Is Your Startup Ready To Work With A VC? Key Points To Consider, From Pitch To Due Diligence

By Murad Salikhov

The right amount of investment and general support from venture investors can be just what a startup needs to go from the early-stage ideas phase to competitive market player. But receiving funding from VCs has grown tougher. This makes communicating with funds an increasingly crucial step for startup teams.

To help startups and their founders overcome this challenge, here are some recommendations.

Define your funding needs and a timeline

Before seeking funding, ask yourself if your startup truly needs investment right now.

If the answer is yes, then you need to figure out the main priorities for funding. But that’s not all. Funding stages and a proper timeline are also important, so divide your startup journey into series — A, B, C and beyond — and set specific, achievable goals for all of them.

You don’t need numerous or complicated goals, but the ones you do have should clearly reflect the growth rate you expect. From my experience, this helps a lot in predicting when your startup will require money next, allowing you to negotiate with investors in advance and avoid financial pitfalls.

Understand the full value of VC support

When engaging with investors, a startup needs to understand not only the financial resources it requires but the nonfinancial ones as well. This shows that the team has a clear vision for development and can help take negotiations to a deeper level.

Besides capital, VCs possess knowledge and can offer strategic guidance and industry connections, helping you find the right product-market fit, hire talent or prevent overspending on marketing. Looking to investors solely for funding limits the help you could get.

Prepare for due diligence

In 2024, investors are conducting more rigorous and prolonged due diligence compared to previous years. So make sure your business is legally sound — otherwise it will not even be taken into consideration.

Establish a proper legal structure (like an LLC or corporation) and maintain up-to-date records. Financial statements, tax filings, contracts with clients, employee records — investors will likely want to see it all.

And make sure to protect your intellectual property by registering trademarks or patents, if you have any. This goes a long way in showing that your startup is credible.

Build a detailed business plan and financial forecast

A clear business plan can help a startup stand out from the crowd and attract investors. And it doesn’t have to be overwhelming: just be precise and focus on your value proposition. What makes your business shine compared to hundreds of similar ones?

Avoid unrealistic numbers and explain your calculations. Inflated or overly optimistic projections can hurt your credibility if you fail to meet them in the future. Keep in mind that the plan should always be monitored and compared to the actual results. It’s also good to outline a few scenarios where things go wrong and how it would impact the anticipated outcomes.

Craft a compelling pitch

Your pitch deck is the face of your startup, so craft it carefully.

Cover the essentials: the problem you’re solving, product-market fit, business model, and so on. Keep your narrative data-driven, show potential returns on investment, and highlight why your team is prepared to succeed.

Investors will value your clarity and confidence.

Final thoughts

Securing funding and establishing lasting relationships with VCs means thorough preparations. By presenting detailed and precise plans, a startup can show that it’s poised to make a change and not just to chase money.

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Murad Salikhov is a serial investor and the co-founder of Schwarzwald Capital Fund, a venture capital fund dedicated to innovative fintech and creator economy projects. Throughout his career, he has held several C-level positions in the payments industry, successfully leading important players including Cartex Group and CreditPilot.

Illustration: Dom Guzman