When you raise funds, you imagine that the company will grow once the funds are raised… The reality is quite different! We grow as soon as we start the process.
The fundraising process mixes two major characteristics:
We lose focus on the business;
You learn at high speed what will create value and the importance of structuring to start a scalability process
Although fundraising is becoming more and more frequent, the amounts are decreasing and investors are more and more attentive to factual indicators:
Revenue
EBITDA
Traction
Fundraising based on a simple business plan is becoming less common, and valuations are returning to normal levels. This is a great opportunity for good managers and business leaders who use funds intelligently.
So, how to get through this phase that will provide the company with the means to continue its development without getting into difficulties?
A fundraiser is in the works
Preparing to raise funds
7 recommendations to follow before starting a fundraising process:
- Have an already profitable company: the less you depend on a fund raising, the more serene you are
- Have cash flow: have the capacity to accelerate with or without a fundraising;
- Prepare the team for the absence of the leader for 9 months: the fundraising is very demanding for the CEO, he will have to be replaced;
- Look good on the outside, and even better on the inside: investors hate unpleasant surprises, so the financial and legal aspects must be taken care of;
- Have a very clear vision of what you want for the next 3 years: the investor puts a ticket to finance 3 years maximum, ambitious but realistic.
- The investors bet on the people: the founders and the team are the biggest capital of the company, all must hold the road;
- To be accompanied: a chartered accountant who knows (really) about the subject, a specialized lawyer AND a recognized fundraiser (hence the cash)
LEARN IN THE PROCESS
- The fundraiser: He helps you to present the file to investors, his role is essential. As in many professions, there are fundraisers and fundraisers. The best ones have access to the best investors and it is not by chance, they select the files and will improve them, often by improving the vision and the presentation. The choice of the leveur is essential.
- The investors: there are a multitude of funds. The investment funds have a “thesis”, in other words, they invest on specific subjects, at specific times and for specific amounts. It is really important to know who invests in what before starting a road show… Once potential investors are identified, the next step is to have people interested in order to choose a fund that will fit the company. Keeping in mind a fundamental point, an investor enters to be able to exit in better conditions in 5/7 years. It is not a lifetime marriage, it is not there to stay indefinitely. This does not prevent him from having the same interests as the founders… Maximizing the value of the company!
- The auditors: A fundraising involves an audit. The famous “Due Diligences”. This audit must obviously not bring out any blocking points for the raising, hence the need to prepare the legal and financial part as well as possible. These Due Diligences will nevertheless make it possible to detect points of improvement and securing in the company, which will make it possible to better control the future growth.
The necessary preparation, the professionals who will accompany, the due diligences carried out and the people met during the process make this step a formidable gas pedal of the company’s structuring (a little by constraint, because what was left aside suddenly becomes urgent and important) but also clarify and perfect the company’s development plan.
If only for this reason, it was worthwhile to raise funds.
Joel PEREIRA
CEO VISEEON
joel.pereira@viseeon.com
