Getting the Due Diligence Right for Fintechs Before Pitching to Investors

Remember, every fintech start-up needs to raise capital to grow, which means pitching to investors.

Before you jump right into the actual pitch, however, it’s important to do your due diligence to maximise your chances of success.

This article provides an overview of the due diligence process and the key steps to ensure your fintech is fully prepared to present your business to potential investors.

Identifying and Evaluating Potential Investors

When it comes to pitching a fintech business, the due diligence process is paramount.

Before securing any investment, you must first identify and evaluate potential investors. This requires taking a close look at various factors, such as their portfolio, past investments, and reputation in the industry and where they are from (your investors could be from different parts of the globe).

You'll also want to measure their experience, resources, and financial strength. Once you've identified potential investors, it's time to evaluate them.

This means considering their potential return on investment, their risk tolerance, and the likelihood of them being successful. You'll also want to evaluate their track record of success and any legal and regulatory issues they may have.

Finally, you'll want to ensure that you have a good relationship with them. After all, you'll be working closely with these investors, and it's important that they are a good fit for your business.

Identifying and evaluating potential investors is essential to the due diligence process when pitching a fintech business. With the right evaluation process, you can make sure you find the perfect investors to help grow your business.

Assessing the Financial Health of Your Business

Businesses pitching to investors for funding often need to assess their business's financial health before making a persuasive case.

Here are some things you should consider when asking yourself this question:

  1. What are your assets? Assets include intangible assets and these can all bring you money, like property, equipment and developed Software. They can be hard to track, but if you have them recorded it's good to know how much you have in each category.
  2. What are your liabilities? Liabilities are debts owed by the company, like loans or unpaid accounts. They may not always be easy to track, but it's important to know what you owe and how much interest accrues on those debts daily. You can also look at revenue projections—how much money do you think will come in over time?
  3. What is your cash flow? Cash flow refers to how fast money flows into and out of your business regularly; it's based on both income and expenses. The faster, the better! If there's only a small amount of cash coming in or going out each month (or even worse: none), it means there's not enough money coming in to cover expenses.

Several financial metrics must be considered to evaluate a company's financial health and long-term sustainability, which requires time. When you outsource the need for a due diligence service – you enhance your decision-making process.

At BDO, we combine a thorough understanding of corporate strategy, finance, and technology with the ability to summarise complex business challenges into concise and easily understood terms.

Understanding the Legal and Regulatory Requirements

When pitching to investors for fintech, it is essential to understand the legal and regulatory requirements.

Due diligence must be carried out to ensure compliance with applicable laws and regulations. It is important to know the nuances of the legal landscape and the potential implications that may arise from any violations.

Furthermore, a thorough understanding of the legal framework is necessary to be able to properly negotiate any contracts and agreements with the investors.

Doing so will ensure that all parties involved in the transaction are protected and that the fintech project complies with the relevant laws. Understanding the legal and regulatory requirements is essential for any business, particularly when pitching to investors for fintech. It is a necessary step in the due diligence process that can save a lot of time and headaches in the future.

Crafting Your Pitch Deck

There's no room for error when you pitch your business to potential investors.

You need to be able to communicate your vision and secure the funding you need to make that vision a reality clearly and concisely.

One of the best ways to do this is by carefully crafting your pitch deck. A pitch deck is essentially a summary of all the information you want to share with an investor in one document, which allows you to tell your story and explain why they should invest.

Your pitch deck should include:

  • Business description (who you are, what industry you're in, etc.)
  • Product/service description (what your company does)
  • Financials (how much money you've made so far and how much revenue you expect in the future)
  • Marketing strategy (how customers will find out about your product or service)
  • Revenue model (how you generate revenue. Is it scalable?)

Developing an Effective Communication Strategy

When pitching to investors for a fintech business, your pitch deck is your greatest asset.

The deck should clearly demonstrate that you have an effective communication strategy and that you are knowledgeable about the market and your competitors. It should also set out the financial health of your business in detail—the more specific, the better.

The most important thing to remember when creating your pitch deck is that it needs to be authentic.

If you're uncomfortable presenting it, so will the investor you are pitching to. You want people to feel like they can trust you and believe in what you're doing.

This starts with understanding what makes up an effective communication strategy and what elements need to be included in your pitch deck.

There are three things that will help ensure your message comes across clearly: clarity, simplicity, and credibility.

  • Clarity means explaining things, so everyone understands them easily; simplicity means keeping things simple so they don't get confusing or complicated; credibility means making sure everything is accurate and true, from your financials to as well as compliance (and may include third-party verification.).
  • Running a successful business requires time, energy, and focus.
  • With everything happening around you, it can be easy for management to lose track.

The golden rule of business is that you should focus all your effort on the things that you are best at executing. So why not lighten the load and outsource some aspects of your business to trusted professionals?

We’re here to help.