Follow This Fundraising Roadmap To Navigate The Process From Pitch to Close

Wander Beauty Co-founder Divya Gugnani has the secret to a successful fundraising process and it’s not what you may think. It’s not your vision, pitch, or the opportunity. Those components are essential but they don’t drive outcomes alone. A serial entrepreneur and investor in over 70 companies, Gugnani’s secret is simple: Preparation

Each step of a successful capital raise must be executed strategically. In her Project Entrepreneur class, Gugnani details how to create your fundraising roadmap and the concrete actions to take beforehand to meet aligned investors and streamline the process. She shares tactical tips to craft, customize, and compel them with your pitch. Then, walks through the key steps and strategies to run an efficient fundraising process and close your ideal partners. Her roadmap will prepare you to excel every step of the way.  

Part I: Design your fundraising roadmap

Once an entrepreneur has decided to raise capital, the first step is to create her fundraising roadmap. “Your roadmap is the part of your fundraising process that you should spend the most time on,” Gugnani says. “It’s not about networking or being in the crux of those meetings. This is the thinking part.” 

Ask these four questions to design yours. 

  1. What type of business do you seek to build? Your vision will dictate your funding journey. “Think about this honestly. Are you looking to create a billion-dollar business that goes public, where you raise venture capital and have a small amount of ownership? Or, are you looking to have more ownership and time to build your company?” 
  2. How much risk are you comfortable taking? Consider this question personally and professionally. “The second piece is about understanding yourself. Are you willing to put in your own money and then make a decision of whether you want to raise capital? Or, do you not want to take any personal risk, raise venture money, and have a salary from day one?” 
  3. What are your milestones? Your business and funding strategies work in tandem. “Take a moment to understand where you are right now and what your next milestone is; Understanding your next milestone allows you to craft your entire roadmap.” 
  4. How much capital do you need to raise? Rely on both your past and future efforts to answer this question. “Let’s say your milestone is to reach $500,000 in sales. Look at your books and see how much revenue you’ve generated to date. How long did it take you to get there? How much money? Now, project out to see how much capital you need to hit your milestone. Fill in the gaps with everything you need to do, such as developing your product and building your team. Keep in context how much money you’ve raised previously and how far you’ve gone with it. Past behavior will give you a good indicator of future performance.” Gugnani suggests tacking on 10 – 15% of ‘mistake capital’ for an extra cushion. 

“This is the soul searching you need to do,” she adds. “When you do the pre-work, all of the other work falls into place.” 

Map Your Timeline

Approach your timeline based on your capital needs, capital burn, and next milestone. “You need to understand: What is the goal of fundraising? What is the timeline? Are you trying to meet a certain milestone that will step it up? Or, are you just trying to do it before you run out of cash?”

Companies seeking the latter can calculate their runway to determine when they need capital.  

  • Runway is the amount of money and time you have to support your operations. 
  • Burn rate is the total amount of capital you spend to operate your business each month (including costs such as rent, compensation, and purchasing your product).

Runway = Capital you have in the bank ÷ Your burn rate. 

So, if you have $100,000 in the bank and you’re burning $10,000 a month. Your runway is 10 months. 

Your runway will help you determine when to launch and outline the dates for your fundraising process. The average capital raise takes between three to six months, with some erring longer or shorter. Duration is influenced by factors within your business, such as your growth and any challenges you’ve faced, as well as broader circumstances like the economic climate and COVID 19. Plan for additional time to ensure the money is in the bank before you run out.

Part II: Articulate your ideal investor

Gugnani encourages entrepreneurs to begin their investor sourcing process with the same level of introspection as their roadmap. “I want you to be self aware. Sit down and make a list: What are your strengths? What are your weaknesses? What are the skills you need to get around the table to drive the outcome of this business? It is vitally important that you get the right people around the opportunity. The only way you can get those right people is to do some self-reflection to understand who you are, what you are, and who you need. ” 

In addition to the skills you’re seeking from investors, consider key factors such as: geography, industry expertise and track record, level of engagement, board involvement, and the unique value their firm offers (like a strong network of CEOs). Use these preferences to filter your investor search. 

Gugnani shared a simple exercise to jumpstart your research. Identify five competitors in your industry that you strive to be like. Study their growth and fundraising strategies and the investors they’ve raised capital from. Utilize your findings to create a list of investors who fulfill your criteria and invest in your size, stage, and sector. 

