5 Steps to Becoming Investment Ready

As a founder of a startup, you'll eventually reach a stage in your business where you need to start looking for further investment. After you have proven your concept, gained some traction and established that there is, in fact, a market for your product or service, it’s time for you to get the funding required to take your business to the next level.

But what do you need to have in place before you start seeking out investors? How can you set yourself up for success? The phrase “investment readiness” is used often, but what does that actually mean in practical terms? Here are five things that your startup needs to establish before you start reaching out to potential investors. 

1. Conduct a Funding Needs Assessment 

The first step is to determine what your needs are. How much capital do you need to raise? It's important to have reasons behind this number and to know what it will be spent on and why. If you have not done a proper funding needs assessment, you may end up discovering that your ask does not actually meet your needs. You may even decide in the process of developing your funding needs assessment that what you actually need is proper working capital management, better utilisation of internal resources, or that the need is less than expected and family and friends fundraising could be adequate. 

2. Develop Proper Investors Materials

It is also important to make sure that there are certain things within your business that are aligned before seeking funding. Do you have the proper materials in order? This includes compliance with relevant authorities (standards bureaus, construction authorities, etc), audited accounts, an established financial model, and a pitch deck. You cannot cannot go into the market until you’ve developed the proper investor materials. 

3. Determine Your Ideal Investor Profile

Once you know how much you need to raise and have your materials in order, it is important to think about your ideal investor. What type of investor is best for your venture? Are you looking for a development financial institution (DFI) or is the company at a very early stage and you really need to look for an angel investor? Are you looking for grant funding or should you be targeting venture capitalists? You need to understand the profile of your ideal investor and how they would fit into the long-term plans and scope of the organisation. There should be compatibility in terms of user needs and the investors expectations. Matching the expectations of each side is critical. 

4. Create a Data Room

Another area that is very important is having what we call a data room. Once you prepare all your documents, all the information should be placed in a data room, which includes all the information that an investor might need. This avoids unnecessary back and forth between the organisation and potential investors, allowing you to respond quickly to any request for information. A deep dive into the data room should give a proper overview of your business. This can include market analysis, capitalisation tables, feedback from clients, financial statements, etc. 

5. Work With a Transaction Advisor

Something that most organisations overlook is seeking the support of a consultant or organisation that can assist in fundraising, a role we call transaction advisors. These are professionals who will take the investee through the whole process of fundraising. They help ensure that everything is in place, that all the boxes are ticked. They form the bridge between the investee and potential investors and can also continue providing post-investment support. This is a role that Villgro Africa plays for our incubation companies. 

Are you ready to take your innovation to the next level and need support to become investment ready? Learn more about our incubation program and apply here