Startup Financing - Getting A Jump Start On Series A Funding

Nothing beats the rush of excitement of fundraising! If you are preparing to raise Series A funding, here are the 5 things that you need to do to jump start the process.

In the previous article - Top 3 financials for Series A funding, we talked about user growth rate, forecasts and budgets, and the top traits of a successful founder. In this article, based on the observation as a mentor for startup incubators and working with startup clients, I have summarized top 5 things in chronological order you need to do to have a successful fundraising.

1. Start preparing 6 months to 1 year early

Give yourself at least 6 months to 1 year of runway time. The fundraising process itself can take a few days to a few months, and building a solid pitch and deck can take about 1-2 months. While the founder may be going out and fundraising full time and meeting with a wide variety of potential investors, someone still  needs to run the company. Designate one point of contact who can run the company while the founder is working on the fundraising full-time.

2. Calculate how much you need to raise

The goal for series A is to raise the right amount you need to hit series B milestones. Use financial forecasts to project expenses for the next couple of years and find out how much you’ll need. Take your company’s valuation into consideration to decide how much you need to raise for the Series A round.

3. Prep your story and polish your pitch

The pitch is the reason to believe your path forward. Then comes the part where you ask for a lot of money. That’s all there is to it.

You want to be able to relate to investors with a wide range of backgrounds and have several different versions of the pitch with slightly different angles of storytelling. You will need convincing reasons for a variety of groups who aren’t always connected to believe and ultimately trust you. 

Think of the financier who wonders “how could this make a profit?” and then put yourself in the shoes of the engineer who asks “how does this work?”.  You’ll need a talk track for different audiences in order to impress a wide variety of people. 

For investors who have a strong finance background, you should prepare as much financial data as possible; measurements that reflect financial success or potential.

For investors who have technical backgrounds, go deeper on the technology, highlight the challenges and how the firm solved them. You want to provide enough info to paint a clear picture for investors. You want them to think your company is the next silicon valley unicorn.

4. Know your KPIs

Key Performance Indicators will reflect improvement and success. Depending on your industry, there are different sets of KPIs you want to showcase. In general, you want to know the KPIs below by heart:

·    Burn rate/runway

·    Revenue

·    Number of customers

·    Transaction frequency

·    Customer acquisition cost

Provide enough data and show investors the impressive trend of development for your startup.

5. Build the data room

A data room is an online file storage that hosts your company files. Impress your investors with the amount of data that you have prepared by getting the data room ready with the list of files below:

·    P&L

·    Balance sheet

·    Financial forecasts

·    Cap table

Investors often ask to see the data room after the initial meeting for due diligence. With the data room setup ready to go, you can send the access right upon their request.

A CPA’s 2 Cents

Get ready sooner rather than later. Give yourself enough time to figure out how much to raise, perfect your pitch, memorize your KPIs, and get your data room ready. With these five things will show investors that you mean business and are ready for the next level.