“Do all of this research before you even launch the process,” she adds. “It will save you an immense amount of time and energy rather than trying to figure it out along the way.”

Network to meet investors 

Research is the first phase of investor sourcing and a catalyst to your networking efforts. Gugnani highly encourages spending three to six months prior to fundraising having “warm early meetings” (informal coffee meetings) with the investors on your list. Lean on your advisors, network, and industry veterans for introductions and reach out to investors personally via email and on LinkedIn. 

“I call them warm early meetings because you don’t want to do them when you’re kicking off fundraising. You’re not raising your hand and saying: I’m fundraising now. You’re saying: I am thinking about starting the fundraising process in three to six months and am getting to know funds that invest in my industry. I would love to spend 20 minutes telling you about my business, hearing about your fund, and perspective. There’s no pressure to fundraise. There’s no dollar amount or valuation discussed.” 

Early networking may not seem essential but these meetings play an indicative role in the success of your fundraising process. Map your timeline accordingly to ensure you meet these three objectives.  

  1. Gauge chemistry. “You can immediately tell whether you have chemistry with someone after a 20-minute coffee. You need to think about the fact that you’re going to spend a lot of time with this person. When an investor comes into your business, especially in the early stages, you may spend a tremendous amount of time talking with them. You have to enjoy these conversations. This is like a marriage without divorce. You don’t break apart unless you sell or leave the company. Choose wisely.” 
  2. Prioritize your list. “Create an A, B, and C list based on who you have chemistry with. The pre-work allows you to start your process with your B and C lists so you can practice and get everything right. Then, by the time you get to your A list, you’re seasoned and can execute a really great process.” 
  3. Manage your time. “You will save yourself from creating a whole deck and data room for someone that you may not have chemistry with. Do the pre-work. Do the networking. I always call it network to get work.” 

Part III: Prepare your fundraising materials 

An efficient fundraising process is one where you are focused on execution, not creating your materials. Prepare your pitch deck, financial model, and data room before you reach out to investors to ensure an organized process. 

Assemble your pitch deck 

Gugnani recommends creating one general pitch deck and, when relevant, customizing it per investor. She speaks to how to craft your narrative here and offers an overview of the slides in her class video. 

Begin once again with self-reflection. “Before you even sit down to write your pitch, think about these questions. Let them inform your story and how you’re going to deliver it to sell your vision, idea, and the opportunity.” 

  • What problem is your business solving? 
  • How are you innovating not imitating? What is your competitive advantage? 
  • Why are you the best team to solve this problem? 
  • What data and traction validate your business? (Pre-launch companies can and should create their own data through user surveys or experiments prior to the fundraising process.)

Investors evaluate pitches differently based on stage and Gugnani shared the three elements they’re assessing during your early and later years. 

  • For early-stage companies, they’re evaluating: people, idea, and opportunity. In addition to the above questions, they want to hear that you have a sizable market opportunity where they can make a significant return on investment. Zero in on these elements in your pitch. 
  • For later stage companies, they’re focusing on: people, product, and distribution. Investors evaluate your company with much greater specificity as you grow and will hone in on your numbers and financials. “Investors are looking deeper now. Who is on your management team? What skills do you have and need to fill? Is your product working? What is your Net Promoter Score? Are you in the right distribution channels? Investors don’t want to see you going everywhere in a haphazard form. You have to have a clear strategy of how you are going to distribute your brand and scale both domestically and internationally. They need to understand that and how can they put money behind your business to amplify it.”

Send your deck at the right time

Entrepreneurs should be mindful of when they share materials and cognizant that investors commonly share decks with other investors. Gugnani advises waiting to share your deck until you are pitching an investor, rather than sharing it via email prior. Seed the dialogue with a blurb about your business and then pitch the investor once you are on the phone or video conference. This not only allows you to manage who is viewing your deck. It ensures an investor is viewing your deck when they are attentive and in the right context. Share it via DocuSign during your conversation and follow up with a copy for those who are interested in entering your process. 

Prepare your financial model 

Financials and projections are often a lingering question entrepreneurs have about fundraising. Here, Gugnani shares what investors are really looking for. 

Your basic financial model consists of your past historical financial performance and projections. These will be reflected in your balance sheet, cash flow statement, and profit and loss statement. 

