It is important to remember that whilst seeking venture capital  you are up against hundreds of other companies, all looking for the same pot of cash.  Approaching your funding in the most efficient way possible will ensure that you stack the odds in your favour, which means successfully closing a funding round before you run out of time, money and options .  This requires preparation, perseverance, and a clear understanding of the process.

Preparation

1. Write your executive summary and business plan

Keep them short and readable, well presented, and proof read everything.  Twice.  Keep your financial projections realistic and based on defensible assumptions, and remember to tell investors how you intend to grow the value of their investment.

2. Identify the right investors to approach at the outset; split them into leads and followers

Not all investors are qualified (i.e. have the right experience and track record) to invest in your business, and of those that are typically only 40% will be potential lead investors.  Knowing which leads to approach early in the process maximises your chances of closing a funding before your deal goes stale.  Also, check if any investors have relationships with your existing shareholders, which can significantly help the process.

3. Check all potential investors for portfolio conflicts

This is especially important for technology companies and others with significant intellectual property.  Investors rarely sign confidentiality agreements before a first meeting, so make sure you don’t explain in detail your new technology to an investor with an existing portfolio company that could be a future competitor.

Pitching

 4. Practice your pitch

When pitching your company you must cover all the relevant points clearly in the time available.  Practice your pitch, ideally to people unfamiliar with your company, until your presentation becomes second nature.

5. Focus your efforts on lead investors

At least one lead investor is required to get your funding completed – they will negotiate the terms and conduct the majority of the due diligence.  Followers will join later, filling out the syndicate on similar terms.  The more lead investors you attract the better your chances of forming competing syndicates, which will improve the valuation and terms of your deal, so you need to focus your efforts in arranging pitches to leads first and foremost.

6. Get feedback after every pitch

Every investor you pitch to will form an opinion about your business.  While you may not agree with what they think, do make sure you get their feedback.  Adjust your pitch and business plan if necessary – especially if you keep hearing similar themes in the feedback.

Negotiating and closing

7. Manage the timetable and keep all your lead investors in-line

Getting a term sheet from one investor before meeting the rest is not a good position to be in – it limits your options and your negotiating position.  Try to ensure all your potential lead investors move through the process at the same rate.

8. Don’t stop at your first term sheet

Even after receiving a term sheet, you still have a long way to go.  Anything can happen, so you should keep pitching to other investors right up until the day of signing.  Again, this is about keeping options open and strengthening your negotiating position.

9. Build parallel investor syndicates

Multiple term sheets can lead to multiple syndicates, which means groups of investors competing to invest in your business.  Don’t be surprised if investors who have previously invested together end up in the same syndicate, so identify investor relationships early.  Also, use existing relationships between lead investors and followers to build out syndicates and get to a close faster.

Preparing for your next round

10. Prepare for your next funding round as soon as you close

Once your funding is successfully closed, think carefully about your future capital requirements.  If you expect to need further capital (it’s common for companies to raise multiple rounds of finance) then start laying the ground work early.  Identify the investors you would like to approach and begin building relationships well before you need their money.  Introduce your company and keep them regularly updated with your progress.  With potential investors already well informed about your company, your next funding round will be much less of a mountain to climb.