Preparing to raise capital can be an exciting and stressful time. It means your company is experiencing growth and that you’re ready to take things to the next level. The best way to prepare to raise capital is to ensure you have the documents and information necessary to present to potential investors during the pitch and due diligence processes.

What do I need to prepare to raise capital?

It’s best to arm yourself with all the information necessary to answer any potential questions a potential investor may have as well as to have the important documents on hand for the initial preparation, pitch, and investigatory stages.

1 – Have Proof of Concept or Traction

Investors want to see traction. They want to know that the organization they’re investing in knows how to succeed. Make sure you have proof that someone will pay for your product or service (and not just friends or family). You want to make sure your current customers are a broad segment and that the sales have been intentional. Investors will also look for a steady stream of customers, an increase in the number of customers, and low churn.

2 – Prepare a Financial Forecast/Financial Projections

No one wants to hand money to someone who doesn’t know exactly what they’re going to do with it. Even less so if the investor can’t directly see what they’re going to get out of it. While there’s no possible way for you to accurately predict the future, you need to have:

  • Detailed quarterly projections for 3-5 years
  • Information on any major growth drivers and prospects
  • Alternative outcomes based on risk factors.

3 – Make Sure you Have Clean (and Accurate) Books

A potential investor is going to ask you a lot of difficult questions and will expect you to have answers to those questions. Have clean books that your potential investor can view, and make sure you have clear working knowledge of those books. Be prepared to answer tough financial questions or be armed with a financial expert (such as a high-level controller or CFO) who can help you answer those questions.

4 – Prepare a Strong Pitch Deck

When you’re preparing to raise capital, part of your preparation will include creating a pitch deck. Resist the urge to over-design, add too much irrelevant imagery, or any other graphics that will detract from the actual story. Investors see hundreds if not thousands of pitch decks. They’re not judging you based on your design prowess; they’re judging your story and proof of concept. Cut out anything extraneous. Focus on a compelling narrative and strong metrics and make sure your pitch deck looks professional, and you’re on the right track.

5 – Have Information About Current Key Customers

Your potential investor will want to know about your top clients as well as strategic partnerships. This shows them the caliber of people you’ve been able to attract and sets the tone for the type of customers and relationships you will be able to acquire moving forward.

6 – Be Prepared with Information on Pending Lawsuits

Make sure you are prepared with information about any pending lawsuits against your organization or initiated by your organization, or any potential upcoming litigation.

7 – Organize Information about Any Existing (or Future) Liabilities

When pursuing capital, be prepared with information about environmental, product, or employee safety liabilities as well as any issues in the past or present.

8 – Come Prepared with Information About Intellectual Property

Make sure you are prepared with documentation for any intellectual property such as:

  • Material patents
  • Copyrights
  • Licenses
  • Trademarks

Also include any information about sales or transactions regarding that property.

9 – Prepare Corporate Records & Documents

Make sure you have prepared all your corporate records and documentations including:

  • Certificates of incorporation
  • Certificates of Designation
  • Rights
  • Bylaws, etc.
  • Include a corporate entity organization chart if necessary.

10 – Organize any Material Agreements

During due diligence, potential investors will likely want to see information regarding:

  • Major agreements, understandings, contacts, or proposed transactions
  • Property leases, mortgages, liens, loans, or other encumbrances
  • Any agreements concerning purchase, lease, or sublease of real property

11 – Prepare a Risk Assessment Analysis & Controlled Risk Profile

Many of the tough questions a potential investor may ask pertain to potential risks, including company risk, industry risk, and market risks. Come into the fundraising process knowing your risks and knowing how to mitigate those risks.

12 – Existing and Projected Marketing, Sales, and Distribution Strategies

Prepare to present information about your marketing, sales, and distribution. Know:

  • What your conversion cycle looks like
  • How long conversion takes
  • Information about churn

Make sure you can answer any questions about (or prepare information for) the marketing, sales, and distribution strategies as well as what actual implementation has and will look like.

13 – Prepare Detailed Market Information

Know what your target customer is and have relevant metrics for:

  • Size of market
  • Competitive landscape
  • Outlook of market
  • Historical and projected market growth rate
  • Current and projected market share
  • Speed and nature of market change (such as with technological developments, etc.)

14 – Include your Organizational Chart & Employee Statistics

A potential investor will want to see the internal structure of your company, including:

  • Organizational chart with key players and summary biographies
  • Historical and projected headcount
  • Information about personnel turnover
  • Any past or present personnel issues
  • Current compensation strategies

15 – Prepare Detailed Information About Current Capital Structure

Before investing in an organization, a potential investor will want details about who owns what and any potential dilutive outcomes. Prepare:

  • List of stockholders with shareholdings, options, warrants, or notes
  • Schedule of all outstanding or potentially dilutive securities with exercise prices and vesting provisions
  • Summary of all debts and lines of credit

16 – Be Aware of Your Current Burn Rate and Runway

Investors want to know how much you’re spending and how quickly you’re spending it. This is used as a frame of reference for how responsibly you will handle their investment and whether or not your business in dire straits (which would be a red flag indicator).

17 – Prepare for Potential Objections and Questions

Don’t be blindsided by tough questions or potential objections. Play devil’s advocate and try to predict the hard questions you may run into. Be prepared with information, answers, or an eloquent way to say that you have a way to find the information the investor needs. Don’t be caught with a blank stare and an “Uhhhh…”

18 – Go Into Fundraising with a Strong Network

When you’re preparing to raise capital, you’ll be at a significant disadvantage if you don’t have a strong network of contacts. These contacts can not only give you a good starting point for seeking potential investors, they can also help you get in the door and validate you as a founder and business person. Don’t underestimate the power of personal connections. Find some way to tie yourself to someone who is connected to a decision-maker and you’ll be stronger out of the gate than a similar company with no contacts.

Next Read…


About the Author

Troy Skabelund

Partner in Residence

Troy Skabelund has over 20 years experience as a CFO and Systems Expert for organizations of all sizes and industries, including 12 years at the Walt Disney Company. He specializes in analyzing and designing financial systems with experience in both proprietary and 3rd party solutions.

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