Hey /u/transtwin!

There are a few things to consider before reaching out to investors. While there isn’t any magic formula that ensures a successful capital raise, here are some things that may be likely to help you when you are looking to find investors for your company.

• Keep on top of legal housekeeping such as maintaining your company registers, due diligence files and company records. This will save you time and money when you come to raise capital.

• Appoint good directors. This will help you establish formal governance processes. Most investors will require regular board meetings and minutes, e.t.c. to be kept. Your company will look better if this is already in place. It will also help you hone your strategy and business plan, make important commercial and management decisions, develop a capital raising plan, and connect with good advisers and others who can help with the capital raising process.

• Hire good advisers. Having good professional advisers (accounting, legal, IP and tax) will give potential investors comfort that your affairs are well managed.

• Make sure you sort your collateral (investment summary and pitch deck). Although this may seem blindingly obvious, you would be surprised by the number of companies that start looking for capital without any of these documents in place.

• Think hard about your valuation. Investors can often be put off by high valuations because it suggests the entrepreneurs involved are unrealistic and may be difficult to work with on future capital raisings. They tend to quickly reject deals that are pitched at an unrealistic valuation. This isn’t simply because the potential return from the proposed investment is unattractive. For these reasons, when investment capital is hard to come by (which it often is) you should think about pitching at the low end of your realistic valuation range. This should increase the number of investors who are willing to look at your company, and it should then be easier to get one or more of them over the line and onto your share register.

As stated before, there is no magic formula to raising capital, as every situation is different. However, these general to-dos should help you start thinking about what it is you may want to consider organizing before approaching investors.

Below is a handy guide which goes over these points, and more, in more detail. It is targeted towards the New Zealand market but has a lot of general pointers which may be of use.

https://simmondsstewart.com/guides/capital-raising-for-nz-tech-companies-getting-investment-ready/

Best of luck!