Table of Contents
As a startup founder looking to raise your company’s first major round of capital in New Zealand, you may feel unsure about where to start. Successful startups typically have a strong network of professionals who can help them throughout their development. When you need to secure investment, having knowledgeable friends in your corner can be extremely helpful. This article sets out the three professionals you should meet with when you are raising capital in New Zealand.
Essential reading for anyone building their startup. This free guide includes practical advice and seven real-life case studies.
How Will I Structure My Capital Raise?
Before you approach professionals for help when raising capital, you should have a clear idea of the structure of your capital raise. This structure will depend on your business, network, and industry. Ask yourself the following questions:
- What key goals will you aim to achieve through the investment?
- How much investment will you need to achieve these goals?
- What kinds of investors will be able to contribute to this amount of capital?
Capital raising typically follows a series of rounds:
You will be dealing with different investors, expectations, and varied investment sizes, depending on the round your startup is undertaking and what stage of business growth you are at.
Pre-Seed Investment
If you are a young startup in the initial stages of growth, you might be looking at pre-seed investment from family and friends or an angel investor. Pre-seed investments are the earliest form of funding – at this point, you are sourcing capital to fund an idea, rather than an existing product or service.
Investment from friends, family or a high net-worth individual in your network is often an easy and fast way of raising funds, and may not have any prohibitive prerequisites or requirements on you or your startup.
Venture Captial
If you do not have access to investments from family and friends, or you are looking to take your startup to the next step, a seed round involving angel investors and early-stage venture capital (VC) might be more appropriate. This is likely to be the case if your startup already has market validation and has begun to generate revenue.
With more sophisticated investors onboard, your startup will need to engage the professionals below to prepare for the investment and plan for future success.
If you are raising capital in Series A or Series B rounds, your startup will require ongoing assistance from a range of professionals. Venture funds or Venture Capital firms will be looking for:
- a finalised product and market fit;
- a robust business model;
- revenue; and
- traction with an established customer base.
Attracting larger investments in these later rounds will require more assistance from professionals who can set you up for success.
Which Professionals Can Help Me?
1. A Startup Accountant
A good accountant is a critical partner in your startup’s development. When looking to raise capital, a startup accountant can provide a range of helpful services, including:
- identifying alternative cash-flow strategies (e.g. research and development grants);
- advising you about structuring your business from a tax management perspective;
- building investor-ready financial models to help with capital raising; and
- providing independent valuations and reports to help you understand how much your business is worth.
These are invaluable services for any startup looking to raise capital. Therefore, it is important that you choose the right accountant for your startup. You should try to find an accountant with a range of existing startup clients. Experience with startups that have successfully raised larger rounds of capital is also helpful.
If your accountant understands your industry and has clients in your area, they may also become a valuable extension of your network. Lastly, you should find somebody you feel comfortable working alongside. Accountants are likely to be with you for a long time.
Continue reading this article below the formCall 0800 005 570 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
2. A Mentor
Rather than contributing a specific skill or service, a mentor can provide you with general guidance, a sounding board for ideas, and experience with the types of problems you face. This can be critical if you are looking to raise capital.
In the past, mentoring in the startup space has largely been in the form of informal and unstructured relationships. While this is still common, as a startup founder now, you have access to a range of mentors and mentoring programs that can help you prepare to raise capital.
The first place to look is within your existing network. If you are already operating in the startup space, you may be connected with a startup founder you admire or an angel investor with experience in your industry. Reaching out to these people can be a great way to kickstart a meaningful relationship.
Alternatively, many New Zealand-based Accelerator Programs offer structured mentoring and guidance, such as Startmate, Creative HQ, Sprout, and Icehouse Ventures. Likewise, these programs benefit from a network of mentors from a range of backgrounds, who may have experience with:
- building their own businesses;
- working for venture capital funds; or
- professional services.
3. A Lawyer
If you plan to raise capital, you will definitely need a capital raising lawyer. Just as you are a specialist in your field of expertise, a capital raising lawyer specialises in:
- preparing businesses to raise funds;
- negotiating terms; and
- executing deals.
A lawyer can help you when raising capital in several key ways. For example, they can help you:
- prepare for the raise (i.e. set up your company’s structure, protect your intellectual property and draft or amend your shareholder’s agreement);
- review and negotiate term sheets;
- draft and negotiate the investment documents (e.g. SAFE or convertible notes, subscription agreements and shareholder agreements); and
- issue shares.
However, you should also look for a lawyer who understands startups. If your lawyer understands the pace and nature of early-stage businesses, empathises with your situation and shares your vision, they will be in a much better position to help you achieve your goals.
Key Takeaways
Raising capital is an exciting stage of your startup’s development but can also be one of the most daunting. As a startup founder, you may not have experience with the process of securing investment. Fortunately, certain professionals can help you throughout the process. If you can find a good accountant, mentor and lawyer to help you along the way, you will set the foundations for a successful capital raise. Connecting with professionals who understand your vision and have expertise in their field is crucial to your success.
If you need help raising capital, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Capital raising is the process of finding investors to help fund your startup. A startup will seek to raise capital when it needs resources to expand and grow. In exchange for providing capital, investors will receive equity in the company.
As a startup, capital raising may be your only option to receive the resource boost required to expand your company and bring your vision to life. It will be difficult to find a bank willing to issue funds to new businesses unless you are willing to secure the loan with your personal assets. Additionally, investors generally bring other benefits aside from their funding, such as industry experience, business advice and expansive networks.
Startups will generally raise funds in different rounds, including the Seed Round, Series A, Series B and so on. Earlier investment rounds will come with greater risk, given that the company is less mature. However, this also means it will yield the greatest returns if the startup is successful.
We appreciate your feedback – your submission has been successfully received.
