When you’re in fundraising mode, the exciting bit is getting the money in.
This can take a long time, as you can imagine, and is likely to depend on a number of factors:
- Who is doing the fundraising?
- How much experience do they have?
- How quickly and easily can you deal with the paperwork?
- Do you have legal support?
- Are you fundraising on an equity, debt or advanced subscription basis?
But you can also speed up the process. Here’s how…
When you are given your investment documentation by your accelerator, it will probably be just standard template terms for them. Don’t just sign it, there is potentially lots of wiggle room! Give it to your lawyer.
Similarly, if you have first time angel investors, they are likely to want to read through and comment on everything. Again, make sure you show your agreement and any comments they might have to your lawyer before you sign it.
In both these scenarios, your lawyer can be your “bad cop”, standing up for you and your company and helping wrap this all up quickly so you can move on with the fundraise.
Remember, throughout all this, you need to be running and managing your business, communicating with stakeholders, keeping everyone up to speed.
The more you can hand the legal side of things to an expert, the more time you’ll have to do your critical work. If you’re spending five hours a day ploughing through documents you don’t understand, that’s not good for you or your business.
I remember just before we secured investment having to face all these documents. Piles of them. Having a lawyer on board made a huge difference.
In fact, hiring a lawyer and starting to outsource expertise is good preparation for the change in mindset you’ll need to make from start-up to scale up.
As a start-up you’re probably used to working from home or in a workspace. Once you take money from an accelerator or an investment fund, you’re on your way to becoming a corporate. You will need to prepare for board meetings and your overall workload will increase.
So, back to your fundraise. Generally, at this stage, everyone’s working towards the same completion date; orchestrated by your lawyers. They will make sure everyone signs where they need to sign at a set time – usually electronically (even before COVID-19).
If you’re organised and keen to get things done on a pure equity deal, you can probably complete within four weeks. An advanced subscription round can be completed within a week which is good to know if you’re keen for cash quickly.
Recently, in light of COVID-19, David Turney of Avery Law LLP, whom I spoke with on my podcast,said he’s aware of many valuations that have been slashed in half recently (as of April 2020). As a result, he’s suggesting that if you are fundraising now you consider an advanced subscription fundraising model. This means you can raise cash quickly and don’t have to discuss valuation.
Going from start-up to scale-up is a challenge, and one best faced with an expert team in your corner.
Click here to connect with David Turney.
Download my new expert guide: NO-STRESS SCALING: HOW TO GO FROM PRE-SEED FUNDING TO ‘SERIES A’ AND BEYOND