Our Startup Funding Guide & A Priceless Checklist

Introduction

The seed round starts in seconds, seconds that pass the slowest. VCs scan you with their steel-cold eyes in silence, and the silence is not broken by sweat and sweet dreams. Dreams they’ve seen countless times in their fights throughout their life, and life has seasoned them in this dance of dollars and dreams. But for you, it may be your first pitch. Unfair? Not necessarily.

Here’s the twist: while the stage might seem rigged against the newcomer, with the right knowledge and preparation, the scales are balanced. Knowledge is the greatest equalizer, and by the end of this article, you’ll be equipped with invaluable insights into what it takes to be funding-ready, distilled directly from successful entrepreneurs who have navigated this journey countless times.

Bootstrap for as Long as Possible

“I wish I knew I didn’t need investors.”
– Emil Åkesson, Chairman & Founding Partner at CLC & Partners

Every entrepreneur dreams of the light that investor capital can bring: rapid scaling, hiring top-tier talent, amplifying marketing efforts, and launching new projects. Yet, the shadows this light casts are equally important. The pressures of external expectations, diluted ownership, and potential strategic shifts might not always align with the founder’s vision. And this can cause serious conflicts.

You should not talk to investors until you have no other option. Try to bootstrap your business as long as you can, use your own resources, and plan the best time to seek outside investment before you do it. Then, you will have a strong hand. If you come into a negotiation with a revenue and a product out, that’s when investors take a keen interest.

The only time you need to get an investor in is when your product or vision is grand, and the only bridge between your vision and reality is capital. But investments aren’t gratis. You are giving away part of your company, your freedom, and your time, which will be stolen from refining your business. And while the pie might get bigger, your slice will become smaller. It’s essential to weigh this trade-off: Is the value they bring worth the percentage you’re giving up?

When You Decide on Seeking Funding

“I wish I knew how mentally and physically tough you need to be….. “
– Darren Coxon, Senior Consultant at CLC & Partners

Entrepreneurs need to dream, and research, and plan, and lose sleep, and doubt, and strategize, and face failures, and adapt, and juggle life and business, and take risks, and persist… And this barely captures the gravity they feel, knowing so many depend on their choices and direction.

Why bear such hurdles? It’s who you are: unemployable, problem-solver, leader, visionary, and can’t live any other way. But like any other choice you make, this choice also leads to challenges ahead, and you need to be prepared. In the end, if you don’t eat your meat, you can’t have any pudding.

Find the Best Funding Method for Your Startup

As you embark on this journey, dive deep into the nuances and expectations each method brings. Understand their implications, both immediate and long-term, and make an informed choice that propels your startup not just financially but also strategically.

When it comes to methods, the conversation often revolves around the heavyweight Venture Capital firms. They’re dominant, backed by substantial marketing budgets, and they consistently make headlines. For many of these VCs, it’s just a numbers game. Their true interest often lies with later-stage startups with impressive annual returns.

However, chasing after VCs can be a misstep for many startups still carving their niche. For early startups, the less flashy angel investors can be a much better choice. They believe in early-stage visions, understand the journey, and typically offer more favorable terms for those they back.

Then there is crowdfunding. It’s especially suited for startups that can rally a community around their vision. By directly engaging with their audience, startups not only raise funds but also validate their idea in the real market. Crowdfunding platforms like Raze Finance present a compelling avenue for such startups.

Seek Strategic Partnerships Over a Bag of Money

In business, the term “strategic” is often tossed around casually. Companies boast about having major players like Apple as partners just because they use their products. However, true strategies go beyond this superficial showmanship.

Strategy is the big picture – where you want your company to be in the future and how to get there. Strategic partnerships involve collaborating with entities that can help you achieve your visions in a mutually beneficial manner.

