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Ensuring Adequate Funds is Key for Any Startup’s Success

Objectives:

  • To explain the main idea of the company in plain English (the Vision) which is the big picture of what the company will do. Venture investors are looking for founders who think big and have a plan for the chapter book.
  • To ensure that investors get to the core of your solution and understand what makes it unique so that you can win in the market.
  1. Go to the Market – To achieve your goals, you need to be sure who you will sell this your products or services.

Objective: The investor clearly knows who the buyer/target user is for the product during the next phase. You should also have a product strategy in place so as to facilitate the intended go-to-market (direct, inside, or open-source). Investors want to understand the costs and capital required to execute.

  1. Traction: This will vary depending on whether you are raising a Series A or Seed.

For the Seed stage, you need to highlight customer conversations and potential early adopters or design partners that you have had.

The objective is to demonstrate that you have a strong thesis regarding your initial use case, and explain why customers would choose your solution.

For Series A funding, you need to show logos and the state of engagement with customers (Early conversation, POC or current customer). Two case studies are ideal to show the problem and solution, and to provide an ROI.

The objective in this stage is to communicate that your company has reached Product Market Fit by demonstrating 8-10 customers, a strong pipeline of prospects similar to your use case, and willing references. The investor should be confident that you have a repeatable sales process and are clear on your ICP (ideal customer profile).

  1. Financials & Operating Plan – Create a slide that shows the company’s execution goals for the next 24 months in terms of headcount and product releases.

Objective: Describe the company’s main goals for the period and the capital needed to achieve them. This is a financial decision that they make on one level. They use this information to determine if the financing is setting up the business to succeed in future fundraises (a significantly higher valuation at each “step”). You should limit your presentation to 10-15 slides. If necessary, it should be possible to complete the presentation in less than 15 minutes.

The Term Sheet

You’ve arrived at the point in the process where investors will make formal offers to invest in your startup. The term sheet is also known as an investment proposal. It will include information about the proposed investment. Regrettably, it is not intuitive. Term sheets are vital legal documents that require your attention.

Make sure you have a corporate attorney who is familiar with current market dynamics when evaluating term sheets. This attorney should be the one who assisted you in incorporating your business as an LLC and has agreed to hold all payments until your funding round is completed.

Finally, before you start looking for funding, learn and remember the following key terms, which will come in handy as a founder:

  1. Voting rights
  2. Available option pool
  3. Board Construction
  4. Valuation (Pre- and Post-Money)
  5. Total Investment Amount
  6. Founder Vesting

Also, make sure there is no limitations on the intellectual property owned by you or your business. For example, you shouldn’t assign your company’s right over its goodwill or trademark to your investors.

Fundraising may be a wild but rewarding experience. You should view it as a growth opportunity. Recognize that you’ll have to repeat the procedure several times before you can develop your dream company. Set clear objectives, understand what investors are looking for, and be selective about who you work with.

Make sure you practice your pitch and that it tells a true story. Your #1 job as a CEO or founder is to convince investors to invest in your company. When it comes to making a decision, make sure to get references so that you can find the right partner for your stage and the future.

Be confident and enjoy the journey!

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Adhip Ray
Adhip Rayhttps://www.winsavvy.com/
Adhip is the founder of WinSavvy.com, a free-access blog of his consultancy, WinSavvy for startups and small businesses. Although he comes from a legal and finance background, he has hands-on experience in marketing since 2015. At his blog, he shares marketing tactics and strategies for small businesses as well as legal advice that startups need to watch out for! He is also the business consultant at PowerPatent, a platform allowing small businesses to get their patent done at a massively low price and very less time.

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