Fundraising in 6 steps: preparation, pitch, term sheet, due diligence, data room and closing. Practical guide for founders.
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.
This article is the result of automatic translation, the accuracy and fidelity of the translation are therefore not guaranteed. To consult the original version of this article, in French, click here.
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:
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:
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.
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:
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.
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.
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.
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.
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.
No. A fundraising round does not necessarily involve a share capital increase, although this is by far the most common structure.
In practice, a term sheet is primarily used to establish the framework for negotiations. However, certain provisions may be drafted as legally binding, such as those relating to confidentiality, exclusivity, governing law, or the allocation of transaction costs.
Due diligence is the stage during which investors review the company's legal, financial, employment, intellectual property, and commercial matters. The objective is to verify the information provided by the company and identify any potential risks. It is a standard market practice, with the scope of the review varying depending on the size of the financing round and the type of investor.
As early as possible. An up-to-date capitalization table (cap table) is almost always requested before or during the due diligence process. It is also used to model the impact of the investment, including dilution, option pool allocation, and transaction terms. While it is not a legal requirement in itself, it is an essential management and decision-making tool.
A fundraising process in France generally takes 4 to 9 months, from initial preparation to closing. The preparation phase (pitch deck, data room, financial modelling) usually takes 1 to 2 months. Initial outreach and investor selection typically require another 1 to 2 months. Once a lead investor is identified, due diligence and legal negotiation of transaction documents generally take 2 to 4 months. Series A and Series B rounds tend to be faster than seed rounds.
The data room should be ready before the first meetings with serious investors, i.e. at the end of the preparation phase. Priority documents include: the company’s articles of association and existing shareholders’ agreement, the last three certified financial statements, key customer contracts (potentially under confidentiality at an early stage), an updated capitalization table, intellectual property documentation (trademarks, patents), and key employment agreements.
After an initial meeting, a silence of 10 to 15 days justifies a simple and concrete follow-up, ideally including new information (e.g. updated financial figures, a new client win, or a press mention). If the silence continues, a direct phone call is preferable to further emails. It can also be useful to create a sense of urgency by mentioning progress with other investors (without exaggeration or misrepresentation). A clear rejection is preferable to silence, as it allows you to focus your efforts on other potential investors.
Cap table: definition, mandatory columns (securities, rights, valuation), common mistakes and best practices for keeping it up to date.
Due diligence data room: document list (legal, financial, HR), organization, tools and mistakes that block a closing.
LBO sale and purchase agreement: asset and liability warranties, conditions precedent, earn-out, price adjustment and negotiation tactics.