How to prepare for a funding round.

What investors want to see

By Kevin Kearney, Co-Founder, Pivotal Finance

If you are heading into a funding round, the most important work typically happens before you ever sit down with an investor. Businesses that raise well are usually the ones that treat preparation as seriously as the pitch itself.

 This blog sets out what investors want to see, the documents you should have ready, and how to give your business the strongest possible foundation for a successful round.

Why preparation matters before you pitch

Investors form a view of your business quickly, often within, or even before, the first meeting. A well-prepared founder, with clear numbers and a confident grasp of the detail, builds trust from the outset. It shows the business is already being run with the rigour that will be expected once the capital is invested.

Getting this right from the start keeps the process moving too. The better prepared you are, the fewer questions due diligence throws up, and the smoother the path to close.

It also puts you in a stronger negotiating position. Founders who can back up their numbers with confidence tend to hold their ground better on valuation and terms, simply because the investor has fewer reasons to doubt the story being told.

The financial documents you need ready

Being investor-ready means having a core set of documents in good shape before conversations begin:

●      Clean, up to date management accounts

●      A financial model that clearly sets out your assumptions and shows how the numbers move under different scenarios

●      A clear cap table showing your current ownership structure

●      A concise narrative on how the capital will be used and what it will deliver

●      A KPI pack that benchmarks your business against comparable companies.

Having these ready before conversations start puts you in a strong position and shows investors you have thought carefully about the round. It also saves valuable time once discussions begin, since the same documents tend to get requested by every investor you speak to.

“Founders who can back up their numbers with confidence tend to hold their ground better on valuation and terms, because the investor has fewer reasons to doubt the story being told.”

What investors look at first

Investors want to understand your growth trajectory and the story behind it. They will look closely at your model, checking that the assumptions are grounded in evidence.

Just as important is how well you know your own numbers. Founders who can speak confidently and accurately about their financials, without needing to check with someone else, give investors real confidence in the leadership behind the business. However, if you are not confident in this area, taking a CFO into a pitch meeting with you is not unexpected.

Your unit economics are usually an early point of focus too, alongside your cash runway. Investors want to see that you understand how the business earns and spends money at a granular level, and that you have a clear view of how long the current cash position gives you to hit your next milestone.

What gets a deal across the line

The businesses that raise successfully tend to share the following commonalities:

●      Their figures hold together under scrutiny, reconciling clearly between the model and the accounts

●      Their founders come prepared for detailed questions and are comfortable talking through the detail behind them (or having a CFO with them to support)

●      Their valuation expectations are grounded in evidence and supported by a track record that backs it up.

Having these solid foundations in place makes the fundraising process considerably easier. It also frees up more of your energy for finding the right investor and building a relationship that will enable you to continue to build your business once they are on the cap table.

How Pivotal Finance can help

We help growing businesses get investor-ready, from building the financial model through to shaping the narrative that sits behind it. Setting up a well-organised data room and getting ahead of the questions due diligence will raise is key, and it is something we support founders with regularly.

We have supported many businesses through this process and know what investors expect to see at each stage. Whether you are a few months out from a raise or already in the middle of one, having experienced people around you who know what good preparation looks like makes a real difference to how the process goes.

A final thought

Fundraising rounds are won long before the pitch itself. The businesses that prepare well give themselves the strongest possible chance of a good outcome, and set themselves up to make the most of the capital once it lands.

If you are approaching a raise and want to talk through how ready your business is, book a free discovery call with the Pivotal Finance team.