New businesses, with great potential for growth, seem to be established in Utah at ever increasing rates. The favorable business climate in our state is well noted. Utah was recently recognized by Forbes as the No. 1 state for business for the fifth time in six years. Year-end rankings named Salt Lake City as the 12th best city to found a startup (Datafox), Provo/Orem as the third best performing city in the country (based on job and technology growth, as determined by the Milken Institute), and Utah as having the 15th most startup activity (Kauffman Institute).

More resources than ever before are available to the entrepreneur, as local governments and communities work to establish strong entrepreneurship ecosystems. In Utah, we see favorable governmental initiatives, proactive universities, proliferating incubators and mentoring organizations, and an increasingly dense network of entrepreneurs and supporting infrastructure, all combining to provide a favorable environment to establish and nurture business startups. And ever expanding technologies provide tools for acceleration of new business innovation.

Most startups need outside capital to grow, and in spite of an empowering environment, not every startup with a great idea gets the funding needed to succeed. Any founder can take a few simple steps to maximize a startup’s chances to obtain needed capital. Here are a few of our thoughts regarding key steps to follow in preparing your venture for its initial significant outside capital infusion:

Nail down your business plan

Be able to effectively and succinctly articulate your business plan. This includes the ability to explain the financial model, describe the risks and market opportunity, show your team’s competencies, demonstrate your understanding of the competitive landscape, and substantiate customer need/acceptance/willingness to purchase. Be prepared to discuss and defend your valuation. Structure your business to avoid “red flags” that could lead to early rejections. Consider what exit opportunities are most likely for your business. Tailor your presentation for the individual investors you plan to approach. In sum, be prepared to effectively and confidently present your case.

Examine financial needs and desired structure

Determine the amount and anticipated timing of needed funds. Calculate expenses you will need to incur to achieve your goals. Consider the types of funding available for your stage of growth and capital need. Understand pros and cons of alternative structures, such as convertible debt and equity. Think about how initial structure may impact subsequent financing efforts, and how later rounds of funding may impact your initial investors. Consider when in your venture’s life cycle you may be looking for more capital, trying to avoid funding gaps and to take advantage of value inflections.

Do homework on potential investors

Identify the various available funding options for your venture. Understand the motivations, investment limitations and preferred investment structures of different types of investors. Determine whether you want to approach (and are a fit for) angel investors or venture capital organizations. Consider what resources your company needs, and what the investor brings to the table, besides cash. Make sure your investment fits what the investor is looking for. Be as selective as you can. Check the investor’s portfolio to see if it includes similar or competitive companies. Contact representatives of other portfolio companies. Research an investor’s team and competencies. Evaluate potential fit between investor representatives and your team. Understand each investor’s process for considering investments, including timing and any specific approaches for valuing portfolio companies. Look at funding alternatives, including grants, SBA loans and crowdfunding variations, and realize their impact on future investments.

Be smart in approaching potential investors

Use your network. Find introductions. Don’t cold-call. Create a plan of attack and target investors strategically. Don’t contact all potential investors at the same time. Use feedback from initial contacts to refine the pitch to be made to other investors. Understand and be prepared to discuss typical investment terms. Recognize that many investors are inundated with funding requests, and you need to figure out how to stand out from the crowd in a positive way. Be persistent and accommodating, but not overbearing, in following up with potential investors.

Document investment terms

Have experienced advisors make sure that the investment terms are appropriate and accurately written, to avoid future problems. Many examples and forms are available on the internet. Become familiar with them and seek input from any contacts you may have who been through the financing process in the past.

Starting your own company is a dream for many, and can be a great contributor to Utah’s economic growth, as well as a legacy to you and your family. Don’t let a promising venture be side-tracked by a failure to properly prepare for, and effectively structure, your initial fundraising efforts. Take the time to create a financing roadmap that shows consideration of investors and awareness of how the process works.

Chris Anderson and Warde Allan are attorneys with Durham Jones & Pinegar, where they lead the firm’s Emerging Growth Company and Venture Capital Practice based out of the firm’s Utah County office.