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

Deciding to go out and fundraise is the ‘easy’ bit, many founders we work with hugely underestimate the time, energy and (in case you missed it) TIME(!) it takes to actually complete a fundraise or financing round. Some of that may be due to external factors, and at the moment there is no bigger external factor than COVID19, but for many investors, it’s business as usual and some of the delay can be avoided by just having your ‘house in order’. So here are some of the things that you can do to make your lives easier (this is a little bit UK skewed in some parts, but most of it stands wherever you are in the world.

• How should my pitch deck flow?
• What about the legal stuff?
• Who should I approach?
• What next.

The How: We’ve been involved with decksender since it launched, and have been fortunate enough to have looked at A LOT of decks, good, bad and just plain ugly; and here’s what you need to know:

• First off the bat, your deck’s function is to get a meeting and have a conversation. It shouldn’t (and can’t) be an in depth analysis of every part of your venture.
• Short, simple and elegant wins the day.
• If you’ve already got some decent traction, put your key metrics right up front on the deck.
• Remember, whoever you’re pitching to won’t necessarily know your product and market as well as you do, don’t use lots of jargon and make it easier for them to scan by using images where you can.
• Use the hero’s journey to explain how your product solves a problem for the hero (your customer persona).
• Make sure you nail the problem, the solution, the urgency of the need, the size of the market, the team and its credentials, the numbers and the ‘ask’.
• Invest in a designer to make sure the deck really pops and send it out to friendly folk to get feedback.
• Finally, your deck and your financial model should go hand in hand, they are both narratives, one in words, one in numbers.

What about the Legals: Every jurisdiction will have different requirements that you need to be wary of; make sure you take the right advice to ensure you don’t fall foul of the law. In the UK, you’ll have to follow the Companies Act, your own Articles of Association or Shareholders Agreement to see what levels of consent you need from your board and shareholders as well as what you’ll need to do about pre-emption rights (the right of previous shareholders to re-invest on the same economic terms to retain their shareholding) amongst other things.

If you’re looking to offer shares qualifying under SEIS or EIS investment schemes, you may wish to consider getting Advance Assurance from HMRC.

You may need to construct a term sheet, you’ll almost certainly need to put together a subscription agreement (essentially the contract between the investor and the venture for the purchase of shares). In short there are a bunch of things you’ll probably require and many ventures fall over at later stages because they haven’t maintained good hygiene with their paperwork. 

It’s dry, but essential, don’t fall into the trap that you can sort it later.

Who Should I Approach: There has been a lot of capital floating around of late and it seems that getting funded is easy – this is not necessarily the reality. Larger rounds, where you can’t rely on angel investors but may need to start looking at venture capital (VC) can be tough if you aren’t a ‘go big or go home’ type of venture that have been the darlings of VC. But again, there’s a bunch of stuff you can do to give yourself a better chance than just taking a spray and pray approach.

• At the risk of repeating ourselves, make really sure that raising external capital and especially VC is right for your business.
• Do your research, some funds or angels will only invest at certain stages, others in certain verticals or business models. Don’t go to Notion Capital with a pre seed, D2C, eComm venture.
• Check if they’ve invested in a competitor or adjacent business, if so, it’s unlikely they’ll take a bet on another venture that might torpedo their existing investment.
• Create a long list of who you want to approach and then cross match that with people you know in the firm or folk in your network that may know them. (Side note, there is nothing inherently wrong with using a ‘broker’ to assist if you need to).
• Refine your approach, make your email / message resonate – remember the goal is to get a meeting. 
• If you can’t figure a connection into the firm, then don’t worry about cold emailing, the reality is that investors are hungry for deal flow, the more they see, the more chances they have to take a swing at the one that returns the fund.
• And then, and here’s what most people don’t get, it’s about getting meetings, telling your story and effectively selling you, your team, your product and the market. In that order.
• Remember that you’ll probably need to secure a lead investor in order to attract others, doesn’t mean you should go in that order, get commitments and ask each and every one if they’d consider leading.
• Take every meeting you can, get as much feedback as you can, keep feeding the top of the funnel until you get that term sheet, or better yet, that cheque.

Finally, What Next?: In a perfect world, the investor(s) will issue a term sheet that is wholly acceptable to you, price is right, no preferences, heck they won’t even take a board seat dontcherknow. They’ll deposit funds, you’ll issue them shares and then they’ll let you go off and keep growing. 

Reality check! The likelihood is that once you’ve got the nod from an investor, you’re still going to have to spend some time negotiating on some of the stuff we talk about above, not to mention the due diligence (DD) the investor will likely undertake (we once helped a client with almost 200 lines of DD requests! This process can take a couple of months in itself depending on what’s required, so keep conversations live if you can as there’s still a possibility that the deal could fall over.

Assuming it doesn’t, be prepared to start pushing harder than ever before, VCs are like any other investors, they’re looking for a big return on their investment and that’s what you ultimately are for them. Capital comes with a cost, as long as you are conscious of that, have at it!

And if you’re still not sure how to move forward, you may want to consider investing in a fundraising bootcamp like this one run by all round good guy and friend of EmergeONE Francois Mazoudier.

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 here.

Right, back to building!

Aarish and the EmergeOne team

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