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Step #2:  Raising Capital? Get Yourself Investment Ready

By, Dennis Crowley & Brian Popiel

For any company or fund looking to raise capital, being “investment ready” is critical. Investment readiness or “financing readiness”, refers to a company or fund's readiness to successfully raise capital from investors. To become investment ready, these entities must be able to demonstrate their value proposition, potential for growth, and their ability to generate returns for investors, as well as demonstrate that you have a clear understanding of your financial situation, including its cash flow, assets, liabilities, and revenue streams. It also means having a strong understanding of the market, competitors, and opportunities for growth.  All this information needs to be in a diligence-ready vehicle that can be reviewed by potential investors.

Investment readiness can be achieved through careful preparation and planning, including developing a solid business plan, financial projections, and a clear strategy for growth.  It also means having a plan for how you will use the funds raised and a strategy for delivering a return on investment to your investors.  But being investment ready requires more than just having a solid business plan and a great idea, it means being able to effectively articulate and share your company's vision and goals to potential investors seeking these types of alternative investments.clemens-van-lay-un1s8VOLRC0-unsplash

Today, technology, such as the Trellis Platform, helps those raising capital not just syndicate their investment opportunity, but also helps them become organized and investment ready.  The onboarding process of the Trellis solution efficiently takes those raising capital through a series of questionnaires that helps that helps the company, fund, or SPV articulate the plan and projection that can then be easily shared with investors.  Once organized, it creates a great diligence-ready, investment presentation platform we call the Digital Roadshow™.

Whether you’re raising your first fund or seed round or it’s your third fund or Series C, to become investment ready, a company or fund should take the following steps:

  1. Develop a solid business plan: A business plan is a critical component of investment readiness. It should outline the company's or fund’s mission, vision, and goals, as well as its strategy for achieving those goals. For a company, the plan should also include a detailed description of the company's products or services, target market, and competitive landscape.  For a fund, it should include the fund’s investment thesis, target market, and return strategy. 
  2. Build a Strong Financial Foundation:  The next step in becoming investment ready is to build a strong financial foundation. This means having accurate financial statements or projections, including income statements, balance sheets, and cash flow statements. It also means having a plan for managing cash flow, including strategies for managing expenses, generating revenue, and securing financing. Projections should be based on realistic assumptions and should consider any potential risks or challenges the company may face.
  3. Establish a clear growth strategy: Companies should have a clear strategy for growth that outlines how they plan to expand their business and increase revenue. This may involve expanding into new markets, launching new products or services, or implementing new marketing strategies.  Funds should clearly define their ability to find, diligence, invest, and support the investment entities.
  4. Develop a strong team: Whether investing in a fund or a company, investors are looking for a strong and experienced team that can execute on the strategy. You should ensure that you have the right people in place to lead the company or fund to achieve its goals, and the right plan in place to staff up as the business plan progresses.
  5. Ensure compliance: All entities (company, fund, or SPV) raising capital, must ensure that they are in compliance with all applicable laws and regulations. This may involve obtaining any necessary licenses or permits, as well as complying with securities laws and regulations.  With technology solutions, like Trellis, you can feel confident knowing that compliance initiatives are already built into the platform.mar-munoz-woVM3KIqpJw-unsplash
  6. Build Relationships with Potential Investors: Building relationships with potential investors is critical to becoming financing ready. You should identify and connect with potential investors early in the process and work to build strong relationships with them. This means attending industry events, networking with other entrepreneurs, and engaging with investors online.
  7. Have a clear plan for using funds: Companies should have a clear plan for how they will deploy the funds raised through investment. This may include investing in new equipment or technology, product development,            hiring new employees, or expanding marketing efforts.
  8. Create a Clear Strategy for Delivering a Return on Investment: Investors want to know how they will make money by investing in your company. To become investment ready, you must have a clear strategy for delivering a return on investment.

Finally, to become financing ready, you must prepare for due diligence, which will be the topic of our next blog. This means having all your financial and legal documents in order, including your business plan, financial statements, tax returns, and legal agreements. You should also be prepared to answer questions about your company's history, strategy, and potential for growth.

Overall, becoming investment ready requires careful preparation and planning. Companies must be able to demonstrate their value proposition, potential for growth, and their ability to generate returns for investors. By following these steps, entities such as companies, funds, or SPV can increase their chances of successfully raising capital from investors and achieving their growth objectives. Becoming financing ready requires careful planning, preparation, and execution. By building a strong financial foundation, developing a clear business plan, building relationships with potential investors, creating a clear strategy for delivering a return on investment, and preparing for due diligence, you can increase your chances of raising capital successfully. By demonstrating that you are investment ready, you can attract investors who are confident in your entity’spotential and are excited to contribute to its success.