INVESTMENT

READINESS
CHECKLIST
How prepared are you
to get investors’
attention?
Before we get down to how investment ready you are, let’s take a
look at the short quiz below.

01
Investment readiness is...
▢ a. A place you reach naturally along the way (like a Starbucks)

▢ b. Bloody unpredictable, hit or miss, luck-based (like gambling)

▢ c. Something you must prepare for consciously (like an exam)

02
To get investment ready I...

▢ a. I’m just saying ‘yes’ to investors’ demands and then figuring it

out.

▢ b. I am bombarding every investor I know with emails. Someone

will be fooled!
▢
c. Created a roadmap, strategy and checklist to get there.
Wondering if you answered it correctly? Here are correct responses,
though we are pretty sure that you nailed it:

01. c.

It’s something you have to work hard on. Yes, we know, you already work hard on your
business, but that on it’s own is not enough. You might have a beautiful business, but if
you can’t show the beauty of it to investors, they will never invest.

02. c.

You need to always have a plan and a strategy in mind.

For example:
Do you go after the best fit investor first or last? It’s best to start with “low priority”
investors first to test your pitch/proposal and then work up. You learn from experience,
so don’t burn the best contact first!

Ready?
Let’s check!
One of the most difficult challenges all entrepreneurs face is how to get
ready for investment. It’s often not clear what investors expect at each
funding stage and where is the best to spend time and effort to
increase the chances of receiving funding.

As part of the Seedstars Investment Readiness Program, we have

defined over 300 factors that can increase a startup’s chances of
receiving investment across 7 categories:

Team, Talent, Advisors

Product & Market

Technology & Operations

Revenue & Growth

Financial & Performance Management

Legal & Admin

Fundraising

As a result of this research, we prepared the 18 key questions that will

help you define how investment ready you are and prepare yourself for
the first investment round.
01

Is your founding team of

the right size?
The founding team has a major influence on most investment decisions.
It will often be the first (and if rejected, the last!) thing an investor
analyses. It is considered optimum to have 2 or 3 founders. If you have
only 1, it is often rejected automatically (despite some data showing it is
possible to be successful as a solo founder).

Investors will want to meet the whole founding team and would need to
be equally impressed by all the founders. You must also show that the
founding team would be able to work well through tough situations.

Image source
Did you know that...

The second largest reason why startups fail (29% of cases) is due
to running out of funding and personal money. CBInsights

About 1% of startups evolve into a unicorn startup like Uber,

Airbnb, Slack, Stripe, and Docker. CBInsights

Equipment costs for startups can range anywhere from $10,000

to $125,000. Fundera

On average, it takes six months to hire someone for a startup.

Forbes

The average age of tech startup founders is 39. Ewing Marion

Kauffman Foundation

Founders of a previously successful business have a 30% chance

of success with their next venture. Skill vs. Luck in
Entrepreneurship and VC

The time of year you pitch, the detailedness of your data, and the
value of your pitch deck are a few of the strongest factors
affecting the amount of funding a business receives. Forbes

Only 2 in 5 startups are profitable, and other startups will either

break even (1 in 3) or continue to lose money (1 in 3). Small
Business Trends
02

Is founding team
complementary?
As it was mentioned earlier, Investors will want to meet the whole
founding team and need to be equally impressed by each founder. The
founding team needs to work well through tough situations. If you don’t
get on or if you don’t like the people you’re working with, change it
now. If you aren’t strong collectively, then it’s very likely that you won’t
get anywhere together.

With a complimentary founding team, your startup can be more than

the sum of its parts.

Good reads to learn more on

forming your star team:

● The Founder Dating Playbook –

Here’s the Process I Used to Find
My Co-Founder.

● Looking for Love in All The

Wrong Places – How to Find a
Co-founder

● How To Build Your Startup’s

Founding Team
03

Are you working on your

Emotional Intelligence?
The CEO will receive extra scrutiny from potential investors and their
expectations will be high. Various soft skills and other subjective
factors such as "emotional intelligence" will play a key role in the
investment decision.

Investors will consider things such as:

• Self-awareness (knowing own strengths/weaknesses)

• Coachability, asking questions, taking feedback and learnings
• Staying cool under pressure
• Passion that is contagious and motivates people to follow
• Persistence with willingness to adapt and pivot
• The right mix of ambition, ego and teamplayer skills

10 Traits of a Great
Manager, According
to Google's Internal
Research

Read the article

04

Can you prove the

market need?
Startups are based on hypothetical scenarios. The most challenging
refers to predicting and understanding the market. You need to prove
your hypothesis is right.

You can demonstrate the market needs by:

• Talking to potential customers. But be careful. Don’t just listen to

what you want to hear. Hear what the customers actually have to say
in spite of your assumptions.

