Sell well: Preparing your company for investment
So far this year, Israeli tech firms have raised about $7.22 billion from investors, marking a 32% increase compared to the same period last year. The trend has been bolstered by larger deals, with six transactions exceeding $100 million. This surge reflects not only the resilience of Israel’s tech ecosystem but also the intense competition among founders vying for the attention of global investors.
Israeli high-tech capital raising quarterly results have shown a recovery in 2024. The capital raised in Q3/2024 reached $2.4b – up 40% from $1.74b raised in Q3/2023!
In this environment, preparing your company for an investment injection is critical. Proper financial preparations can mean the difference between securing the optimal deal or missing the mark entirely. Let’s look at some of the fundamental preparations for Israeli entrepreneurs;
Understanding Expectations
Investors are becoming increasingly discerning, especially as the size of deals grows. Beyond product innovation and market traction, they are looking for companies that demonstrate financial health, scalability, and operational discipline. For Israeli tech founders, the challenge lies in showcasing these qualities within the fast-moving and often resource-constrained realities of the start-up world. A well-prepared financial foundation sends a strong signal to investors, showing that you are ready to grow and scale effectively with your capital.
To stand out, founders must ensure that their financial records, operational metrics, and growth projections are clear, reliable, and aligned with the expectations of institutional and private investors alike.
Solidify Your Financial Foundations
The first step in preparing for an investment round is ensuring your financial infrastructure is robust and investor-ready. Investors expect transparent, organized financial statements that reflect an accurate picture of your company’s health. If your accounting systems and processes have been ad hoc or inconsistent, now is the time to address that.
Engage a professional accounting team or financial consultant to conduct an internal audit of your books. Correct any discrepancies, ensure compliance with local and international financial regulations, and prepare consolidated financial reports. Beyond the basics, consider how your reporting aligns with key performance indicators (KPIs) that investors care about, such as revenue growth, gross margins, customer acquisition costs, and churn rates.
Craft a Compelling Narrative
Numbers alone don’t tell the entire story; it’s how you frame them that can make or break an investor pitch. Your financial narrative should clearly articulate your company’s performance to date, its resilience during market fluctuations, and the scalability of your business model. For instance, if you’ve experienced a slowdown in one area, show how you’ve adapted to maintain growth elsewhere.
In preparing this narrative, focus on presenting clear financial forecasts. Investors want to know not only where your company stands today but where it is headed. Be realistic but optimistic, and ground your projections in detailed assumptions about market trends, customer behavior, and operational efficiencies. Highlight how the incoming investment will unlock new growth opportunities, whether through product development, market expansion, or strategic hires.
Prepare for Rigorous DD
The due diligence process can be intense, particularly in larger funding rounds. Investors will scrutinize every aspect of your financial operations, from past performance to future forecasts. To navigate this stage successfully, ensure that you have a clear, detailed data room ready before the process begins.
Leadership should also dry runs to best prepare for the negotiations, and consulting a third-party consultancy will allow you to get the best possible outcome.
This data room should include audited financial statements, tax filings, legal agreements, customer contracts, and details on intellectual property. Anticipate questions about historical revenue trends, margin fluctuations, and the financial impact of operational decisions. Being proactive about documentation not only speeds up the process but also builds investor confidence in your operational readiness.
Address Valuation and Equity Dynamics
Valuation is a critical element of any investment negotiation. Israeli tech founders should enter these discussions armed with a clear understanding of their company’s worth, grounded in market realities and competitive benchmarks. Overinflated valuations might secure headlines but can lead to challenges in later funding rounds or limit flexibility in structuring deals.
Consider engaging a professional valuation expert to provide an independent assessment of your company’s value. This helps set realistic expectations for both parties and provides a credible basis for negotiations. Additionally, be strategic about how equity is allocated. Investors will pay close attention to how ownership is distributed among founders, employees, and existing investors, as well as the impact of new dilution on these stakeholders.
Showcase Scalability
Investors are not just funding your current operations; they are buying into your future growth potential. Demonstrating scalability—your ability to grow revenue without a proportional increase in costs—is essential.
For this, your financial preparations must include a clear articulation of how the investment will accelerate scalable growth. Highlight areas where efficiencies can be gained, such as automating processes, expanding through partnerships, or improving unit economics. If your company has achieved strong growth in a specific market or customer segment, show how those learnings can be replicated on a larger scale.
Align Your Goals with Investor Objectives
Securing an investment is not just about convincing investors that your company is worth their money; it’s also about ensuring that their goals align with yours. Different types of investors—whether venture capital firms, private equity players, or strategic corporate investors—will have different expectations in terms of timelines, exit strategies, and levels of involvement.
Be clear about what you are looking for in a funding partner. Are you seeking an investor who can provide operational guidance or open doors to new markets? Or is your priority finding capital with minimal interference in day-to-day operations? Having clarity on this upfront can help you target the right investors and build stronger relationships during the negotiation process.
Strengthen Internal Controls
Finally, preparing for an investment injection is an opportunity to refine your internal controls and governance structures. Investors will want assurance that your company is being run professionally, with appropriate checks and balances in place.
Ensure that your decision-making processes are well-documented and that key functions like finance, legal, and compliance are adequately resourced. What is your governance framework, if you can prove that your structure has worked well, then include it. Showcase your capable board of directors or advisory board, this often adds an additional layer of credibility.
The Payoff
Preparing for an investment injection is not a one-time task but an ongoing discipline. By taking the time to build a solid financial foundation, craft a compelling narrative, and anticipate investor expectations, you position your company to secure the best possible deal. With Israeli tech firms leading the charge in global innovation, the competition for capital is fierce. However, with the right preparations, your company can not only attract the right investors but also set the stage for sustainable growth and long-term success.
At a time when larger deals are reshaping the Israeli tech landscape, founders who prioritise financial readiness and strategic alignment will lead the way.
At Kingsgate, we provide expert guidance for Israeli founders in capital raising, providing bespoke strategies to secure funding, maximize sale value, or transition ownership smoothly.
Will Moore – Founder of Kingsgate – Supporting Israeli tech with M&A corporate financing.
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Will Moore is an Israel enthusiast with a passion for supporting Israeli Tech entrepreneurs scale ups to maximize their value through capital investment. He enjoys deal flow and connecting Israeli businesses with Western established institutional professional investors. He has lived in Israel for two years and is an advocate for Israeli technology innovation that brings huge positive disruption to industries.
