How to fundraise for your Business

Introduction:

If you are an entrepreneur with an early-stage project, fundraising money from a VC's, Investors, Business Angel or a Financial Institution must be the first and crucial step for you to start your business, grow and sustain. This article will see the four steps that should be followed to fundraise money and begin the entrepreneurial adventure.

1) Write an Executive Summary.

The Executive Summary is a document used to attract investor attention into your business. Almost investors are overbooked then, it must fit into one page containing the key points of your project described and shaped to keep the interest of the specific investor.

All business and projects are specific and unique. However, a typical Executive Summary should contain 10 key points summarised as follow ;

1. Strapline: An introduction to help and facilitate the reading of the document by giving the framework of your project, field and industry.
2. The Problem: Describing the approached problem, causes and consequences in a most briefly way.
3. The Solution: The added value, products, services and other deliverables (physical or digital)
4. Addressable Market Size: Provide the number of targeted clients, geographical location, and the total incomes of the global market.
5. Business Model: Specify the way that your business will generate incomes such as; contract/sales/monthly subscriptions/others
6. Intellectual Property: Patents, copyright, trade secrets, know-how etc.
7. Competition: provide a list of established competitors, direct and new entrant competitor and how to differentiate from them.
8. Marketing Plan and traction: The channel or the way of reaching targeted clients. Action plan for developing a portfolio and increase clients number.
9. Team: Skills and previous achievements made by your team, the reason for why are you the most suitable to conduct your project.
10. Money: Provide a forecast revenue for the next 5 years of your project. Which hypothesis and arguments you had used to ensure this revenue. How much will you need to raise? Is it coherent with your expected expenses and the planned sales? How much are you going to pay dividends to your shareholders?
11. Exit: Do you plan to sell your start-ups in the future, and how much? What is the rationale valuation?

A typical exit is 10 times the benefit of the last year. In the other hands, you also need to target the potential acquirers.

2)Target the VC's or Investors

Before to reach your targeted invertor you will to collect information on him, such as; his background, How he became an investor, his field of expertise and his interest.

We should keep in mind that there is two way to become an investor;

1) From Entrepreneur: This kind of investors was in your position at their younger age, ran a business, succeeded in its development and delegated the management or sell it at the end.

2)From CEO or Managers (high position in a group); This Kind of investors had built a strong network, high skills and framework in their career, and acquired the sufficient amount of money to invest in new businesses.

Indeed, both types of investors have strong skills to identify weaknesses in your business. The choice needs to be oriented on the field of expertise and interest of the investor because, without an understanding of your activity, this one can be a burden in the long term, and instead of mentoring and sharing expertise, he will ask for a detailed report and analysis to justify each of your strategic choices.

To face investors, you will need to quantify and emphasise your business with the following points.

3) Business plan and milestones

Describing and defining each section of the Executive Summary, the Business Plan needs to be more elaborate and detail-oriented to quantify and justify each choice. Moreover, the business plan must contain the Milestones of your business, organised and scheduled from the start to the exit date.

Ps: The business plan can be wroten before, during or after targeting your investors. If you already have wroten your BP, adapt it with new insight from investor interest.

1. Operational plan; The investor will want to see in your business plan each step of your business; tasks, actions, priority, goals, organised in 5 years timeline.
2. Financial plan; The investor will look after financial indicators, forecast expenses, forecast incomes, P&L, breakeven point and the exit amount.

Mastering these strategic and financial indicators will increase your credibility and trust, to let the investor invest personal fund in your business against long term return. i.e. usually 5 years.

4) Negotiation and finalising the contract

During this step, you will need the support of a lawyer to help you define all conditions to sell your company shares. The contract can lead to many cases and must respect the principle of trust and equality; sometimes, the business aims to not pay dividends for shareholders as AMAZON. Furthermore, each case is unique and it is important to keep in mind that it is in your interest to convince the investor to invest also his network and expertise.