The Pre-Fundraising Checklist: 10 Questions to Ask Yourself Before Raising Money
Before you start making it rain, let's make sure you've got your umbrella and rain boots ready with this pre-fundraising checklist.
Hello! Each week, I'll be sharing actionable tips and insights, for developing your financial acumen and improving your life. Subscribe now to receive these valuable insights and start making progress towards your goals today. It only takes one second and is completely free.
Hello there!
If you're considering raising money for your business, there are a few things you need to consider first. Just like with lifestyle inflation, you don't want to fall into the trap of raising more money than you actually need and then getting trapped in a cycle of debt and financial insecurity.
To avoid this, here's a pre-fundraising checklist of 10 questions you should ask yourself before raising money.
1. What problem are you solving?
The first step in your pre-fundraising checklist is to identify the problem your business or project is solving. You need to have a clear understanding of the pain point you are addressing, and how you are uniquely positioned to solve it.
For example, if you are developing a new app, what specific user needs does it address, and what makes it stand out from other similar apps in the market?
Here is a great article from Antler on how to define your value proposition that I found very insightful.
“A problem well stated is a problem half solved” - John Dewey
2. Who is your target audience?
Knowing your target audience is crucial in fundraising. You need to be clear about who your product or service is for, and why they would be interested in investing in it.
You need to develop a clear and compelling value proposition that will resonate with your target audience.
3. What is your business model?
Your business model is the foundation of your fundraising efforts. You need to have a clear understanding of how you will make money, what your revenue streams are, and how you plan to scale your business.
Investors want to see a sustainable and scalable business model that has the potential to generate significant returns.
I came across this insightful article from Harvard Business Review on How to Design a Winning Business Model, you should check it out if you wish to create or improve yours.
4. What is your team's expertise?
Investors are not just investing in your business or project; they are investing in you and your team. It is crucial to have a talented and experienced team that can execute your business plan effectively.
You need to have a clear understanding of your team's strengths, and weaknesses, and how you can complement each other.
5. What is your traction so far?
Investors want to see proof of concept before investing. You need to have a clear understanding of your traction so far, whether it is user adoption, revenue, or partnerships. To do so, you can measure the evolution of various metrics including new customers, churn rate, net retention rate, customer acquisition costs and lifetime value.
You need to demonstrate that your business or project has market demand and is making progress towards your goals.
6. What is your fundraising goal?
Having a clear understanding of your fundraising goal is essential in setting realistic expectations and aligning your efforts.
Whether it is to recruit people, develop new technology or raise brand awareness, you need to determine how much funding you need to achieve your milestones, and how you plan to use the funds.
7. What is your fundraising strategy?
Your fundraising strategy is the roadmap that will guide your fundraising efforts. You need to determine how you will approach investors, what channels you will use, and what your pitch will be.
Your fundraising strategy should be aligned with your business goals and priorities.
8. What is your valuation?
Your valuation is the price at which you are selling equity in your business or project. It is crucial to have a realistic valuation that reflects your business's current stage and potential.
There are multiple ways to assess the value of your company depending on its stage and level of profitability. Here is an article from Seed Legals detailing How to Value Your Company.
Setting a valuation that is too high can deter investors while setting it too low can undervalue your business.
9. What are your deal terms?
Your deal terms are the conditions under which investors will invest in your business or project. You need to have a clear understanding of the terms you are willing to offer, such as equity, board seats, and return expectations.
You should read this article to have a better understanding of deal terms.
Your deal terms should be attractive enough to entice investors while protecting your business interests.
10. What are your legal and compliance requirements?
Finally, you must ensure that you comply with all legal and regulatory requirements for fundraising.
You need to work with legal and financial experts to ensure that you are adhering to all relevant laws and regulations, such as securities laws and tax requirements.
By asking yourself these 10 questions, you can ensure that you are fully prepared to raise the funds you need for your business without falling into the trap of over-inflating your financial needs.
I hope you found this pre-fundraising checklist useful. Don't forget to share it with others who may benefit from it.
Have a great week!
Isaac
Thanks for reading my article! If you found it helpful, please consider subscribing to the newsletter and sharing it with your friends and colleagues. Your support helps me create more valuable content like this.