Who Is Involved in a Fundraising Round: Venture Capital, Business Angels and Other Players

In the dynamic and often complex process of a fundraising round, several players play a key role. Each participant brings specific skills and resources that are essential to completing the transaction. Whether you are an entrepreneur, an investor or simply curious about how financial mechanisms work, this article gives an overview of the main players involved in a fundraising round.

The issuer: the company seeking funding

The issuer is arguably the central player in any fundraising round. It is usually a company seeking to raise capital to accelerate its growth, develop new products or services, or enter new markets. The issuer must prepare a solid file, including a detailed business plan, accurate financial statements and a clear strategy for what it intends to do with the funds raised.

This process also involves setting the company’s valuation, a crucial element for attracting potential investors while reflecting the economic reality of the business. Each step requires rigour and transparency, which are essential to building trust with future funders.

Preparing the business plan

A well-structured business plan is essential. It includes not only a presentation of the company but also a market analysis, a detailed description of the products or services offered, a competitor analysis and financial projections. This document will serve as the basis for negotiations with investors.

Good preparation also makes it possible to define clearly the funding needs and the objectives of the fundraising round. This helps not only to convince investors but also to guide the company’s future development.

Valuing the company

Setting the company’s valuation is a particularly delicate step. An excessively high valuation may deter investors, while an undervaluation may excessively dilute the founders. Several methods exist, such as the market multiples approach, discounted cash flows or valuation by comparison with similar transactions.

It is often advisable to call on an expert to support the valuation adopted. Investment funds and venture capital firms often examine these elements very closely before making their decision.

Institutional and private investors

Investors can be of different types: institutional or private. Each contributes varying amounts of money depending on their profile and investment objectives.

Investment funds and venture capital firms

Investment funds and venture capital firms (venture capitalists) are key players in fundraising rounds. They provide significant capital and often their sector expertise. In return, these investors expect a high return, which justifies the risks they take in funding companies that are often young and innovative.

See also: our corporate practice.

Entrepreneurs must fully understand what these funders expect, particularly in terms of growth and profitability, as each funding round can have marked implications for the company’s governance.

Business angels and other private investors

Business angels are wealthy individuals who invest their own money in emerging companies. Unlike investment funds, they may contribute smaller amounts, but their experience and network are often valuable assets for a growing company.

Some companies also opt for participatory fundraising through crowdfunding platforms. This method makes it possible to bring in a large number of small investors, often fans or customers of the company, thereby sharing the risk among many people.

Financial intermediaries

Financial intermediaries act as facilitators between the issuer and investors. Banks, insurance companies or pension funds may act as advisers or even take part directly in the financing.

Banks and financial institutions

Banks can offer several services during a fundraising round. They can act as financial advisers, helping to structure the transaction and identify potential investors. Some banks also offer bridge loan solutions, allowing the company to obtain cash quickly while waiting for the fundraising round to close.

In addition, some financial institutions have their own investment vehicles, which can take part directly in financing transactions, thereby increasing the pool of available capital.

Insurance companies and pension funds

Insurance companies and pension funds sometimes take part in fundraising rounds as part of their asset management. They look for investment opportunities that offer a degree of stability and long-term growth potential. Their investments are often seen as a mark of credibility for the issuer.

For companies, these institutional investors are often a stable and significant source of funding, less volatile than other categories of investors.

Public and semi-public bodies

Public players take part in certain fundraising rounds, especially for innovative projects with a significant impact on the economy or society. They provide various types of support: grants, subsidised loans or direct equity investments.

Government agencies

Public agencies often offer funding programmes for strategic sectors such as technology, healthcare or renewable energy. Their involvement aims to stimulate innovation and competitiveness. By contributing to fundraising rounds, these agencies make it easier for promising young companies to access capital.

These public investments can encourage other investors to follow, creating a beneficial leverage effect for the company. They may also make their participation conditional on certain criteria, thereby ensuring that the funds are used responsibly and effectively.

Incubators and business nurseries

Often supported by public funds, incubators and business nurseries also play a decisive role in fundraising rounds. They offer an ideal environment for start-ups, bringing together material resources, expertise and a network of financial partners.

In addition to facilitating introductions to potential investors, these structures help to refine the business model and test prototypes, making the company more attractive to outside capital.

The specific role of legal and financial advisers

Lawyers and financial advisers play a crucial part in every phase of the fundraising round. They assist the issuer on the legal and tax aspects of the transaction.

The role of lawyers in a fundraising round

As a fundraising lawyer, the legal adviser drafts and reviews the necessary contractual documents, such as the letter of intent, the shareholders’ agreement or non-disclosure agreements. Their role is also to ensure that the rights of all stakeholders are protected.

It is essential to ensure compliance with the regulations in force in order to avoid any future dispute. It is therefore strongly recommended to involve a lawyer from the very first stages of the fundraising round.

Financial advisers

Financial advisers assist the issuer in structuring the budget and financial forecasts. Their role is not limited to analysing figures; they bring a comprehensive strategic view of the transaction. These experts also help to optimise the capital structure, assess investors’ offers and advise on the right timing to launch a fundraising round.

Calling on these professionals makes it possible to approach a fundraising round with an informed perspective, thereby maximising the chances of success while ensuring sound and transparent management of the capital received.

Summary table of the players involved