Equity Funding Blog

Business Funding – 5 Steps to the Finish Line


Raising the funds you need to grow your company is not an easy process. But knowing what to expect from the business funding process will empower you to tackle the challenge head-on.

Here are actionable tips based on our conversations with thousands of entrepreneurs and investors you can implement to carry your company across the business funding finish line.

Step 1: Establish your Legal Infrastructure

Choose your Company’s Legal Structure

  • Sole proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • Corporation

Discuss with your trusted accountant or attorney which legal structure is the best for your situation. Small business owners will not want to remain a sole proprietorship in most situations. By registering as an LLC or Corporation, personal assets and liabilities are legally separate from your company’s.

Owner Agreements

  • Operating agreement
  • Shareholders’ agreement
  • Founders’ agreement
  • Partnership agreement

If your company has more than one founder, be sure to have an Agreement that defines each founders’ roles and responsibilities, equity ownership and vesting schedule, and assignment of intellectual property.

Investors hate to see their capital investment be lost to lack of agreement among cofounders. Tying up potential loose strings proactively reduces the risk to the investor and increases the likelihood of getting funded.

Business licenses

If your business requires any federal or local licenses to operate, be sure to get them before seeking capital.


Step 2: Button up your Business

Maximize Operational Efficiency

Companies that make the most efficient use of their resources will drive the most value out of each dollar the investor puts into the business.

While each company has a number of situation-specific ways to improve their efficiency, signing up your company with a Preferred Employer Organization (PEO) is a quick process and an easy win for business owners looking to take their company to the next level. We have found that companies who have outsourced their HR to a PEO are more attractive investments.

Preferred Employer Organizations:

  • Can save your company up to 50% on health care, payroll, and worker’s comp
  • Ensure legal compliance
  • Protect invested capital from unnecessary fines
  • Help you attract and retain the best talent
  • Give you an advisory team of HR professionals
  • Allow employees to dedicate time to high value work

You can discover if a PEO would help your company by requesting a free quote here.

Create your Business Plan, PPM, and Term Sheet

Forming your business plan is one of the most important steps in obtaining funding. While putting together your presentation, be sure the ‘what’ and ‘how’ of your company aligns with the ‘why’ and the ‘who’.

A “Private Placement Memorandum” (PPM) or an “Offering Memorandum” is required to meet Regulation D requirements regarding the risk factors and characteristics of the offering. Principals of the offering may be determined to have violated anti-fraud provisions of federal securities laws if the PPM disclosures are misleading or false.

A term sheet is a non-binding agreement that outlines the terms and conditions by which an Investor will make a financial investment in a company. You can learn more about what is commonly included in a term sheet here.


Step 3: Attract Investment

Common sources of capital include:

  • Friends and family
  • Existing investors
  • Banks or financial institutions
  • Angel groups
  • Venture capital groups
  • Crowdfunding

How to present to investors

If you got this far, congrats! A majority of business owner’s never get their foot in the door to have the opportunity to pitch an investor.

While practicing your investor presentation, remember that emotions drive action. If you want the investor to capitalize your company, you must appeal to their emotions. At the end of the day, the presentation to an investor is nothing more than a human conversation.

Here are some actionable tips to help you fine tune your presentation:

  • Begin your pitch with the purpose and mission of your business.
  • Let the Investor get to know your team.
  • The ‘What’ and ‘How’ are only important to the investor after they believe in the ‘Why’ and the ‘Who’.
  • Be completely honest and truthful.
  • You don’t have to know all the answers. If you don’t have an answer, it is better to take note of the question and offer to follow up with a more detailed response tomorrow via phone call or email.
  • Show the investor the exit opportunity. How will you deliver them a great return on investment in 2-5 years?


Step 4: Follow up after the First Meeting

Send a follow up email after your meeting and confirm any actions that were mutually agreed upon and thank them for their time. In all communications you should be concise, direct, and honest.

What if you don’t hear back from the investor? Do not take this as rejection. The investor normally will not share the same sense of urgency to deploy capital as you do to raise it. But there are ways to create this sense of urgency through follow up emails with the potential investor:

  • Show company momentum by sharing great news
  • Get published by a credible news source and send them the article
  • Share new product launches
  • Let them know if your company crosses a major hurdle
  • Politely let them know if you get strong and credible interest from other investors
  • Do their homework for them – if they need to ‘run’ the numbers on ‘xyz’, do it for them!


Step 5: Negotiate and Finalize the Contract

By this point, you should have a knowledgable and experienced lawyer in place. They will help guide you through the process of negotiating the exact language and terms of the agreement, drafting of the Subscription Agreement, and closing of the deal. Stay cool, be yourself, and get funded!

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