6 Ways to Get Your Business "Investor Ready"

You‘ve poured blood, sweat, and tears into building your startup. You know you‘re onto something big. But to take it to the next level, you need outside capital.

The right investors can be rocket fuel for your business, providing not only the cash to scale but also the expertise and connections to enter new markets. However, the process of finding and wooing investors is far from easy. Fundraising is often a grueling, months-long slog with plenty of rejection along the way.

While there‘s no magic formula, there are concrete steps you can take to get your business in shape for investors and boost your odds of a successful raise. In this guide, we‘ll dive into six proven strategies to make your startup irresistible to investors and VCs.

1. Develop a Rock-Solid Business Plan

Having a brilliant business idea is one thing. Being able to clearly communicate how you‘ll turn that idea into a profitable, fast-growing company is another. That‘s where a compelling business plan comes in.

A strong business plan is the foundation of your fundraising efforts. It forces you to define your vision, target market, competitive landscape, and financial projections in detail. More importantly, it signals to investors that you‘ve done your homework and have a clear roadmap for success.

So what goes into a great business plan? At a high level, it should include:

• Executive summary
• Company overview
• Market analysis
• Competitive analysis
• Product or service description
• Marketing and sales strategy
• Financial projections
• Team background
• Funding needs and use of proceeds

Below is a sample outline you can use as a starting point:

Section	Key Points
Executive Summary	– Hook investors with your unique value prop and vision – Provide a concise overview of the problem, your solution, target market, and key milestones
Company Overview	– Explain your company‘s mission, history, and legal structure – Highlight relevant traction and achievements to date
Market Analysis	– Define your target market size and key customer segments – Discuss market trends, growth projections, and what‘s driving demand
Competitive Analysis	– Identify your key competitors and how you‘re differentiated – Provide a SWOT analysis of your position in the market
Product/Service	– Go in-depth on your core offering and value to customers – Discuss your product roadmap, IP, and development timeline
Go-to-Market Plan	– Detail your marketing and sales strategies to drive adoption – Specify your pricing model, channels, and partnerships
Financial Projections	– Provide 3-5 year financial projections for revenue, expenses and headcount – Specify your funding needs and key assumptions behind projections

Don‘t underestimate the power of the business plan. One study found that entrepreneurs who wrote a plan were 16% more likely to succeed in growing their business than those who didn‘t. If crafting a plan from scratch feels daunting, consider working with a business plan consultant or advisor who has experience supporting startups.

2. Know Your Numbers

Investors bet on results, not just ideas. Being able to speak fluently about your key performance indicators (KPIs) and financial health will be crucial in investor conversations.

Start by nailing down the metrics that matter most for your business model and stage. Some common ones investors focus on include:

• Revenue growth rate
• Gross margin
• Customer acquisition cost (CAC)
• Lifetime value (LTV)
• Burn rate
• Runway

Make sure you know how to calculate each metric and can explain the nuances behind your numbers. For example, many SaaS investors look for companies with high revenue growth (> 100% YoY), gross margins over 70%, and a LTV/CAC ratio greater than 3.

Here‘s how those calculations might look for a hypothetical SaaS startup:

Metric	Formula	Example
Revenue Growth Rate	(Current Month Revenue – Prior Year Month Revenue) / Prior Year Month Revenue	($100K – $50K) / $50K = 100%
Gross Margin	(Revenue – Cost of Goods Sold) / Revenue	($100K – $30K) / $100K = 70%
Customer Acquisition Cost (CAC)	Total Sales & Marketing Expense / # of New Customers Added	$50K / 100 = $500 per customer
Customer Lifetime Value (LTV)	Average Revenue per Account * Gross Margin / Customer Churn Rate	$10K * 0.7 / 0.01 = $70K per customer

In addition to these core SaaS metrics, be prepared to discuss your:

• Unit economics: the direct revenues and costs associated with a specific business model expressed on a per unit basis
• Valuation expectations: your target valuation and key assumptions (e.g. revenue multiple, comparable companies)
• Funding needs: how much you‘re raising and how you plan to deploy the capital

Ultimately, strong command of your numbers will demonstrate to investors that you have a clear understanding of your business and a data-driven approach to scaling it.

3. Land on the Right Funding Figure

One of the most common questions founders agonize over is how much money to raise. Raise too little and you may not hit the milestones needed for your next funding round. Ask for too much and you risk unnecessary dilution or scaring investors off.

Several factors go into determining the right funding amount, including your:

• Current stage and valuation
• Milestones to hit before the next raise
• Hiring needs
• Planned investments in product, sales, and marketing
• Desired runway (typically 12-18 months)

To pin down a figure, create a bottoms-up financial model that maps out your expected cash inflows and outflows over the next 2-3 years. Bake in key assumptions around revenue growth, headcount, and expenses. From there, you can toggle different funding amounts to see the impact on your runway and milestones.

As a gut check, research benchmarks for your industry and stage. Below are median pre-money valuations and round sizes in the US in 2022 based on PitchBook data:

Funding Stage	Pre-Money Valuation	Round Size
Pre-Seed	$7.5M	$500K
Seed	$10.5M	$2.6M
Series A	$24M	$10M
Series B	$68M	$26M
Series C	$150M	$50M

Of course, these are just rough guidelines. Your specific valuation and funding needs will depend on factors like your industry, location, traction, and investor demand.

