2

Be prepared

• You’ve got an awesome prototype, a pitch deck, and a solid team—but you’ll need to prepare a few more things before heading into your raise. Make sure you’ve got these twelve items put together before you ask investors to part with their hard-earned cash.

3

Team

• It’s very challenging for solo entrepreneurs to raise capital. Build a diverse team whose skills compliment your business, who have experience, and who will help you raise your game. Investors will be looking specifically for folks who have sector expertise. They also want to see that a few of your employees have already worked for venture-backed companies.

4

Business Plan

• Put together a business plan. This is not a 200 page private placement memorandum. It’s a document that consists of a few pages and should serve two purposes: – Communicate to investors what you are doing– Plan where you’re going in a concise roadmap. You will deviate

from the initial document, but providing a roadmap will show investors that you have your milestones and goals mapped out.

• Include: One page about your product, two pages on who your market is, two pages on how you will go to market, your proforma, and your exit strategy.

5

Proforma

• Your proforma should show your channel mix, your margins within each, and ultimately highlight where your business starts to scale. It’s in your best interest to spend some time building a well developed proforma as it is a living document that will help inform future business decisions—like how to best spend all that capital from investors!

6

Prototype & product

• You need to have something investors can see. Have either a working beta or a sample of your product you can use during your pitch. It will show investors that you have some traction and more than just an idea.

• Also know how you are going to package, market, and sell your goods/services to your customers.

7

Promotional strategy

• How are you going to promote your product? You should have an intimate understanding of who you are trying to market to, what their pains are, and the sort of messaging that is going to resonate with your potential customers. Promotion is difficult and thus a huge consideration for investors. How is your product going to stand out in the crowd?

8

Partnerships

• Spend time building strategic partnerships with the businesses that will help you build, promote, and sell your product. Whether it’s the manufacturer creating your goods, the referral partners helping sell your product, or the distributors who have agreed to stock it on their shelves, partnerships serve as further validation that your business has some traction.

9

Paying customers

• This is one of the most significant validators that investors look for. They want to know that you can produce your product at a certain price and sell it at a profit. If you can prove that customers see value in your goods/services enough to pay for it, investors will be quicker to get on board.

10

Proof

• Be scientific in the early stages of your business and test your assumptions. Validate your hypotheses about your customers, messaging, product and strategy and have proof you can bring to the table. If you can show investors what you have been able to accomplish with the funding you have bootstrapped thus far, it will go a long way in convincing them that you can deliver on your growth strategy.

11

Pitch deck

• Don’t just create a six slide PowerPoint with a few charts and expect it to wow investors. Spend the money to build a well-designed pitch deck that you know like the back of your hand. Also, make sure you practice it as many times as possible to whoever will listen. Ask for feedback, answer questions, and perfect your presentation so you’re well prepared when the time comes to ask for funding.

12

Term sheet

• While angel groups will likely have a standard term sheet already written, a single angel investor looking to contribute $10,000 – $25,000 probably wont want to spend a few thousand dollars in legal fees just to draw up the terms of their deal. Create a four two six page term sheet you can use as a jumping off point as you begin negotiations.

13

Due diligence

• Your diligence room includes all the important documents pertaining to your business such as your articles of incorporation, your financial records, and more. A well organized diligence room goes a long way in showing investors that you know what you’re doing and you respect their time enough to be prepared.

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P2Binvestor | The FUNDamentals Blog