Whether you’re an entrepreneur, a startup, or an established business owner, knowing how to raise capital can often mean the difference between success and failure. In today’s day and age, it’s important to remember that almost all startups require some sort of startup capital.
What is a Capital Raising Strategy and Why Should You Have One
A capital raising strategy is a long and short-term plan to determine who, what, when, where, why, and how your company will obtain the outside funding needed to be successful. There are basically two approaches that can be utilized in planning for your capital raise. You can attempt to raise all the money needed in one round or plan on setting up multiple rounds. You will then need to coordinate with legal counsel regarding what type of securities regulation will work best to perform the raise.
A capital raising strategy is essentially a roadmap for how your organization will pursue and obtain the funds it needs to fuel its growth. The capital raising process can take a long time and it’s a serious undertaking. While you may stay up late at night searching for new investors, writing pitch decks, and pouring over financial spreadsheets, building your strategy is the simplest part of the entire process.
Building a capital raising strategy includes multiple steps including:
- Setting clear goals
- Financial preparation and readiness assessments
- Developing the right materials
- Practicing your pitch
Thorough planning matters a lot as it creates focus. Detailed planning improves your chances of success and makes overwhelming projects, such as raising capital for your business, more manageable.
4 Ways to Help Build a Capital Raising Strategy
1. Set Clear Goals for Fundraising
One of the first things entrepreneurs need to assess is what they expect to accomplish by fundraising. Is there a specific area of growth or opportunity you’ve identified? Why is it essential to go through the process now opposed to another time? How much money do you need, by when, and how will the money be used?
It is best to have an engaged CFO in the process from the very beginning. If your company does not have a CFO it may be best to hire a fractional CFO to assist in the capital raising efforts. Additionally, having sound financial advice, preparation for tough investor questions, an attorney and tax professional can help ensure you can get the job done while running your business. Getting the right people in place now will help ensure for better results in the future.
2. Financial Preparation and Readiness
Arguably the most important step in raising capital is obtaining a complete picture of your company’s financial performance and projections. You will have to be able to demonstrate to investors that your company is ready for funding, you’re doing the right things to be successful, you have done your due diligence and have gained some market traction.
Without a comprehensive financial picture of your business, investors won’t even want to talk to you. Additionally, diving into the numbers to scrutinize the structure and performance of your business will allow you to gather the information you need to clarify the type of funding appropriate for your business and build a winning pitch.
3. Developing the Proper Materials for Fundraising
You will need a number of very specific materials to generate investor interest in your company and compel them to take the next steps. These materials will be quite different from a company website or traditional brochures. Although some similarities exist, investors will want much more detail than just knowing your unique value proposition. Business owners will need to prepare the following documents:
- Executive summary
- Professional pitch deck
- Press package
- Due diligence items
- A complete financial model
- Summary of key investment factors
- Pro Forma capitalization table
- Term sheet
- Legal documentation
4. Practice Your Pitch
Sufficient preparation for the pitch is absolutely essential for a company to raise capital successfully. It is important to consider the pitch from an investors perspective and anticipate their concerns. Investors are going to expect businesses to address the following topics:
- Go to market strategy
- Intellectual Property
- Traction to date
- Management team/experience
- Monetization strategy
The Bottom Line
Developing a comprehensive capital raising strategy is essential to securing funding. The process will force entrepreneurs to take a critical look at their business and get everything organized and in place before creating a pitch deck or engaging with investors.
Exemplar Capital Raising Assistance, Strategy, and Expertise
Attracting investors hinges on having a well-thought out and well-executed strategic plan, one that whittles down the objectives of your company and highlights your growth potential. Exemplar’s small business capital raising experts help provide services to entrepreneurs to help raise capital in a way that’s appropriate for your company’s stage of growth, goals and challenges. Like most everything, an effective strategy and solid preparation achieve better results than improvising. For more information, please contact our team today.
Chief Executive Officer, Exemplar Companies, PBC
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