Question: When do I need to raise capital?Answer:
If you are looking to raise capital, allow sufficient time to start the capital raising process well before your existing capital runs out. The entire capital raising process may take up to several months to complete.
While each capital raising transaction is different, just as each startup business is different, an equity round capital raise may include:
- Searching for suitable investors. Doing so depends on how much capital you need and what stage of growth your business is at. You may look at friends and family, professional investors or institutional investors such as venture capital firms.
- Entering into negotiations with investors on the commercial terms of the investment;
- Documenting agreed terms and the mechanics of how the investment will take place.
- Updating or drafting key company documents such as the Shareholders Agreement and/or Company Constitution;
- Receiving funds from your investor; and
- Issuing your investor with shares.
Typically, the lengthiest stages of the capital raising process are often when finding suitable investors and negotiating agreed terms. However, the pace and ease at which you can raise capital may depend on what particular funding round this is (for instance seed round, bridging round, Series A, Series B etc), the amount you wish to raise and the specific investors involved, their personalities and requirements.