9 Easy Steps to Get Investment Ready: Complete Startup Guide

Introduction

In the past few weeks, we have developed a series of articles covering the main areas a startup needs to pay attention to in order to launch a successful business.
In this last article, we will summarize them to give you a more general guide, that will help you to check if you have considered all the aspects, before pitching your startup idea to investors. 
At GründerAtelier we’ve launched an accelerator program that will guide you through the steps you need to take in order to scale.

According to our expertise, these are the 9 essential steps for a startup to get investment-ready.

1. Problem & Solution Analysis

Problem & solution analysis is always the first challenge for entrepreneurs in building a convincing pitch deck.

In fact, investors want to finance ideas that solve real problems, not fictional ones.

Also consumers – or other companies – won’t buy a service or product that doesn’t fill an urgent and specific need.

To properly conduct a problem & solution analysis you need to ask yourself the following questions, before presenting your solution:

• What is the problem and how big is it?
• Why is it important?
• Who are you solving the problem for?
• Who are the target customers?

Then, you have to state how your product/service is going to solve the issue, underlining the main disadvantages if it remains unsolved.

In order to do this, you need clear, reliable and updated data, avoiding the mistake of relying on your subjective opinion only.

2. Market Analysis

A detailed market analysis is one of the most relevant parts when it comes to understanding the potential of a new idea.

It allows founders to develop a proper market-entry strategy for their startup and helps them to understand which market share they can reach through their value proposition.

A proper market analysis consists of the following parts:

• Product analysis  (key features, function, goal, good/bad points, areas of improvement etc.)
• Competitive scenario (competitors’ analysis using different means and criteria such as positioning maps/SWOT analysis/performance matrixes etc.) 
• Market Evaluation (dividing the target market into three different categories: TAM – Total Addressable Market, SAM – Serviceable Addressable Market and SOM – Serviceable Obtainable Market).

The subsequential step is to set the Go-To-Market strategy (GTM strategy), defining :

• Offerings
• Customers
• Channels
• Pricing

3. Business Model

A business model showcases the logic with which a company creates, distributes and captures value. We can define it as a set of organizational and strategic solutions through which the company acquires a competitive advantage and generates revenues by providing products and/or services to its customers. 

These are the factors that need to be considered when defining a business plan:

• Value Chain Structure: it describes all the activities that a product or service goes through from its creation to its delivery to the final consumer, together with a reference on how much value the product receives at each step of the chain.

• Revenue Generation: this section describes the breakdown of every revenue stream with respective weights on the overall business.

• Pricing: an analysis of the market demand and supply is essential, in order to come up with the best pricing strategy for the product or service.

• Customer acquisition channels: which channels and acquisition techniques will be used to transform a potential client into an effective one. 

• Customer analysis: a business has to acquire and retain customers in a sustainable way. In general terms, The CAC (customer acquisition cost) should always be lower than the CLTV (customer lifetime value). 

4. Pitch-deck

Whenever founders need to showcase their idea or company, either to potential investors or customers, they will rely on a pitch deck to make the presentation more effective.

A pitch deck typically consists of 15-20 slides and is intended to showcase the company both from a qualitative and quantitative point of view, presenting:

• How the company intends to monetize from their idea
• The financial projections, the milestones and the investment needs
• The Problem & Solution Analysis
• The Market Analysis
• The team that manages the operations in the company

The vision and the mission of the company.

5. Milestones, Term Sheet and Valuation

Milestones are points in time along the company’s timeline before a future event or goal.

Investors seek to minimize risk while not losing an opportunity to invest in a hot company so they are constantly trying to find the least risky point to fund a startup.

For this reason, the most strategic timing for a company to raise funds is either right before or right after the completion of a key milestone.

