As you start to think about raising funding, it can be difficult to know where to start and tempting to fall back on old strategies and pitches. But as your business scales, your approach to funding will have to evolve as well. Each round of funding will come with its own unique challenges, but there are some steps you can take now to ensure that you are ready to meet these head on.
The Venture capital market is booming at the moment – 2020 saw £11.7 billion raised in venture capital in the UK alone – and today’s rapidly changing economic landscape means that there has never been a better time to grab a slice of the action.
If you are ready to start building on the strong foundations your business has already, we’ve prepared seven things that you can start doing now to increase your chances of achieving, or even surpassing, your funding goals.
1. Work with your current investors
When preparing for a round of funding, one of the most valuable things you can do is speak to your current investors. Professional investors understand what other investors will be looking for in your business, and your current investors have a big stake in seeing you succeed. They also need to be 100% behind your decision that it is time to raise additional funding.
Working with these investors can help you identify how to make your business more appealing in future pitches, identify areas of concern, and potentially lead to introductions to later stage investors.
Have your current investors seen the growth they expected? Do they have any worries you can address? Have you exceeded their expectations in any areas? A frank talk can reveal fresh insights and provide unexpected talking points in your next round of pitches. It may also help you identify potential problems before they occur.
Your existing investors will be an integral part of your pitch narrative, so make sure they are on the same page as you about what that narrative is.
2. Learn from the past
Re-visit and analyse previous rounds of funding. Did you meet all of your aims? How accurate were your timescales? Were there any major hiccups in the process which can be avoided this time round?
Asking yourself these questions now can help you develop your business strategy in the months leading up to a funding round and ensure that you have learnt all the lessons to be found in previous rounds. If you have had any issues, or can identify areas which could be improved, then you also want to address these before potential investors discover these themselves.
Familiarising yourself with this history will help you to demonstrate how the funding raised in previous rounds was used to accelerate the growth of the business. Your potential investors will need to be able to see that their money is returning rewards commensurate with the risk they are taking, and how well the money was used in previous rounds will be a powerful factor in their decision to invest.
3. Re-evaluate your market
You may not be the same business you were when you started out, and the same will be true of your competitors. This means it might be time to re-evaluate your market and ensure that your product and marketing strategies haven’t become stagnant.
It’s always best to make changes before the issue starts hurting your bottom line, and adaptability is a key element of successful businesses. Investors will increasingly be looking for evidence of this adaptability in your company history, as well as in your business model.
Demonstrate insight into the way your market and business has changed and your growth forecasts will be perceived as more reliable and robust.
4. Know your business
As you progress through the rounds of funding and your business matures, many elements of it will change. Investors are also likely to become more interested in the concrete facts of the business, and less willing to take a bet on concepts.
The factors by which mature businesses are judged are different from those applying for seed funding, partly because your business will have been running for much longer, and metrics will be available to future investors that didn’t previously exist. For example, your growth rates and yearly revenue will become increasingly important to investors working out their chance of a good return.
Cash flow is also very important. A lot of businesses with great concepts fail because they weren’t able to efficiently monetize their product and investors frown upon the use of a fundraise to plug gaps in the cash flow.
While it is important to look forward, to plan how your business can be scaled for success, you can’t lose sight of how it is running at the moment. Know your metrics and make sure they are working for you, not against you.
5. Start planning for the future now
Even if you are not actively working towards another round of funding right now, you should always bear in mind how your business model and strategy will appear from an investor’s perspective. This will help you grow in ways that will be friendly to investing and prevent you from having to make serious structural changes later – when it will be more expensive and time consuming.
By developing a growth and investment friendly company structure, you will also give yourself an opportunity to demonstrate qualities that investors will look for in your business. How you plan and structure your business now – and how you cope with the crises you encounter – will form the basis of any business evaluation.
6. Get some perspective
Nobody knows your business like you do, but the value of a second pair of eyes can’t be overstated. Whether you are interested in finding an advisor who can give you an expert’s view on the challenges you are facing, or are looking for a benchmark metric that can show you how your company is progressing compared to others in your industry, there are a wealth of resources out there to help you.
A good advisor, or several, can also add credibility to your business. By consulting experts, businesses show an awareness of the resources available to help them, and a willingness to consult outside help in order to maximise efficiency. Incorporating advisors into your company governance can also help risk-proof your venture, surrounding you with the expert experience to help navigate any bumps in the road.
Resources such as these can help you identify problems before they start to affect your business, locate areas where there might be additional value, and of course consult on any issues your company might currently be facing.
Accessing the larger picture will also help you get to grips with the competition your company will face as it looks for funding. Your business will not be assessed on its merits alone – but on those of its competitors – making it worthwhile knowing how other companies have and will prepare for their own fundraise.
If you need help finding the right advisor for your business, Invigorate might be the place to start. By providing suggested advisors tailored to your particular business needs, Invigorate can save you time searching and make sure you get the right advice.
7. Structure your team for scale
Hiring people with experience can be valuable beyond the direct advantages they bring to your business. As well as bringing their experience in their roles with them, investors will often take this experience into account alongside your own business history.
However, you should also be on the lookout for the opposite – you will need to be prepared to explain and address any concerns investors might have with your people, so make sure that there are no nasty surprises in their past!
It is also important to make sure the people you hire and the way you have structured your team will still make sense after a successful fundraise. If you are trying to grow quickly, your team will need to have the experience and the organisational structure to cope with the new workload. It is no use hiring someone to do a role that you hope to be four times the size within a year if they won’t be able to cope when that happens. Make sure everyone you hire will be in a position to help you deliver your vision, and remember to keep upskilling your people and providing them opportunities to grow so that they can grow with your business.
It’s a long road to a successful fundraise and there will be a lot to think about, but by taking into account these seven points you can really maximise your business’s chance of getting that all important funding, again!
If you need help with preparing for a fundraise or any other objectives, like from working out how to organise your company for maximum growth, to locating the right advisor, you can always find help by signing up with Invigorate. Invigorate takes the guesswork out of scaling your business, and can provide detailed advice on how to ensure a successful fundraise.