5 “must-dos” before hitting the fundraising trail
January 28th, 2019
Five years ago, I sat around a kitchen table with my four partners concocting a grand master plan to disrupt the programmatic advertising industry. Shortly after this casual brainstorming session we founded district m to turn this dream into reality. Three years later our first round of funding came in, with a second round following just two years after to fuel our growth ambitions.
This short story is the stuff that tech start-up dreams are made of, but the truth is that we spent those first few years implementing a rigorous strategy that would deliver exceptional results against a very precise set of KPIs. The ultimate purpose of this strategy was to create a compelling value proposition that would stand the test of time and eventually, deserve financing to continue growing the business well beyond the first few years. Here are my top 5 tips for any entrepreneur considering the fundraising trail.
01. Get your financials straight
The first thing a potential investor will look at is financial metrics. We ran district m like a big business from the get-go. My advice to start-ups is to:
- Appoint reputable auditors to provide excellent service and to promote trust with a potential investor.
- Draft comprehensive annual reports for a transparent, trackable view of historical financial performance.
- Know the bottom and top line and everything in between: a potential investor will assign a maths genius (aka financial analyst) to drill down into underlying numbers.
- If not currently profitable, develop a detailed growth strategy with a projected profitability timeline.
02. Know your marketplace
An investor wants to see you demonstrate deep knowledge of the competitive landscape in which your company operates including a thorough understanding of your strengths and weaknesses compared to peers.
district m was founded after we identified a market gap in terms of efficiency, transparency and speed for existing solutions. We were also very aware that our competitors had more developed technologies and resources than us, which may appear to be an advantage, but often leads to slower processes. This insight enabled us to gear our solutions and team to exploit a big opportunity.
03. Develop a growth roadmap
Define and set your growth objectives and develop a comprehensive strategy based on market opportunities that enables your company to achieve them. When your company begins a funding search, you must have a clear, disciplined capital allocation strategy in place that outlines what, where and how you will be spending incoming funds. This could include examples such as talent acquisition, R&D and product development, marketing initiatives, and international expansion.
The realistic growth strategy can play a dual role by strengthening your company’s business case as well as helping to find potential investors with interests that align with your company’s specific growth ambitions.
On that note: It may seem obvious, but funding should never be used to pay off debts or get the company out of a negative situation.
04. Investors are partners, not a bank
Identify a partner that will truly understand the reality of your business so that apart from finance they can also offer valuable guidance and insights.
In our latest funding round, Investissement Québec and the Fonds de solidarité FTQ were obvious partners for district m largely due to their diverse investment portfolios, which we knew held significant partnership opportunities. We actively selected local Quebec investors for greater synergies and to promote job creation and technology innovation in our home market. We believe that it is important for businesses to nurture their local ecosystems, which in turn has a positive impact on the global market.
05. Why now?
At district m, our first round of funding occurred after successfully operating for three years when we knew we had an attractive investment proposition to offer. This included: profitability, scale, management team. It is very important that you understand the commitment you are making on behalf of your business when you go into partnership with an investor. You will become accountable to other people, who will have sway over your business decisions.
Behave like a big business from day one by setting goals and rigorously implementing systems, processes and strategies to deliver on your dreams long-term after the first kitchen table brainstorm!
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