The equity fundraising process can be extremely
time-consuming in part because there are so many different sources of equity
financing. Including but not limited to high net worth individuals, traditional
venture capital firms, and large international banking institutions, potential
investors number well into the thousands. While you want to be aggressive and
expansive in your search for a financial backer, you can save valuable resources
and time by focusing your efforts only on those investors who are most likely to
fund your company. In illustration, many large venture capital firms have
preferred minimum investment levels. If you're seeking to raise only $500,000
for your business, then your time would be better spent on smaller investment
firms and angels. In addition, when you are contacting and meeting with
potential investors, your company will be more warmly received if you come
across as well-informed about their background and investment interests, and the
targeting process can help educate you in this regard.
After you have a list of potential investors, you
should submit business
plan (including an executive summary) to each of them. (Read more about
creating your executive summary and business plan in Springboard's Business Plan
Guide.) Try to submit the plan to an investor either directly if you have
been personally introduced to him/her or through a contact that has agreed to
make an introduction on your behalf. Within a couple of days of the submission,
you should be sure to follow up with a telephone call and email to ensure that
the investor received the document, to answer any questions s/he might have, and
to schedule a time to meet to give them a formal presentation.
Please note that while every case is different, many investors are extremely
resistant to signing confidentiality agreements prior to reviewing business
plans.
After submitting a business plan to an investor, you
should schedule time to give them a formal presentation. This initial meeting
typically takes place in the investor's offices, usually last one to two hours,
and can include a varying number of individuals. It is important for you to
prepare appropriately for this presentation, which can be a pivotal step in your
future with a given investor. You can find information about the elements of a
venture presentation in Creating Your Pitch and essential guidelines for giving
a private investor presentation in The Investor
Presentation.
After hearing your investment presentation and
conducting extensive preliminary research on your company and industry, an
investor may indicate that s/he is highly interested in your company. S/he may
intend to sign a term sheet, which is a summary of the terms upon which the
financier is willing to invest in the company. A term sheet is a non-binding and
outlines the expected nature of the ownership-bearing security that the investor
expects to purchase from the company. Read more about this complicated document
in The Term
Sheet.
Following the execution of a term sheet, an investor
typically has anywhere from four to eight weeks to conduct due diligence, which
is a process potential investors undertake to analyze and assess the
desirability, value, and potential of an investment opportunity. Read more about
this process in Due
Diligence.
Following the execution of a term sheet, an investor
typically has anywhere from four to eight weeks to conduct due diligence, which
is a process potential investors undertake to analyze and assess the
desirability, value, and potential of an investment opportunity. Read more about
this process in Due
Diligence.
Timing (1:55)
Springboard alumna Heather Shively offers advice on the timing of the fundraising process.
Investor Likes and Dislikes (3:58)
Investor Jackie Reses describes investors' likes and dislikes in a potential investment.
