First Principles Fundraising #4

Over the course of this series, we’ve taken a first principles approach to startup fundraising. Firstly, understanding whether fundraising aligns with your growth plans and strategic goals. Following that, we looked at the importance of timing, inflection points, and preparing your story around milestones, risk, and return. Most recently, we explored identifying the right investors, finding those who align with your stage, sector, and strategy.

Now that you’ve assessed the need for funding, prepared your startup for investment, and identified the ideal investors, it’s time to execute. Running a tight, efficient fundraising process ensures that you save time, minimize distractions, and maximize your chances of closing on favourable terms. A structured approach can make all the difference in avoiding the chaos that often accompanies fundraising.

Now we’ll look at the three critical steps to a rock-solid fundraising process.

Step 1: Preparation

Preparation is the cornerstone of a solid fundraising process. By thoroughly researching industry norms, aligning your business metrics with investor expectations and organizing a comprehensive investor database, you ensure your approach is strategic and efficient.

A well-prepared founder can answer the trickiest questions, significantly increasing the likelihood of closing the round on favourable terms while minimizing distractions from running the business.

This step is divided into three key parts:

1. Research

Arm yourself with knowledge. Understand how fundraising works in your industry, at your stage, and for your business model or technology. Study market conditions, benchmarks, and comparable deals. Learn what metrics and signals investors value most—whether it’s traction, unit economics, or technology defensibility. Ensure you know what’s expected in terms of documentation, due diligence, and data rooms. By becoming an expert on your sector, you’ll set realistic expectations for yourself and build credibility with potential investors.

2. Alignment

Optimize your business for the fundraising process, based on everything you’ve learned from researching expectations and requirements. For example, if traction is a critical metric, focus on hitting meaningful milestones before you start pitching. Turn letters of intent into paid pilots, convert pilots into long-term contracts, and shore up any gaps in your team’s expertise. Investors want to see that you’re building a well-rounded team and an accelerating growth curve—ideally one that hints at the early stages of “hockey stick” style growth.

3. Building an Investor Database

Based on the principles in outlined previously, compile a list of target investors. Include those you’ve connected with through networking or outreach as well as new leads. Identify relevant targets by using databases like Crunchbase to find investors in similar (but not conflicting) startups, or look at investor databases like OpenVC or Shipshape.vc. Organize this list in a CRM or spreadsheet, complete with contact details, submission preferences, and any notes on past interactions.

Step 2: Documentation

For a startup’s first fundraising round, the key to effective documentation is being concise, clear, and correct. Investors aren’t expecting perfection or exhaustive detail, but they do want to see materials that reflect your pitch in a coherent and logical way. For example, your financial model doesn’t need to precisely cover every dollar going into or out of the business, but it should align with your growth story and clearly demonstrate how the raised capital will fuel that growth. The goal is to provide clarity and build confidence, without distracting investors with complexity.

Ensure all your materials are pitch-perfect before initiating outreach. Key documents include:

  • Pitch Deck: A compelling presentation that highlights the scale of the problem you are addressing, and makes your solution feel inevitable.
  • Financial Model: A robust, defensible projection of your company’s growth and economics.
  • Cap Table: A clear snapshot of your ownership structure, including existing equity holders and their stakes.
  • Memo or ‘Teaser Deck’: A concise summary of the investment opportunity, easy for investors to share internally.

Having these documents polished and ready will save you significant time and allow you to move quickly once you begin pitching.

Step 3: Execution

Running a tight fundraising process with a limited window for investor meetings and follow-ups is crucial for maintaining momentum and maximizing your negotiating position. By concentrating outreach and conversations into a two-to-three-week sprint, you create urgency among investors, ensuring quicker decisions and reducing the risk of drawn-out discussions. This approach not only helps secure the best terms but also allows you to return to building your business sooner—keeping your internal momentum going and minimizing the distraction that fundraising can cause. A swift, efficient process signals professionalism and respect for both your time and that of potential investors.

This step can also be divided into three key parts:

1. Outreach

Use your database to send concise and well formed emails to prospective investors a few weeks before you intend to kick off conversations, sharing a brief teaser deck or memo (the bait) and a scheduling link (the hook) to make the process as easy as possible. Allow investors to book meetings within your chosen timeframe — perhaps clearing a two week window in your calendar for nothing but investor meetings. Don’t be afraid to follow up once or twice, just keep it brief and polite — emphasizing your fundraising calendar.

2. Meetings

Investor meetings aren’t just an opportunity to pitch your vision but also gauge their expectations and learn what you can to refine your approach in future. Approach each meeting with clear goals: present your story confidently, listen carefully to feedback, and ask pointed questions about the investor’s process. This demonstrates your seriousness and helps move the conversation forward. Treat each interaction as a chance to build rapport while assessing whether the investor is someone you’ll want on your cap table for the next decade. Some investors prefer the first meeting to be a more personal conversation, getting to know each other without slides, so be prepared to adjust on the fly.

3. Closing

The closing process in an early-stage funding round is about bringing all moving parts into alignment. Once you’ve received term sheets, focus on negotiating favorable terms while identifying a lead investor — or potentially co-leads — who will help set the tone for the round. The lead often defines key terms, conducts due diligence, and provides a signal of credibility to other investors. However, it is possible to pull together early stage rounds and act as the mediator yourself, without needing a lead investor, depending on the preferences of those involved. Clear communication, transparency, and decisiveness are critical at this stage to finalize commitments and efficiently close the round, enabling you to shift focus back to growing your business.

A disciplined fundraising process not only improves your chances of securing the capital you need but also signals to investors that you are organized, efficient, and prepared to execute. Keep your process tight, and you’ll position your company for success in this critical stage of growth.