The financials that you share will be based on the size and stage of your business and how long you’ve been in operation. Gugnani recommends sharing your historical performance, how much capital you have raised and the terms, and how you have allocated that capital (such as to marketing, product, and engineering). “People want to understand if you are a good steward of capital. Did you do well with that money? Did you burn it really quickly? Did you spend a little bit and get a lot of traction?” 

Projections also vary by stage. For very early-stage businesses, most investors want to see monthly projections for the next year. Companies that have been operating for longer can share a quarterly three to five year plan. “It’s not really about the numbers. It’s about how you think through the numbers,” Gugnani says. “Make reasonable assumptions. For example, if you’re launching five markets in 2021, you can say that you launched two markets last year. Then, show what five is going to do to your topline revenue and how much it’s going to cost you. It’s more important to an investor that they understand your thought process and can get behind the assumptions.”

➺ A key insight on financials from Gugnani’s lens as an investor: “When it comes to projections, so many things could go right and wrong. Show me your historical data and what you’ve done. Past performance is going to give me the best sense of your future performance.” 

Fill your data room

The data room is a collection of documents that offer a comprehensive look into your business. The amount of data you share will vary based on the size and stage of your company. Common sections to include are: corporate, financial, industry, sales and customer data, marketing and PR, operations, HR, insurance, and legal. Gugnani outlines the documents to include in each section in her presentation below. Founders should ask an investor to sign an NDA prior to granting access to their data room. However, still take measures to protect your company’s privacy, such as anonymizing your org charts. 

Assemble one master data room with all the information investors may ask you about, and that you are willing to share, prior to fundraising. Then, as you move through, create an individual data room to share with each investor when they commit to the process. 

➺ A key insight on time management: “Entrepreneurs who don’t invest in the data room get in trouble during the process. It takes them so much longer because they’re answering 20 requests from 20 different investors. Do your homework upfront. Put all of your documents in so when someone asks you for something it’s already there.” 

Part IV: Master Your Pitch 

An entrepreneur’s diligence preparing for her fundraising process should weave throughout each pitch.  Gugnani shares key strategies to deliver a winning pitch and navigate conversations with investors.  

Customize your pitch 

This is where your research and networking pay off. Prior to every pitch, utilize the insights you’ve gathered on the investor and fund to adjust your deck and delivery. “Play into the areas where you know they’re focused and matter to them. Why do they invest in certain areas? What excites them? How can you speak to that? Now is your chance to really speak to them granularly.” For example, ahead of pitching a fund that focuses on social responsibility, Gugnani adds slides about Wander Beauty’s partnership with Dress for Success.

“Everything you do should be crafted and customized. Your success rate in these meetings is going to be much higher if you do your homework and deliver the right message to the right person at the right time. Think about it as a marketer and entrepreneur. How do you sell your customers? Sell the investor the same way.” 

Read the room 

Entrepreneurs should always create an excellent deck, whilst keeping in mind that it is a tool to reference, not a script for your meeting. “Take a moment to get across key information about your business and see how it goes. Do they start engaging with you and asking questions? Then, the deck becomes secondary and you have a dialogue about your business. Or, do you feel it’s more structured and they want to walk through slide by slide? Read the meeting, an investor’s body language, and how they’re interacting with you.” It’s also wise to pause throughout and ask if they have any questions. 

Gugnani personally prefers to spend meetings getting to know founders, learning about their history, and what motivates them. “This pitch deck in front of you? I’m going to bet you $1,000 it’s not going to work out to be what’s on that paper. The ultimate bet is on the people. Investment decisions come down to building a sense of trust and connection with an entrepreneur.” 

Focus on your story 

Investors may be assessing your numbers, but the only way to capture their attention is with a compelling narrative. How can you put an investor in your shoes?  

“I can show you data about why Wander Beauty makes sense – That’s irrelevant to someone who is hearing my story. They want to hear about the morning I was putting on my under eye concealer on the subway, with two kids under two, and I looked to my right and saw a woman doing her hair and to my left another was putting on her skincare. Women are doing their beauty routine on the go, but no brand is speaking to real women in the context of their real lives. The story of how you came to it and your personal experience is what is going to sell your business to an investor.” 

Cultivate your confidence

Your pitch may be focused on showcasing your business and the opportunity, but ultimately, you’re selling your leadership as a founder. As Gugnani shared: The bet is on you. “Investors need to have conviction that a founder can deliver. If you don’t have confidence in your business, how is an investor supposed to have confidence in it?”

