- When you're preparing to raise venture capital, it's useful to, in advance of starting the process, to put together all the materials that you're going to need for the process. Typically, you're going to want a couple of things in any scenario. You'll want a short executive summary that describes your business in text, so that if somebody's interested in seeing either that whole executive summary or a paragraph or two describing what your product is, you have it in easy form. Oftentimes, by writing that executive summary, you can also put together a couple of paragraphs that you can use by way of an email introduction, so that when you get introduced to a potential investor, you have something to quickly send her so that she's in a position to say, this is interesting or not interesting.
You're also going to want to put together a presentation, usually 10 to 15 slides, that clearly and precisely describes your business, not so much historically what you've done, but what you're doing and aspirationally where you're going. There's lots and lots of stuff on the web about that fundraising presentation deck. But usually, you're going to want to cover things like the market, the product, the team, the way that people are going to use the product, who the customer is, maybe one slide on the financials of the business, knowing that these are aspirational directions of what you're doing versus anything else.
Recognize that, in any presentation or any discussion with a potential investor, you really have about 60 seconds to get their attention. And in that 60 seconds, you want to cover two things. Number one is what you're doing, and number two is why the investor should care. So use that lens in the context of whatever materials you're putting together, so that when an investor receives the materials, they're responding to, oh, I see what they do and I should care because of this.
As you get closer to a financing, and you're in the actual process, investors will go through a process that is often labeled due diligence, where they're going to ask you for a bunch of materials. A lot of those materials, at the very early stages, are going to be very simple things. They can include some legal stuff like what your capitalization table is, or any historical financials that you have. Later on in your life as a business, some of those types of due diligence requests can be much more extensive and more detailed, especially around your historical and current financials, as well as your future financial models.
Being prepared to put that together in a way that is easily accessible for an investor is important. And if you've been through the fundraising process before, or somebody on your team has, then preparing that material before you start fundraising, so that you're not spending a lot of time trying to fundraise and then scramble to put together a bunch of stuff, is really helpful. If you don't have anybody on your team that's historically gone out and raised venture financing, get a mentor to help you, get somebody who's one of your angel investors who's been involved in raising a lot of venture capital or has credibility and experience with it to help you put together some of those initial documents.
Also, make sure that you have a really good law firm that knows how to do venture-type financings as your lawyer, because they can help you prepare, both in advance of the funding process, but also while the fundraising is happening, all of the different types of materials you're going to need to put the deal together.
- Exploring potential stakeholders: friends, family, and more
- Finding a venture capital firm
- Breaking down the term sheet
- Taking on debt
- Asking for NDAs
- Accepting a no