Fundraising A-Z: The CFO’s Role in Raising Capital

For founders and business leaders, there’s nothing quite as exciting as raising venture capital. Unfortunately, fundraising can also be exhausting and unpredictable for a lot of businesses.

The process of raising capital is different for every company. It depends a lot on the industry you’re in, your particular business model, and your timing in the market. Each round of fundraising brings a whole new set of requirements in terms of organisation and data to produce.

It’s up to the finance team to manage these requirements and make sure things go as smoothly as possible. But as a CFO, where should you start? How can you be as prepared as possible for every step in the process, including investor presentations, due diligence, and closing the round?

We convened a meeting of our CFO Connect community in Berlin to find out. On Tuesday 24th September, we brought two experienced finance leaders together to talk about their companies’ successful fundraising rounds:

Fabian Wesemann, Co-Founder & Group CFO at Wefox (€125M in Series B funding raised in March 2019)

Karime Mimoun, Head of Controlling at TIER Mobility (€25M in Series A funding raised in October 2018)

Thanks to their expertise and willingness to share, we had an excellent discussion covering the many different aspects of raising venture capital, including what to expect from different fundraising series, and how CFOs can be as prepared as possible.

Here’s what they told us.

More about our experts

Fabian Wesemann, Co-Founder & Group CFO at Wefox: Fabian is an experienced founder and CFO, with a background in the banking and start-up sectors. Most recently, he co-founded digital InsurTech outfit Wefox.

Karime Mimoun, Head of Controlling at TIER Mobility: Karime has a wealth of experience in corporate finance and M&A from working for many years as an M&A advisor for Corporate Finance Partners, among others. He is now Head of Controlling at TIER, a mobility-sharing platform.

What’s the role of the CFO in preparing for fundraising?

For Karime, the CFO has a broad spectrum of questions to consider. “The responsibility of the CFO is not just the fundraising itself - it’s also how they want to structure it. Do they want to raise equity, or debt? Do they want to bootstrap? What kind of capital structure is best for the company going forward?”

The CFO should also consider the matter of scale, he says. “Sometimes it’s better not to raise too much. The more money you raise, the higher the dilution. The timing is also a key question - if you don’t raise now, what are the implications, and when is the best time to raise based on your KPI profile? Finally, is there a plan B in place, in case of adverse developments?”

In Fabian’s case, his experience of fundraising has changed over time. “It’s something you grow into. For our first pitch, we went into the first presentation unprepared, without a strong slide deck and a real follow-up process. We’ve changed now and make sure we’ve done our homework. There will always be an opportunity to learn from every pitch, but you need to be on top of your game in answering the questions. Investors are quick decision-makers. ”

But one thing that’s easily overlooked by CFOs? Telling a good story to potential investors. Yes, you want to have impressive data and key metrics to share, but these should always be used to paint a picture and show where the company is heading.

“There needs to be a convincing storyline in your slide deck,” says Fabian. “You need to be clear about your business model and your timeline, and you need to give certainty about where you’re heading.”

A key way for CFOs to provide this certainty is to make sure you have the right data.

What kinds of data should CFOs focus on when raising funds?

You could easily get lost in company data. But as with most matters in life, it’s quality over quantity.

So what should you look for?

Karime explained that it depends on the company’s stage of growth. “The equity story is different based on your stage. If you’re in an early stage with seed funding or series A, your pitch should be about the idea and the management team. Those are the key value drivers.”

And what about series B? “Once you move into series B, it’s all about financial metrics. Key KPIs, revenues, profitability and unit economics. The tricky part is deciding whether you’re in series A or B, and deciding whether you want to focus on your KPIs or the idea itself. If you’re going for the larger growth investors, you’ll need to get into the details and provide solid data sets. If not, you can focus on the idea and the team while approaching classical venture capital funds.”

For Fabian, it depends on the investor. “We only have one standard presentation deck. In the meeting, we try to find out what the needs of the investors are, to read what they’re looking for and jump to certain pre-prepared sections in the appendix or follow up with the right data set.”

Even so, there are some basics to get right every time. “The business model needs to be integrated into our financial actuals. If you structure your data so you can answer these questions, you’ll always be prepared.”

What’s the difference between funding rounds?

What should CFOs expect from the different funding rounds? What makes seed funding so different from series A or B, for example?

As Karime explains, “The difference is always the amount. Different amounts involve different investor universes. The smaller seed amounts usually start with local investors, with a local focus. These are easier to attract at this stage.”

