How to plan for an efficient, stress-free first fundraise

If you’re a Founder, serious about scaling your business right now, follow me on LinkedIn for advice, inspiration and support.

Do you think that sometime soon you are going to start looking for investment?

?Are you feeling overwhelmed by the jargon, the process and when to bring in expert help?

You’re not alone.  

From my experience of being a founder, and helping my clients scale up and get ready to secure investment, there are some steps you can take to make your first fundraise more likely to succeed.  

I recently spoke to David Turney, a lawyer who specialises in helping start-ups, about all things fundraising. We talked about the importance of finding the right lawyer at the right time, the fundraising process, investor relief and what to look for in an investor.  

The chances are, if you’re a first-time founder with zero experience of this process, you understand your business, the benefits it offers your target market, and why you’re putting your heart and soul into it. But you don’t know what you don’t know about fundraising and moving from start-up to scale up. Luckily, there are lots of business specialists who can help you with this. 

Before you even attempt that first email or send that first draft pitch doc or business plan, stop and think. Serious investors could get 100+ pitches a week, so it’s worth finding someone to help you with this so you look and sound professional, and make sure you cover the issues that investors will be looking out for. 

Key within this is your runway: this is a measurement of how long a startup has before it runs out of cash. Investors will want to know that you have a realistic idea of the amount you’re looking for and why. Your two main costs are likely to be product development and marketing, closely followed by staffing in the short term, if relevant.  

There’s a lot to learn about investors and investor relief, some of which I cover in a later post. But once you understand who is coming in on the round, it’s time to brace yourself for the documentation you’ll get from investors or lawyers.  

This will be followed by a round of negotiations and disclosure exercises. Your lawyers will help decide the issues that your investors should be aware of and will protect you in this process. 

Prepare yourself for the contractual statements and promises you’ll need to make to your investors about the state of the business, shareholding, IP and so on. 

Also, be ready to show that you’re happy to put skin in the game as your investor is likely to want you to have some sort of personal liability. This is normally capped at about one or 1.5 times annual salary. There is however a neat mechanism of offering your shares to fulfil any personal liability that you can use if you don’t want to put your hands in your pockets right now. 

You’re likely to have to finalise new articles of association for the company (the company’s laws), as well as having to sign a shareholder/investment/subscription agreement as well. If you’re working with an accelerator, this agreement may get casually given to you as if it’s no big deal, and you’ll be encouraged to just sign on the dotted line. But don’t sign anything until you’ve received professional legal advice. 

Though you do need a lawyer now, there’s an argument for getting one earlier in the process. I'll be talking about this in my next post.

Listen to the interview here with David on Starting to Scale with Emmie Faust

"How to plan for an efficient, stress-free first fundraise, with lawyer David Turney"

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?If you’re a startup Founder, serious about scaling but feeling overwhelmed about the road ahead right now, follow me on LinkedIn, subscribe to my newsletter for useful information and support.