Series A funding is usually raised by early-stage startups. It is one of the most difficult to raise become the business is just growing. Only a handful of investors are ready to bet on a business that is two or three years old.
However, you should not be discouraged from raising Series A funding. Here are some things you should know before raising Series A funding.
Be series A ready
If you are looking to raise a Series A, it might be a good idea to get familiar with what venture funds look for to ascertain if your company is Series A ready. Promising unit economics, revenue, proof of business model, systems ready to support efficient scaling, product/market fit, customer acquisition strategy and success, quality of team are some key factors that are taken generally taken into consideration and it is wise to evaluate where your company stands against these metrics to figure if you are ready for Series A.
Start early
Fundraising in the current environment is a time-consuming process – be realistic about the timeframe. Make sure you start the process at least 7-8 months prior to when you want to raise a Series A financing. The deal process has two parts, a pre-term sheet and post-term sheet. Underestimating the time required inevitably leads to desperation and will often need to alter your
funding strategy to include diverting attention to raise a bridge round to sustain the business.
Leverage your network
Seed funding is more plentiful and easier to raise as compared to Series A. Leveraging your network and building genuine relationships before you start your Series A fundraise will make it easier for you to get potential meetings with investors. Reach out to your extended network and request them to reach out to their connections. This second-degree network has powerful and favourable outcomes. Spreading the word about your business through your network or through PR/marketing initiatives is always helpful.
Practice your Pitch
The key is to take as many meetings as possible. Speak to other founders who have successfully raised Series A and take their inputs for your pitch. Meet the low priority investors on your list first – they will ask you relevant question and provide you with valuable feedback which you should incorporate in your pitch before meeting the top priority investors on your list.
Get the deal terms right
It is imperative that you ensure that the deal terms for your Series A are right and consistent with the trajectory of your business. The Series A terms will play as a foundation for all future rounds – many of those same terms that you have signed up for in your Series A are likely to carry through to future rounds i.e Series B or Series C – hence important to get them the right the first time itself.
Engage a lawyer
If you’re raising venture capital — you need a lawyer who specializes in structuring venture capital financing. A lawyer who has done multiple of such deals understands the nuances involved in structuring such rounds both from the perspective of which deal terms are important, what the standard market practice is and when to stay firm and when to concede to the investor. This will aid you to close your investment documents faster and more efficiently.
Have all paperwork in place
Shorten your transaction closing time by having all paperwork in place for due diligence. Ensure that your company’s legal documentation and compliance is up to date and have your team put together all records relating to employees, past financing, corporate structure and establishment, client contracts, intellectual property, cap table, etc. The paperwork should be organized and ready for review by the investor appointed legal counsel/diligence team.
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