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Driving Growth

Five steps to a successful fundraise in technology

By: Tallat Mahmood 

When raising capital, make sure you don't waste time and money in the process. Here's how to get it right.

At some point or other along the life cycle of your technology business, it is likely you will need access to additional capital to help realise your growth plans. This funding may be required for sales and marketing, developing your technology, growing your team or other strategic ambition.

Whatever the reason, raising capital is usually a critical point for any business and one that can turn sour very quickly unless you’re prepared and take good advice. It is extremely important to think carefully about how you start this process.

We’ve outlined five steps that you need to think about before beginning a fundraise for your technology business to ensure you successfully secure the funding you need, and don’t waste time and money in the process.

1. Have a sensible business plan

The first thing any potential investor will want to have a look at is a business plan that explains what you’re looking to do, and how. It’s not necessary to fill 100 pages with excessive detail around every aspect of your business but it is important that you are able to explain key milestones in the story of your business, past, present and future.

You will also need to clearly articulate the opportunity for any investor. In other words, why should they invest?

2. Firm up your financials

The financials are the linchpin to any fundraise. They both highlight historical activity and demonstrate how you expect to grow the business.

Where business owners tend to falter is in not being able to justify their numbers properly. The strongest justification is having a track record that you’re looking to continue or accelerate. However, generally you ought to think about what proofs points you can point investors towards to get them to believe that you will achieve the growth you expect.

Is your growth predicated on a change in regulation or some other market development? Is the growth due to come from some new functionality of your offering? Or through a new market you are looking to focus on? Exploring such avenues will help justify why you believe you will achieve the growth you expect.

3. Prepare your PR landscape

An often-overlooked area when preparing for a fundraise is ensuring the business has the right public relations support. This can be either internal or external PR.

Internal PR can be a new client win, or a significant new hire with a strong reputation in your niche market. Such developments can help to improve the perception of your business with investors. However, internal PR is difficult to engineer so that it coincides with a fundraise.

External PR on the other hand is easier to plan for. Getting featured in a relevant industry publication or having some unique feature of your business publicised is extremely helpful prior to any process.

The right PR creates the right perception around your business and helps stand you out from the competition.

4. Get your house in order

It’s easy to underestimate the amount of time required by fundraising. The majority of this time burden is usually on management (depending on the size of the team) as they respond to information requests and provide that information to investors.

Without doubt, the best way for management to limit the burden on their time is to ensure their house is in order. This means making sure all contracts are signed and financial information is up to date. In particular, make sure that intellectual property (IP) of any technology in your business is assigned to the company as opposed to any individual. This is a common pitfall when the IP is assigned to an individual and causes unnecessary frustration during a fundraising process.

Finally, it is important to have shareholders in check prior to a process. The last thing an investor wants is to compete with a large shareholder base that is disorganised and has restrictive rights or protections. To that end, it would make sense to seek early legal advice on your corporate structure.

5. Put the right team in place

Any funder will be putting a large amount of credence into the team that leads the business. Ultimately, they are relying on you and your team to deliver the growth that you are forecasting.

Consequently, it is critically important that there are no fundamental gaps in key roles that are core to the business. It is also important that any roles needed to deliver growth in the business in future are also factored into the plan. 

As published in The Philippine Daily Inquirer, dated 4 July 2016