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Startup Fundraising Checklist

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Startup Fundraising Checklist

Raising money for your startup is hard. It always was and will be.

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Fundraising checklist

Are you ready for your startup fundraising?

Is your business/idea working?
Is your team complete?
Is your business a venture capital case?
What are your USPs?
Why do you want to raise?
What time of investor do you need (Angel, Accelerator, Pre-Seed or Seed)?
Do you just want money or also a mentor or board member?
What are you looking for in an investor?
Did you check other financing options (Revenue-based financing, Accelerators, Incubators, Startup studios etc)?

Define and check technical details

Decide which person is in charge of the fundraising process.
Choose advisors/counsels of the round
and decide how much you want to raise.
What are you going to spend the money on?
How much equity are you willing to give to your investors and at what valuation?
How are you going to raise (convertible note, safe note, priced round, equity round)?

Get yourself and your documents ready

Talk to other founders to learn from their experience
Collect the current date for Financial Model Look at 📈Business Models + Startup Financials and 🚀Startup OS
Agree on key assumptions for financial modelling
Play with multiple scenarios
Choose the final version of financial models and keep it handy at all times
Prepare a “Data Room” - folder with all documents Look at 🚀Startup OS
Craft a storyline and content for your pitch deck
Collect and collate all your metrics and performance analytics
Build a draft pitch deck
Run it by your advisors/mentors and implement recommendations
Prepare your final pitch deck
Run a test pitch with your mentors and team
Answer all the “investor questions” for yourself, simply be prepared!
Practice! Practice!

Run your fundraising process

Create an Investor CRM Look at 🚀Startup OS
Create a list of potential investors
The research investment focus of investors
Create a personalised contact strategy for each investor
Ask for intros
Talk to other founders, about which investors are most useful on their cap table
Schedule meetings and pitch to investors
Create a FOMO by scheduling multiple meetings in parallel
Create and send our regular investment updates Templates on 🚀Startup OS
Create an investor criteria list (SMART investment)
List of questions you have for investors
Push investors to give commitments

Negotiating the terms

Mentally change the roles to understand what is important to the investor
Model your capable
Model exit strategies with current terms
Check term sheet with the legal team, other founders and advisors

Finish investment

Choose the investors you want to work with
Prepare the contracts with your lawyers
Get all the legal documents signed
Celebrate with your team Note: Please dont brag on LinkedIn and look for social validation. Just announce!
Prepare for a press release

You can download this checklist as a PDF below

Fundraising Checklist.pdf5114.4KB

Questions VCs will ask Founders

Fundraising is hard especially if you've never gone through the process before. These questions will assist you in preparing for your journey ahead.

Most common questions your VC may ask you in the process of “getting to know more” or “due diligence”

Your Idea

  • What is your short-term vision? (1-2 years)
  • What is your medium-term vision? (3-5 years)
  • What is your long-term vision? (5+ years)
  • What is the monetisation strategy(business model)?
  • What is your target market?
  • Who are users/customers?
  • What is your Unique Value Proposition?
  • What are the main pain points you are trying to solve?
  • What do you plan to do with the raised capital?

Your Team

  • Who is in your team?
  • What skills and experience do they have?
  • How much time are they dedicating to the startup?
  • What is the equity split / how does your cap table look like?

Proof of concept and IP

  • Do you have a working prototype or product?
  • Are people using it, how many active users do you have?
  • Can I check it out and use the platform to test it out?
  • Do you have IP and how are you protecting it?

Relationships

  • Have you made any strategic partnerships?
  • Do you have any advisors?
  • What is your distribution strategy?

Sales and Traction

  • What is your GTM strategy?
  • Are you making money?
  • What are your sales figures?
  • How many active users do you have?
  • Where are you finding your users/customers?
  • What does your conversion/churn rate look like?
  • How many organisations have been onboarded onto your platform?
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Includes;

  • 🕵🏻‍♂️ 60+ questions VCs will ask
  • 60+ questions you can ask VCs

See the questions also at;

18 Mistakes that kill startups

Paul Graham, the co-founder of Y-Combinator, was once asked “what makes startups fail?” It’s a clever question because if a person avoids doing what’s on this list, then they should survive.

Above all else, the one thing that kills your project is “not making something users want.” Everything else below can be disregarded if you aren’t making something people want.

1. Single Founder

There are very few examples of successful startups that are just one person. Even though most companies have one public-facing figurehead, there is usually a team around them. Having a team allows you to bounce ideas around and share the workload. Accountability is created when you don’t want to let your co-founders down, which can help get through the lowest of lows.