The hard part comes later. “Series A and B usually move to an international stage. The larger the amount, the more global the investor universe becomes. Dealing with different investor types is the biggest difference. To land the bigger fish, you need to prove and convince much more with your data.”

Fortunately, Karime has a handy tip to offer. “Always start with the less attractive investor meetings. This gives you a live dry run, and it lets you plug the gaps and prepare you for the typical investor questions. Then, you’ll be on your A game once you speak to the more attractive investors.”

You may hope to be able to nail your first meeting and end the investment round right there. But in reality, the more you practice, the better you get. So, practice with investors you can afford not to win over immediately.

What about due diligence?

For Fabian, the key difference in funding rounds comes down to due diligence.

“Up until due diligence, nothing really changes. It’s all about convincing people. The difference is in the diligence part. It’s important to do your due diligence on the investors, as this process can really change between venture capital firms and private equity, for example.”

Karime agrees and offers a note of caution. “Sometimes, especially when an investor hires an audit firm, they might ask some ridiculous questions during the due diligence. These firms aren’t always used to dealing with startups, and they may not realise your stage and that you don’t have the depth of information yet. In this case, you need to push back and explain the situation.”

Fabian also has a helpful way to deal with due diligence demands. “In that scenario, it’s about engaging with the question positively, and working together to find a solution. Often, by digging behind the question you can help to satisfy everyone involved.”

Bringing in the cavalry: Do you need outside advisors?

If you’re new(ish) to this, outside advisors can be a huge help. But are they always necessary? How can you tell?

As Fabian explained, it all depends on your goals. “We worked with Goldman Sachs. Obviously, they’re a great brand, and they’ve helped a lot. Outside advisors can certainly be helpful if you are looking to expand your investor network, and if you need additional helping hands to avoid taking people out of operational roles. You’ll need those people to outperform the numbers.”

Karime explained that getting outside help can raise concerns amongst investors. “In early stage fundraising, outside advisors can be a red flag. If a company can’t pitch to seed investors on their own, this can be a sign that there might be gaps in their crucial skill set.”

What should you expect in the closing process?

“The most important thing is the closing party,” Fabian joked. “Seriously, it’s great to build relationships. At this point, the CFO usually passes things over to the legal teams to finalize. You need to chase them, though, otherwise they’ll fixate on random complexities.”

“Even if you are about to sign the agreement, things can always happen before the money hits your bank account, so you need to stay ready,” says Karime. “Then, once you have the money, you need to focus on hitting the milestones you’ve promised to investors. You have to stay focused and continue working hard.”

Fabian has one more piece of advice. “In a fundraising process, there’s always at least one gigantic problem. When it happens, you should feel good about it, because at least then you know what it is. You need to stay ready for anything.”

What happens for the CFO after a successful fundraising?

How do things change after a successful fundraising round? What happens once the money is in the bank?

For Fabian, there’s one key benefit. “You can sleep through the night again. That obviously helps. Once you have the funds, you push them into the organization in the way you’ve presented during the fundraising. Then, you need to get back to your normal business and deliver what you promised.”

Karime agrees. “It can be challenging at times. The business was waiting for the funding, and all the teams now want to do their hiring and their big projects. Once the money is there, the CFO has to put a process in place to deal with requests. You have to allocate it efficiently and fairly across the organization.”

What do you wish you knew during your first fundraising?

What do the panel members know about fundraising now that would have helped when they first started?

For Fabian, it’s about setting a clear process. “You need that first lead investor on board. A clear process helps to do that. There are so many meetings, and you need to have deadlines already in place for the next steps. This helps to build trust and relationships with potential investors.”

Karime wishes he’d known more about the tough times ahead. “You need to expect challenges, friction, and problems. It’s a really stressful time. You need to be patient, and treat fundraising as a task like any other. Your business is growing, and this brings new challenges.”

The upside? “Once you’ve secured the funding, the fun part begins.”

Conclusion: Know what to expect from your next funding round

As a CFO, raising funds can be an exhilarating - and daunting - process. Key metrics, organization, due diligence: there’s a lot you need to know about in advance!

Unfortunately, it can be hard for startups to find good guidance on what to expect from the fundraising process. As with everything else in business, the best thing you can do is listen to the experts for hands-on, practical advice.

Our CFO Connect community is a place for sharing insights, asking the hard questions, and growing your community of finance experts. If you’ve enjoyed this recap on what to expect in the fundraising process, then be sure to join us in-person for our next event.

Another huge thanks to Karime and Fabian for dedicating their valuable time to share their advice and observations.

And thanks again to Rent24 for hosting our discussion. Hope to see you at the next one!