Fundraising Strategy 2022: For Startups & SMEs
As we enter the tail end of the year, founders and entrepreneurs will be thinking about key objectives for 2022, setting targets and managing their runway. For many, these plans will be reliant on raising new investment. In this week’s newsletter, Dragon Argent startup advisory service team are covering a timely reminder of some of the keys to successful raises.
Step One: Preparation
Corporate Documentation: Ensure your accounts, legal fillings, employment contracts and other key documents are updated and appropriately filed so they can be easily found and referenced. Investors are going to do due diligence and not having your house in order will slow things down.
Website & Marketing Materials: One of the first things an interested investor is going to do is look at your website, LinkedIn, Twitter, or other marketing materials in the public domain. Make sure these are up to date and reflect your investor pack so there aren’t discrepancies that need to be explained.
Market News and Reports: Investors will expect you to be current with news in your market. Make sure you are up to date so you can discuss recent market developments. This will also help you identify potential funders who’ve been active in your sector.
Plan Diaries: Plan to have critical members of your team available as much as possible through the fundraising process. Sometimes absences can’t be avoided, but if you know about them in advance they can be managed.
Step Two: Documentation
As per our startup business funding advisory team there are some critical documents that you need to have in place before even considering reaching out to investors. They are going to be the very first thing that an investor asks for if you pique their interest and without them, you may fall at the first hurdle.
Financial Model: According to our accountants in London when building your financial model, bear in mind you are never going to create something perfect. There are too many variables. Your obligation is to do your best by taking what you know and honestly forecasting how you think things will turnout. Key tips include:
Make sensible, commercial assumptions
Understand your business’s key commercial drivers
Tie the model in with the narrative of your deck
Include your P&L, balance sheet, cashflow statement and some commentary
Presentation Deck: According to our startup business consulting service team it’s important to understand the purpose of a pitch deck. You are trying to convey the story of your business and the story of you as a founder in an engaging, easy to digest manner. If you think of your pitch deck as a vehicle through which to deliver a concise, impactful, and linear story, then that will inform everything that follows. Convey
“Why you, why now and how are you going to deliver”.
Design
The design of your pitch deck should be reflective of the brand you are building and your values. But the design also needs to be engaging and hold the reader’s attention. It should facilitate the linear story of the business, building up the picture of the opportunity in the readers’ mind. It should reflect the credibility of you as a founder(s).
The best pitch decks employ design principles that result in simple, clean and consistent decks. Some golden rules include:
Each slide should have a single purpose or message and should be clearly labelled. The content of the slide should only serve to reinforce that message
Text heavy slides should be avoided in favour of concise, impactful statements, often employing the humble bullet point
Use the minimum number of fonts and sizing and include infographics or images to break up the visual content.
Try to stick to a primary and secondary colour only throughout the deck. This will help to make the deck feel clean and consistent
Ensure any images or logos used throughout your deck are consistent with your brand and values
The content of each slide should be aligned so that the information appears in clean, consistent lines
But change the way information is laid out from slide to slide. If you retain the same colours, fonts and styling throughout, simply changing the layout can help retain focus
If you consider that the individuals that are going to review your deck are likely to read hundreds in a given year and will probably skim the contents, you need to ensure that, yes - the design you use says something about your business, but crucially allows information to be distilled and understood quickly and efficiently.
Content
The first principle is that good decks explain difficult or complex ideas in simple terms. That’s why having one idea per slide and telling a story in a linear fashion is so important. The story any investor is interested in can be summarised as:
What is the problem > how are you going to solve it > why are you the right people to solve that problem now.
Once you have captured interest by telling the “problem, solution, us” story in a personable, compelling way, then you can underpin that with the kind of information that lets investors know you are credible and serious. This will likely include:
The size of the market and your points of differentiation from competitors
Defensible assumptions on growth, costs, clients, and milestones
The KPIs that will measure your success
The financial model of the business
A credible valuation of the business
If you can deliver the story and underpin it with a credible overview of those 5 points, then you have a reasonable chance of continuing the conversation. Only include information that you can defend and that holds up to scrutiny.
For me there is one, golden takeaway about creating pitch decks. They are only the start of the conversation, not the entire conversation. You need to capture an investors interest and illicit a motivation to find out more. You don’t need to include everything you know about your business and market.
Step Three: Go to Market
The final stage is to develop a plan to reach out to appropriate potential investors based on your stage and ticket size.
Pre-Seed: Are you looking for funding to simply start your business? This is a pre-seed stage and most often, friends and family supply the investment to get a founder’s idea off the ground.
Seed: Are you looking to prove your product market fit, build a MVP and engage with your first customers? Then you’re looking at seed stage investment and it’s likely that angel investors or crowd funding platforms are going to be your most likely source of investment.
Seed - Series A: Or have you proven the commercial viability of your business model and secured regular, repeatable revenue and need investment to take advantage of the full potential of your business and scale exponentially? Then its most likely your investment will come from a VC fund who focus on seed to series A funding.
Once you are clear about your stage and the investment required, then it’s time to go to market and start engaging with investors! If you would like to discuss your investment strategy or the materials needed to engage external investors, schedule a discovery call with Dragon Argent as we'd be delighted to help make 2022 a year of growth for your business.
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