A strategic investor, unlike a typical investor, is more than a funding source. They share your vision and are committed to helping you reach your milestones. These investors bring not just money but also invaluable guidance, connections, and opportunities for future growth. They act as true partners, expand your network, open doors to further investments, and propel your company forward. Essentially, they are far more than a mere cash infusion. They are integral to your long-term success, as you are to them.

For instance, for a startup with a beverage product, securing funding from Coca-Cola’s Venturing & Emerging Brands (VEB) can offer unparalleled advantages compared to other investors.

Understand Investors

Venture capital is a strategy, a meticulous plan drawn out to maximize returns while mitigating risks. If you’re aiming to win investors, a crucial aspect is understanding their mindset. Here’s a breakdown:

Revenue: First and foremost, investors are not charity. They are interested in your business for the sweet ROI (return on investment). The higher the potential return, the shinier your startup becomes. However, they know high rewards often come with high risks and always weigh these two against each other.

The Fear of Missing Out (FOMO): Investors have FOMO hardwired into them. They are constantly on the lookout for the “next big thing,” and their biggest nightmare is saying, “I knew them when they were just a garage startup.” Make them understand your startup is that story waiting to happen.

Due Diligence: Investors do not like risks, and they will scrutinize every aspect of your startup. From your business model, financials, and market size to your team, product, and competition. Expect to be on the hot seat.

Long-term Viability: Many investors look for startups with long-term viability. They’re not just investing in the current product or prototype but in the potential to innovate and dominate the market in the coming years.

Signs of Weakness: Certain red flags can spell “pass” for many: lack of revenue, limited runway, no other offers on the table, lack of traction, unrealistic projections, buzzword overload, and lack of transparency.

Signs of Strength: On the flip side, there are attributes that make you incredibly attractive to investors: a steady revenue stream, profitability, multiple potential investors, a strong and competent team, being in an up-and-coming sector, clear market opportunity, a robust revenue model, and scalability.

The bottom line is simple: Can you make them profit? Revenue is king, but that doesn’t mean the court around the king is less important.

Make Sure You Are on the Table, Not the Menu

Determining how much equity to give away when seeking investment is a complex and dynamic decision. There is no fixed formula or calculator that can provide an exact number that fits all. Equity allocation should be viewed as a strategic long-term consideration.

In the early stages, you might aim for a portion of your company, often ranging from 10% to 30%. This may seem a reasonable amount. However, this is just one step along the road. As your startup progresses through Seed and Series A to H rounds, more investors will come on board, leading to a further dilution in this vicious cycle.

The key takeaway is to plan your funding roadmap beforehand. Maintain a balance between securing the necessary capital to fuel your growth and retaining enough equity to ensure that you have control and a substantial stake in your own company’s future. Keep every penny count.

Giving away too much equity in the early stages can limit your control and future opportunities, so it’s crucial to evaluate each investment opportunity carefully and negotiate terms that align with your long-term vision. Keep in mind that losing control over your business also means slower operations which directly affects the success of your business.

Be Prepared

In the startup battlefield, the investment arena is the frontline. You need to gear up and face the barrage of questions, skepticism, and challenges thrown your way. Being well-prepared will allow you to articulate your vision with precision and clarity and also demonstrate the solidity of your concept and the depth of your commitment to it.

Mind Over Matter

As much as a startup pitch is about presenting the facts and figures, it’s equally about the energy, the story, and the charisma you bring to the table. You want to project confidence and authenticity, not a rehearsed script.

Think about it. Investors listen to numerous pitches. What’s going to make yours memorable? Humor, passion, and genuine engagement can set you apart.

Seriously, make them laugh. Get the good hormones to do the work for you. If you can get them to say ‘Oh, remember that one guy?’ moment the next day, that’s a win. Our brain remembers better when things are associated with emotions.

Practice Makes Perfect

On the practical side, preparation is paramount. Don’t dive in blind. Practice until it’s a part of you, a thousand times if necessary. Whether it’s in front of a mirror, getting feedback from friends, or running through the presentation with your co-founders, it all helps.

