Fundraising projects must have strong growth potential to attract investors. The latter decide to enter the capital of the company only after a thorough analysis of the established business plan in 3 years.
To facilitate your search for financing, you can call on “fundraising” structures that can facilitate your search for capital (Chausen Finance, ProxyCap Invest, Leonardo, MGT, etc.). They can help you put together your fundraising application file and of course direct you to the right people for a percentage of the amount raised.
How to do valuation?
Before you begin your search for venture capital, remember that you will be asked about your company’s valuation and how you plan to take out investors. Several methods exist for determining your valuation, even if it generally follows the following rule.
Overall, investors would like to have 10 to 50% of your company’s shares. So for an investment of EUR 100,000, your valuation should generally be between EUR 1,000,000 and EUR 200,000. If your valuation is too high, business angels generally won’t see the point of investing in your company because it will leave them with little chance of making money. Similarly, if it is too low, they will not invest because their goal is generally not to have control over it as they will bear their liability.
Who can invest in your business?
Micro-risk capital for individuals: For those with low financial needs, organizations provide cohesive risk capital. These structures, such as Cigales, FinanCités or even LoveMoney for employment, tend to commit in small companies only up to a few thousand euros.
Business Angels: These are individuals who choose to invest part of their capital in young companies whose growth they feel will enable them to conduct a good resale operation. Their participation is usually not less than 15,000 euros. Intermediaries are there in the market to get you in touch with the business angels. The French Angels Association federates most of the Business Angels network in France.
Corporate Enterprises: Subsidiary investment funds of large industrial groups finance projects in the same field of activity. They often interfere with the construction phase, sometimes in the development phase. The amount invested usually exceeds 300,000 euros. Thanks to these shares taken in the capital of young companies in the sector, industrial conglomerates control technological developments in their markets. But the expertise thus given can be crucial for the development of a project.
Regional Investors: Funds that aim to support the creation of established companies (Regional SCRs, FIPs or FCPRs and FCPIs) in the region. They usually invest between 70,000 and 600,000 euros.
National Investors: Funds dedicated to projects with very large financial needs as the minimum ticket is rarely less than EUR 500,000 (Institutional Funds, National SCR, FCPR or FCPI). Think more about this type of financing than seeding to grow your business.
There are several concepts to know when you want to raise money.
venture capital Refers to operations carried out using equity to finance innovative companies in the manufacturing phase or young companies with strong growth potential. The amount invested usually exceeds 1 million euros.
starting capital (seed capital) intervene in the pre-startup phase or just after the activity starts. In order to benefit from this investment, the legal status of the company must still have been created. This capital is used to develop and test the product.
construction capital (Start-up: Interferes at the start of activity or in the early stages of development.
growth capital Intervents in the maturity stage of the company, when it wants to start a new phase of its growth.
transmission capital (LBO: Leveraged Buy Out; LMBO: Leveraged Management Buy Out) occurs when a company is sold.
private equity Happens at all stages of company life. The term refers to all equity investments in the company’s capital that are not listed. These investments are made by professionals who aim to increase their profits while reselling their shares, and that is in the short term.
Tips for successful fundraising
Work well on your business plan by highlighting your product and its innovative qualities in relation to the market.
Create a summary of no more than two pages at the beginning of your business plan. It, with catchy words, faithfully represents your project. It should be misleading but should also inform. To do this, be careful in answering the questions: Who am I? what am i selling? Whose ? How do I plan to sell my product/service? How much does it cost ? How much can this bring me? How long will it take for me to pay back? This summary should also include a teaser.
Make presentations as a team. Through this presentation, investors should observe your seriousness, your credibility and the complementarity that exists between the partners. You have to work on this presentation so that it enters the right time and is dynamic. Otherwise, you risk losing investors’ attention quickly.