• Check for the best practices. What do your biggest competitors do?
Make sure localisation issues are considered.

• Is there more demand than you initially expected? This is a great sign
that you may have found a product/market fit.

Before the Startup

with Paul Graham

Watch the video

05

Do you know your

positioning vs competitors?
Know exactly where you will position your startup and how it will
compete. In general, there are four ways you can position yourself vs
the competitors and, based on history, some have a better chance of
success than others. See the table below:
06

Do you know your

barriers to entry?
Whenever you decide to launch your product or service to a market, you
need to be well-aware of what might be your challenges and know
how you are planning to overcome them.

Scale/Volume- do more volume to lower

costs (e.g. Amazon);

Network effects, a strong value added

through two-sided marketplace (e.g.
Linkedin);

Strong Complexity of technology, operations

(e.g. pharma);
barriers Regulation, licences can bar new

to entry entrants (e.g. bank license restrictions);

Partnerships, especially distribution

licenses and can be hard to compete
against (e.g. Telco distribution of
microinsurance - Bima/MicroEnsure).

Once you’ve prepared a plan on how you’re going to deal with the
possible barriers to enter a market for your startup, your startup is more
likely to receive a positive reaction by investors.
07

Do you know your

market size?
Predicting the market size is not an easy task. Affected by sensitive
drivers or hypotheses, the calculations could be questionable. However,
you and your investors need to know what you are getting into.

The key indicators are:

01 02
Total Available Serviceable Addressable
Market Market
is the total market demand is the size of population matching
for a product or service. This your customer description. The
metric helps prioritize ideal value should be more than
business opportunities by $100M. Focus on this measure.
serving as a quick metric of
the basic potential of a given
opportunity.

03
Serviceable
Obtainable Market
is the portion of Serviceable
Addressable Market that
you can capture.
08

Do you have an
in-house tech team?
Investors want to see that the core tech parts are built, owned and
understood by the company. Outsourcing for an MVP before getting a
CTO on board is fine. But in the long-term, you will need to have tech
in-house.

Moreover, set up various channels for customer feedback and

proactivity look for it. Your tech team, not only the CTO, should receive
customer feedback weekly. Based on that, build your tech product
focusing on your user-experience and usability with a visually
appealing look.

Good reads to help you build and manage

your in-house tech team:

● How Startups Build Their ● How we’re building a

Tech Teams Without world-class engineering
Spending a Fortune team to create cutting-edge
products (by Hotjar)

● How should you structure ● From C++ to the C-Suite:

your engineering team? How Software Engineering
Made Me A Better Executive
09

Is your solution
scalable?
Your product must be built with quality and scale in mind. For that, you
should be using version control to track changes, doing unit tests and
code reviews for quality control. Also, you should have a contingency
plan for disasters and make sure you don’t lose client data.

In order to grow, your product needs to be built on a platform that can

scale.

The most common problems for a scalable platform are:

The Response Time

the time taken to process request and return response

Capacity Planning
figuring out the required infrastructure

Architecture Bottlenecks such as:

• A centralised component in the application architecture which can not
be scaled out and adds an upper limit

• A latency component is a slow component that puts lower limit on

response time
10

What are your

acquisition channels?
Poor marketing is the #7 reason startups fail. Marketing is just the
“top of funnel” element of awareness and acquisition, but it is the
starting point for the startup's growth and indispensability.

Some acquisition channels scale, some don’t. Generally, you start with
things that don’t scale well. Try both inbound (longer setup, but longer
payback) and outbound (instant).
Also, you need to decide if you should be spending on acquisition (and
growth).

Searching for Product/Market Fit:

rules to follow

3
conserve cash.

Searching for a Repeatable &

Scalable Sales Model: spend
experimentally.

Scaling the business: spend

aggressively.

Good reads about marketing

for startups:

● 4 B2B Tech Marketing ● The Top Comms Mistakes

Trends You Need To Know Startups Make — And How
To Avoid Them

● So You Think You’re Ready ● The Ultimate Guide to

to Hire a Marketer? Read Startup Marketing
This First.
11

Have you found your

product/market fit?
There are various methods to help you determine if you have
product/market fit.

It’s related to the #1 reason startups fail: “No market need”. If your
customers don’t get value from your startup’s product or service, why
would they hang around? So, does your retention flatten out? If so, you
may be retaining enough users for a viable business.

Surveys

Ask for your users’ feedback. If they are happy and would recommend
you to others you may be on the right track. Use the NPS score to
measure “promoters” and “detractors”.
Situation analysis

Are customers buying as fast as you can make it? Media/reporters are
calling you? Can hire fast enough? Money is piling up?

OR

Is it forced? Are sales cycles long/deals never close?