What exactly does confidence look like? “You come in. You rock the meeting. If you don’t have an answer, you say: That’s a great question. Let me look into it and get back to you. It’s the way you handle yourself. It’s the way you handle every conversation and follow up communications. These are all indicators of what you’re going to be like as an entrepreneur and what it’s like to work with you.” 

Know your numbers 

Show that you can deliver by demonstrating a strong grasp over your numbers and the ability to explain them. An investor wants to see that you know your company inside and out. “Know your financials. Know how much revenue you did last year. Know how much money you have in the bank. Know your unit economics. How much does it cost you to create your product? What are your margins? You really want to think through those key unit areas because it helps investors understand whether your business makes sense on a per-unit basis. So, when they put money behind it can scale and grow.” 

Gugnani’s advice is equally relevant to your key metrics, such as your KPIs, and a directive to be vigilant monitoring them. Always have a thorough understanding of your performance and how to speak to it. 

Be transparent  

The entrepreneurial journey is one of constant evolution. Every founder makes mistakes and Gugnani encourages being honest about them. “Everyone’s business has missteps. If you own them and show how you fixed them, that shows your ability as an entrepreneur to pivot and change course – 99% of entrepreneurship is doing this,” she says. “There have been times when I’ve gone out to raise money and made a hiring mistake. I sat in the meeting and said: The head I hired for this department wasn’t the right fit. We ended up spending too much money and not driving enough traction. The last three months of data show that I fixed the problem. But, if you go back six months, you’re not going to love the data.”  

Pay attention to recurring questions 

Investors are evaluating your business on similar tenets and will likely ask you the same questions, particularly about weak spots in your business. Gugnani advises noting them and addressing them upfront in your deck and meeting. “It’s a tactical way of grabbing the bull by the horns. Don’t wait for people to bring it up. Proactively deal with it and allow yourself the opportunity to craft the narrative around that issue, instead of them extrapolating and making up their own viewpoint.”  

Iterate constantly 

Every meeting is an opportunity to improve your pitch. Gugnani shares an assignment to complete after each one: The moment you leave, write down three things you did well and plan to do next time and three things you could have done better and will improve. “This is an iterative process. Take the feedback and tweak. Then, go back into market and do it better. It is ever-evolving.” 

“Your pitch has to be as dynamic as your startup itself.” 

Part V: Execute Your Fundraising Process

Intentional completion of the above steps lays the foundation for an efficient fundraising process. Here, Gugnani details the steps and strategies to navigate from pitch to close. 

Organize investors into cohorts 

Gugnani recommends grouping investors into cohorts of four or five and reaching out to one group at a time simultaneously. It’s important to schedule your early pitches with investors at the middle of your list, ahead of speaking with your top choices. You may begin pitching four investors on your B list and enter them into your process. Once you start receiving offers, reach out to a group on your A list. On the contrary, if you aren’t receiving offers, continue reaching out to your forthcoming lists. 

Craft your outreach to let an investor know that you’re reaching out to a select group of investors to begin your fundraising process. Share how much capital you are raising and that you would love to schedule a meeting with them. Strive to arrange all cohort meetings during the same timeframe, such as two weeks, to create momentum. 

It’s wise to target a large number of investors, but founders should be mindful of how many they are reaching out to at once. Before you launch your fundraising process, gain a clear understanding of your bandwidth and the number of investors you can realistically manage whilst running your business. “Don’t try to run a fundraising process where you’re talking to 40 investors. You will fall and you will not get back up. You will be flooded with requests, be unresponsive, and lose opportunities. You will burn bridges and ruin your reputation. Take it slow and steady.”

Enter investors into your process 

After each round of pitches, you will invite interested investors to participate in your fundraising process. The first step is to send them a letter detailing the process, a timeline to receive a term sheet (Gugnani suggests three weeks for early stage companies), as well as access to the data room you create for them. 

Ask them about their diligence process and anything they may need to make a decision. Then, follow up in a week to see if they’ve reviewed the materials and have any questions. 

➺ A key insight on diligence: Every investor has a unique process and it’s important to align on actionable next steps to maintain efficiency. “You need to know: What is their diligence process? What materials do they expect from you? What is their timeline to make a decision? Who is going to make that decision? You want to meet those decision-makers upfront. Learn all of this at the start so it is streamlined for both of you.” Additionally, if you aren’t speaking with the decision-maker, consider politely asking for them to join your forthcoming meeting. 

