Are you looking for greater financial and material resources that will be a real springboard for your start-up? If you are not interested in a bank loan, if your network of potential investors has yet to be developed, financing through fundraising is a very interesting lever. But is it necessarily a good idea to raise funds in 2023 when the macro-economic context tends to be destabilized?
The benefits of a fundraiser
A connoisseur of investors
The most important quality of the fundraiser is his experience and knowledge of investors: he knows what investors want, what their investment criteria are and how to meet them in a suitable way.
The fundraiser will therefore be able to attract investors, taking into account their interests, their appetites or their fears with regard to certain types of proposals. He knows how funds work and will anticipate the questions of the interviewers in order to build a pitch that answers them perfectly. The fundraiser thus helps the entrepreneur to build a punchy pitch and relevant documentation to hold the attention and convince investors, and ensure a positive response.
The technical skills of the fundraiser (knowledge of the players, mastery of the stages of fundraising) are therefore very valuable to the entrepreneur. He is a real asset in negotiating the deal to conclude it in the best conditions: he knows what must be negotiated or not, and does so in such a way as not to jeopardise the operation.
In addition, his external view of the start-up helps him to identify its weaknesses and put it in perspective with other comparable companies. He or she will thus prevent you from coming to the market with claims that are not in line with the reality of the market. It will therefore be a force for proposal on how the project will be presented.
His address book is also a considerable advantage: he can compensate for the inefficiency of the entrepreneur's social capital through his own network. He has a network of top tier VCs and is in constant contact with most of the funds in the market. The fundraiser thus has privileged access to funds and knows the current trends. He also knows who has money at the time of the construction of the file, who is active or in pause and which themes are favoured by which funds.
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Saving valuable time
Raising funds is one of the CEO's key tasks, and it takes a lot of time. Calling on a fundraiser saves time, because he knows all the stages of fundraising and will know how to manage them: preparing the business plan, selecting the right investors, making appointments, organising the road show (the investor tour), etc.
It follows up on applications and organises the schedule of investor contacts to maximise the momentum and get offers in a reasonable time. As a result, it allows the entrepreneur to avoid investing all his time in raising capital and to focus on his business.
Time is also saved on the preparation of the operation: the leveur accompanies the entrepreneur from start to finish, gives him advice and is committed to the success of the project. For example, he can train the entrepreneur in oral presentation. This saves valuable time.
Between the time saved and the higher amount obtained thanks to the expertise of the leveur, the operation can be very profitable.
The disadvantages of the fundraiser
Typical profile of the "bad" fundraiser
A bad fundraiser, or someone who improvises himself as a fundraiser, will immediately cause investors to reject him. Through the fundraiser, your company's image is also at stake. His or her lack of credibility or professionalism can thus be detrimental to your ambitions.
An improvised fundraiser will not know how to negotiate a L.O.I. (letter of intent), that crucial document which summarises the terms and conditions under which the investor is ready to invest in the capital of a company, and will be a handicap rather than an asset.
Also, some fundraisers work on multiple deals at the same time, sending multiple decks to multiple investors. Be careful, as your file will probably be sloppy. So always ask them how they work, and whether the team is working on too many deals at once. An overworked fundraiser will have less time to devote to you and will be less interested in understanding your business.
Therefore, before hiring a leaser, always check his or her track record and be well informed about his or her background!
An unsuitable fundraiser
A fundraiser can be very serious and professional, but that doesn't mean that he or she is the right one for you! For example, in certain rounds, fundraisers are not to be recommended: small deals (under €1M) are often carried out by business angels who are generally not very open to the intervention of a fundraiser. Choose also according to the theme, its specialities...
Furthermore, the ability to make people dream about your project, to "sell" it, to present it clearly, your self-sacrifice and determination, your negotiation and decision-making skills, are first and foremost your responsibility: this cannot be subcontracted, unless you find the right fundraiser, i.e. a real sparring partner!
The choice of fundraiser must therefore be carefully considered: it is a question of finding the actor who corresponds perfectly to the profile of the company seeking funds in order to give itself a maximum chance.
To sum up: How to choose a good fundraiser?
A good fundraiser can be a real asset in maximising the chances of obtaining the finance you need, and above all, of doing so under the best possible conditions... But only if you choose the right person!
It is essential to be well informed about your fundraiser and to ask a number of questions before you can trust them completely. Here are the boxes to check to identify the right fundraiser:
- Is the leaver experienced? How well known is he or she? Check their track record to find out how long they have been in business, how many deals they have completed, what their successes have been, and how good their address book is. Find out from business start-up partners, search engines, trade fairs or investor/entrepreneur meetings. Also, do not hesitate to ask the fund-raiser for a list of references that you can contact yourself later on to make sure of their experience and good reputation.
- Do the amounts raised match the amount you are looking for? It is essential to find the right fundraiser for your financing project. Look at the history of their operations and their amounts, in order to compare them with your own financing project.
- Discuss how they work: how often do they contact the funds? Does he do all the documentation for you or do you build it together? Are they involved in the negotiation? These questions are essential in order to know whether you will be able to work together constructively and in symbiosis.
Alternative solutions to fundraising
Fortunately, there are many financing solutions available today that can allow you to avoid raising funds for small/medium amounts. Many are non-dilutive financing solutions, which offer you the possibility to keep full possession of your capital.
Revenue Based Financing is one of these solutions. Karmen allows digital companies to finance their growth in a non-dilutive way and very quickly.
At Karmen, the investor has no direct ownership in the business and does not require fixed payments. Payments will be based on the company's revenue . Karmen uses a tool to anticipate the future revenues of a business.
In concrete terms, if your income decreases during a month, the royalties to Karmen will be reduced proportionally . Conversely, if the company's revenues increase drastically during a month, the royalties will increase simultaneously.
Karmen offers an alternative to fundraising that allows more companies to finance themselves.
Indeed, Karmen does not have any particular requirement on a business sector or an ultra-tech product as a venture capital fund may have.
Getting a quick loan is the essence of Karmen's offer, as a business can receive cash in less than 48 hours.
Finally, remember that fundraising takes time, energy and is a psychological ordeal. Once the previous boxes have been ticked, choosing a fundraiser with whom you feel comfortable and get on well allows you to make the final decision!
There are many alternatives to fundraising - much less time consuming and less expensive! For example Revenue based financingan interesting alternative to fundraising, fast and without dilution.
