We make fundraising easier and more transparent for startups, so we know a thing or two about how to run an investor campaign. The Capital Pilot Investability assessment and rating gives startups actionable feedback on their investor proposition before starting their campaign, and confidence that they are in great shape once they kick things off. Our own growth and scaling plans for 2022 and beyond required external equity investment, so we took the opportunity to follow our own advice.
The Capital Pilot team recently completed our own EIS seed funding round, raising £500k from angel investors. We spent two months preparing for the raise and it took eight months to complete from first contact with investors to completion. There were 18 investors in the round, only seven of which were existing shareholders.
Due to the pandemic, it was obviously difficult to arrange face-to-face meetings with potential investors. But, where there’s Zoom, there’s a way and our team worked diligently to secure our funding almost entirely virtually. In fact, we only took one face-to-face meeting with an investor during the entire round. To say that we are proud of our team for their hard work and dedication is an understatement.
No plan survives first contact with the enemy, but detailed planning ahead of time puts you in the best possible shape for success.
Pre-flight checks - the first two months
Our team spent two months preparing to kick off our fundraising campaign. Like any startup, it was important for us to demonstrate value and growth potential to potential investors. So, we shifted as much focus and hours as the business could tolerate to building the proof we needed for investment.
The team identified target investors by analysing existing relationships and identifying potential new opportunities. We tracked everything in our CRM so we could evaluate our progress and keep our communications in one place.
We created our investor narrative and focused on the key messages we needed to include in our outreach materials so investors could clearly and easily capture what Capital Pilot is all about – changing the face of early-stage investment; automating manual processes to drive efficiency and transparency. Turning subjective judgements into an objective numerical scale.
We set a target amount for the round and refined our financial model over and over (and over) again to ensure that our projections supported our growth story and, importantly, the target amount. There is no point in setting an aspirational target if your financial model simply cannot support it.
Most importantly, we signed up for our own Investability Assessment and Rating. Just like any startup can, we submitted our investor proposition and materials to the service. We went through our own rating and feedback process from start to finish. And, we took notes along the way so we could continue to refine our product to help as many UK startups as possible.
Whether you call it eating our own dog food or drinking our own Kool-Aid, we did just that.
Unbiased advice
It’s pretty strange to try and rate yourself. Thankfully, our rating process relies on a combination of AI and human analysis so even feedback on our own company remained unbiased and neutral because, quite frankly, the algorithm [and our assessment team] doesn’t “recognise our handwriting”. The process is built to be unhackable.
We received a rating of over 800 out of 1,000 which gave us huge confidence in our offer, but the assessment also tipped us off to potential reactions and comments we might hear during our conversations with investors. We knew what questions we might receive and so, importantly, we were prepared with answers.
The rating exercise not only helped us check and balance our system but it gave our team, which included a few fundraising novices, a genuine insight into our own product and the confidence to close our investment round successfully.
That’s nice, but how did you really do it?
Receiving our assessment score obviously helped us prepare for our seed round. We love our product and could write a LOT more fluff about our process but, quite frankly, we want to be as helpful to you as possible. Want to know how we really did it? How many calls we made, what materials we used or what our due diligence process entailed?
We love transparency, so here, dear reader, is a quick and honest rundown of our seed round fundraising campaign which we undertook after we received our rating and actioned feedback received to fix our flaws.
Step 1: Initial Contacts. We emailed our target investors in 2 tiers, using template emails with a personalised first paragraph. We use the Mixmax email add-on for template management, tracking of open rates, and reminders for follow-up. Depending on whether we had an existing relationship with the target investor or not we included a 1-pager or full presentation in the email. We use Docsend for all documents we send out, to measure open rates, re-visits, and time spent per page/slide and overall. Mixmax and Docsend enabled us to bespoke our follow-up. At this initial phase, our target was to arrange an initial call with the potential investor. We found that a proactive offer of time slots for Zoom meetings, again through Mixmax, worked much better than simply asking if the investor was interested in a call.
Step 2: Investor Calls. Our 1-2-1 investor calls were tailored to the specific investor and tended not to follow a fixed format. We did however ensure we always got across the 5 key sales messages each time. For these calls, our goal was to deliver the next round of information - full pitch deck or financial model or due diligence - and to generate the expectation for a follow-on discussion.
Step 3: Group Calls. We worked with our friends at E2E Capital Ventures to arrange two group investor calls intended for angel investors with whom we did not have pre-existing relationships. Over 100 invitations were sent out, resulting in 30 attendees.
Step 4: Due Diligence. We pre-prepared a set of due diligence documents in a Docsend folder. Investors were given access to the folder at the appropriate point in our engagement. This ensured consistency of information flow and ensured we could track which documents were viewed and for how long.
Step 5: Advanced Subscriptions. We used an advanced subscription agreement to close on early investors as soon as they were ready, rather than waiting for the entire round to be filled. Given that we were raising during COVID this enabled us to maintain our cash runway when funding rounds were taking longer to close.
Step 6: Closing Stragglers. Towards the end of the process the momentum in a funding campaign shifts. At the point when we were 80% complete, we were able to change our messaging to investors who had expressed interest but were slow. We set a realistic deadline and saw good results from delivering a “now or never” message. The fact that we were close to completion also encouraged a couple of existing investors to increase their commitments
Are you fundraising soon?
Capital Pilot’s Investability Assessment and Rating should be the first port of call for founders preparing to raise funds. We provide objective feedback on your investor proposition, with clear suggestions on how to improve. In addition, we provide rated startups with lists of matching investors to help focus your campaign.
The Capital Pilot website has a wealth of resources on different aspects of fundraising which can be found HERE. Everything you need to know about preparing to meet investors, all in one place.