18 December 2019

Entrepreneurs: The Ultimate Guide to Successful Fundraising

Stéphane Paillard
Coach Startup - Entrepreneur-in-Residence at Schoolab

Fundraising is primarily used to finance and support the growth of a start-up, it must be seen as a lever and not as an end in itself. Too often, entrepreneurs think that winning a fundraiser is like crossing the finish line – think again, this is just the start of an even more intense race!

Entrepreneurs : When and why to raise funds?

Fundraising is a financial transaction to increase the capital of a company. It allows both liquidity to be available to finance future investments and recruitment. This is an essential step to enable the company to structure itself for the rest of its adventure, but it is also a way to bring various investor profiles into its capital. 

There are two main profiles of startup investors : venture capital investments funds and business angels

  • Business Angels, who are individuals with significant industry experience and a developed network, can make available to entrepreneurs.
  • Venture capital investment funds, structures run by financial profiles, waiting for an ROI (return on their investment), which will allow the company to raise larger amounts. VC funds also help entrepreneurs develop a requirement for financial monitoring of their business, based on their contractual expectations.

Fundraising is aimed at all types of companies, but there is a significant difference depending on the type of funder: business angels generally invest between 20,000 and 30,000 euros, while on venture capital, the amounts invested will instead reach 150,000 euros to 200,000 euros, per fund. Entrepreneurs can count on 1 to 10 million euros per fund. 

Make it rain, but on the right things!

Indeed, once the capital is released, it is time for the teams to:

  • structuring HR policy
  • Install financial tools to track strategies (including acquisition or pricing)
  • Recruiting talent

How to raise startup funds – the steps not to be missed

The main criteria for risk investors

It all depends, of course, on the type of company and the type of transaction, but investors are most likely to be interested in the following criteria: 

  • In Seed: the profile of the co-founders, the product and the potential traction. Funding is focused on high risk and return
  • Series A: The company is already more advanced, and apart from the existing product and customers, investors will be interested in performance indicators
  • In series B and C: these series correspond much more to pure financial considerations, with far fewer humans taken into account

It also depends on the players involved: venture capitalists can take a higher risk and allow themselves to focus less on financial indicators, while banks will tend to demand much higher results accounts Detailed.

How to make a good investment record: Stéphane Paillard’s four tips

“Whatever happens, you should not hesitate to seek the advice of people whose job it is,” advises Stéphane Paillard, Head of Startups at Schoolab. “Often, entrepreneurs only go to investors when they need funds. It’s a mistake, we have to build relationships and understand their expectations much more upstream, in order to create a solid record.”

1. Talking to investment experts

The AngelSquare, Daphni and OneRagtime platforms are ideal for entrepreneurs looking for feedback. We must not hesitate to go to these interlocutors, whose job is to help startups raise funds and give them expertise. They have quite the ability to advise on creating a quality pitch deck. 

2. Don’t hesitate to hire a Designer for your startup pitch

Your deck should be at the visual height of what you do on a daily basis – don’t limit yourself to a careless PowerPoint and invest time (and possibly money) in creating a qualitative support, which will be much better received by your Interlocutors!

3. Don’t lie about your startup numbers but make them relevant for fundraising

You don’t have to present a thousand metrics in your pitch, but you have to take the indicators that speak the most about themselves and the most relevant – think carefully about how best to expose your potential.

4. Don’t forget that fundraising is not a sprint

A lift takes about 4 to 8 months. Going to the investors when there are only 2 months of cashflow left on your start-up account is a very bad idea! This type of situation may put too much pressure on the contractor, who, pressed for time, will be more likely to accept poor lifting conditions. 

What are the best VC funds to contact to raise funds?

To choose its interlocutors, it all depends on the type of company that seeks to raise. Indeed, a SaaS application that chose THE MRR (Monthly Recurring Revenue) as its business model was not interested in the same funds as a SpaceTech startup that wanted to revolutionize space travel.

Xange site to search for your investment fund http://findmyvc.io/

The Day After fundraising : What happens after a fundraiser?

As we said earlier, fundraising is the beginning of a marathon! For at least 18 months, the co-founders will have to fuel at full speed to recruit new talent, bring more rigor and precision in their operations, and put in place many processes to support growth. 

The role of the CEO changes drastically, because instead of the boots trapping and operations, he has to do a lot of management and must learn to track the performance of his employees, to identify frictions and productivity points in his company. . After an initial fundraising, there is this obligatory passage where the funds raised must be used to optimize and maximize revenues. This obligation implies a real square structure of its activities: every euro invested must now be 10 euros earned. Management teams are now given much greater responsibilities. 

More money, more stakeholders, more responsibilities: welcome to the vicious-virtuo circle of fundraisers!

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