With an entrepreneurial background, I've been expanding my understanding of the startup world through the eyes of an investor since joining SeedBlink.

Every week, I talk to many startups about their fundraising journeys, and I see a wide range of readiness levels. When we have these conversations, I frequently discuss how to approach angel investors, venture capitalists, and other sources of funding. In this article, I'd like to share my fundraising preparation experiences and insights.

The essence of planning in fundraising

The idea of planning your next fundraising campaign can be overwhelming. I can still remember my steps through this process. Of course, I learned all of the tools from some of the programs in which I participated, but doing it felt like scaling an actual mountain after a few lessons of indoor wall-climbing.

Fundraising is often a necessary part of getting your startup off the ground. As a result, thorough preparation is required. Additionally, I'll assume you've already validated your idea. If you're thinking about funding but haven't validated your idea in any way, stop right here. Participating in an incubation or accelerator program might turn out to be valuable. In addition, the steps I propose in this article are high-level and practical. Preparing your materials and organization for funding is where all the investor readiness comes in programs are for!

Step 1: Define your funding needs

The first step might be the most important and often the most challenging – defining your funding needs. It's essential to understand that each company and every stage of a startup's life demands different funding requirements. Take the time to make a top-level plan of your growth for the coming 5 years and, from there, deduce the amount of money you'll need to reach validation milestones. Ideally, aim for sufficient capital that will carry you through the next 12 to 18 months or until a pre-determined satisfactory profitability point is reached.

As a guiding principle, here's a breakdown of the key stages and what you should aim to showcase:

• Pre-Seed stage: demonstrate your competence. At this initial stage, the focus is on proving your team's competence. Investors are looking for founders with the right skills, passion, and drive to turn an idea into reality. This is why typically Friends, Family, and Fans (how can anybody be a fool that believes in your greatness) are important in this sage.
• Seed stage: MVP and customer validation. Your goal is to develop a Minimum Viable Product (MVP) and achieve customer validation. This is where you test your product in the market and gather feedback, demonstrating that there's a demand for your solution.
• Series A: achieving product-market fit, the objective shifts to demonstrating product-market fit. This means showing that your product not only appeals to customers but also addresses a significant need in a sizable market.
• Series B: scalable and repeatable business model. Here, you should demonstrate a scalable and repeatable business model. Investors want to see that you can not only attract customers but also grow and replicate your success consistently.
• Series C: ready to conquer the world. The Series C stage is where you're preparing to 'conquer the world.' To investors, you should be demonstrating the potential for global expansion and significant market dominance. Your business should be on a clear path to not just sustain but also accelerate its growth on a large scale.

● Series D: stop it and go back to work. This guide is not for you. If you need to have a break feel free to send me a DM and we can have a chat about work-life - balance in the few hours a week you have besides your company.

So great, you now have a funding roadmap. This roadmap should detail how the funds will be used, the achievements you plan to accomplish with them, and the specific goals and timelines you're setting. Additionally, consider the kind of investments you'll need to make (CAPEX / OPEX / etc.), as this will impact the type of funding that's most suitable for you.

Step 2: Identify the right type of funding

There are many ways to fund your startup, each with its advantages and disadvantages. These include angel investors, venture capital, crowdfunding, in-kind support, loans, and initial coin offerings (if you are planning to scam someone). It's imperative to evaluate each option carefully and choose what's most beneficial for your current needs. For this article, we focus on equity investments.

There are however some factors you want to keep in mind:

• You might want to retain as much equity as possible as a founding team. If you can bootstrap large parts of find subsidies that is great but retaining great employees or finding supportive knowledgeable investors can propel your growth
• Early loans can significantly impact your cash flow during growth phases, and they often come with personal liabilities. Personal liabilities are not ideal in an innovative market segment where about 90% of companies fail within the first five years.
• You might want to stop using the term “smart money” when talking about your ideal investor. You are somehow implying there is a lot of “dumb money” and whichever the case; every investor I have talked to never referred to themselves as “dumb”.
• Subsidies are not simply 'free money.' Between your subsidy advisor taking a 15% commission, the need for full-time administrative personnel, and the often rapidly evolving environment that subsidies may not accommodate, not to mention that in the best-case scenarios, you might only get 50% of the costs covered, they can end up costing you years of your life instead of a nice “dumb” bag of money.

