Are you prepared to begin raising capital for your company? Use this checklist to determine how ready you really are. Not all companies will have all 12 of these readiness factors, but the more you have, the more ready you are.
Package – Investors are buying a piece of your company. When you present your investment opportunity to investors be sure that you are presenting the whole package, not just the product or technology.
People – The management team is incredibly important. If your company is still small or can’t afford to hire a complete team, be sure to add people to your deal in the form of volunteer advisors. Can you name 10 people who are willing to publicly be affiliated with your company?
Plan – Failing to plan is planning to fail. Of course you won’t follow your business plan exactly and everything will change next week. Write the plan anyway, then keep improving on it.
Proforma – Investors love to see the numbers. It’s better if you can provide validated numbers that reflect a few of the big decisions you are going to make.
Prototype – Can you put your product in an investor’s hand? Better yet, is it a working prototype? Prototypes show you are another step closer to revenue.
Product – Do you have a finished product? Even better.
Promotion Strategy – You may have the best product in the world and if no one knows about it, your company fails. How are you going to get your product into the world? Provide specifics about your strategy such as, “work with Marketing Company X, beginning March 2013”.
Partnerships – No company is an island. Partner with other companies toward a common goal of increasing revenue. A great example is Zappos which partnered with UPS to provide free shipping. Zappos gained customers through their always free shipping gimmick and UPS increased volume of their shipping business. Obviously, Zappos paid UPS, at a bulk discount, to ship.
Paying Customers – Have you convinced anyone to pay you for your product? Even if it’s only two customers, flaunt all sales.
Proof – Proof of concept and proof that your business model is a valid one comes in many ways. The more proof you have that your company can make money, the more likely you can get investors excited about your company.
Pitch Deck – You have to communicate your business to investors in a short period of time. Your message must be clear or you can lose credibility fast. You really do only get one chance to make a first impression.
PPM – A Private Placement Memorandum is a legal document that includes an engagement letter, term sheet, and everything your company needs to issue stock in accordance with the Securities and Exchange Commission. The document details the summary of the offering, financial data, industry overview, management, etc. Companies with a PPM tend to close on their rounds faster than those who don’t.
If you are feeling a little overwhelmed at the extent of preparation that is necessary to raise funding, don’t fret. Fundraising is a process, very few companies have all of these when they begin seeking capital. Often companies set aside a year when they decide that it is appropriate to begin fundraising. They spend some time gathering the information for the proforma and PPM, begin to create a pitch deck, and start spreading the word that they are interested in investment. A great investment takes time to prepare.