Four Diligence Factors to Consider Before Your Startup’s Next Funding Round

Four Diligence Factors to Consider Before Your Startup’s Next Funding Round

Your startup’s last investment round finally closed, and there are demands from your investors that extend beyond your financial statement– knowing what those additional suggestions are is the hard part. What investors want goes far beyond your product. 

Consider this VC20 interview in which a partner talks about how he likes to go on a trip in the car with a founder before investing. The partner does that because he wants to assess how a founder acts under a variety of different scenarios. Investors assess in ways that go beyond the financials. You need to prepare your team for anything. 

Here are four diligence factors that your co-founders and employees should consider as your startup begins thinking about the next round: 

  • Public Relations, Event Sponsorship, & Media 
  • Partnerships
  • Product
  • Social Media 

Public Relations, Event Sponsorship, Media: 

  • Press Releases Rule: 100% of journalists stated that press releases were their number one way of sourcing stories. 
  • Meetings Count: For every dollar that is spent on a face-to-face meeting or business event, an additional $1.60 is generated for the U.S. economy
  • Buying Source: Trade shows, as well as conferences, are part of the top three sources that buyers will turn to

Public relations is the management of the general public’s perception of a company’s reputation. It most often involves the media and other organizations. This factor should not be underrated. There needs to be a delicate balance in this relationship. 

Tactics such as press releases, influencer marketing, and social media (we’ll talk more about social media in the next session) to reach the target. 

According to MeltWater, 100% of journalists stated that press releases were their number one way of sourcing stories. With the average journalist having 300 emails waiting for them each morning, a company has to truly stand out by doing amazing work or associating itself with an organization, event, or person that is doing amazing work. 

Being present and liked in the media will speak volumes to your investors. 
Additionally, organic media mentions are an extremely valuable piece of a company’s digital presence. Look at Tesla’s cybertruck announcement. Elon Musk did not have to spend a dollar on PR to generate the press and media attention which followed the truck’s announcement. 

Event sponsorship is one of the most important factors in making your company more revenue. For every dollar that is spent on a face-to-face meeting or business event, an additional $1.60 is generated for the U.S. economy. This is an increase of 160%. Trade shows, as well as conferences, are part of the top three sources that buyers will turn to when researching vendor products and services. 

Having event visibility means that your company is putting itself out there to be known. It informs research, it informs how you and your team unlock potential customers, it informs how you interact with current customers, and it informs how your team interacts with media (it turns out that media shows up to events, too). 

With that said, organizational spending on events is not going anywhere. Events might just boil down to being another box that needs to be checked on the road to a company’s success, but it is a necessary box to check. 

Social Media: 

  • Lots of Profiles: Over 3.5 billion people have social media accounts. 
  • That’s a High Triple P Ratio (Profiles Per Person): The average person has 7.6 social media accounts 
  • Constantly Contact: The average person spends 140 minutes a day on social media 

Even though financial statements are some of the most important pieces of your company, there are other factors such as social media presence that determine the overall impression your company will make on the world. 

For example, Innovesta uses social analysis as part of your company’s Innodex score. Innodex is an AI-powered assessment engine that scores private companies based on an aggregation of objective, transparent, and validated data from multiple sources into a single credibility score. 

Social analysis is an emerging measurement tool that quantifies Linkedin, Facebook, Social media data from sources like Twitter, Linkedin, Facebook, Glassdoor, and Tradradis are used to calculate the social analysis score. The score is informed by events that happen in a company’s lifetime. 

Partnerships: 

  • Partnerships Get Customers: 57% of companies use partnerships as a customer acquisition tactic 
  • High Failure Rate: Up to 70% of partnerships fail 

Strategic partnerships with other companies serve as a basis not for only how your company is associated with other brands- partnerships also serve as a driving force for customer acquisition. 

According to Powerlinx.com, 57% of companies use partnerships to acquire customers. In addition, partnerships are used to expand geographic reach, access new technologies and IP, and share other resources. That’s of the 30% of company partnerships that actually survive. 

It is a strong sign when a company continues to expand its number of partnerships with positive brands. However, partnerships can be hard to quantify. Some partnerships are more valuable than others. 

Want a reliable resource for data and investment insights? Check the Innodex. 

Product: 

  • Next Product Please: 95% of new products fail
  • It’s Not You, It’s Me: Sometimes product failure has nothing to do with the product 

As an executive or founder, you need to have a clear understanding of product development. Depending on what stage a company is at, it might not have a working product. Yet, even if the company is past the Minimum Viable Product (MVP) stage and is offering a product to its audience, the chance of the product failing is likely. 

In fact, 95% of all new products fail. 

New products fail for a variety of reasons, some of which have little to do with the actual product itself. Poor timing in a product’s marketing development and failure to align the roadmap with company stakeholders can all affect a product’s development.  

In Conclusion

There are a number of factors that must be considered as you plan for the next round: 

  • Public Relations, Event Attendance, & Sponsorship 
  • Partnerships
  • Product
  • Social Media  

There are important investment factors that go beyond financials, this list is just the tip of those other factors. Your investors will desire to understand additional investment factors in a reliable way without having to go all over the internet to find all of that information out. Look at the number of people reading newsletters now compared to 5 years ago. The way we absorb content is changing. 

Innodex is an AI-powered assessment engine for private companies that aggregates objective, transparent, and validated data from multiple sources into a single credibility score. A company’s Innodex accounts for data beyond the financials. The score identifies gaps and patterns through a fully-customizable machine learning algorithm, which uniquely synthesizes social sentiment, news, and internal feedback. 

Go to https://www.innovesta.co for more information. 

Close Menu