Some people even prepare a script like a Broadway play, including pauses, intonations, and even jokes. Others prefer a more spontaneous approach. Whatever suits you, make sure you become comfortable with it, sound natural, and remember it’s not a monologue.

In conclusion, be genuine, be confident, and be well-prepared. It’s about forming a connection, making an impression, and, above all, believing in your vision enough to make others see it too.

Pitch Perfect

At CLC & Partners, we apply a revenue-first methodology. We focus on making businesses both profitable and sustainable. This strategy doesn’t just attract investors; it retains them. Once we complete refining the revenue model, we shift our focus to perfecting the pitch. A solid financial foundation is paramount, but the ability to convey its merits convincingly to investors is equally crucial.

If this approach resonates with you, we are here to guide you.

When it comes to crafting a good pitch deck, your passion needs to shine and readiness be evident. Stay true to your voice and style, and adjust it accordingly to your startup. In addition, it’s always good to violate the norms a little bit. After all, the most memorable ones are those that dare to be different.

If you’re seeking a general framework, consider the following guidelines:

Hook

It is arguably the most critical element of your pitch. With VCs drowning in a sea of pitches, you have seconds to land a hit that leaves a mark. Make your statement bold, make it resonate, and make it undeniably you. Put your best foot forward and set the stage for what will you talk about.

There are various ways to achieve this. You might use storytelling and tell a customer’s journey or your own experience leading to the startup’s inception. You can also use the undeniable power of data. Emphasize market needs, potential revenue, or the growth prospects of your sector. If you have good traction and have reached milestones, showcasing it can convey the legitimacy and potential of your startup.

The objective is clear: intrigue, impress, and imprint your venture’s potential on the minds of the audience.

Problem

“I wish I knew 9 out of 10 start-ups fail, not just from business challenges, but because they start with their own vision and not the eyes of their target audience.”

– Robert Leon Karlsson, CMO at CLC & Partners

Too often, start-ups are blinded by their own visions, overlooking the essential viewpoints of their target audience. Introduce the problem you’ll be solving and make sure you are aligned with your target audience. It should include real-world pain points, and you need to explain their significance and urgency.

Be aware that you may be an expert in your problem area, but your audience might not share your depth of understanding. Break down the complexity, simplify jargon, and lay out the landscape in a manner that’s digestible, relatable, and undeniably compelling. Your goal is to make them not only understand the problem but also feel its weight.

Solution

In any compelling story, once the problem is clear, the hero emerges with a solution. Your startup is that hero. It’s vital to prove that your solution is a tangible, tested reality. You want to present a validated prototype, product, or service with some level of real-world application.

Let your product do the talking. Demo your product. Display your testimonials with strong visuals. Give your investors a firsthand experience of your solution.

The Edge

Show your competitive advantage over others in your market. It can be a first-mover advantage, a unique business model, a robust product, or a unique patent. For instance, if your startup is built on upfront payment, it’s a great green flag for investors. Your traction is also a good indicator of your advantage. You can use a rising trend graph indicating user acquisition or monthly growth.

This isn’t just about showcasing present achievements but also about future potential. Highlight any scalable aspects, growing partnerships, or expansion plans to signify not just where you are but where you’re confidently headed. The aim is to instill belief in the investors that your startup has that special element poised to revolutionize the market.

Numbers

Investors predominantly focus on the financials. Emil Åkesson states that a staggering 40% of slide viewing time is dedicated to these slides. However, he also warns while these numbers grab the spotlight, the importance of the other factors of your pitch shouldn’t be diminished. The foundation is paramount, but the structure as a whole needs to be robust and cohesive as well.

Turning a problem into a profitable opportunity is the linchpin of your startup’s viability. Here, realism and transparency are your best allies. Show the market size. Demonstrate the magnitude of the opportunity, quantifying the potential customer base and the revenue it could generate.