ClassPass’ Founder
on How Marketplace
Startups Can Achieve
Product/Market Fit

Read the article

How to find and

maintain
product/market fit

Read the article

12

Do you measure your

unit economics?
Knowing your unit economics will be critical when you are in front of
sophisticated investors, but there are also metrics that will help you run
a better business.

To measure your unit economics, there are some formulas that help
you:

Customer Acquisition Cost (CAC): ($) Total sales and marketing

expenses / (#) new customers acquired
Churn: [(#) Total customers churned this time period / (#) Total
customers at the start of this time period ] x 100 = (%) Customer Churn
Rate

Lifetime value (LTV)

For SaaS For Ecommerce For Mobile

companies companies Apps
($) Average monthly revenue ($) Average Order Value x (#) (note that adding the
per customer x (# months) Repeat Sales x (# months) referral value is optional)
customer lifetime x Gross Average
($) Average revenue per user x
Margin (%) Retention Time x Gross
(1/monthly churn) + ($) Referral
($) Average monthly revenue Margin (%)
value x Gross Margin (%) = ($)
per customer x (1 /monthly
churn) X Gross Margin (%)

LTV to CAC Ratio Calculation: ($) LTV / ($) CAC

The most important aspect is that if your LTV to CAC ratio is at least 3,
otherwise your ratio is too low. You should always aim for it to be higher
than 3.
13

How do you track your

KPIs?
If you can’t measure it, you can’t manage it! It’s also a huge win with
investors to be able to show them historical data, trends, etc, rather
than just one or two numbers on a slide deck.

Start somewhere (even just recording your One Metric That Matters)
and make your decisions based on data. Manual data entry never lasts
long (time-consuming, prone to errors, etc...), so invest early to
automate analytics and data collection.

Adora Cheung - How

to Set KPIs and Goals

Watch the video

14

How do you manage

cash flow?
Many B2B Business suffer from cash flow problems and get stuck in a
vicious cycle of delayed payments.

Our key advice on this topic is to pay attention to:

Runway (cash in bank/сurrent monthly expenses): remember that

fundraising takes 6-12 months in most cases. If possible, have some
cash reserves for unexpected shocks (tech, market, natural).

Accounts Receivable Management: if payments are done by bank

transfer, you need to be on top of them (automate reminders, call,
WhatsApp, incentivise). Consider invoice discounting if you have
significant receivables to manage.

Remember that running out of cash is the #2 reason startups fail.

Sometimes it’s justified (i.e. no market need), other times it’s simply bad
cash management.
15

Do you take a proper care

of your legal structure?
In the long-term, the company’s legal structure will be used to make
your business more efficient (for purposes like sales, taxes, hiring etc).

In the short-term, to facilitate investment, the structure should just be

clean, simple and “regular”. Do not let the structure block investors. Go
with the usual entity type and jurisdiction for your country or region.
Also, organise your data room from day 1. It’s just good housekeeping!

Most common and basic data room items include:

• Certificate or articles of incorporation

• Trademark(s) and intellectual property agreements

• Cap Table

• Investment Agreements for all shareholders and note holders

• Balance sheet or income statement since inception

• Bank account statements and export since inception

• Tax returns since inception

16

What equity are you

planning to give away?
Don’t give away too much equity early on. Losing 50% of equity before
your seed round is not advisable. You need to keep your cap table clean
by tracking the terms, dates, amount and the dilution.

Check out our cap table template.

This analysis shows the average dilution of employee ownership per

round. If you give too much early on, you will end up with nothing.

Plus, it may seem very unattractive for your future potential investors.
17

What is your
fundraising strategy?
Investing is full of uncertainty. Your funding needs and round should be
communicated with certainty or it won’t close.

So, you need to develop a fundraising strategy based on How much

(Terms), Why (For a clear milestone and use of funds) and Who (Types
of investors and your pipeline of potential leads).

Terms
• How much & currency
• Type (Grant, Convertible Debt/Note, Equity, Debt Financing)
• Valuation/Cap/Discount

Why are you raising

• Funding should be for a clear milestone you aim to achieve
• Usage of funding should be clearly budgeted/known

Lead investor
• A lead investor does the hard work so other investors can follow
• Without a lead, closing a round can be challenging at early stage
(angel/seed) and impossible at a later stage (series A onwards)

Lead Investor targets

• Like sales, fundraising has a certain conversion/success rate
• Build and manage your investor pipeline
• Target the right profiles depending on the round
18

How does your pitch

deck look and feel like?
“Just send me your deck” - the infamous words some investors will say to
you. Make it worthwhile for them to open it. Also, have the pitch deck
ready beforehand, so you can send it quickly. They will “judge a book by
its cover”. To have a high-quality pitch deck, don’t reinvent the wheel!
Use tried and tested formats and have the material (i.e. data room)
ready to back up the deck.