➺ A key insight on timelines: Deadlines are critical. Investors are assessing your operating acumen and an inability to set clear deadlines is a red flag that may cause them to lose confidence. “Set up a process and put stakes in the ground,” Gugnani urges. “Too many entrepreneurs raise capital for a year. It’s infuriating for investors because the deal never gets done. They don’t know when you’re raising money and whether there’s urgency. You will be spinning your wheels indefinitely if you don’t set up a process.”

Evaluate your offers 

An agreed upon timeline enables you to receive offers at the same time, which is essential in running a tight process. “Now, you sit down and review them to decide: Are you happy with one of these offers and ready to move forward? Or, do you want to let more people in the process?” In the latter case, you’ll reach out to your next cohort. 

A founder’s organization pays off at this stage as it allows you to create a competitive dynamic. “The most successful fundraising rounds are when you have competitive interest. It drives the price where you want and is an opportunity to negotiate terms that matter to you. It’s very important to have more than one person in the running.” 

Evaluate all your offers once received and weigh the pros and cons to decide which investors you’d like to partner with. Revisit your reflection about the specific attributes you are seeking and how these investors fulfill those needs. Keep these key tips in mind from Gugnani as you close your investment. 

Let the market dictate your valuation 

Gugnani urges founders not to discuss valuation too early in the process. Rather than state her company’s valuation, she sends investors a list of industry comps and lets them make an offer. (You can find industry comps on public databases or by asking investors and investment bankers.) 

“Too many people say, ‘This is the valuation I want,’ and don’t get it. Investors talk to each other. So, there will be a conversation that this founder thinks their business is worth a lot more than it should be. It can ruin your fundraising process. Don’t do that to yourself.” 

A key insight on negotiation: “Start negotiating when you have offers in hand. You have a lot more leverage to say: I’d love to build this business with you but I really need you to step up on the valuation because I have comparable offers that are higher. You can be honest about what you need and want, but don’t overplay your hand from the beginning. That’s a rookie mistake.” 

Founders are often laser focused on valuation. Don’t let it be your compass. When Gugnani was fundraising for her third company, she signed terms with one of the lowest valuations because the investor was her top choice. “It’s all about people and getting mindshare from someone who can drive the outcome of your business,” she says. “On the back end, when you sell, the company is worth way more than a little valuation upfront.” 

Strive to have few investors 

Gugnani is a strong believer in partnering with a few investors who will actively help you grow your company. A small group of committed individuals not only streamlines your team’s execution. It makes your life easier as a founder. Keep in mind: A cap table with 10 investors is an agreement to manage 10 sets of interests and requests for several years. 

Be decisive

A founder’s best case scenario is deciding between term sheets from her top investors. However, it’s important to be decisive about who is going to lead your round. “Indecision is a big mistake people make. They can’t decide on an investor so they raise a $3 million round, with $1 million from three investors. That’s the worst thing you can do because now you have three people with a seat at the table who all want different things. You need a clear person who is in charge of that round, has meaningful ownership, and is going to get behind you and be meaningfully involved in your business.” 

Picture it this way: “You are the team captain. You’re out on the field executing, leading your team and your coach is giving you plays. Do you want one coach or three coaches? You want one coach telling you how to lead your team to win, right? Set yourself up for success.”  

Don’t oversubscribe your deal

What entrepreneur doesn’t want investors offering them extra money? This is, of course, a fortunate circumstance, but one Gugnani advises founders to address with caution. “Don’t get tempted to take money you don’t need. Think it through: Partner with a few people and raise a little bit of money. Get traction and grow your company. Then, reassess in a year or two when you’re ready to take on more people. Do it in stages. Be methodical and smart. Don’t just take a bunch of checks because people are waving them at you.” 

Be clear about your needs

Bring your reflection work to your conversations with investors and discuss how you both envision your partnership. This is a long-term relationship and it’s important to align on clear expectations around how you’ll engage with each other. “Be upfront about what you need from them and how much time, energy, and information you’re willing to give and vice versa. Everyone works differently and you have to understand what works for you.”   

Fundraising is often thought of as its own education. The lesson from Gugnani’s class? Do your homework. Every step matters in reaching the outcome you want. “As an entrepreneur, you should be focused on building your company, not out fundraising,” she adds. “Spend your time where it is valuable, which is creating revenue opportunities and growth in your business. Make this process seamless by being prepared ahead of time.” 

Back to Index