Our tips to succeed your capital raising (2/3)

5 criteria to correctly size & time your fundraising:

  • Allow for a 6 months fundraising process – you should thus have12 month cash cushion at a minimum  so us not to come under undue pressure;
  • The amount to be raised should not be more than 40% of pre-money valuation;
  • Furthermore, the amount to be raised should be enough to allow “cash break even” within 3 years (excluding guaranteed or known external financing) & do not require a return on the market before 30 months.
  • Sizing limits & criteria:
    • For employees: potential dilution (through award of warrants, options, bonus shares, etc) should be limited to 15 %  of money raised and 5% of pro-forma shareholding.
    • For the founders / managers: potential dilution should be limited to 15 %  of money raised and 7.5% of pro-forma shareholding.
    • Cash-out limited to a minimum and in any case less than 15% of the amount raised (note: cash-out by founders / managers is incompatible with award of warrants, options or other dilutive instruments).
  • Momentum should be created from signing on an anchor or reference shareholder & the first third party investor (who should jointly subscribe to 50 % of the funds to be raised) and allowing closing within 3 months.

source: Alexander Partners

to be continued…