With fall around the corner, fundraising processes will kick off in earnest again. Every entrepreneur has a different set of goals for fundraising and is willing to make a unique set of trade-offs.
Raising capital is like raising a barn – everyone needs to know the plan for it to work well. Founders should explicitly enumerate fundraising goals. Such a prioritization provides clarity to the executive team and to the board, ensuring everyone is operating under the same plan. It’s also helpful during negotiation to determine which terms can be traded away and which terms are deal breakers.
Below are the 8 most common fundraising goals I’ve seen:
- Maximizing valuation – More aptly called dilution minimization, valuation is the most visible metric of a financing. But it’s also the one that’s zero sum: there are only 100 percentage points of ownership for investors, founders and employees.
- Maintaining control – Some startups find controlling the board or owning a majority of shares is the most important feature of a financing.
- Sharing the vision – Finding partner who believes in the dream and the team is fundamental to a successful working relationship.
- Finding complimentary working styles – Like any relationship, chemistry is critical for success. Chemistry between founders and investors is no different. Reference your potential investors with their other CEOs. Consider building a relationship with your potential investors over long periods of time.
- Benefiting from relevant experience – Experience is reassuring and can help a company repeat the successful strategy of a related company or avoid the mistakes of a failed predecessor.
- Accessing a network – Depending on the sector and stage of a startup, an investor’s network may be useful/important to the success of the company.
- Minimizing process duration – Sometimes, it’s all about speed. The faster an investor can close, the more attractive the offer.
- Leveraging a brand/other services – Helpful in hiring or building momentum in the press, an investor’s brand can extend a halo effect to a startup (and vice versa).
Each founder will have different preferences for a financing which may change in subsequent rounds as the company grows.
Have you seen other goals that I should add to this list?