The average capital raising process usually takes between 3-5 months from start to finish, including preparation time. The timeline depends on a number of factors, including what you are solving for (e.g. speed vs valuation), the complexity of your business, market conditions and investor interest.
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For companies that are loss-making, it’s ideal to start raising capital with at least 9-12 months of runway left. This ensures you have sufficient time to secure funding, negotiate favourable terms and maintain control of the process without facing unnecessary pressure.

There are several common reasons why a capital raising might not be successful:

• Poorly crafted pitch deck: Founders often prepare pitch decks based on what they think will resonate, rather than focusing on what investors are truly looking for. This can result in too much emphasis on the product and not enough on the business model, market opportunity and financial metrics.
• Operational distraction: During a capital raise, founders can become too distracted by the fundraising process, causing operational performance to decline. Investors look closely at monthly and quarterly performance during a capital raising, and any missed forecasts can lead to a loss of confidence.
• Unrealistic valuation expectations: Founders sometimes come into the process with preconceived, unrealistic valuation expectations. This can make it difficult to align with investor perspectives, ultimately stalling the capital raise.
• Limited investor network: A weak or limited investor network can hinder your ability to secure adequate funding. Relying too heavily on warm intros through your personal network may lead to insufficient interest and/or misalignment with investors.

Investors typically focus on the following metrics for SaaS companies:

• Revenue growth: Investors use year-on-year revenue growth as an important factor in determining a valuation multiple.
• Gross profit margin: The percentage of every dollar earned as revenue that you get to keep after subtracting the direct costs required to deliver that revenue.
• Annual recurring revenue (ARR): The annual value of all recurring revenue contracts at any point in time.
• Net revenue retention (NRR): The percentage of ARR that your company retains for a cohort after a 12 month period, including the impact of churn, downgrades and upsells.
• Gross revenue retention (GRR): The percentage of ARR that your company retains for a cohort after a 12 month period, including the impact of churn and downgrades, but excluding the benefit of upsells.
• Logo (customer) retention rate: The percentage of your customers that remain after a 12 month period - similar to revenue retention but focused on the number of customers instead of revenue.
• Customer lifetime value (LTV): The sum of gross profit expected from a new customer across their entire lifetime, calculated as the average ARR per customer, multiplied by your gross profit margin, multiplied by your average customer lifespan.
• Customer acquisition costs (CAC): The amount of sales and marketing dollars beings spent to acquire each incremental customer, calculated as the total sales and marketing costs in a period, divided by the number of new customers added during a period.
• LTV/CAC: A ratio for measuring how efficiently your company generates value from sales and marketing.

Every technology company should have a detailed understanding of their recurring revenue by customer by month to support the calculation of these SaaS metrics. It is important to invest significant time in cleaning the raw data to ensure the metrics are accurate and a true reflection of your customer behaviour. This will enable you to understand how best to pitch your metrics to support valuation discussions, as well as stand-up to investor scrutiny during due diligence.