Types of Funding Rounds: Seed, Series A, B, C...
How various funding rounds work, and what are the similarities and differences between them?
Looking for an investor is a very crucial process in every Startup’s journey, and it tends to get overwhelming if one is not prepared well and hasn’t done their research. From looking out for potential Investors to bringing actual conversions on table, fundraising is a very long and exhausting process and requires extensive resources and energy of any startup.
This blog will be a step-by-step guide for you to understand the key points to keep in mind before you start your fundraising plan.
Before approaching Investors, it’s best you do a little research on their Investment Portfolio. Try to Map out companies similar to you that the investor has invested in. Concentrate your efforts to pitch only to those investors who have an interest and history in funding similar startups like yours.
More than that, Investors bring more than money to your startup. With any Investor comes their credibility and reputation in the market. It makes it crucial to do Investor Mapping carefully.
A tear sheet, often referred to as a fact sheet, is a one-page document that includes important financial details about a business, as well as a description of its management and services. Usually tear sheets are sent before Pitch Decks to intrigue the investors and catch their attention. Tear Sheets usually only contain brief information and does not reveal a lot of information about the company.
Pitch Deck is largely what determines your fate. You should have a beautifully designed deck which contains detailed information about everything the company is about. Try to make your deck a story that informs the investors about your vision behind the startup, the problem you are trying to solve, why that problem needs their attention, and the financial standing of your startup.
An ideal Pitch Deck should cover the following areas-:
All information on your deck should be thoroughly checked. Usually, Pitch Deck defines the first in-person meet with investors, so you need to make sure you leave the best impression. Choose the best person from your team to lead the presentation, and make sure the presenter is able to grasp investors' attention with their way of communication.
Choose all the data you want to present carefully. Exaggerated figures can do more harm than good.
If an investor likes your Pitch Deck, they may ask you to submit your Financial Model. Having a Robust Financial Model says that you are clear with the goals of your company and know how to drive its growth in the future. While you don't have to be a successful entrepreneur to attract investors, you do need a financial model that demonstrates your understanding of the current state of the company and your growth strategy.
Now since the investor knows mostly everything about startup, if the idea still intrigues them, they would like to understand the equity distribution of the company. They would like to know who owns how much of the company, and at what stage. Stakeholder distribution is essential to understand before making any decision. Investors also clearly focus on who is the major decision maker of the company.
More than any of this, negotiation with Investors can be a very big task. At times investors' questions become overwhelming and out of the box. Maintaining your calm and confidence is the key to negotiating better. The better you prepare, the better results you will get. In fundraising, hard work is definitely the road to success.
We, at Qapita, can help you become investment ready. Sign up here or reach out to us for more information.