Common Questions for MedTech Startups Fundraising
Fundraising for any, and every, startup company is hard. Throw in the extra complexities and long commercialization times in MedTech and HealthTech, and now you’re in a pressure cooker. If you haven’t gone through the process of raising capital for a startup before, you’re going to have some questions. In this blog, we address some of those FAQs:
Pre-fundraising Preparation
First, what types of funding groups does Factor 7 Medical work with?
Angel Investors
Family Offices
Venture Capital Firms
Private Equity Firms
Investment Banks
Strategic Partnerships: Collaborating with another company that provides capital, resources, or distribution channels.
How should my company prepare for a fundraising round?
Before you start pitching to investors, you should:
Create a business plan: Clearly outline your business model, market opportunity, competitive landscape, and financial needs.
Build a pitch deck: Develop a concise and visually appealing presentation that covers the problem, solution, business model, team, financials, and milestones.
Organize your financials: Prepare up-to-date financial statements and projections that align with your business narrative. GAAP accounting is preferable to cash accounting.
Build your network: Attend industry events and leverage online platforms to connect with potential investors and mentors.
Organize legal documentation: Gather all relevant legal agreements, intellectual property filings, and a clean capitalization (cap) table.
Prepare for due diligence: Be ready to provide additional documentation and transparently address any weaknesses in your business.
How much money should I raise?
There is no single right answer, but you should have a thoughtfully calculated "runway" that considers your monthly burn rate. You should raise enough capital to achieve significant milestones that will attract the next round of funding, including an added buffer for unexpected costs and delays.
What should my company's valuation be?
Valuation is what your company is worth, and it is most often based on comparable companies in your industry. Investors will ultimately determine the final valuation, but a strong financial model allows you to enter negotiations with realistic expectations.
Common Questions to Expect from Investors
Below are some questions you should anticipate receiving from investors. (These are not questions directed at Factor 7 Medical.)
What problem are you solving?
Investors want a clear and simple answer that shows you have a deep understanding of your customers' pain points and the size of the opportunity.
Who are your competitors, and what is your unique advantage?
You must show that you understand the competitive landscape and know what makes your product or service stand out. Acknowledging your competitors' strengths is better than dismissing them.
What is your go-to-market strategy?
Investors want to know your plan for acquiring customers and why you believe it will work. Your marketing and distribution channels should be well-defined.
How does your business model work, and what are the unit economics?
Be prepared to explain how you make money, including your pricing, revenue streams, and long-term profitability. Your unit economics should demonstrate that your business model is sustainable and scalable, with a customer's lifetime value (LTV) greater than the cost of acquiring them (CAC).
What is your team's background, and why are you the right people to execute this vision?
Investors want to see a capable and resilient founding team with deep domain expertise. They will want to know about the founders' motivations and how they met.
How will you use the capital?
Investors want a detailed breakdown of how you plan to use their money to achieve key milestones and accelerate growth.
Tips for Success
How can we maximize our chances of success?
Tell a compelling story: Back up your mission and vision with data. Investors are looking for a story that is both exciting and verifiable.
Build momentum early: Creating initial buzz from your network can generate social proof that attracts other investors.
Be realistic with financials: Avoid overstating revenue forecasts. Realistic projections build trust and show you understand your business's potential.
Practice your pitch: Rehearse for tough questions by having mock pitches.
Maintain transparency: Be honest with potential investors about your strengths and weaknesses.
Be prepared for rejection: Fundraising is a long process. Use feedback from "no" answers to improve your pitch and strategy.
Start early: Begin the process at least eight months before you anticipate needing the funds to avoid a cash crunch and maintain negotiating leverage.
Contact Factor 7 Medical to learn more on how our experts can partner with you on your capital raise and success!
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