Financing is an essential consideration when starting a business, especially when it comes to a startup. In this regard, many companies turn to fundraising to finance their project (seed capital) or accelerate their growth (growth capital).  

Fundraising is a process whereby a company increases its share capital through capital contributions from existing or external investors. In exchange for their investment, these investors receive shares in the company, which allow them to participate in corporate affairs and governance decisions. 

The goal of this process is to convince investors to inject funds into your company and bring them on board as shareholders in order to stimulate the company’s development and finance its growth. 

Raising capital thus offers numerous advantages. It allows the founder to secure equity financing without resorting to a bank loan. Furthermore, bringing in outside investors enables the founder to expand their network of expertise andbring specialized know-how or expertise to the company. 

While fundraising is a popular financing method among young, innovative companies, it is not a straightforward process. Whether this is your first round of fundraising or not, its success depends on following a specific set of steps. 

1. Formalize Your Strategy 

Funding isn’t possible without proper preparation. The first step in raising funds is therefore to formalize your strategy. You must be able to present a solid and credible business plan to potential investors. This involves defining your direction and crafting a compelling pitch. 

To do this, you’ll need the following materials: 

1️⃣ The Pitch Deck

The pitch deck is a short, visual presentation of your business project (between 10 and 20 slides). The goal is to spark investors’ interest by highlighting the project’s key elements through images, charts, key figures, and short, impactful text. 

The pitch typically highlights a market challenge and the solution your company provides to address it (presentation of the product or service). It concisely summarizes the market research conducted, your business model, financial projections, planned sales strategies, and the amount of funding needed to achieve your goals. 

2️⃣ The Business Plan 

The business plan is an essential presentation tool when approaching and negotiating with private investors. It must demonstrate the viability and reliability of the proposed project. It should be concise, clear, yet comprehensive. Both its form and content must be meticulously crafted to attract investors. It must therefore include: 

• • An introduction to the founding team and the products/services offered by the company; 
  • A statement of the company’s values; 
  • A market and competitive analysis; 
  • A projected financial statement to demonstrate the project’s financial viability; 
  • A description of the sales and communication strategies; 
  • A business model; 
  • An executive summary summarizing the key points of the business plan and providing an overview of the project. This summary is intended to spark investors’ interest. 
    

3️⃣ The Capitalization Table

The cap table, or capitalization table, is a summary of the distribution of capital within your company. This table is constantly changing, particularly during a fundraising round or when BSPCE options are granted.  

When raising capital, the cap table is typically requested by prospective investors. It allows them to understand the current distribution of equity and the impact their investment would have on it, if applicable. 

Updating your capital table also allows you to assess the balance within it and thus anticipate any need for rebalancing before presenting your project to investors.

2. Select Your Investors 

While drafting these documents, you should seek out investors who can support you during your seed phase or development project. To do this, you must define the profile of your ideal investor. 

This step should not be overlooked, as these equity investors will subsequently play an active role in your company’s operations. Be sure to select financial partners who share your company’s values. 

It is therefore advisable to choose a group of investors who operate in your industry and thus have a deep understanding of the market in which you are positioned. Additionally, two criteria should guide you in selecting your future shareholders or partners: 

• • Their ability to provide substantial funding; 
  • Their skills, expertise, and professional network (necessary to maintain the company’s competitiveness). 

3. Sign a term sheet 

Once you have identified interested investors, you should begin negotiating the terms of the fundraising by signing a letter of intent (LOI) or term sheet. 

The letter of intent, or term sheet, formalizes discussions with investors and provides a framework for the financial and legal terms of the negotiation. This document outlines the intentions of the parties involved in the fundraising. 

Unless otherwise specified, the term sheet does not constitute a legal commitment and is not binding; its sole purpose is to structure the negotiations. 

The investor’s signing of the letter of intent triggers a new phase in the fundraising process: due diligence, the success of which determines the next steps in the fundraising process. 

4. Conduct due diligence 

After the matching phase comes the due diligence stage. This is the stage during which potential investors conduct an in-depth review of your proposal: market potential, time-to-market, technical and legal feasibility, credibility of financial projections, team cohesion, and more. In other words, they scrutinize the relevance and viability of your project. 

Communication and responsiveness are key during this phase. You must be prepared to provide investors with additional information as needed and to share any new relevant data with them (new clients, updated figures, etc.). 

In practice, this step almost always relies on adata room: a secure space where you centralize, organize, and share the requested documents (legal, financial, corporate, intellectual property, contracts, KPIs, etc.). A well-organized data room speeds up communication, reduces back-and-forth exchanges, and builds trust.

5. Negotiate and Sign Your Shareholders’ Agreement

Once the due diligence phase is complete, you should negotiate the detailed terms of the fundraising round with interested investors. The terms of the transaction are discussed and formalized through a partnership or shareholders’ agreement. 

This document is a contract designed to govern the relationships among the company’s shareholders. It defines the role and scope of each shareholder’s rights, balances your interests with those of the investors, and anticipates potential deadlock situations. 

Drafting a partnership agreement is a strategic step because it establishes the rules governing the company’s operations.  

6. Finalize Your Fundraising (Closing) 

The closing is the final step in the fundraising process. Once the shareholders’ agreement has been signed, the company’s capital must be increased. This final step involves completing a number of formalities. 

1️⃣ Call an extraordinary general meeting (EGM) to vote on and approve the capital increase and the admission of new shareholders into the company

2️⃣ Investors mustsign the stock subscription forms 

3️⃣ Issuance of a certificate of deposit by the bank upon presentation of the subscription forms and receipt of the funds corresponding to the investor’s contribution

4️⃣ Completion of legal formalities: registration of the articles of incorporation with the Commercial Court registry, publication in a legal gazette, etc. 

Conclusion

A successful fundraising campaign requires planning ahead for its key stages (setting up the data room, identifying potential investors, etc.) and having the right support during negotiations with investors. 

With Equify, you can streamline this complex process and prepare for the key phases of your transaction: organizing and sharing your corporate documentation as part of the due diligence process, signing your documents (shareholders’ agreement, subscription forms, etc.), convening your general meeting, and updating your corporate records.