A term sheet is a non-binding agreement with the basic terms and conditions of an investment. It serves as a basis for future negotiations and more detailed, legally binding documents.
The key sections of the typical VC Term Sheet are:

• Offering Terms
• Charter
• Share Purchase Agreement (“SPA”)
• Investor Rights
• Right of First Refusal / Co-Sale Agreement
• Voting Agreement

Valuation is the analytical process of determining the current (or projected) worth of an asset or a company. The price defines the number of shares an investor will get and also represents the intrinsic/market value of the company.

6. Cap Table

A capitalization table is a document that lists all the startup’s securities, their owners and the prices paid by those parties to acquire those securities. It is also used to calculate the percentage of ownership of a project or business and to calculate dilution scenarios in the occurrence of capital raise activities.

Equity, from a financial perspective, can be defined as the residual claim on the company value after that all the debtholders have been satisfied.

There are two main categories of equity: common equity and preferred equity. The main difference between them concerns the type and quantity of rights which includes, but not limits to, voting rights, dividend rights, conversion rates, dilution clauses.

7. Data Room

In today’s business environment, storing and organizing data in a safe place and in such a way that they can be easily consulted has become a vital factor for every company. For this reason, data rooms are an essential asset.

Data rooms can be either virtual or physical. Creating a virtual data room from zero requires skills that not all companies have. For this reason, it is recommended to contact software houses that offer virtual customized data rooms.

In order to choose the virtual data room that best suits your business needs and properly integrates it within the existing corporate IT infrastructure you need to consider:

• Security tools and measures
• The file management system
• Ease of use

8. Team Formation

The team is the main variable that investors look at, especially for young startups that are looking to raise funding.
Some of the most important assets of a team are:

• Communication
• Teamwork
• Fully dedicated founders
• Skill diversity

In order to find the right persons to fill the vacant spots in your company, you need a strong recruiting process. The term recruiting refers to the entire corporate procedure of research and selection of candidates. This process can be developed internally or externally and takes place in three stages: planning, research, and selection.

Many companies are moving away from the classic selective interview to embrace new recruiting techniques that allow candidates to better test their skills. Some examples are gamification and contests.

The objective of these new techniques is to reach candidates with the right characteristics in a faster way, stealing talents from the competitors and quickly filling the vacant role with a productive asset. 

The success of a company is also assessed based on the effectiveness of its organizational culture since this determines the collaborators’ individual approach, the pattern of thoughts and the perception of the role played. Therefore, meticulously developing its structure is a cardinal process.

The main components of corporate culture are:

• Vision
• Mission
• Goals
• Values
• Activities
• People

9. Legal Aspects

The regulatory body for startups is constantly evolving; It is complicated for entrepreneurs to keep up with this changing legal ecosystem, therefore legal advice plays an essential role in the development process of a startup concept.

Legal support is highly recommended for administrative tasks, but it is also very important to receive advice on the right legal entity to use in the formation of the startup.

There are some cardinal aspects that a new company has to consider, starting from its launch phase.

• Licences: when running a certain type of business in a determined location, you may need specific business licenses and permits from your country, state or city.

• Taxation: it depends on the legal entity you choose, the type of business you are running and where you are located.

• Employment: when you have employees, you may need to obtain an identification number and fulfil all types of wage withholding tax obligations.

• Asset Protection: protecting your IP is a crucial step for the future development of most companies.

• Equality: you should also be aware of the current anti-discrimination laws and apply them to your company.

How will GründerAtelier help your startup to succeed?

GründerAtelier is a creative space where high-potential startups find knowledge, funding and guidance for a successful launch and expansion.
We strive to partner with ambitious entrepreneurs and bright minds to create a prosperous environment where the most innovative ideas can thrive.

The professional team of GründerAtelier has offered many successful sessions to guide young startups through their capital raising, operational development, marketing, sales, talent acquisition and scaling endeavours.

We’ve launched an accelerator program that will guide you through all the steps you need to take in order to scale.

We hope you’ve found this article useful. Get in touch with us on LinkedIn or Instagram!