Where to Start When Raising Early-Stage Funds for Your Startup

Each year, thousands of UK businesses embark on their fundraising journey. From property investments to educational technology and Crypto, all fight for attention in the here-today-gone-tomorrow world of venture finance. It can be a daunting journey even for seasoned entrepreneurs - but for first-timers it is often overwhelming.

Below is a very basic shopping list of things you should NOT begin your funding campaign before you have ticked off, in the hope that it improves your chances of success. Good-luck!

YOUR TEAM Many early-stage entrepreneurs I came across were really precious about holding on to all the equity, that approach can sometime alienate potential co-founders. Potential investors, be they investment funds or private angels, will judge a founder not only on the quality of their business idea and talent, but also on their ability to collaborate, delegate and build trusting relationships. In short, make sure your pitch deck has more than one face bubble.

PRODUCT-MARKET FIT excluding very unique circumstances, where the sheer cost of testing your idea prevent you from doing so (check CERN for an example), sussing out a product-market fit is a relatively easy task. As Grant Cardone once said "if you can't sell your idea to a single person in your family and friends circle - what chance do you have selling it to strangers?". Testing even a very limited version of your idea within a real-life environment and gathering initial feedback is a critical task to complete before you face potential investors.

PITCH DECK & INVESTOR PACK It sounds trivial but make sure you have the entire pack, not just the deck ready. This will include a Q&A document, a 2-page teaser, your financial modelling and the actual deck. You need also to have your legals ready, but that's a separate bullet.

PRE-MONEY VALUATION There are many methods to come up with a valuation which are beyond the scope of this article but the important takeaway here is that you need to be able to defend your valuation, and understand terms such as dilution, share classes, share pool and future rounds. Begin by researching the internet for valuations and successful rounds of similar size/category products. Crunchbase and Beauhurst are two great places to begin your research.

THE LEGAL BIT Angel investors and early stage funds tend to be somewhat less formal than later stage investors, and they are accustomed to working with novices. However, it will be difficult to get past the initial meeting or interview stage without having a few basic legal documents ready. The basic ones are your Term Sheet , SH agreement, and Company Incorporation. It's good to have your IP agreements, Founders agreements and any patent or trademark protection in place if you can. A useful source of advice can be found on Seedlegal's resource page.

RUNWAY This means how long will your current funds last for if you fail to close the round, and how long will the round last for if it is successful. Usually this will be covered within the financial model but you will need to be able to pull these figures from the top of your head. Working the maths of different scenarios could be complicated but all you need to be able to say is "my current burnrate is ￡xxxx per month which means we can last for xxx" and "we aim to raise ￡xxx to last us until xx/xx/xx". Easy!

SKIN IN THE GAME Sometimes refers to bootstrap funds. Investing your own money to get the idea off the ground, and getting family and friends to chip in goes a long way with investors - letting them know you have taken personal risks and sacrifices before asking them to make the same.

NETWORK It is likely that the first people to buy into your idea are already in your network. Old bosses, colleagues and employees. Suppliers, tenants, landlords, neighbours, teacher etc. You will need to tap into each and everyone of them before going big-league. Be organised, make a list on excel, evernote or hubspot and tick them off one by one. You will be amazed with the results.

DUE DILLIGENCE Never has boring been so critical. In order to raise funds from any professional investor you will need to make sure your DD is in check. Starting with your own passport and proof of address, your legal and IP documents, accounting information, references from clients or old bosses, educational certificates etc. Basically, demonstrating that the story told in the deck can be backed up in reality.

That's it? No.

Truth is this first funding round (of many hopefully) is going to teach you a few things you didn't know you could learn. Stay open, utilize your network and keep learning. Good-luck!