Constantin Salameh – Senior Coach and Investment Advisor, shares the key learnings on investment readiness and valuation. 

1. The fundraising and valuation process is always longer than what is planned initially. 

People expect the fundraising process to be closed in three months while the most likely scenario is 6 to 12 months. This means that the company needs to bootstrap for at least a period of 6 to 9 months to be able to go through the phase and prepare themselves for the funding round. Bootstrapping – building your company without outside investment money, becomes an essential dimension in the art of survival in a difficult environment. 

2. Nobody will believe your financial forecasts unless these forecasts are validated. 

The financial forecasts are validated through either customer focus groups, market surveys, one-on-one interviews and ideally, with a letter of intent or with potential orders that will be placed in the near future. So, it is critical is to get the validation of your forecasts as they will prove to be an important factor in the valuation of your company. The stronger is the market validation of your forecasts, the higher will be your company valuation.

3. You need to plan for several funding rounds. 

The most likely situation is that your company will go through 3 to 4 funding rounds with each round bringing a potential dilution for existing shareholders including the founder(s). Hence, it is highly recommended to plan for the future funding rounds today and protect the interests and motivation of the founders so that they will not find themselves  with a very small percentage of the equity capital of the company following 3 or 4 funding rounds. This dilution process will also impact the valuation of the company today and in future rounds in an effort to keep the founders highly motivated. 

4. You need to always have the right financial advisor working with you and your team.

Valuing a company, deciding on the funding gap, selecting the right investor, negotiating a win-win term sheet and finalizing the shareholders agreement, are time-consuming and complex tasks that will require you to have the right financial advisor with you all along the journey.

We’re here to help you in this investment readiness journey with our business and financial advisors and solid track record in assisting companies raise grants, debt and equity capital over the past years.

5.  You need to be open to release sweat equity. 

Sweat equity is a form of equity that you may provide to entities or to individuals who you believe will provide substantial value in the transformation of your company, but you don’t have the cash to pay for. Hence, you release a small amount of “sweat” equity (typically 1% to 3%) to cover their services. These services could be in accessing funds, accessing new markets, accessing innovative technology or accessing top talents. 

6. You need to launch the right advisory board. 

Identify your main pain points and major challenges that you are facing and then look for experienced professionals who are best positioned to address these pain points and challenges. They will become members of your advisory board and work with you and your team in scaling and creating value to your stakeholders. We can also help you access the right members of your advisory board as we are working with dozens of coaches, advisors and mentors across several functions and several sectors. 

7. You live and die by the quality of your cashflow forecasts. 

Make sure that you understand how to put a cashflow forecast together and understand the key assumptions, make sure that you monitor it on an ongoing basis, make sure that you know what are your future cash gaps, and make sure that you are clear about the most effective ways to be able to fund these gaps. Very few companies master the discipline of proper cash-flow forecasting and management.