Step 3: Prepare your documents

Before you start potential investors, you need to have the basis in place. The first step is to create a data room with three documents.

Investment deck

This includes the business plans that articulate your value proposition, target market, revenue model, competition analysis, growth strategy, and all those points you find online that should be in a proper investment deck.

When preparing your investment deck it might be tempting to include every detail about your business. At least that is what happened to me, I know for you everything is already to the point. I promise you that keeping it simple and concise is much better. DocSend has amazing research on this topic and investors don’t spend more than three minutes reviewing a deck.

“I thought I was different and took much more time but I started timing it and the first time I didn’t”

So, the Deck needs to be precise, engaging, and highlight unique points that enhance your proposition. A common mistake is to include large blocks of text; and not include key areas such as the actual investment proposition or business model.

Financials

you need to present clear financial projections, including both Profit & Loss (P&L) and cash flow statements, for the upcoming five years. this should not just be some guesswork but a complete overview that offers potential investors a view of your startup’s financial health and strategic direction. Fortunately, you already made this roadmap in step 1, an easy shortcut!

In addition, also include any relevant annual reports you might already have.

Ownership structure

Understanding and presenting your startup's ownership structure is crucial for potential investors. Start by creating an organization chart. This chart should not only illustrate the different B.V for example. Additionally it might already be nice to show where your intellectual property (IP) is held.

In addition to the organizational chart, ensure you have your company's registry documentation ready, as obtained from the Chamber of Commerce. This official record shows on some level you exist.

Lastly, prepare an up-to-date capitalization table (cap table). This table should detail the company's equity ownership, including shares held by founders, investors, and other stakeholders. It's a crucial tool for understanding the company's equity structure and for making informed decisions about future equity distribution and investment rounds. Learn more about cap tables here.

Step 4: Build a target investor list

Conduct thorough research (just Google it) to compile a list of investors or firms that specialize in your industry or sector. A general number that goes around the internet is you need 50 investor meetings for a successful fundraising round. DocSend research also suggests aiming for around 50 investor meetings.

What does that mean for your investor list? Well, more than 50. Approach this as a sales funnel: realistically assess your expected conversion rate from outreach to becoming an investor. That way you can make an educated guess of how many you will need on your list.

Also, add key information if the investor invests in the stage/sector you are in and some interesting hooks you might use to reach out to them. finding the right investor is like forming a partnership, take your time to know what they do. Investors who understand your business and operate in your segment add value beyond funding. Hey, that seems smart!

When looking at angel investors, equity crowdfunding, or even initial coin offerings - please don’t, then the list should be even longer. Finally incorporate a way to track feedback and the stage you are in with every investor. ie. lead, first contact, first meeting, due diligence etc.

Yes, you need to do this part and yes this is going to feel like work.

Step 5: start the outreach.

You are all set! With your list and pitch ready, it’s time to initiate outreach. Well not totally, consider first looking for feedback on your pitch and deck from experienced individuals in the field. You might also want to start with your 'second or third choice' investors to test initial responses and refine your approach based on the feedback received.

Personalizing your approach for each investor is additionally important. Tailor your pitch to highlight why your startup aligns with their interests and investment strategy. Leverage different communication channels like email, and LinkedIn, and do look for warm introductions from your network.

Additionally, the startup world is heavily reliant on networking; attending events can be a significant advantage. Not only do events offer opportunities to meet new investors, they also help in building an actual relationship with them and other start-up founders in the same boat as you.

As a final tip. There exists this magical instrument that allows for instant, real-time connection, almost as if you were standing right next to the person you want to speak to. an amazing device nearly everyone has nowadays. It's your phone, use it!

Food for thought

A funding round can be a demanding process taking many months, but with good preparation, I hope this makes the initial interactions with investors go more smoothly. Each step, from defining your funding needs to personalizing investor outreach, will help increase the success of your campaign. Feel free to send a message if you want to speak about your situation!

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This editorial was written by Sander Peltenburg, Investment Associate Benelux at SeedBlink.

Sander is a seasoned entrepreneur and expert in the Dutch startup ecosystem, with over a decade of experience in fostering innovation and entrepreneurship, especially in the agri-food and tech sectors. Currently at Seedblink, he excels in guiding startup founders through funding rounds and connecting them with a vast network of European tech investors.