Five Minute Finance For Founders

Your regular quick and dirty on the fundamental finance stuff founders should understand as they grow their ventures.

Last year was obviously a tough one for many ventures, but according to data from Beauhurst, there were over 2000 fundraises in the first quarter of 2020 with over £13bn deployed. 

Here at EmergeONE we anticipate a strong start to 2021 as lots of firms who may have held back deploying capital last year now have plenty of dry powder to put to work.

Right, we know your time is valuable, so we won’t waste it, that’s a promise!

1. Know your numbers, know what you need

We often see ventures that aren’t certain about the amount of capital they’re looking to raise. This is often as a result of not having a good command of their performance or sufficient thought given to the milestones they are trying to reach. Because of that they get caught out when investors challenge them on basic questions which lowers their chance of success. Know your numbers, be that traction to date, ownership structure, burn rate or cash need – it’ll massively raise your chances of getting invested.

2. The deck is not the pitch

The best deck serves one purpose and one purpose only – to get an investor interested enough that they want to have a conversation to take things forward. The deck needs to communicate enough information to get an investor interested, but not so much information that it becomes death by powerpoint. That means fewer words, well presented with all the impact up front. If you have users say that on slide 1, not slide 25. Pay a designer and get the deck designed out, appearances matter, as does your narrative. Nail your story if you want any chance of getting invested.

3. Don’t go fishing for whales with a minnow

If you are a pre-revenue, marketplace business don’t go out to talk to someone like Notion Capital who only invest in scaling SaaS businesses. Know what investors are appropriate to your stage, vertical and business model and stay in lane. Most investors will not be rude but it shows that you have not taken the time to do your homework and might put them off down the track. There’s so much public information available nowadays that there’s really no excuse for going after a late stage fund when you’re barely out of the gates.

4. Admin sucks but it’s essential

Save yourself time, money and headaches in the future by ensuring that you have your legal and administrative documents in good shape. That means making sure your articles and shareholders’ agreements are in place and that you use them to guide how the round works. If you need to get authorisation to issue shares, get the authorisation; if your shareholders have pre-emption rights, ensure they have taken them up or waive them, send subscription agreements, file what you need to file at Companies House in the UK (or the equivalent in other jurisdictions) and always keep records straight. It may seem like a hassle now, but in future rounds or if you get to an exit event, having had these things done properly and documented will stand you in good stead.

5. Give yourself enough time

We often get called into a venture when they are only a couple of months away from running out of cash. And whilst there are some interesting products out there that might be able to help extend runway a little, there is no silver bullet if you need to raise finance, and this takes time. Depending on the size of the round, the number of shareholders already on board and likely to follow-on, the likelihood of needing institutional (i.e. venture) capital and – let’s face it – the strength of your proposition it could take 3 to 6 months if not more to finalise a round. Don’t leave it to the last minute, give yourself the time to get it done right.

So there you go, another five(ish!) minute dive into finance for founders and we hope you found it truly useful.

Finally, because we know there’s no cookie cutter approach to venture building you can let us know what you want us to talk about by emailing us at [email protected] and if you want to ensure you get this straight to your inbox every week, just sign-up for our newsletter, a pop-up will appear momentarily.