5 Steps to Develop a Fundraising Plan

Aug 06, 2012

Money doesn’t fall from trees.  You got to get off your arse, and go get it.  Many startups also really don’t raise any money until their CEO focuses on fundraising fulltime.  So if you’re stuck or lost in all the details of fundraising, we’ve broken it down into 5 big action items for a fundraising plan:

1. Projections

Build your projections with costs first, then revenue.  Don’t over-complicate it until your finances start to get complicated.  If they are that complicated, then you should be passing it off to a CPA (outsourced or inhouse) anyway.  Update your projections every quarter.

The best two tools I found that help you do this:

  1. EZ Numbers works better for startups.  Same ones investors use.  It does everything: founders’ shares, investment calculations, ROI, valuations, etc.  And it’s made really easy so you can start small, and scale it.
  2. B Plan’s Online Business Planning software.  If you have a service based business where you don’t need all their founder share calculations, but you need to show & calculate revenue, there software helps you project this, and measure your performance.

Also, if you are one of the many new businesses planning on raising funds through crowdfunding, word is going around it’s required you have financial projections.  If you are raising over $100K, you must have a CPA certify your financial projections.  If you are raising over $500K, you must have a CPA or CFO do your financial projections (if anyone else has more information on this, we’d love to hear it!).

2. Prospect List

Now that we have our financial projections, we’re going to start by making a list of every wealthy person you know.  Your prospect list.  This is your “friends and family category”.  Be very careful soliciting investors on the internet or by email.  Check up on state laws surrounding how much loss can be written off on taxes.  Your typical F&F’s aren’t aware of tax benefits/loses, etc.  so you need to explain these.  It’s also a really good idea to retain an attorney at this point.

Assume a 25% success rate to either get an introduction or a commitment; if you are more successful, your prospect list is not long enough.

3. Pilot Pitches

Two things here: First, always ask for feedback.  Rework and refine your pitches based on the feedback given by your prospect list.  You’ll probably never get feedback though, so this is a catch 22.  Why does no one like to give feedback?  Because if you make the changes, you’ll assume it means “change this & I’ll invest”.  Or they don’t want to burn bridges.  They’d rather watch you from afar.

Second, don’t state an ROI.  This can legally be considered a promise, therefore becoming a liability.

4. Expand Prospect List

Next, expand your prospect list to include possible venture capital, and angel investors.  Most of your prospect list will automatically expand anyway; as people will tell you “so and so might be interested in this”.  Your friends and family category should’ve included wealthy people, other then your mom.  Wealthy people, know wealthier people.

Watch out for people who take a cut to make an introduction, then that person takes a cut to make an introduction, then the next, etc etc.  I know this is really popular here in Florida, and other states where money is hard to come by.  It’s a huge scam, and you have to be very cautious.  While I believe in paying people for their honest efforts, I don’t believe you should pay money upfront to anyone doing this b/c of scams.  If they really believe in you, they’ll make the introduction anyway.

5. Closing Date

Generate a closing date for your fundraising round after you’ve gotten all commitments you need.  Doing this all at once can save a ton of money, you’ll need an attorney.  Can’t swing that hefty attorney’s bill?  After all, he doesn’t drive a Mercedes for nothing.  Many attorneys are glad to postpone payments until after you close.  And no, attorney’s can’t accept credit cards for retainer fees because it has to be put into a trust account (I’ve already tried that one too 😉 ).

Good luck!

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