Welcome back to part two of our what you need to know about raising capital series! In case you missed it, check out part one in the series, focusing on building good habits: managing your business and having your financial house in order.
Now, we’re moving on and getting ready to raise! Remember, Standard Ledger acts as fractional CFO for numerous startups, and we have helped clients raise more than $40m in the last 5 years, so as always, if we can help let us know!
1. Growth direction, forecasting and planning
Alongside your BAU forecasting and managing it’s now time to start thinking about what an accelerated version of your business looks like. You’ll start to spin up scenarios, including those wonderful growth assumptions, and be discussing these at the leadership and board level in order to recap what growth plan you want to execute on. This usually shows the need for more cash than the company has, and drives ‘the ask’ for how much you will need to raise.
Having a clear aim (usually revenue or ARR) for growth is essential, so setting a target for the next 12-24 months will give you a solid direction to head in. We think planning quarter-by-quarter, and ultimately month-by-month of how you’ll get there works best.
You’ll often be juggling a BAU forecast alongside multiple iterations of a growth forecast, and balancing all of these while maintaining the latest actuals each month, starts to get a little…interesting. Our advice? Keep your forecasts detailed yet flexible, allowing room for adjustments as your business evolves.
2. Calculating funding needs
One of the critical aspects of preparing to raise capital is determining how much funding your business requires, which involves evaluating your growth plans, operational expenses, and potential risks to ask for the right amount. Make sure you do a thorough analysis of your financial projections, taking into account various scenarios and contingencies that may affect your funding needs.
Taking all of the growth and planning into consideration you’ll also need to think about the sequence of actions needed to propel your business forward. Usually investment in advertising/marketing to boost sales pipeline comes first (which might require hiring through external agencies or an internal marketing specialist), next you’ll need salespeople to convert leads into actual sales, and then making sure you have the necessary resources for implementation, operations, and customer success to support your growing customer base.
Remember that before you approach investors you need to have a clear understanding of how the capital will be used and the impact it will have on your business’s growth. By having a well-defined funding strategy in place, you’ll be able to articulate your financial needs confidently and attract the right investors for your business.
3. Crafting the investor pitch
So now you’ve outlined your growth goals, financial forecasts, and funding requirements – it’s time to get crafting. The investor pitch communicates your vision, value proposition, and business growth potential in a compelling way, so make sure you fine tune your pitch to resonate with potential investors (that you’ve already been building relationships with!), highlighting how their support can help your business achieve its goals.
Focus on articulating the unique selling points of your business, showcasing your market opportunity, and demonstrating a solid understanding of your industry landscape. Remember, investors are looking for financial returns but also a promising partnership with a forward-thinking and ambitious team, so by presenting a well-prepared and persuasive pitch, you’ll maximise your chances of securing the funding you need to fuel your growth.
What’s next?
The exciting journey of raising capital for your startup or scaleup needs thorough preparation, clear growth goals, detailed financial plans, calculated funding needs, and a compelling investor pitch. Approaching the process strategically and thoughtfully positions you for sustainable growth and long-term success, and we can help!
At Standard Ledger, we understand the challenges and opportunities that come with raising capital for startups and innovative companies. Our team of experienced professionals is here to support you every step of the way, providing strategic financial advice and guidance to help you achieve your growth objectives. Get in touch with us today to learn how we can be your partners in growth.
Read here for the next part of our series: Ready, Set, Go! What you need to know about raising capital. Part 3: Let’s Get Set!
BOOK A CALL with us for a chat, and get your business ready for the next stage of growth.
