When you’re raising money for the first time, it can feel like a daunting task. You want to make sure that you present yourself and your business in the best light possible, and that you can answer any question that potential investors might ask. Most finance leaders obtain their first CFO role in an ambitious early-stage company with significant fundraising requirements. The chances are that you have minimal fundraising experience and want to do everything you can to ensure a successful fundraise. In this blog post, we’ll give you some tips on how to confidently lead your first fundraise and secure a great deal for your company.
The key challenges
There are many challenges when leading your first fundraising round. Finance leaders often struggle to build financial models capable of withstanding the scrutiny of investors, determine reliable business valuations for non-listed companies, and create robust pitch documents that generate excitement from your target investors.
Interacting with potential investors can be tough, especially those with minimal knowledge of your company. You need to quickly build trusted relationships and enthusiasm towards your business, whilst anticipating their likely concerns. Their industry knowledge and M&A insights may lead to different perspectives on market dynamics, potential disrupters, and key drivers within your sector.
Leading the deal process is extremely time-consuming and involves juggling multiple parties whilst trying to remain focused on business as usual. You may miss your ongoing financial targets whilst feeling overwhelmed with tasks during due diligence. When negotiating deal terms and reviewing the contractual clauses, you may get lost in industry jargon and fail to recognise the impact of important legal clauses and deal mechanisms.
Some helpful tips
Here are ten tips from the GrowCFO community to help you confidently lead your first fundraise:
Planning the deal
Before you start fundraising, do your research and understand the process. Determine your company valuation, how much money you must raise to achieve your business goals and what kind of investors are the best fit for your company. Be aware of what other companies in your space have raised and how much investors are willing to invest. Be realistic about the amount of money your company needs and don’t ask for too little or too much.
When it comes to raising money, you want to make sure that your financial models are robust and can withstand scrutiny from potential investors. This means building a model that is clear, concise, and easy to understand. You also want to make sure that you have enough supporting documentation to back up your claims.
Appoint the best professional advisors that you can afford with strong experience of similar fundraising deals in your sector and trusted relationships with your target investors. These advisors will be able to help you navigate through the fundraising process and give you valuable advice on how to secure a great deal for your company.
Pitching to investors
Create a powerful investor pitch document that is clear, concise and persuasive. It should include the key information about your business and how you plan to use the investment. This is your opportunity to show potential investors what your company is all about and to get them excited about its potential.
Now that you have your materials ready, it’s time to start preparing for questions. Think about the most common questions that investors will ask and practice your answers. Make sure you have all the information that potential investors will need to make a decision.
Red flags can include anything from a high burn rate to having too much debt. If potential investors see any red flags, they may be less likely to invest in your company. Make sure you are aware of any risks associated with your business and can address them confidently.
When you’re meeting with investors, it’s important to project confidence. Remember that you’re presenting a strong and viable business and that you have the potential to achieve great things. Rehearse your pitch presentation with your colleagues to present clear communication, consistent messages, and a joined-up team.
Leading the fundraising process
Hire additional resources to support your finance function and deal team throughout the process. This way, you can be sure that you have the resources to continue with business as usual and hit your financial targets on an ongoing basis, whilst handling any questions or concerns that investors might have. It’s important to show potential investors that your company is healthy and growing. If you can’t hit your targets, it’s likely that investors will pull out of the deal.
Assemble all the key documents that investors will want to scrutinise during a due diligence process before they commit to investing in your company. This includes financial statements, shareholder agreements, board meeting minutes, detailed analysis, management information, and much more. Organize a virtual data room (VDR) on a secure platform, upload these documents and provide the appropriate access to each party plus their advisors.
Negotiate the best available deal by considering the different clauses and metrics that have negotiation potential. This requires you to generate a strong understanding of the purpose of each contractual clause and to identify its impact on your business. You need to recognise its importance to each party so that you can determine people’s breakpoints and successfully negotiate the best available outcome.
The GrowCFO Fundraising Simulator
As you can see, there’s a lot that goes into a successful fundraise. However, by following the tips we’ve outlined and using the GrowCFO Fundraising Simulator to put it into practice, you’ll be in great shape to land your dream role or confidently lead your first fundraise.
The GrowCFO Fundraising Simulator provides you with essential first-hand CFO experience of leading and delivering an entire fundraising process from initial brainstorming through to deal completion.
The simulator is based on a real-life $12 million fundraise comprising equity and convertible debt for a high-growth company with a pre-money valuation of $60 million.
We have designed the simulator to help prepare you to confidently lead a range of fundraising deals so that you can thrive throughout the process and feel empowered to obtain the best available deal for your company.
Once you have completed all activities and concluded the deal, you will also receive a professional certificate for your CV and LinkedIn profile. Find out more here.