Capital raising: Focus on fundability

When you’re seeking venture capital for your business, fundability plays a crucial role. Fundability refers to how appealing your business looks to investors, showing that it has the potential to succeed and grow. It includes everything from your team’s capabilities to your product’s market fit. Let’s explore what fundability means and why it matters when raising money from venture capital firms.

Fundability and company financing

Fundability determines how likely investors are to provide capital for your company. When it comes to company financing, equity investors look at several key factors before deciding to invest:

• Strong Team: Investors want to see that you have a capable, complementary team. A mix of business and technical expertise boosts your fundability, as it shows you can execute the vision for your business.
• Proof of Concept: Investors are hesitant to fund mere ideas. They need to see proof that your product or service works, such as through a minimum viable product (MVP) or early customer feedback. This reduces their risk.
• Clear Business Model: Your business model must demonstrate how your company will make money and grow. Investors want to see that you have a well-thought-out plan for revenue generation and scaling.
• Solid Financials: Having strong financials or a clear financial roadmap shows that you can manage funds responsibly. Investors want to know that their equity investment will be well-utilized to achieve growth and profitability.

For more insights on how to improve your chances of securing funding, check out this guide from WISC Partners.

Why fundability matters to venture capital firms

1. Attracting VC Firms: The more fundable your business, the better your chances of attracting venture capital firms. Investors are drawn to companies that demonstrate a high potential for success.
2. Leverage in Capital Raising: When your business is fundable, you gain more leverage during the capital-raising process. This can help you negotiate better terms, such as how much equity you keep and the level of control you maintain.
3. Maintaining Control on the Capitalization Table: A fundable business allows you to maintain more control over your company’s capitalization table. This means retaining more ownership and influence over key business decisions.
4. Efficient Seed Round Funding: Fundraising can take a lot of time and energy. The more fundable you are, the faster you can close a seed round or other financing, allowing you to focus on growing your business.
5. Access to Angel Networks and Strategic Investors: Fundable businesses often attract not just venture capital but also support from angel networks and strategic partners. These investors can provide valuable advice and connections to help your company thrive.

How to improve your fundability for VC firms

To increase your fundability and attract venture capital firms, focus on these areas:

• Build a Strong Team: Ensure your team has the right balance of business and technical expertise. If you’re missing key skills, consider bringing in new members or advisors who can strengthen your leadership.
• Prove Your Concept: Investors want to see a working product or service. Develop a prototype, gather early customer feedback, or demonstrate your product’s viability to reduce perceived risks.
• Refine Your Business Model: Make sure your business model clearly shows how you’ll generate revenue and grow. Investors want confidence in your path to profitability.
• Strengthen Financial Management: Investors look at your financial management closely. Ensure you have a clear understanding of your financial needs, burn rate, and runway to make your business more attractive.

For more advice on improving your fundability, take a look at OpenVC’s comprehensive guide.

Conclusion: Why fundability is key to venture capital success

Fundability is essential when seeking equity investment from venture capital firms. It’s not just about having a great idea; you need to show that your business can grow and succeed. By strengthening your team, proving your concept, refining your business model, and managing your finances well, you increase your chances of attracting investors and closing a successful seed round. Fundability sets the foundation for long-term success in the venture capital world.