Are you ready to raise? The twelve-point check
Most failed raises were never going to work, and the founder could have known. Twelve questions to answer honestly before you list — on the business, the numbers, the structure and you.
Roughly half of the founders who start a raise would have been better off not starting it yet. Not because the business was bad, but because the raise was premature: the evidence wasn't there, the structure wasn't clean, or the founder hadn't worked out what the money was for. Investors spot this in minutes, and a failed raise costs you six months and a reputation. Before you list, answer these twelve questions. If more than three are "no", fix those first.
The business
- Can you say what you do in one sentence a stranger understands? If it takes a paragraph, you are not ready to explain it to forty investors.
- Is there evidence anyone will pay? Revenue is best. A paid pilot, a signed letter of intent with a value, or a waiting list with a conversion rate will do. A survey saying people "would consider" it will not.
- Do you know your unit economics? What it costs to win a customer, what they pay, what they cost to serve, how long they stay. Approximate is fine; unknown is not.
- Is there a reason it's now? A regulation, a technology, a cost shift, a behaviour change. "Now" is the second question an investor asks after "what".
The numbers
- Do you have twelve months of actuals in a format you can share in a day? Management accounts, bank statements, a customer list. If producing them would take a fortnight, do that fortnight first.
- Does a 36-month forecast exist, with assumptions you can defend? Not a target — a model. Revenue built up from customers and price, costs built up from people and rent, cash month by month. The cashflow tool on Find does the arithmetic; the assumptions are yours.
- Do you know exactly how much you need, and what it reaches? "As much as we can get" is the wrong answer. The right answer is a number, a milestone, and the date the milestone lands — see how much to raise.
The structure
- Is the company clean? A UK limited company, one class of ordinary shares, filings up to date, no loans from directors that will be "repaid from the raise", no side agreements that give anyone a slice nobody has written down. Investors' solicitors find these things; it is better that you fix them first.
- Do all the founders agree on the raise, the valuation and who does what? Co-founder disagreement surfacing during diligence is the commonest avoidable reason rounds collapse.
- Is SEIS/EIS available, and have you applied for advance assurance? If your trade qualifies, the difference in investor appetite is enormous. If it doesn't, know that before an investor asks.
You
- Can you spend a day a week on this for three months? A raise is a job. If the business falls over when you look away, raise less, later, or hire before you raise.
- Are you prepared to be told no thirty times? Most good raises collect thirty noes on the way to three yeses. If a no will derail you, get a mentor before you start, not after.
If you scored well
List. Twenty minutes for the six sections, the video this week, advance assurance in the post. If you scored badly on the numbers, give yourself a month with the forecast tool and your accountant. If you scored badly on the structure, a solicitor for a day. If you scored badly on the business, that is not a raise problem and money will not fix it.
Questions founders ask
"We need the money now. Can't we just go?"
You can, and investors will see exactly what you would have seen with the checklist — and price it in, or pass. Two weeks of preparation usually saves two months of raising.
"We're a lifestyle business with good profits. Should we raise equity at all?"
Probably not — see debt versus equity. Profitable businesses that do not need to grow fast are usually better served by a loan than by giving away a fifth of the company.
"Our accounts are a mess. Is that fatal?"
No, but it is a month of work before the raise, not during it. Investors forgive messy history if the current numbers are clean and you can explain the mess.