What are the essential factors for a series A fundraising process?
We list and explain the six main components for this fundraising phase - timing, speaker, pitch deck, investors, valuation and cash.
1- OK BUT FIRST, TIMING!
Fundraising is one of the main tools for leveraging the trajectory of a business. A crucial factor is deciding the best time.
Insights into the current scenario:
I. Increased investor caution;
II. Market still liquid - many funds raised; I
II. Higher level of demand in fundamentals (growth, gross margin, product consolidation and good contracts);
IV. Correction in valuations and market multiples.
2- THE FIRST IMPRESSION IS THE ONE THAT STAYS
The speaker
Regardless of the investment round, the speaker is extremely relevant in the fundraising process.
The first selection funnel by VC funds is based on how the message was said by the entrepreneur.
I. Attitude towards investors;
II. Energy and ambition of the entrepreneur;
III. Mastery of the business narrative;
IV. Linear and cohesive presentation;
V. Clarity regarding fundraising objectives and competitive advantages in the operating market.
3- THE STORY TO BE TOLD
The pitch deck
There is no single way to tell a good story, but there are 4 components that guarantee greater interest from investors at the time of presentation:
I. Product market fit - Demonstration that the product has already been tested, approved and consolidated in a customer portfolio;
II. T2D3 growth - Building an exponential growth thesis - tripling a company's ARR in the first two years and doubling it in the following three years;
III. Minimum ARR - Annual recurring revenue between $3-5M;
IV. Use of proceeds - Summary of the application of the capital that will be raised. The practice generally consists of showing the distribution of these investments.
4- THE JURY
The Investors
Presenting yourself in front of a jury that is looking for a profile completely different from yours represents a lack of focus and preparation. It is important to create an investor screening by filtering:
I. Markets in which the fund is exposed;
II. Check size;
III. Priority geographies;
IV. Liquidity to make new investments;
V. Type of action and post-deal management;
5- THE REMUNERATION OFFERED
The Valuation
Each project has its own context and valuations change a lot between transactions. In general, we observe that the post-money valuation is between US$5-20 M, with average dilution of around 20-35% for investors.
I. How strategic the fund is to unlock business growth;
II - How willing the entrepreneur is to execute the deal;
III - How much the company managed to unlock in bootstrap growth.
6- DO NOT DEPEND ON THE AUDITION TEST
The company's cashier
The word of the moment is “cash”. With the recent slowdown in VC deals and negotiated multiples compared to 2021 records, VC funds are more selective in projects that have:
I - Historical consistency;
II - Focus on the company's organic growth;
III - Increased profitability;
IV - Arrangement in a box to grow alone.