Analysis Featured

Preparing for an Institutional Capital Raise

ideal type of investment

Getting Started

Whatever area of the financial technology sector your company may operate in, raising capital will likely be an integral part of your company’s success. Whether you are a marketplace lender, financial/insurance technology company, or trading/risk management solution provider, securing institutional funding is a potential game-changer for a business.

Raising capital from institutional investors is no easy chore. It takes significant time and resources and therefore must be planned accordingly. Proper planning minimizes transaction costs and increases the likelihood of a successful fund raise. With that in mind, here is a checklist to help business leaders better prepare. I describe each item in greater detail below.

  1. Build a Skilled Team
  2. Determine the Ideal Type of Investment
  3. Prepare an Investor List
  4. Create a Marketing Plan and Pitch for Investors
  5. Establish a Timeframe for your Capital Raise

Build a skilled team

Without the right team, raising money will be a struggle. No good deal comes easy, and business owners need to be able trust their advisers and employees to do the work. This isn’t a skill that one can practice along the way. You need a professional team with experience at raising money for fintech and/or financial services companies. Make your fund raise a team effort, and assemble a group with the right skill set and experience. Build a team with the following tasks in mind.

institutional investor teamI always recommend having an investment banker and/or someone on your staff delegated to spearhead the capital raise. That person can promote the company prior to bringing in the senior management team for the initial meetings. The leader/founder of the organization can do the final meetings and close the deal.

Determine the Ideal Type of Investment

Educate yourself on the types of investments available and determine what form of investment is right for your stage. See the table below for reference.

ideal type of investmentPrepare an Investor List

Create an initial “buyers list” in a spreadsheet or other software package. Focusing on too many is a mistake, so research investors and build a quality list. Then pare down that list to better prospects. This will save time in the long-run, likely resulting in a more positive outcome. Here are certain characteristics to distinguish investors.

prepare an investor list

Create a Marketing Plan and Pitch for Investors

At this stage, the company establishes who works on the project, the type of investment, and what investors to approach. Now it is time to create the marketing materials and assemble documentation for distribution. Here are a couple tips to that end.

Developing a Company Narrative

When communicating with institutional investors, companies have the tendency to mire themselves in too much detail. Avoid confusion by creating a narrative that is simple. Overly complex story lines are a big mistake. The best company pitches describe the market opportunity and how the company is positioned to benefit from it. Since the investor is already pre-qualified, these high-level details along with a brief description of operational metrics is all that is needed to get through the first screening.

Having a Value Proposition

What is it about the company that drives success? How does the proposed investment address the needs of the business and increase shareholder value? Will the capital infusion pay for itself? Does the management team have a strong track record? Are there processes and procedures in place that reduce risk for the capital provider? Answer these questions and find your company’s unique value proposition. Then sell that rather than the amount of money or terms being discussed. Do not be shy asking for the right amount. Present the company as equipped to build a business that will earn a return on investment. If your company’s proposition sticks out, the money will be available.

Seek outside advice

If the company has not done so already, consider hiring an investment banker to prepare materials and offer objective advice. A good investment bank should open doors with investors. They may also provide guidance in determining the best type of investment, and provide details on comparable transactions. If you decide not to use an investment banker, there are other outside companies that may help polish the company story and supply professional marketing materials.

Establish a Timeframe for your Capital Raise

It’s been said that time is the enemy of all deals. You want a deal done as soon as possible. However, the process will take at least a few months. Preparing the investor list and marketing materials, and contacting investors, all take time, as does negotiation and due diligence. Realistically, expect a period between six to nine months for most capital raises.

Keep the Deal on Track

Capital raising campaigns are sales efforts done over a span of several months. That means ups and downs along the way. It’s okay to get excited about positive meetings and disappointed when things don’t go as well. That is human nature. But remember that institutional investors are being pitched all the time. If it has been weeks since the last meeting, rest assured the investor has seen other companies.

Even if the company did an excellent pitch, do not expect the investor to do the follow-up. Many investors are large institutions. Managers of these organizations have responsibilities including management and board meetings, other deals, and their own investors to deal with. Ultimately, it is your company’s responsibility to make the deal a priority. Appoint someone to lead the effort and hold everyone accountable. Have the leader commit everyone to a time frame. This should smooth out the deal highs and lows and keep the momentum going until financial close.

Avoid Lapses

Prevent periods of “going dark” by scheduling around the two times every year when raising institutional capital is exceedingly difficult. These are from mid-July to September 1st and Thanksgiving to New Years. Even if your point of contact is in the office, one of the key decision makers is likely on holiday with their family. That makes getting a deal during these times very unlikely. Potentially worse, the period of inactivity may derail any momentum. Plan the timing of important deadlines prior to these natural breaks, or better yet, avoid these time periods altogether.


Capital raising from institutions is tough business. It is a Herculean effort no matter which part of the financial technology sector you operate in. Do not let this discourage you. Use the five tasks I outline above to organize the business prior to marketing the raise. Know that it will be a challenge and plan appropriately.


Written by Phil Toth, Managing Director, Oberon Securities


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