Financing Readiness

Introduction to Financing – How to Secure Funding

Securing funding can be a challenging task for entrepreneurs in the early stages of founding their businesses. Venture Capitalist wisdom dictates that an entrepreneur should foremost be a salesperson who is able to effectively pitch both their business idea as well as themselves to their investors. As you prepare and refine your startup pitch, we have come up with a handy guide of essentials you need to remember to be successful.

1. Prepare a Business Plan

A business plan is a comprehensive document that broadly captures the place your business occupies (or will occupy) in the industry. Patrick FitzGerald, Managing Director of DreamIt Ventures, for a workshop at Wharton School of Business recommends that a business plan must include the following:

• Company Intro: What do you do – in ten words or less
• Team and their bios (including education, skills, and interests): This humanizes your company and gives your investors more opportunities to relate to you. Biases are unfortunately deep-rooted in the venture investment space
• User Experience: What is your product and how will a consumer experience it
• Marketplace: Where is your product sold?
• Market Strategy: What is your target market, target revenue and profits, and geographies you’ll serve? For more information on market-sizing and market planning, refer to the fantastic resources available here at the MaRS Learning Centre.
• Revenues: Detailed financial modeling of past revenues, expected figures for the current year, and potential cash flows will demonstrate to your investors that you are prepared for the next step
• The Ask: How much money would you need to scale your business towards the next step?

2. Identify your target funding sources

This may seem obvious, but it may take some time and deliberation to pin down exactly what kind of funding options you should explore for your business. We have outlined two main options: lending and investment. Debt applications differ from pitch decks for equity investors – make sure you choose the right resources.

3. Pitch Deck

A pitch deck is a more concise version of your business plan. Essentially, it is a brief, catchy presentation that can hook your investors in, and motivate them to learn more about your business. It would be useful for entrepreneurs to prepare at least two general versions of the pitch deck – one around 3 slides and 3 minutes long, and another capped at 10-15 slides and approximately 20 minutes long, and then to tweak these for specific investors.

Your pitch deck should include these:

• The Problem: What gap have you identified in the market?
• Your Solution: How does your product bridge this gap? It may help to show how your product changes the market (a Before/After scenario). Include data from market research to showcase the strength of your product or idea
• Business Model: Who is the customer and how will your product reach them?
• Competition: Are there any other players already doing the same thing? What does this mean for the viability of your business? Try to remain honest here, and address any risk concerns that potential investors may have
• Founding Team: This is one of the most important parts of your pitch. You need to make direct connections with the investors while assuring them that your team has the industry experience to make this endeavor successful. Your management team should have strong credentials and high motivation to garner investor interest.
• Marketing Plan: This is your vision for what your business can accomplish with capital injection. This is where your story crescendos and you clinch that deal. Include potential investor ROI, customer acquisition strategies, current/potential partnerships, and expansion plans here.
• Fundraising: This would include past rounds of funding (if applicable), as well as information on other investors who are interested in your business or have already committed to it.