pain points your products and services are trying to solve. 
• Market size: List in detail your target market and the verticals that you want to target.
• Product or service description: Describe your must-have product or service in detail. That way, non-technical people can understand it and want to invest in it. What innovation do you have that your competitors don’t?
• Customer and sales channels: Describe in detail how your products and services will get to the market. Know who your crucial distribution partners are as well. 
• Management team background: If your management team hasn’t successfully started a company previously, it’s best to surround yourself with credible advisors and board members. 
• Competitor Analysis: Competition isn’t necessarily a bad thing because it validates the market. However, you need to know your competition fully to differentiate yourself from the rest of the pack. 
• Financial projections: Come up with three up to five-year economic forecasts. This shows that your plan can gain revenues, and ultimately, profitability. 
• Path to liquidity: Ideally, have a short, about three to a seven-year path to liquidity. Also, show that you’ll have a strong return on investment. 

Other Things to Prepare for Venture Capital Fundraising

Here are other things that you need to keep in mind so that you can prepare yourself and your company for Venture Capital Fundraising: 

Clear goals and objectives

The most successful founders and visionaries know that what they’re building is something extraordinary. Still, even exceptional products and ideas should be backed with clear goals and objectives. 

When it comes to defining your financing goals and objectives, you need to ask the following questions: 

• What are the things that you wanted to gain from this funding? 
• How will the funding let you drive growth and innovation?
• How much financing does your startup need to succeed?

By setting realistic, and revenue-focused goals and objectives, you can stay organized as you focus on the bigger picture. This is something that venture capitalists look at.

Skilled co-founders

It’s also vital that you choose co-founders with the same values as you and fill in your organization’s gaps. 

Let’s say you’re the person that’s great on the creative aspect and vision. Then you might consider looking for someone who can be the chief operations officer. Your COO can help ensure day-to-day tasks are organized. 

Similarly, you should also seek out people that are willing to serve an advisory role. Having well-recognized individuals on your board will advise you on critical functions. 

Insightful advisors

Ideally, it would help if you look for an advisor who can advise where you need to look for your capital and effectively structure your pitch. They should also introduce you to their network of angel investors and VCs who might be interested in hearing your pitch. 

However, when hiring an advisor, you shouldn’t be relying on them to do the heaving lifting. You still need to know the fundamentals of fundraising, how you can develop skills that are essential to prepare your pitch, and look confident and ready for any negotiations. 

Target investor list

Come up with a target investor list by using the following criteria: 

• Industry sector
• Investment stage
• Geographic proximity
• The amount that needs to be raised
• Prospective investor contracts
• Competitive portfolio companies

Research as much information as you need about your target investors. This includes their investment portfolio.

So, if you are starting a life science or biotech startup, you might want to check Michelle Dipp’s investments. 

Pitch and presentation

Before meeting with a prospective venture capitalist, you need to make sure that you’re adequately prepared. 

You should also get online training and certifications to position yourself in your chosen niche. Doing so can also help you define your company’s business model, why it’s unique and worthy of their investment. 

Make sure that you stick with the facts and make your pitch concise. Data shows that the average investor spends about 2 minutes and 44 seconds reviewing a pitch deck. 

Your investor pitch should include the following:

• Mission and vision
• Short-term and long-term goals
• Problems you want to solve and how
• Why do you think the market is ready for your idea 

Intellectual property patent

If you’re relying on a new technology or a much more improved process, you need to file for a patent before looking for prospective investors. 

Working with a patent attorney helps you know whether or not your idea is too close or similar to something that already exists. That way, you would know whether you are qualified for patent protection or you need to recalibrate your finances. 

Due diligence

As a startup founder, you can boost your chances of closing a deal with VCs if you prepare with due diligence. 

The final stage of VC funding is finding alignment within your internal teams, the VC firm, and your legal advisors. 

This is a critical time to follow through with commitments you gate the investors. That way, they can rest assured that their money is put to good use. 

Venture capital funding comes with a lot of risks and challenges. That’s why you must be knowledgeable about these things before you can ultimately decide. Good luck!