Many founders also work backwards from their target ownership percentages. For example, say you‘re raising a $2M seed round and are willing to sell up to 20% of the company. Using the formula pre-money valuation = investment / ownership %, you‘d be targeting a $8M pre-money valuation ($2M / 20%).

If you‘re struggling to land on the right number, consider tapping an experienced startup advisor or fundraising coach to pressure-test your assumptions. Many specialize in helping founders develop financial models and refine their ask.

4. Think Like an Investor

One of the best ways to prepare for fundraising is to put yourself in an investor‘s shoes. After all, they‘re bombarded with pitches every day. Knowing what motivates them and anticipating their objections can help you stand out.

Start by researching the specific investors and firms you plan to target. Visit their websites and read their content to get a sense of their:

• Investment thesis: what stages, sectors, business models and geographies do they focus on?
• Portfolio: what do their existing investments reveal about their preferences?
• Value-add: how do they support founders beyond just capital?

From there, try to unpack the key questions and concerns an investor might have about your business. Some common ones:

• How big is the market opportunity?
• How are you differentiated from competitors?
• How will you acquire customers?
• What are your unit economics?
• How will you use the funding to hit milestones?
• What are major risk factors?
• Does the founding team have the right skills and experience?

Conducting a mock due diligence exercise can surface gaps in your pitch and areas to strengthen. Below is a starter due diligence checklist you can use to prep:

Area	Items
Product	– Product roadmap – User adoption metrics – Customer feedback
Technology	– IP strategy – System architecture – Scalability plans
Market	– Target market sizing – Competitor analysis – Customer segmentation
Go-to-Market	– Pricing model – Sales and marketing plans – Key partnerships
Financials	– Cap table – P&L and cash flow statements – Burn and runway
Team	– Management team bios – Organizational chart – Hiring plan
Legal	– Corporate documents – Contracts – Regulatory compliance

By proactively addressing likely investor questions and concerns, you‘ll demonstrate you‘ve thought deeply about your business and aren‘t afraid of tough challenges.

5. Master the Elevator Pitch

A concise, compelling elevator pitch is one of the most valuable tools in your fundraising arsenal. Being able to distill your company‘s essence into a 30-60 second spiel can open up doors with investors, recruits, and potential partners.

The goal isn‘t to pack in every detail about your business but rather to hook someone‘s interest enough to land a second conversation. A great elevator pitch typically covers:

• The problem you‘re solving
• Your unique value proposition
• Your target user or customer
• Traction or proof points
• The ask (e.g funding)

Brevity is key. Avoid technical jargon and focus on the big picture value you deliver.

Here‘s an example of how a pitch for a hypothetical SaaS startup might sound:

"Scheduling appointments is still a nightmare for patients and doctors‘ offices. Our AI-powered platform automates the entire scheduling workflow, reducing no-shows by 50% and saving staff hundreds of hours. We‘re already working with 20 practices and are seeing 25% MoM growth. We‘re raising $1M to expand our team and fuel nationwide expansion."

While it looks simple on the page, a great elevator pitch can take hours to refine. Some tips to nail your delivery:

• Use concrete, punchy language
• Paint a vivid picture of the user problem
• Speak to the investor benefits (not just product features)
• Practice until you no longer sound scripted
• Convey passion and enthusiasm

Don‘t be afraid to customize your pitch for different audiences. The way you‘d describe your company to a healthcare-focused VC should be different than to a tech journalist.

Once you‘ve hooked an investor‘s interest with your elevator pitch, it‘s time to build the relationship. Ask questions, show genuine interest in their perspectives, and look for ways to add value. Over time, you can start sharing meatier investor materials like your pitch deck and financial model.

6. Be Ready to Walk Away

When you‘re in the thick of fundraising, landing an investor commitment can feel like the ultimate validation. However, not every investor is created equal.

The best investors offer far more than just capital. They‘re thought partners who‘ve been in the trenches themselves and can provide pertinent advice. They have deep rolodexes they tap to connect you to recruits, customers, and follow-on investors. And they know how to apply pressure at the right moments while also giving you space to run your business.

On the flip side, misaligned investors can suck up valuable time and mental energy. They can push for the wrong hires or steer you in strategic directions that don‘t match your vision. In extreme cases, they can even tank your business.

Doing reference checks on prospective investors is a must. Talk to founders of both active portfolio companies and those who‘ve exited to get a holistic view of the investor‘s reputation and approach.

When it comes time to negotiate a deal, look beyond the headline valuation figure. Key terms to review closely with your lawyer include:

• Board seats and governance
• Liquidation preferences
• Anti-dilution provisions
• Vesting and option pool
• Drag-along rights

Don‘t be afraid to push back on terms that could put you at a disadvantage down the line. And if something doesn‘t feel right, be willing to walk away.

As Naval Ravikant, co-founder of AngelList, has said, "the first rule of doing deals with investors is ‘don‘t be desperate‘." Keeping a cool head and optionality will earn investors‘ respect and ultimately lead to better long-term outcomes.

By following these six strategies – from developing a rock-solid business plan to mastering your pitch to picking the right partners – you‘ll put yourself in pole position for a successful fundraise. But landing investors is just the first step. The real work of building an enduring, impactful company lies ahead.