Fundraising is very time consuming and a distraction to running a business🔗

Despite the fact founders need capital to further their endeavours, they simultaneously have to run the day to day in their business and maintain momentum to build on the great story they are telling investors. All whilst being put through their paces in investor diligence processes.

This is why preparation is key when embarking on a fundraise. It is commonplace for founders to approach any and all funders with their opportunity, often wasting valuable time chasing down responses from investors whose mandates are not aligned to the space they are innovating in or maybe the stage they are at.

In order to conserve time and focus your energies and efforts on funding routes which are most likely to align with your business, spend some time researching funders that have a mandate to invest in your sector and stage of business. Take a look at each funder’s website and socials to see if they publish their investment criteria. This way you can better understand what they are looking for and how best to apply for funding.

Taking the time to research and being more targeted means your valuable time is now focused on investors who have the mandate, track record and experience to back your business, which means a higher likelihood of engagement and interest in the opportunity being presented.

This is key for me. A value-led culture talks to me as an individual and I am more likely to partner with an organisation with values I can relate to. It is important, however, to validate whether these are lived values – does the behaviour of the individuals you are speaking to exemplify the stated values of the company? Is there anyone in your network that can provide any insights from their experience? Is there any public information that can help you form a view?

Good meeting etiquette is just as much a responsibility for an investor as it is for you as the founder. Punctuality, preparedness and engagement in discussions are all things that can offer insights on how an organisation operates and the value placed on its investor-founder relationships.

The people you are meeting with represent the organisation you are proposing a long-term relationship with, so finding those people likeable and approachable with conversational ease is important. A lot of insight can also be drawn from the questions they are asking and the challenges they pose to you during diligence. This will help you understand how they are viewing your business in terms of risk and opportunity, where their experience lies and the value they may be able to bring to the table. Developing a personal connection and understanding is important for a fruitful long-term relationship.

Obviously, part of your role as a founder is to generate excitement and belief in your proposition. If you are not feeling a shared excitement in your mission from a prospective investor, either further work needs to be done in delivering this or there is a question over whether there is sufficient belief in what you are building from an investor. This could build as you cultivate your relationship and a shared understanding develops. If it continues to lack, however, it can also be an alignment flag.

Be honest with prospective funders about what levels of achievement are realistic, what is ambitious, and where you see an exit coming from and at what point. It is important to understand what their objectives are for your business from a performance and returns perspective and to evaluate whether these align with your own expectations and ambitions. Both you and your investor should broadly be on the same page about an exit horizon for your business. This will ensure you are working together to achieve this without conflicting agendas from the off.

Do your own research into a VC by referencing them with founders they have previously invested in and worked with. It is important to draw insights from success stories as well as those who may have struggled to realise their ambitions. Every business is going to experience moments of challenge, and it is important to understand how your prospective investor may react and support you.

It is not out of the ordinary for founders to ask questions of their VC to understand how they operate and whether they are a fit for you. Think about the things that are most important to you – e.g. areas where you lack skills and experience – and prepare some questions to ask in your meetings with them. See what they are able to offer you outside of a capital injection.

An approach that aligns with your expectations🔗

All VCs have different mandates, criteria and approaches. It is crucial that there is an alignment between how a VC approaches their investments and portfolio growth and what you as a founder want or expect.

You may be a founder that is seeking a passive investor, where you do not want pro-active advice and support in growing your business. Taking money from a VC who adopts a very active investment management approach would likely be problematic unless you change your view and are accepting of a more value-add investor.

Being transparent about what you are wanting, expecting and require will ensure both you and your investor agree on how you will work together post transaction.

Evaluating Experience🔗

Finding a VC who has experience investing in businesses at a similar stage to yours could be advantageous for you as a founder, especially if they operate in similar sectors. Depending on their approach, they may offer you deeper insights or support with scaling challenges that are common in your market or at your business stage. For instance, you may be able to tap into a wider network. An investor in this space may also have a more realistic expectation of the time, effort, and capital required to achieve a successful exit. Whilst this may provide advantages for both parties, it is not an absolute requirement for a successful investor-founder relationship or to realise the potential of the business.