For years, entrepreneurs and founders have been looking for the magic formula to unlock investment. From carefully tailored pitch decks to ‘selling the story’ to, well, outright misrepresentation, founders are always looking for that edge.

As someone who has spoken to hundreds of founders, I still find it surprising that most of them do not make sure they have a few basic but key areas covered before reaching out to investors. Here are four things that you can easily cover that will have a significant impact in your fundraising journey.

Validation

‘We had an amazing idea, created an MVP and built a business model around it. We’re all set for investment!’ You feel the hard part is over and now you just need to raise money to scale. However, in all of this you missed out one important thing: market validation or, as some call it, proof of concept. We see a lot of founders skip this step and go straight to raising investment, and thus fail to do so. Investors want to see execution and actual proof that your product has the potential to achieve product-market fit.

To put it simply: no one cares about how good you think your idea is. If you can’t back it up with some traction, you will have a very difficult time raising money. Spend time putting your product out there, gathering data and feedback and refining everything. You will be in a much stronger position when speaking to investors.

Know your numbers

‘Let me get back to you on our financials after checking with our finance person. Personally I don’t have a finance background and numbers scare me!’ I can’t tell you how common this is to hear from founders and how big a red flag it is. As a founder, and often CEO, it is your job to have financial information about your business at your fingertips.

You are asking investors to put money into your company. How likely do you think it is for someone to take a bet on you if they feel you don’t take any interest in the management of the company’s finances? It doesn’t matter if you have a background in tech, health or any other field – knowing your company’s numbers inside out is your responsibility as a founder.

Test assumptions

‘We have decent revenue with minimal marketing. Imagine what we could achieve if we increase our marketing budget!’ As a startup looking to raise funding, how many times have you said this to investors, or thought this? On paper, this seems like a good argument. Surely marketing is directly related to sales, and thus increasing marketing expense will increase sales. But how do we quantify this? How do we say that x% increase in marketing will result in y% increase in sales? Unfortunately, ‘imagining’ isn’t enough. You need to go out there and test this assumption. Even if you increase your marketing by a nominal amount, you can gauge the impact on revenue and have actual data to back up your claim.

‘In the last quarter, we increased our marketing budget from $100 to $150 to test it out. It resulted in our monthly revenue jumping from $1,000 to $2,000!’

Does this sound better? Of course it does.

Marketing here is just used as an example. This can be applied to almost any assumption you make. Here are some more:

‘We are about to launch a new product/service. Our customers will love it!’

‘Companies similar to us in other countries have done very well, validating our business model.’

‘We are about to go completely cashless and don’t expect our sales to suffer significantly.’

Have a Clear Capital Deployment Plan

‘We will use this money for hiring, marketing and moving into a bigger space. We should have a runway of at least 18 months.’ While this is a decent opening statement when explaining to investors where their money will go, unfortunately most founders don’t go any further. When probed, it is revealed that the founder didn’t actually think this through, which points to them not understanding how to extract value from the investor’s money.

What positions will you hire? In what months? Why do you need this person? What are the KPIs for this position? What will be this person’s output and contribution to overall objectives?

What is the marketing strategy? Do you have a clear plan or will you just spray and pray? Do you have data to back this plan up? How will the results be tracked and how will success be measured?

Why do you need to move into a bigger space? Is the location important? What is the breakup of costs that you will incur, both capital and operational? What are the benefits against this cost?

These are just some basic details you need to think about for each item you are planning to use the money for.

Raising investment is hard as it is. Don’t make it harder by failing to cover these basics before you put yourself in front of investors. You’ll be surprised how much your chances of securing funding increase if you think through things in detail and come prepared.