Start with the milestone and the capital structure
A supply-chain company may raise money to develop software, hire a sales team, expand a carrier or warehouse network, purchase equipment, or fund working capital. Before approaching investors, define the milestone the capital should reach and whether equity, debt, or an asset-backed facility fits the business. Each choice creates different ownership, repayment, and control obligations.
Prepare a focused investor conversation
Explain the customer problem, who pays, how the service fits a real workflow, and what evidence supports demand. A logistics technology company should be ready to discuss implementation time, integration responsibilities, data rights, security, retention, and renewal. A carrier, broker, or 3PL should explain customer concentration, insurance, working-capital timing, capacity, and operating risks. An asset-heavy company should show equipment use, maintenance costs, utilization, and existing debt.
Bring a consistent financial model with historical results, assumptions, cash needs, planned uses, and measurable milestones. State what the company has already achieved and what remains uncertain. Prepare the cap table, corporate records, material customer and supplier agreements, intellectual property ownership, debt documents, and any material disputes or regulatory issues. Diligence is more productive when the numbers and facts reconcile across the deck, data room, and management’s answers.
Compare investor relationships—not labels alone
Venture or growth equity may provide capital in exchange for ownership and governance rights. A strategic investor may also seek a commercial relationship, access to information, or other protections. Debt avoids immediate dilution but adds repayment, collateral, guarantees, and covenant risk. A sector label or previous investment does not show whether a particular fund is active, has capital available, or wants to invest in your stage. Verify current mandate and decision process directly using dated investor materials.
When comparing term sheets, look beyond valuation. Review dilution, liquidation preference, board seats, voting and information rights, pro-rata rights, vesting, exclusivity, commercial commitments, protective provisions, fees, interest, maturity, collateral, and default terms. Model what happens in a slower-growth case and at the next financing, not only under the headline plan.
Know the U.S. private-offering rules
If raising through a U.S. securities offering, the exemption affects how the offering may be conducted. The SEC says Rule 506(b) does not permit general solicitation; Rule 506(c) allows it under conditions that include verifying accredited-investor status. Separate pathways have different requirements, so founders should not assume that a public investor directory, social post, or open pitch is permissible for every offering. SEC Rule 506 overview; SEC guide to capital-raising pathways.
The SEC cautions that private placements can be illiquid, offer limited disclosure, and carry the risk of total loss. Communicate risks and terms accurately and work with securities counsel before soliciting investors or signing documents. SEC private-placement bulletin.
Questions to ask each potential investor
- Which current fund or entity would invest, and what stage, geography, and business model does it consider?
- Who makes the decision, what evidence is needed, and what is the expected process?
- What board, information, exclusivity, or commercial rights are expected?
- How would the investment change ownership, governance, and future financing options?
- What references can describe the investor’s working relationship with portfolio companies?
Use the first meeting to test alignment and learn what diligence is needed. Have qualified legal and financial advisers review the actual offering and terms before committing.