In today’s difficult funding environment, advance preparation is critical to success for any company seeking to raise capital.
Most businesses fail not because the owner or founder is unskilled at providing its product or service to customers. Most fail because they are undercapitalized, poorly run, and vulnerable to unexpected challenges. Investors understand this. Private Equity and Venture Capital investors are keenly focused on ensuring that the businesses they invest in are well prepared for the challenges ahead. To nail the pitch and survive due diligence, the leadership team must demonstrate complete command of their business. The only way to accomplish this is through advance preparation.
It is often said that capital raising is a full-time job. In our experience as attorneys, business leaders, and investors, we’ve seen enough to know when a company is ready to begin raising capital. Your attorneys should be able to help you plan and execute a successful financing round but to maximize the value your counsel can bring to the funding effort, you must engage your counsel well before you start pitching investors.
How Do You Know If You’re Ready?
Investment readiness is all about being thorough, transparent, and of course, investable. Success depends on more than a great idea or product. Success is about exploring all the potential holes in your plan and attacking those yourself before investors get the chance.
You must assemble an experienced team of professionals with deep experience in business, finance, and legal matters. The considerations to explore to get more VC-ready include:
- Strength of your team: What is the makeup of your team? Does your team have diverse experience and skill sets to better inform your work? How will rights and responsibilities be divided among the team?
- Market research: What is the market for your product? Are there competitors? If so, how will you separate your product or service from them? Does your market have expendable income to spend on your product or service, or will it have to replace a product or service it already pays for? Is the product or service scalable on the market?
- Intellectual property review: Do you already own the IP? Are those IP rights shared? How much value does the IP add to your company? Is there potential for claims of infringement upon other similar IPs? Have you defended your IP against potential infringers if there are any?
- Traction: Are you already on the market? Do you have any third-party manufacturers or vendors involved, and what do those contracts look like? How much money is already going in and out of the business so far?
This is nowhere near an exhaustive list of questions you need to be asking before you’re ever in a room with potential investors. They’re going to heavily scrutinize every angle because, frankly, it’s their money and reputation on the line.
What Can You Do Today to Be VC-Ready?
If you’re nearing the point where funding is critical but you’re not sure if you’re ready, the best thing you can do today is connect with a legal partner who will guide you through this process. Having a legal partner who not only understands entity formation and other integral business law matters but also has experience as both an entrepreneur and an investor is game-changing for startups and growth companies.
Soloway is disrupting legal to serve you better by breaking the constraints of the traditional legal model and moving into something far more exciting and forward-thinking. We work with clients from VC readiness all the way through formation and even through exit strategies. Our Legal Health Check services can also support those entering critical funding stages to examine all potential risks and liabilities before an investor is turned away. We are your legal partner for any legal and funding strategies you need to turn your vision into reality. Let’s connect and talk abut ways to chart a clear and successful path forward.
Soloway
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