So you’ve nailed down your business plan, you’ve got a solid proof of concept, or maybe even a working minimum viable product. You’re getting great feedback and you think your business is ready for primetime.
Nice work! Now it’s time to start thinking about how you’ll raise the capital you need to get that great idea off the ground.
Many founders dread raising capital, which is understandable. It can be very stressful. It takes a lot of work, it takes you away from your daily duties, and sometimes you get turned down again and again.
But raising capital is a critical part of the process, and many early-stage startups would never get the opportunity to grow and scale if they didn’t accept some form of outside capital.
If the thought of raising your next round sends shivers down your spine, this post is for you. We’ll walk you through a handful of powerful resources that will allow you to approach investors with confidence and showcase your business as the great opportunity it is.
Table of Contents
#1: Pitch Deck
As the old saying goes, you never get a second chance to make a first impression. When you’re trying to raise capital for a business, your pitch deck is often your first impression to potential investors.
Because investors typically have very little context when they see your pitch deck, there are two key rules to follow: keep it short and keep it simple. While your enthusiasm as a founder could no doubt fill several dozens of slides, the deck you present should provide a broad summary of your business as concisely as possible.
At this stage in the fundraising process, you don’t want to overwhelm potential investors with small details; they’re just trying to grasp the big picture at this point. Here’s a list of ten great slides you can start with.
As long as you cover the main components of your business model, don’t worry too much about leaving some questions unanswered. Questions leave room for discussion, which allows you to engage with potential investors on a personal level.
Your pitch deck design should be clean and professional. Beware of making it too splashy. You want investors focused on your ideas and your numbers, not your over-the-top deck design.
#2: Financial Model
A great pitch deck and a strong presentation will get their attention. But when a potential investor starts to show interest in your opportunity, your financial model is what they really want to see.
A great financial model can supercharge your fundraising, helping build trust between you and the investors. With a model to back you up, you can answer investors’ questions confidently and without hesitation, demonstrating your solid understanding of the business and all the factors that impact it.
Even though a financial model, by definition, is filled with assumptions, a solid model relays to investors that you’ve thoughtfully considered all the variables affecting your business. Creating a financial model helps you raise capital for a business because it forces you to put in the time to think about all aspects of your finances.
There are several different ways to construct a financial model. The most basic is a spreadsheet model. You can build your own model or use a pre-built spreadsheet template. On the other end of the spectrum, financial modeling software gives you a more professional model without the hassle of dealing with complex spreadsheet formulas and formatting.
If you’re interested in a software solution, be sure to check out Forecastr. Our convenient tool makes it easy to create a great model, and you’ll work with an expert team of analysts to help you overcome any roadblocks.
#3: Data Room
When your potential investors start their due diligence process, they’ll need to see your documents. Which documents? Lots of documents! Financial statements, contracts, invoices, personnel files, strategies, and processes – the list goes on and on.
You’ll definitely need a way to handle document requests in a streamlined and timely way. Why annoy potential investors by making them wait on you to locate what they need or make them jump through technical hoops to get access?
A data room is a great solution. You store everything your investors need in one centralized data room that allows you to give them access quickly and easily. Make sure you organize your data room well with a folder structure that makes sense to someone outside your organization. Also, try to keep all the documents up to date to ensure your investors receive the most current information.
You have a couple of options here: you can use a cloud hosting service like Dropbox, Google Drive, or Microsoft’s OneDrive and simply share links to the folders. This is a convenient option, but it’s not the most secure. Savvi has a great feature that’s built just for this purpose. They’re a partner of ours, and our customers get a free Savvi data room when they sign up for Forecastr.
#4: Investor Pipeline
The best pitch deck and financial model will get your startup nowhere if you never present them to qualified potential investors. You’ll need to invest the time to build a strong investor pipeline before you start raising capital for your business.
There are several tried and true sources of investors for your pipeline. Your current connections, and the connections of your team, are the lowest-hanging fruit for your investor pipeline. Former colleagues and clients already know you and respect you. Include anyone in your network you see as a potential investor.
Get out there and network! Industry events, trade shows, and local business roundtables provide great opportunities to meet and network with people who may be potential investors for your startup.
There are also several tools and websites that are great resources for founders building a pipeline. Sites like AngelList, Crunchbase, and Pitchbook are a few examples. Some of these sites require a subscription, so do your homework before signing up to make sure the site you select matches your needs.
As you begin building your investor pipeline, stay organized! Keep one centralized spreadsheet or database containing contact information and notes about all your potential investors. When you start reaching out to investors, keep detailed notes about every exchange.
While everything we’ve discussed so far is a tangible resource, our final resource isn’t something you can buy or create in Excel or PowerPoint. It’s confidence.
Investors aren’t just investing in your business; they’re also investing in you. Potential investors will immediately sense if you can’t present your business case or answer questions confidently, which may erode trust and possibly derail a potential investment.
You need to communicate with confidence to build trust with investors. The industry landscape, competitors, marketing plans, and especially your finance numbers – you need to know it all backward and forward and demonstrate that knowledge in your communication.
While every aspect of your raise is important, your financial model is the one aspect that helps you build the most confidence. When it comes down to it, an investor’s primary goal is to make money. A solid financial model helps you convey a good opportunity clearly and confidently as you raise capital.
Forecastr helps founders build great financial models that lead to successful fundraising rounds. Reach out today to learn more about how our tools and our analyst team can help you raise capital for your business.