During the fundraising process, many businesses focus too much on the pitch deck or expect high valuations, forgetting what professional investors truly care about: whether the business has a solid foundation to manage capital and create sustainable value.
The book Crossing the Street by Andy Ho – Chief Investment Officer at VinaCapital – summarizes 20 key principles drawn from over two decades of investing in the Vietnamese market. From a business perspective, these principles are not only investor evaluation criteria but also a valuable checklist to prepare internal readiness for serious fundraising.
Table of Contents
1. The business must be operational, not just an idea
Investors usually avoid greenfield projects unless there is a seasoned team and clear cash flow. They prioritize businesses with actual products, customers, and initial operating results.
2. Ownership structure must be simple and transparent
Complex structures (e.g., cross-holding among subsidiaries or between shareholders) make risk assessment difficult. Businesses should review and clarify ownership and control rights.
3. Family-owned structures should be professionalized
If the business is family-run, ownership and management roles must be clearly separated to avoid key decisions being dominated by one individual or family ties.
4. Financial statements should be audited by an independent firm
Audit builds initial trust. If not yet eligible for Big 4 audits, choose a reputable firm and ensure results are transparent and publicly available.
5. Cash flows must be controlled and transparent
Investors won’t commit capital without understanding how money will be used. Internal accounting systems, spending authority, and approval workflows must be clearly established.
6. A clear exit plan
Businesses should define exit scenarios in advance, such as IPO, M&A, or repayment via cash flow. No exit plan means investors won’t know when – or how – they’ll get their capital back.
7. Allow investor monitoring and participation
Even without operational control, investors should be offered a seat on the Board, Supervisory Committee, or other mechanisms for strategic involvement.
8. Legal documents must be standardized and bilingual
Investment agreements, charters, and shareholder agreements should have English or bilingual versions professionally reviewed to avoid future interpretation conflicts.
9. Share structure should prioritize capital recovery for investors
Terms like liquidation preference help protect investors during downside events – not at the expense of the company, but to ensure fair risk-sharing.
10. Avoid too many classes of preferential shares
Preferential shares for existing shareholders can create imbalance, causing concerns for new investors when it comes to exit value distribution.
11. Maintain a reasonable debt ratio
Over-reliance on debt, especially short-term, can raise stability concerns. It’s best to keep debt within levels that can be serviced by internal cash flow.
12. Disclose related-party transactions
Transactions with shareholders, relatives, or affiliated companies must be disclosed and reflected in financial statements. Any sign of conflict of interest undermines trust.
13. Propose staged disbursement
Instead of asking for full funding upfront, divide investment into milestones. This builds investor confidence and sets up mechanisms to control risk.
14. Clarify potential dilution factors
If the company has issued convertible notes, ESOPs, or made commitments to other shareholders, clearly disclose the terms so investors can assess ownership impact.
15. Prepare complete legal documentation
Documents such as business registration, charter, licenses, major contracts, patents, etc., should be organized in a data room for due diligence purposes.
16. Allow some investor veto rights
Veto rights on capital increases, large asset sales, or debt beyond a threshold are standard in professional investments. Completely rejecting these may unsettle investors.
17. Set up regular reporting
At minimum, quarterly reports on financials and operations should be provided, including revenue, expenses, key KPIs, and action plans. This builds long-term trust.
18. Separate ownership from management
Even if the founder is also the CEO, there should be clear delegation, approval processes, and a structure that doesn’t rely solely on one person.
19. Founder must commit full-time
Investors won’t fund founders juggling multiple projects. Full-time means not only time commitment, but also focus, mindset, and responsibility.
20. Culture and ethics are decisive factors
Ultimately, investors invest in people, not just reports. How you lead, treat your team, and engage stakeholders directly influences investment decisions.
Conclusion
Fundraising is not about convincing someone to believe in your vision – it’s about proving that your business is capable of using capital effectively and creating sustainable value.
The 20 points above are not barriers – they are a mirror reflecting the internal strength of the business. The more prepared you are, the more options you have – not just in choosing investors, but also in setting terms and achieving growth.
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To meet the above requirements, a business may need to conduct internal reviews, upgrade its financial and operational systems, and standardize legal and governance documents. These are things that should not be postponed until an investor shows up.
If you’re preparing to raise capital or want to assess your company’s readiness before approaching professional investors, feel free to reach out to the EPS advisory team for further discussion.