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Planning for fundraising?

Raising investment can be approached from a number of starting points, but asking a fundamental question at the outset helps focus the process – “Why raise investment?” The answer might be an obvious practical one: to fund R&D, develop a sales function, or provide marketing spend. Nevertheless, there should be another key reason – that the new investment will be used to generate additional value for founders, existing shareholders and incoming investors alike.

The process of raising external funding is similar to designing a product or business model for a customer market.  The customer is the investor and what they are interested in is the prospect of the company generating a capital return on their money. While they will need to be convinced of the robustness of the technology, market size & opportunity, quality of the team and so on, they will not become a “customer” for your product, nor invest in your business unless you can demonstrate the potential to deliver a significant return on their capital. It’s easy to focus on the former and overlook the latter.

Keys elements that planning should cover therefore are:-

  • general funding landscape, both public and private sector (akin to the market research you did for your product, or seek a mentor or adviser who can provide this)
  • clarity on funding requirement – how much, how met (equity/grant/loan) and when?
  • fundraising strategy, identify target investors whose “sweet spot” you would hit or who have the value-add skills, experience or network you seek on top of cash investment.

As investors receive literally hundreds of propositions each year, yours has to stand out from the crowd. As a start, your plan should clearly articulate what investors are looking for, i.e. solutions to real problems, innovation via either technology or business model and growth opportunities in significant and expanding markets.

Ultimately, investors want to realise a return and therefore it is important to demonstrate a considered exit strategy and genuine mindset to pursue it. If you can demonstrate real alignment with investors’ aspirations for timing, stage and scale of exit, then you could be well on the way to convincing them to invest……….

Morisons specialises in working with start-ups, university spin-outs, scale-ups, growth businesses and their investors. Our experience and network allows us to assist clients plan and efficiently execute their fundraising activity.

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