Break down your business model and revenue streams. Explain how each contributes to the overall financial health of your venture. Clarify how your model not only generates profits for the startup but also creates value for your partners and stakeholders. Be as clear as possible and leave no room for ambiguity.

Customer Acquisition

Capturing the market includes sales, marketing, PR, and more. Bland assurances like “going viral” or “word of mouth” won’t suffice here. Neither will a vague plan of running ads on popular platforms over a detailed cross-platform plan. Your acquisition blueprint should be concrete and well-researched.

Walk the investors through your strategic roadmap: the channels you are targeting, the customer lifetime value you’re forecasting, the acquisition costs per channel, and how you plan to optimize and scale these efforts. Showcase your traction and partners. Demonstrate that you not only understand and streamline your customer’s journey but also have the tools and strategy to guide them to your doorstep effectively.

Competition

Competitors are a reality, not a possibility, and investors will want to know about this. Addressing them realistically in your pitch reflects diligence and thorough market research. By acknowledging your competition, you reassure the investors that you’re neither blindsided nor over-optimistic.

Your unique selling proposition is central here. Perhaps you’ve carved a distinct niche, or you’re leveraging a groundbreaking technology. Whatever the distinction, ensure it’s both compelling and sustainable. Conducting a SWOT analysis beforehand can help you refine and communicate your advantages more effectively.

Lay out your long-term vision and strategy in your summary. Detail how you aim to maintain your competitive edge and continually add value in the face of evolving market dynamics. Your ultimate goal should be to ensure investors perceive your startup will build value for the long term.

Team

Behind every great startup is an exceptional team, and investors also bet on the jockeys, not just the horses. Highlight the expertise and unique attributes that each member brings. If your team has top-tier professionals, put them in the spotlight early on. And remember, visuals matter. If possible, introduce your team in person. If not, show professional, high-quality photos that capture their essence.

Having a sustainable growth model for your team can impress investors. Promote the metric of revenue per employee and underscore that your focus isn’t on headcount but on the value generated. After all, what truly defines a successful venture is the value it offers, not the number of names on its payroll.

Projections

Financial forecasts are a critical component to showcasing your startup’s trajectory. These projections can be presented through detailed figures or through illustrative trends, but clarity, accuracy, and realism are paramount.

Two common methodologies for forecasting are the bottom-up and top-down approaches. It’s often beneficial to employ both, but numbers should be coherent. This dual approach will showcase thoroughness and instill greater confidence in the accuracy of your projections. You should also highlight the milestones you’ve already achieved and outline potential exit strategies and the milestones necessary to realize them to attract investors.

Remember, exaggeration is your enemy. Overstating or misrepresenting figures can tarnish your credibility. Rather than framing two customers becoming four as “100% growth,” it’s better to state the addition of two customers. Your interactions with potential investors can shape long-term relationships. Always initiate these partnerships grounded in honesty for a healthy one.

Call to Action

After painting a comprehensive picture of your startup’s journey, challenges, and potential, it’s essential to articulate your ask. Express your expectations clearly to the investors. This directness will help you avoid any ambiguity.

Conclude by revisiting the high points of your presentation and synthesize the essence of your pitch in a few potent sentences. A well-articulated call to action leaves a lasting impression and reinforces the purpose and potential of your startup in the minds of the investors.

In the end, this provides a foundational framework for a compelling pitch deck. Yet, the magic lies in personalizing it. To truly craft a pitch deck that resonates, you must invest your valuable time and, perhaps, lean on the expertise of professionals. Consider seeking guidance from experts like the consultants at CLC & Partners to refine and elevate your presentation. After all, the right pitch can be the key that unlocks your startup’s next big chapter.

Be Skeptical of Large Offers

There might be times when investors, recognizing the potential of your idea, push to invest more than you’ve asked for. While it might be tempting, it’s wise to resist since you may end up giving away more equity than you need to. If you’ve determined you need two million, don’t get swayed by a ten million offer. Accepting such offers can unnecessarily dilute your ownership, diminish your say in your business, and lead to remorse.