Here is a table with the expected content in a pitch deck:

Let’s go now through each key slide one-by-one to see what should be
there:

01 - What problem are you solving?

- Why is it an important problem to solve?
- How great is the pain?

✓ Tell a story
✓ Draw from personal experience
✓ Generate empathy/emotions with your
listeners
✓ Keep it visual

Ø Don’t make it complicated

Ø Don’t overload it with numbers

- How does your solution fix the problem? 02

- What are the key features?

✓ Show some images

Ø Don’t get too technical (Know your
audience)

03
- How big is your market -
TAM/SAM/SOM?
- What sources/assumptions did you use?
- Top down or bottom up assumptions?

✓ Demonstrate it’s a worthy market to

address
Ø Don’t use unresearched/unrealistic
numbers

- What have you achieved so far? 04

- What are your key metrics (volume, users, etc)?
- What is your monthly revenue/expenses?
- What are you growth rates?

✓ Show hard numbers

✓ Show clearly what’s achieved vs. projected
✓ Show milestones if no traction
Ø Don’t exaggerate or confuse
05
- How do you make money?
- What is the revenue model (subscription,
on demand, freemium, commission, etc)?
- CAC
- LTV

✓ Explain the primary source of revenue in

detail
Ø Don’t show multiple sources with vague
ideas - it shows them that you have no
clear idea

06
- How much do you need?
- What are the funds for?
- How long will your runway be?
- What terms (valuation, cap, etc)?
- Who has already committed funds?

✓ Know your numbers

✓ Be realistic (have comparables)
✓ Ask for things that aren’t just money
Ø Don’t just ask for the sake of asking

Need a pitch deck template?

You can download it below
Available in pptx and keynote

Download
Pitch it smart
Startup pitching is both an art and a science. Mastering it and
understanding how to get investors’ attention can make or break an
entrepreneur. Planning, preparing, and tailoring your startup pitch to
find new investors is key to turning your idea into reality.

Charlie Graham-Brown,
Seedstars CIO recommends
you to:

Be confident, not arrogant and ambitious, not unrealistic.

Founders need to strike a balance here. Usually the emerging
market entrepreneurs come across as confident, but either not
ambitious enough or unrealistic. To get the returns investors
are looking for, ambition is required. And to achieve the
ambition, you need to show a realistic path of how you will get
there.

Use WHEN, not IF. For the entrepreneurs lacking confidence,

this is a telltale sign. If you don’t have confidence in yourself,
how can you expect investors to get onboard?

Do your homework. You need to think of an investor as a

partner and knowing something about them is the first step to
that. Find out what else the investor can bring to the table
other than money and be sure to discuss it with them.

Raise the challenges yourself. An investor will figure the

challenges out soon enough, so you may as well surface them
early on to show that you’re prioritising them. This is also a
good way of getting the conversation a bit deeper.

Practice. Pitching to investors and having all the numbers and

answers in mind is hard work. Before you start meeting
investors, practice with teammates or mentors who can put
you through an artificial grilling.
Conclusions
These tips give you some guidance on how to get ready for investment.
One last advice: in fundraising, it takes time to get everything ready.
Prepare really well before contacting an investor.

We can support you in this mission with our two programs: Investment
Readiness Program and Growth Program. We scout for the best tech
startups to mentor and connect them to investors, while also investing
in them ourselves. We walk the talk. Join the program and see how your
startup can improve its performance and get ready to secure
investment.

Get investment faster by knowing where to spend your time and

energy when preparing for your first investment round.

Learn how to create a fundraising strategy and how to pitch what

investors are looking for.

Benchmark globally by learning the best practices. Challenge our

global team of experts with your questions!

Get introduced to investors from around the globe specialised in tech

startups.
Apply to the Online Seedstars World Competition 2020/21 and compete
to be one of the 10 startups selected for a USD 50K growth program
investment with a Global Winner getting up to
USD 500K in investment.

Apply Now
More resources to get
investment ready

Fundraising Strategy for an Early-Stage Startup from A to Z.

Startup Survival Guide.

Being a Better Leader: 5 Skills Founders Have to Learn to Survive

Their First Year.

What Pitches Make Startups the Finalist of the Seedstars World

Competition?

Growing Your Tech Startup with Limited Funding.

How to Successfully Pitch Your Startup Idea to Investors at an Event?

"The Goal Is to 'Cure' a Slightly Sick Investment Fund Sector," Bas

Godska (Investor’s view).

"To Become a Successful Angel Investor, I Believe the Trick Is Not to

Be Independent", - Joseph de Leon (Investor’s view).

Check more resources

 Produced by

Nadia Mykhalevych
Content Marketing Manager at Seedstars
Materials provided by
the Seedstars Investment Team

If you spot any errors or issues, please contact Nadia at

nadia.m@[Link]