2. Bad location

Be where the experts live. Graham wrote this post in 2006 and called out a handful of US cities where startups were viable. Physical location matters significantly less in 2022, but the message remains the same - be around the “right” people. I think this can be partially substituted through online communities, but in-person connections still matter.

3. Marginal Niche

People can pick obscure and trivial problems to solve for their startup. There is usually one reason for this: avoiding competition. Any good idea is going to have competition. “You can only avoid competition by avoiding good ideas.”

4. Derivative Idea

Creating an imitation of an existing company is common, but that isn’t usually a good starting place for a company. Most successful startups are created because the founder is solving a specific unsolved problem with first-hand experience. Look for problems and imagine what it would take to solve them.

5. Obstinacy

It’s important to have a vision, but a startup must be flexible. You can’t be rigid, but you can’t also pivot every week. Graham offers this barometer on when you should pivot, “If you're thinking about turning in some new direction and your users seem excited about it, it's probably a good bet.”

6. Hiring Bad Programmers

Can’t add much more to this one. If you aren’t a programmer, then the best thing is to get a programmer that can hire good ones. The only problem is how do you end up with the first good programmer? Tough nut to crack that requires a little bit of luck for non-programmers.

7. Choosing the Wrong Platform

A platform is a foundation for your startup. Graham refers to platforms in terms of technology (e.g., operating system or programming language), but this good be broader. Whatever you are building on top of you’ll want to make sure it supports the structure above.

8. Slowness in Launching

Launching quickly forces you to finish the work. “Nothing is truly finished till it’s released.” Releases allow you to get feedback from your users to begin the iteration process. Nothing will ever be perfect when it’s launched.

9. Launching Too Early

Launching too slowly has killed more startups rather than launching too fast, but it is possible to launch too quickly. What’s the minimum you need to launch? Graham writes, “identify a core that's both (a) useful on its own and (b) something that can be incrementally expanded into the whole project, and then get that done as soon as possible.”

10. Having No Specific User in Mind

The problems we understand the most are the ones we encounter. Building something for yourself simplifies the issue of creating something users don’t want. You can always build for users other than yourself, but you’ll need to be consistently checking that you are staying the course.

11. Raising Too Little Money

Raising capital creates a runway. Once the runway is up, you are either airborne or dead. More money allows for a longer runway to get airborne. Being “airborne” has different meanings for different situations.

12. Spending Too Much

The most common way of spending too much is hiring too many people. Graham has 3 suggestions about hiring:

  1. Don’t hire if you can avoid it
  2. Incentivise with equity rather than salary
  3. Only hire people to write code or will acquire users as those are the only things you need at first

13. Raising Too Much Money

“When you raise a lot of money, your company moves to the suburbs and has kids” The culture changes from just founders to bringing in employees. Employees aren’t as dedicated. Having money creates inertia because more people are involved. That being said, capital is needed to scale, but adequate thought needs to be put in place before this decision is made.

14. Poor Investment Management

As founders, you want to spend as much of your time on product development rather than managing relationships with your investors. As long as things are going well, your investors should remain fairly quiet and allow you to chart your own path. The problem is that things rarely go smoothly in startups.

15. Sacrificing Users to (Supposed) Profit

Making something that people want is much harder than creating a business model. You need to put your product first, then you can think about profits. It’s irresponsible to not think about a business model, but if you can’t create something people want then your business model doesn’t matter.

16. Not Wanting to Get Your Hands Dirty

If you can be the one who attracts users, you’ll have a much greater chance of succeeding. Product development is most important, but business activities will need to happen if you want to translate your idea into a company.

17. Fights Between Founders

Most disputes aren’t about the situation, but rather the people involved. This is why the choice of co-founders is critical. “The people are the most important ingredient in a startup, so don't compromise there.” Disagreements are going to happen, but you want to have a team that won’t implode over them.

18. A Half-Hearted Effort

The most common failed startups are the ones we never hear about. Friends working on a side project but were never able to fully dedicate the energy required to it. Most successful founders quit their jobs and most failed ones don’t. That doesn’t mean that everyone should quit their jobs, but it’s very hard to give a startup the required time and attention if it isn’t a top priority.

Link to the full article by Paul Graham.

PS: The article may be from 2006, but is still very relevant and realistic!

The Complete Guide to Building a Winning Pitch Deck

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You can also download the guide on BaseTemplate. Use the link below 👇

Happy founding and fundraising 😃

This resource is in collaboration with our friends at Base Templates.

BaseTemplates supports founders with their fundraising templates, pitch deck templates, financial modelling templates and a whole lot of tools and resources for both investors and founders to make the whole process of fundraising “easy as butter”