Guide to the capital raise process

An investigation into the private equity capital raising process

    There are two main ways that companies raise money: equity financing and debt financing. You’ve researched how to raise capital and opted for equity, which means you’re almost ready to start raising money. However, the capital raise process can be overwhelming if you’ve never done it before.  

    This guide breaks down the private equity fundraising process into 8 steps, so you know exactly what to expect. We’ll also take a brief look at the debt raising process. 
    capital raise checklist

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    A digitized checklist of all the critical data a company needs to prepare for a raise.

    Private equity capital raise process in 8 steps

    Generally speaking, the private equity capital raising process can be split into 3 stages: 
    1. Pre-offering (before approaching investors)
    2. Offering (liaising with investors)
    3. Closing (securing partnership with investors)

    However, across those three stages, there are 8 important steps to a successful capital raise. Follow the below step-by-step guide and you’ll be securing your first investor partnership in no time.

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    Step 1: Define funding strategy & Ts and Cs

    So, what deal are you looking for? What are you hoping to walk away with? What percentage of your business are you willing to part with in return for capital? Are you looking for mentorship or purely funds? The first step in the capital raise process is deciding exactly what success looks like for you. 

    If you have a clear plan in mind for the funds you want to secure, you’re more likely to secure investment, plus execution then becomes as easy as simply following your plan. 

    Step 2: Prepare business detail

    Your business cannot exist in your head when you present to investors. Now is the time (if you haven’t already) to research, document and project (accurately) your numbers (users/customers, revenue, expenditure etc). 

    Investors will want to know about the market potential, your business model, your marketing strategy, budgets and so much more. Make sure you have this information at your fingertips. 

    Make it easy on yourself. Download the capital raise checklist now.    

    Step 3: Find investors

    Do your research. What investors are active in your space? Scour your network of contacts for a connection that might be able to give you a warm introduction. Contact top-tier business schools to see whether they can point you in the right direction. Create a profile on AngelList and apply to MicroVentures. Believe it or not, finding investors is not the hardest part about securing funding. However, if you’re struggling, you might consider appointing a financial advisor.

    Step 4: Create pitch presentation

    You’re going to want to make investors an offer they can’t refuse, and that requires an immaculately prepared presentation. Of course, your most compelling business detail will feature here, but it’s also worth noting that Angel Investors love a story.

    Pitch to your friends. Pitch to your colleagues. Pitch to friendly business contacts to get their views. Not only will the practice “make perfect” but it’ll also give you a chance to get other people’s insights and incorporate them as you see fit. 

    Step 5: Organize meetings

    The private equity capital raising process can be a numbers game in more ways than one. Make sure you schedule plenty of meetings to give yourself a good chance of landing at least one. This part of the capital raise process is often called the “presentation roadshow”. Remember, if you’re approaching venture capitalists, your business needs to be established in some way - a good story will only get you so far.

    Step 6: Facilitate the due diligence process

    The work isn’t done just because the pitch is over. Once you’ve wowed investors with your presentation, it’s time to follow through with some impressive evidence. Interested investors will want to do due diligence, so having everything already prepared for them in a virtual data room is a huge plus.  

    Step 7: Negotiate partnership agreement

    You’re so close now, you can almost smell the success. Remember, when drawing up the partnership agreement, it must work for you, your investor, and the overall business. Many startup owners don’t protect their own interests well enough. Plan for the long-term and use a good lawyer to ensure the detail is considered. 

    Step 8: Sign and celebrate!

    You’ve done it. Congratulations! Your patience and hard work have paid off - now you can put your plan into action and show the investor that your business is the success you know it can be.

    Introduction to the debt raising process

    The debt raising process is not dissimilar to the above steps for a private equity capital raise. It’s important to prepare your business plan, funding strategy, presentation roadshow and due diligence. 

    Follow the steps above, but instead of investment in exchange for equity, you’re approaching lenders for funds in exchange for debt.  

    Find out about the various ways to raise debt, from credit cards to loans, on our debt financing page.

    How to prepare for a raise (what investors look for)

    The capital raise process is all about preparation. Investors may be wealthy but they’re time-poor. They want all the material information laid out for them so they can make a swift, informed decision. 

    Since 47% of deals fall through due to issues that arise during the due diligence process, it’s imperative that you dot the i’s and cross the t’s well before you jump into asking for funds. 

    This capital raise checklist can help you prepare. A digitized template, it contains all the critical data points that ensure a company is healthy and prepared for investment.

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    What is capital raising in investment banking?

    Capital raising is the process of raising corporate funds. Investment bankers play an important role in helping private companies raise capital by, for example, identifying and targeting the most suitable capital sources and investors for that company.

    What is private equity fundraising?

    Private equity fundraising describes the capital raise process between a private company and private equity firms that buy shares in companies on behalf of institutional and accredited investors.

    How can a private company raise capital?

    There are 5 main ways a private company can raise capital (as opposed to debt raising, i.e. taking out a loan): 1. Angel investment, 2. Venture capital, 3. Private equity, 4. Friends and family investment, 5. Crowdfunding. Learn more: Capital Raise Strategies