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6 min read

How to Prepare for Financing Events, from Funding to IPO

When your startup is gearing up to raise money, you're bombarded with advice on the steps you need to take, and the services you need to adopt, to make your business appealing to investors. But an area that even the most thorough funding-prep checklist or how-to article tends to neglect is contract management.

Investors want to know that you have a sustainable business model and that you have maximized your chances for success. That means minimizing your risk, which requires that you have a comprehensive and consistent handle on your contract portfolio.

For example, imagine you offer a Software-as-a-Service solution that is available under a number of prices and feature tiers. In order to minimize customer churn, you offer discounts for annual commitments. In order to accelerate early adoption, you offer extra months free to your first few customers. And to minimize customer acquisition costs, you offer even more months free as referral bonuses to clients who get others to sign up.

Depending on when -- and under what terms -- you offered these discounts and incentives, you could have a number of "locked in" customers coming up for contract renewal in large waves. If you're not ready, there could be a huge spike in customer churn waiting in your contract portfolio but hidden under a morass of contract addenda and one-time agreements.

No one will be surprised that you didn't build in meticulous contract management during your early product-market fit phase, nor when you were scaling up. But no serious investor is going to be satisfied with "we're not sure" as an answer to the question, "how many customer contracts will come up for renewal in each of the next 12 months?"

Now, expand this uncertainty to customers who signed on under a previous service level agreement, privacy policy, or deprecated feature set (prior to your last product pivot).  Every single one of those customers likely has some sort of billing footprint, and some sort of application activity log, but you'd be shocked how little insight those two data points may give you into your liabilities and obligations to each customer. 

The only real way to know what you owe, who owes you, and what your risk profile looks like is to actually read every customer contract. 

If you're in a position to raise money, the number of customer contracts you need to read is probably not something that can be tackled manually. You need to parse and analyze contracts at scale. And to do that, you need a contract management solution with the natural language-processing artificial intelligence that can comprehend the unstructured data of contracts and turn it into a structured, report-friendly data set.

In other words, you need LinkSquares.

LinkSquares contract management tools parse through contract documents, recognize common legal terminology, clauses, and concepts, and build you a database of obligations and opportunities out of what is otherwise just a dense pile of legalese. LinkSquares converts all the typical contract chaos of early stage startups into a manageable contract portfolio that investors appreciate.

And even if the numbers aren't perfect, the fact that you have a grasp of your contract risks -- and solution that will keep you in control of your contracts on a go-forward basis -- will do a great deal to instill investor confidence.   

If you want to raise money, you need to know where your contracts are, what they say, and what they do to your overall risk. LinkSquares can tell you. And if you don't have a grasp on your contracts, your funding round won't go as smoothly as you like -- and might not go anywhere at all.

If you're getting ready to raise money -- or just need to bring some order to your contract chaos -- talk to LinkSquares today.