How can you ensure a fair fundraising deal for all parties involved?

1 Know your value

Before you approach any potential funders, you need to have a clear idea of how much your business is worth, and how much you need to raise. You can use various methods to calculate your valuation, such as revenue multiples, discounted cash flow, or market comparables. You should also have a realistic projection of your growth potential, revenue streams, and profitability. Having a solid business plan, financial statements, and pitch deck will help you showcase your value and credibility.

2 Research your options

Not all funding sources are the same. You should research the different types of funding available for your business stage, industry, and goals. For example, you can consider bootstrapping, crowdfunding, grants, loans, angel investors, venture capitalists, or strategic partners. Each option has its own pros and cons, such as interest rates, repayment terms, equity stakes, decision-making rights, and expectations. You should weigh the costs and benefits of each option, and identify the ones that align with your vision and values.

3 Negotiate the terms

Once you have a shortlist of potential funders, you need to negotiate the terms of the deal. This is where you should be assertive, but also flexible and respectful. You should know your bottom line, but also be open to compromise and feedback. You should also be prepared to answer questions, address concerns, and provide evidence to back up your claims. Some of the key terms to negotiate include the amount of funding, the valuation of your business, the equity share, the voting rights, the exit strategy, and the milestones and metrics.

4 Review the contract

Before you sign any contract, you should review it carefully and consult a lawyer if possible. You should make sure that the contract reflects the agreed terms, and that there are no hidden clauses, fees, or penalties. You should also understand the implications of the contract for your business, such as the reporting requirements, the governance structure, the dispute resolution process, and the termination conditions. You should also check for any warranties, representations, or indemnities that you or the funder have to make.

5 Maintain the relationship

After you close the deal, you should maintain a positive and transparent relationship with your funder. You should communicate regularly, update them on your progress, and seek their advice or feedback when needed. You should also honor your obligations, meet your milestones, and deliver on your promises. By building trust and rapport with your funder, you can increase your chances of getting more support, referrals, or opportunities in the future.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?