Getting Ready for the next Fund Raise

You would expect that funding and the adequacy thereof would be front of mind for entrepreneurs, especially those of start-up and early-stage businesses. The past few months of economic disruption has certainly shone a light on this and by extension the need to raise new funds.

For most businesses pursuing a growth trajectory, it is normal for fund raising to take place at different stages or times of the corporate journey. This starts with founder capital, friends and family, angels and can be followed by several rounds of more institutional investment (be that from HNWs, VC’s. private equity or strategics).

Given that this process or journey is well understood by most entrepreneurs it remains surprising how often individual fund raising seems to take place at the last minute and in a vacuum with little regard to future funding rounds.

Most growing businesses will inevitably need to undertake additional funding rounds in the future and so it is surprising how rarely do management of such businesses establish a long term plan approach to fund raising that incorporates KPIs as to where the business needs to be prior to the next stage of funding. Instead the audible sigh of relief at having raised funds is followed by a head long rush to utilise the funding.

At Trinity Bridge we advocate a structured approach to the identification of the key milestones that need to be in achieved prior to the next funding round. These milestones will obviously vary according to the nature of the business but will include not only financial and operational targets but also other measures of business growth such as depth of management team, financial controls and governance.

Such a disciplined approach is desirable at each stage of funding in anticipation of future rounds but it is never too late to put in place such measures and can be supplemented by a series of diagnostic reviews of a companies operations and progress. These ‘quick and dirty’ reviews can be undertaken by experienced third parties reporting either to management or the Board directly.  Adherence to such a discipline should ease the process of the next round of fund raising.