Fundraising is a very important part in the journey of a startup. Though it plays a crucial role in helping a startup reach the next level, there are many aspects that need to be considered before fundraising is prioritized. Investors expect the startup to fill in many checkboxes before the startup approaches for fundraising. Moreover, many things can be accomplished before any funds are raised. 

In this article, we will share a simple checklist a founder can review before they decide to raise funds. The details are shared below:

1. Motivated Team: Founders should make sure to have a motivated team as they are more willing to put in their extra efforts and time required to run the business, helping it grow. Additionally, motivated employees help to spread a company’s decent reputation and further develop performance and profit. 
2. Current Growth: Founders need to ensure that the current performance metrics are growing consistently and in line or ahead of the industry’s standards. This parameter is necessary to prove business viability and garner investors’ interest. Moreover, if the performance indicators aren’t in line with expectations, it might be best to consult with an expert or reassess your product offering before approaching the investor. 
3. Win-Win Negotiation: Founders should focus on getting an optimal deal with the investor, since it is a long-term partnership. It is important to get the terms of the investor funding right the first time, as many of those terms will follow in Series B and C funding. Work with other founders or a trusted mentor to ensure that the terms are right. 
4. Potential Risks: While seeking capital, founders should be aware of the potential risks to the business and how it may disrupt the functioning within the organization. In general, it showcases the startups’ awareness towards different risks involved in running the business.  Likewise, investors would also want to understand different measures taken by the startup to diminish those risks.
5. Fund Utilization: Founders can plan prior to funding how to utilize the finances once they get the investment. After analyzing the planned use of the investment, make sure that the funds are going toward the areas which need the most improvement. This will only ensure the investor that the fundraising is reasonable. 
6. Product Description: The entrepreneur must clearly articulate what the company’s product or service consists of and how it addresses the  customers’ pain points. Moreover, the startup should have a plan to demonstrate the product and even provide a hands on experience if possible. This gets the investors involved in your solution and also highlights the utility of your business. 
7. Current Market Statistics: Maintaining a record of Industry statistics gives investors a glance at the current state of the market, and how far the startup can go in the future. Targeting a profitable business may not be the best approach if the market is very small. However, it might sound more beneficial to an investor if the startup targets a market with huge opportunity. This is the best approach to highlight the potential of the startup.
8. Knowing the competition: The founders should be aware about the prevailing or growing competition in the industry. It shows the investor how well the entrepreneur knows the industry. Additionally, to tackle the competition, a strategy should be framed with the aim to increase the customer base as well as to face the existing market. 
9. Current Capital Structure: It is advisable that founders maintain a detailed Capitalization Table, along with a summary of possible debts and line of credit, if any. These would provide an analysis of a company’s percentages of ownership, leverage, equity dilution, and value of equity in each round of investment. 
10. Co-founders: It’s generally advised to have a well rounded co-founding team of 3-4 people instead of a single founder company. It avoids a single point of failure, brings more expertise to the table,  and reduces pressure on the founding team. This increases the long term viability of the startup. 
11. Key Partnerships: Founders should maintain the details of all the top clients and the associations with other companies for the investor’s knowledge. This shows them the type of individuals pulled in towards the business and establishes a benchmark for the kind of clients and connections in future.
12. ESOP Pools: An ESOP pool comprises portions of equity held for the issuance of employees, consultants, founders, etc. of a company. It is a way to attract and reward new talent to the startup. It acts as a tool of motivation for the employees that once they own a stock they feel responsible for the performance of the company. 
13. Handling Rejection: Some entrepreneurs might face rejection during the time of fundraising. Investors see many pitch decks in a day and regardless of how amazing the product is, they might reject it. So, it is important for the entrepreneur to handle rejections in a positive manner and accept it. 
14. Intellectual Property: Investors would prefer  to avoid investing in a startup that neglected to make protection law filings, has unaccredited associations, or hasn’t agreed with business laws. Prior to pitching, an entrepreneur really needs to ensure the organization is spotless according to a lawful viewpoint. 
15. Exit Plan: Having an exit plan simply increases the chances of investment by an investor as this will give them an idea of their return on investment. Usually, the main exit strategy for startups is to sell the company to a bigger one or going public with an IPO. This way, the investors can sell off the shares in the company. So, a founder should have an exit strategy in mind. 
16. Pitch Deck: The founder should be well prepared with a pitch and focus on a compelling narrative and strong metrics. The pitch deck should look professional and cut out the irrelevant things as it will only distract and confuse the investor. It is recommended to practice the pitch and get some feedback from someone more experienced, to improve their final delivery.
17. Key Metrics: An entrepreneur should be able to comprehend the financials and key metrics such as retention rate, revenue, acquisition cost, customer base, etc. of their company. Investors want to know that the founders have an idea about those and can express them reasonably. This shows how well the entrepreneur knows the insights of their business.
18. Networking: Approaching fundraising with a strong network of contacts is always advantageous for a business. Networking ensures that a founder has access to opportunities which the team might not be able to find on its own. Likewise, these connections can be quite useful while building the startup, i.e. valuable associations, better margins on deals, etc.  
19. Current Burn Rate: The team should be aware of the rate at which the available finances are being spent in the organization. This is used as a frame of reference for how responsibly the funds will be handled once the investor invests and if there are any red flags. 
20. Financial Projections: It is beneficial to prepare a format of how the finances will be spent in the future within the company. The entrepreneur can prepare a detailed structure of the possible risks or growth prospects of the company in the foreseeable future and quarterly projections of the upcoming couple of years.

Though the list seems a bit long, there are many difficult questions an investor might ask in their interactions, and the investor will expect the founders to have reasonable answers. Hiding the inconsistencies and losses in the business will only make matters worse. So, prepare all the necessary documents and information to present to the investors during the pitch and due diligence process. 

In such scenarios, it’s best to get the counsel of experts and improve your chances of success. For example, working with Investment banks can improve your business structure, valuation terms, cap table, etc. Bayfront provides a host of services for startups that will improve the startup’s chances of funding, i.e. market research, financial projections, investor connect, and many more. In case you are interested, drop a mail to get in touch.