Make sure your start-up is "deal ready"

Fundraising, the elephant in the room at the moment amongst many of our start-up clients. It seemed the second half of 2023 proved to be a really challenging period for landing capital, even in the form of smaller Seed and Series A rounds.

I was catching up with the CEO of a client of ours this week and discussed the rollercoaster of emotions faced during tough fundraising conditions and that nothing is done until all i's are dotted and t's crossed! We both agreed that “a slog” was an accurate phrase for H2 2023. 

However, optimism remains amongst the leaders I speak to with many believing this “slog” could be temporary and there are some green shoots on the horizon (the “this too shall pass” mindset is one I like to adopt!)

Of course, as as start-up leader you cant' control external market conditions with a silver bullet but you can control your “readiness” for investment discussions. Here are some things you should consider…

Valuation dynamics: Align your company's valuation with realistic market expectations to attract and not repel investors. Conduct objective market research, especially amongst fellow startups in your field, use data, and be persuasive in your communication. Recent research has found that as many as 9 in 10 startups misjudge this, leaving a gap in expectations between them and investors.

Be transparent on your profitability roadmap: Investors want to see growth but ultimately want profitability and ROI. Be realistic on your timelines to profitability based on your stage of maturity and then have a clear and realistic plan on how this will be achieved. An overly optimistic forecast will lose you credibility!

The right investor fit: Consider what you really need and want from your investor partners. Yes, capital is critical but you should also consider whether this investment partner has previous pedigree in your niche or stage of company. You should look at this as a “marriage” for the long-term so choosing investors who align with your mission and values is important. Once this is clear, ensure your business is “attractive” for this type of investor.

Team strength: Investors will seldom back a startup without a strong leadership team. In fact, the strength of the Exec team can be as important as your technology / service! (95% of investors prioritise team quality!) It demonstrates strategic vision and operational maturity. Evidence has shown startups going on to become Unicorns have large, highly-experienced leadership teams as I covered a few months ago. 

The overriding message here is fundraising requires meticulous planning and preparation, clear and transparent messaging, and ultimately realistic expectations. As a startup leader, you need to know exactly what your ideal investment partner(s) look like and then what this type of partner is looking for, and ensure there is alignment across your business. Get this right and it'll go a long way to you securing a successful, long-term investment partner. 

Hyperion Executive Search has been supporting international cleantech / climate tech startups and their investors (VC / PE / Family Office / CVC) for the last decade. We have a wealth of experience in helping startups to navigate the dynamic world of scaling their business post-investment, finding the best leadership talent during each phase. If you're a a startup leader and are looking for support on hiring great leadership talent as you scale post-investment, get in touch at david.beeston@hyperionsearch.com