Raising funds as a start-up, VSE or SME is a big journey that can take several months. It is important to persevere and go through each step to reach the expected funding round.
Finding investors, calculating the value of a collection or even using other types of financing: this is what entrepreneurs do to accelerate your business growth. There are several solutions for fundraising, so it is essential to find the one that best suits your situation and needs. Discover the Be a Boss archive on fundraising and how to succeed.
What are the steps to raise funds?
Setting fundraising goals is the first step. Company growth, cash needs to develop your product: the amount to be raised it will depend on the objective to reach. After estimating the value of the roundtable, you must make your project convincing thanks to a solid business plan. Document preparation is essential for convince investors.
Once these preparation stages are completed, the identification of investors comes. Investment funds or business angels : they are the ones who will participate in the financing of the project. These investors then submit a letter of intent (LOI) and due diligence. After signing a confidentiality clause, negotiations can begin to lead to closure: the end of fundraising.
Fundraisers, what do they do?
Fundraisers are people that entrepreneurs contact to help them succeed in a funding round. They accompany the company in presenting the project and do their best to attract investors. Working hand in hand with the entrepreneur, the fundraiser receive remuneration for their servicesbased on a fixed amount or a percentage of the amount collected.
Calling a fundraiser is a considerable time saver, but it can be expensive. Despite their expertise in attracting investors and presenting a project, fundraisers must be well documented before attending a meeting. It is the manager’s job to provide all essential information the smooth running of fundraising.
How much to raise for your funding round?
You have to go through several steps to estimate the amount to be withdrawn. First of all, you must estimate the value of your company by the concept, by the team, but also by potential innovations and the characteristics of the target market. The Business Plan allows entrepreneurs to estimate how much money they will need to complete your project.
There are several calculation methods: intrinsic methodsthat aim to analyze the inside of the company and analog methods, which aim to create much more complex calculations. Depending on the amount to be raised, shares of the company will be sold. This detail must therefore be taken into account before defining the desired value, as you should not sell too many shares of your company.
Are startups the only ones raising funds?
These are the most well-known fundraisers because they are new and innovative companies, but it’s not just start-ups that do the fundraising. SMEs and ETIs also raise funds in order to develop your growth or carry out a large-scale project. Since fundraising is non-refundable, it is a significant asset for companies.
A fundraiser can last for several months, which allows companies to prepare well for project launch if the funding round is successful. It will still be necessary to pay attention to the participation of the alienated capital, in order to don’t give too high a percentage of your society.
Are there other ways to raise funds?
It’s not just raising funds to support a business development project. Love Money is also a solution used by many companies and start-ups. Aiming ask relatives for money, Love Money makes them return to the company’s capital until their investment. This is an advantage because the new shareholders are known to the manager and the proximity is already present.
Love Money promises a much smaller amount than the classic fundraiser, but allows finance small-scale projects. However, the relationship with investors must remain irreproachable: that is why it is important to choose the family members who will invest in the project. Conflicts can jeopardize Love Money’s funding.
Raising funds is not an easy task, but don’t be discouraged. This financing allows entrepreneurs to develop your activity, your product or your marketing strategy. Whatever the project, as long as it aims to grow the company’s activity, it is possible to resort to fundraising.