21 Steps for Entrepreneurs to Raise a First Institutional Round of Financing

by John Hagedorn, advisor to FLG Partners & retired CFO

Download the Full Paper: 21 Steps for Entrepreneurs

This paper’s primary purpose is to describe the research, analysis, and organizing sets which founders must complete with great rigor if they are to be successful in raising a first financing round from venture capital firms. The objective of the first 16 of these steps is to qualify the startup as having the potential to grow into a company which can reward the investors with the returns they require. This qualification is in not met by following an accepted outline for preparing documents and presentations. It is accomplished by the founders doing the homework that proves first to themselves, and then to investors that their venture meets the criteria for success posed at each step.

The secondary purpose, at which the last 5 steps are aimed, is to offer guidance on the processes of identifying, presenting to, and preparing for closing a round with the “right” investors. While the major issues in the term sheet are listed, no input is provided on how to negotiate terms, as the founder’s only real potential to prevail in disputes on terms lies in having multiple investors vying for a “seat at the table.”
Thus, instead of describing what constitutes a well written business plan, this paper will focus on the separate business issues that the plan must address. The business plan is rarely read in its entirety by investors until they have gone into the due diligence process penultimate to close of the round. However, most successful entrepreneurs, use the business plan’s development for three purposes essential for the startup to succeed:

  • Determining if the problem they perceive, the solution they have conceived and the markets they will serve qualify their startup as a venture that deserves their devotion and investors’ funds.
  • Guiding the development of the business with the goals, objectives, strategies and milestones clearly defined.
  • Recruiting other key members of the founding team.
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