By resisting such offers, you not only protect the essence of your startup but also convey a deep-rooted belief in its trajectory. This solid stand will safeguard your vision and position you in a place of strength during negotiations.

Failure is Feedback

Your pitch deck should be as alive as your startup dreams. You may hear investors saying, “Your revenue model lacks scalability,” or “Your user acquisition strategy isn’t convincing.” Try to improve these areas in your next pitch, and you will be just fine. Every critique offers a valuable perspective. The key is not to mix feedback with setbacks but as lessons to iterate upon.

The process demands patience. Some feedback might sting, but each critique will shape your startup’s bildungsroman (coming of age), carving out your unique story. Next time, appreciate the lesson, refine it, and storm back in. Every pitch, every “no,” will set the stage for that final game-changing “yes.”

Success is Successive

Once you get the funding, the thrill is undeniable. It’s the climax of countless pitches, sleepless nights, and persistent networking. But remember, success is not a single peak; it’s a series of summits, each higher than the last. The euphoria should fade soon, and the gravity of responsibility set in.

This funding is the belief of outsiders in your startup’s potential. With this trust comes the responsibility to nurture your venture and fulfill those expectations. The way you allocate funds, prioritize projects, and optimize operations will dictate your venture’s long-term trajectory. Every dime should be judiciously utilized. It’s not just money; it’s the materialized form of your startup, equity, and vision.

Remember, the ultimate aim is to realize your startup’s potential, scale it to new heights, and fulfill the vision you’ve passionately pursued. So, let your vision guide your expenses and ensure that every expenditure offers value.

Conclusion

And there you have it. From the initial steps of bootstrapping to the climax of securing that all-important funding, we analyzed and ventured through the myriad facets of the startup landscape. After seeing it all, one cannot help but see it’s not just a roadmap to secure funding but a startup blueprint for robust and sustainable growth.

Now you have a compass, but the map you chart is distinctly yours. For tailored support and a streamlined funding process, connect with us at clc.partners, and let’s elevate your funding journey together!

And here’s the priceless checklist from Emil Åkesson:

Investor Readiness Checklist

I. Corporate Governance:

Board of Directors:
- Composition
- Meeting Minutes

Shareholder Agreements
Articles of Incorporation
Bylaws
Compliance with applicable laws and regulations
Conflict of Interest Policy

II. Financial Documentation:

Audited Financial Statements
Current Year Budget
Financial Projections
Cap Table
Unit Economics
Burn Rate Analysis

III. Pitch Deck:

Problem & Solution

Market Size & Analysis
Business Model
Revenue Model
Competitive Analysis
Marketing & Sales Strategy
Traction (Customer Growth, Revenue, Partnerships)
Team Overview
Financials
Ask Slide (Investment ask, Use of Funds)

IV. Operational Metrics:

Customer Acquisition Cost (CAC)
Lifetime Value (LTV)
Churn Rate
Monthly Recurring Revenue (MRR) / Annual Recurring Revenue (ARR)
Net Promoter Score (NPS)
Product Metrics (usage, engagement)

V. Legal & IP:

Intellectual Property:
- Patents
- Trademarks
- Copyrights

Contracts & Agreements:
- Customer Contracts
- Supplier Agreements
- Employee and Contractor Agreements

Litigation and Legal Compliance

VI. Market Validation:

Customer Testimonials
Case Studies
Industry Awards and Recognition

VII. Technology & Product:

Product Roadmap
Technology Stack
Data Security & Privacy Compliance

VIII. Team:

Founders & Key Management
Advisory Board
Organizational Chart

IX. Exit Strategy:

Potential Acquirers
Industry Multiples
Projected Exit Valuation

X. Other:

Insurance Coverage
Real Estate and Tangible Assets