This article originally appeared on http://euromentors.eu
Soon, the Disrupt Europe Year will come to an end, but we will Grow Global during the next year! So EYIF wants to find out straight from our Euromentors who and what inspired them. And yes, we received a lot of useful advice!
Our second article is dedicated to Carlos Espinal, Partner at Seedcamp. He launched the eBook Fundraising Field Guide, the first of its kind, to help early-stage tech startup founders decipher and navigate through the tedious fundraising process.
Here are some useful tips:
As with product development or any other kind of major development initiatives, you are going to want to have a plan. Fundraising is something that isn’t done overnight; you can’t leave it to the last minute. So the earlier you start planning, building up your materials, building up your forecast and all the elements that are required to convince somebody else to part with their money, the earlier you are likely to have a successful fundraise.
So with raising capital, obviously the rule of thumb of “raise as much as you can” is obviously better than raising too little. The trick is finding the right mix between going to speak to an investor, asking too much money vis-a-vis what you’ve accomplished, versus, raising the right amount of money vis-a-vis what they are willing to tolerate relative to your accomplishments. So try to raise as much as you can, but understand that this doesn’t mean you raise all the money, typically what is required for you to get to cash flow break-even.
Fundraising requires materials for you to be able to share with people, to have people introduce you and the key materials don’t necessarily have to be the way that sometimes people portray them to be, as some thick document with 500 pages explaining every single detail of the company. It just has to be the right level to get somebody to get excited about your company, typically this is maybe a one pager, perhaps it’s a small power point doc, but almost always it requires some sort of financial projection in the uses of capital.
Reaching investors is no different thing than making new friends. You can go to events, you can reach out to them via social networks, like LinkedIn, or what is likely to be the best way to do it is through introductions. Introductions, by far, bring the best results.
So the legal process is the beginning from the point you think of a structure in conjunction with your investor to have it articulated on a term sheet, to then the way that lawyers represent that into the final documentation. That whole process can take time. Generally speaking you want to have lawyers speaking with lawyers and founders speaking with partners, on funds. That way you have more of an equal conversation between equal parties. And try not to breach that, as it becomes a little bit more difficult for you to speak directly with a lawyer; it creates some of the issues. So if you understand the flow and you understand who you need to be talking to, that process with be coped smoothly.