FND: Funding

Document Type

Code: FND
Name: Funding
Domain: Financial & Investment

Abstract

This specification defines the Funding document type within the BSpec 1.0 Universal Business Specification Standard. It establishes normative requirements, structured templates, and implementation guidance for organizations documenting funding within the financial-investment domain. This specification enables systematic, machine-readable documentation that supports strategic planning, operational execution, and organizational alignment.

Purpose and Scope

The Funding document defines systematic approaches to raising capital and securing financial resources to support business operations, growth initiatives, and strategic investments. It establishes funding frameworks that optimize capital structure, minimize cost of capital, and align funding strategies with business objectives.

Document Metadata Schema

---
id: FND-{funding-round}
title: "Funding — {Funding Round or Initiative}"
type: FND
status: Draft|Review|Approved|Active|Deprecated
version: 1.0.0
owner: Finance-Team|CFO
stakeholders: [finance-team, executive-team, investors, board]
domain: financial
priority: Critical|High|Medium|Low
scope: funding-strategy
horizon: strategic
visibility: confidential

depends_on: [FIN-*, VAL-*, STR-*, FOR-*]
enables: [INV-*, MET-*, REP-*, GOV-*]

funding_type: Equity|Debt|Hybrid|Grant|Revenue-based
funding_stage: Pre-seed|Seed|Series-A|Series-B|Growth|Mezzanine|IPO
investor_type: Angel|VC|PE|Strategic|Public|Government
use_of_funds: Growth|Working-capital|Acquisition|R&D|Geographic-expansion

success_criteria:
  - "Funding strategy meets capital requirements and growth objectives"
  - "Funding terms are favorable and align with business strategy"
  - "Funding process is efficient and minimizes business disruption"
  - "Investor relationships support long-term business success"

assumptions:
  - "Business strategy and capital requirements are clearly defined"
  - "Financial projections and valuation are accurate and defensible"
  - "Market conditions are favorable for fundraising activities"

constraints: [Regulatory and market constraints]
standards: [Fundraising and investment standards]
review_cycle: quarterly
---

Content Structure Template

# Funding — {Funding Round or Initiative}

## Executive Summary
**Purpose:** {Brief description of funding objectives and strategy}
**Funding Amount:** {Target funding amount and range}
**Funding Type:** {Equity|Debt|Hybrid|Grant|Revenue-based}
**Timeline:** {Expected fundraising timeline and milestones}

## Funding Strategy

### Capital Requirements
- **Growth Capital:** {Funding for business expansion and scaling}
- **Working Capital:** {Operational funding requirements}
- **Strategic Investments:** {Capital for acquisitions and partnerships}
- **Contingency Reserves:** {Reserve funds for risks and opportunities}

### Funding Philosophy
    ```yaml
    funding_approach:
      capital_efficiency: {Minimize dilution and cost of capital}
      strategic_alignment: {Align investors with business strategy}
      growth_optimization: {Fund growth while maintaining control}
      risk_management: {Balance growth funding with financial stability}
    
    funding_criteria:
      investor_profile: {Target investor characteristics}
      terms_preferences: {Preferred funding terms and structure}
      timeline_constraints: {Fundraising timeline requirements}
    ```

### Use of Funds
- **Business Development:** {Sales, marketing, and customer acquisition}
- **Product Development:** {R&D, technology, and innovation investments}
- **Operations Scaling:** {Infrastructure, systems, and team expansion}
- **Market Expansion:** {Geographic expansion and new market entry}

## Funding Sources

### Equity Funding
    ```yaml
    equity_sources:
      angel_investors:
        characteristics: {High-net-worth individuals and angel groups}
        typical_check_size: {Individual investment range}
        value_add: [mentorship, networks, industry_expertise]
    
      venture_capital:
        focus_areas: [growth_stage, industry_vertical, geography]
        investment_criteria: {VC investment requirements}
        due_diligence: {VC due diligence process}
    
      private_equity:
        investment_stage: {Growth and expansion stage focus}
        control_preferences: {Majority vs minority positions}
        value_creation: {Operational improvement focus}
    ```

### Debt Funding
- **Bank Financing:** {Traditional bank loans and credit facilities}
- **Asset-Based Lending:** {Secured lending against business assets}
- **Revenue-Based Financing:** {Revenue-sharing financing arrangements}
- **Convertible Debt:** {Debt instruments with equity conversion features}

### Alternative Funding
    ```yaml
    alternative_sources:
      government_grants:
        programs: [innovation_grants, research_grants, export_grants]
        eligibility: {Grant eligibility requirements}
        application_process: {Grant application procedures}
    
      strategic_partnerships:
        corporate_ventures: {Strategic investor partnerships}
        joint_ventures: {Collaborative funding arrangements}
        licensing_deals: {Revenue-generating partnerships}
    
      crowdfunding:
        platforms: [equity_crowdfunding, reward_crowdfunding]
        campaign_strategy: {Crowdfunding approach}
        regulatory_compliance: {Securities law compliance}
    ```

## Valuation and Deal Structure

### Valuation Framework
    ```yaml
    valuation:
      valuation_methods:
        - method: {Discounted Cash Flow}
          assumptions: [discount_rate, growth_assumptions]
          result: {Intrinsic value calculation}
    
        - method: {Comparable Company Analysis}
          comparables: [public_comps, private_comps]
          multiples: [revenue, ebitda, growth]
    
        - method: {Precedent Transactions}
          transactions: [recent_deals, industry_deals]
          premiums: {Control and strategic premiums}
    
      valuation_range:
        low_case: {Conservative valuation scenario}
        base_case: {Most likely valuation}
        high_case: {Optimistic valuation scenario}
    ```

### Deal Terms
- **Investment Amount:** {Total funding and investor allocations}
- **Valuation:** {Pre-money and post-money valuations}
- **Equity Ownership:** {Ownership percentages and dilution}
- **Liquidation Preferences:** {Investor downside protection}
- **Board Composition:** {Board seats and governance rights}
- **Anti-Dilution Protection:** {Protection against down rounds}

### Investment Structure
    ```yaml
    deal_structure:
      security_type: {Common|Preferred|Convertible|SAFE}
    
      investor_rights:
        information_rights: {Financial reporting and transparency}
        approval_rights: {Investor consent requirements}
        tag_along_rights: {Co-sale provisions}
        drag_along_rights: {Forced sale provisions}
    
      founder_protection:
        vesting_schedules: {Founder equity vesting}
        acceleration_clauses: {Vesting acceleration triggers}
        employment_agreements: {Founder employment terms}
    ```

## Due Diligence Process

### Due Diligence Preparation
    ```yaml
    due_diligence:
      data_room_setup:
        financial_documents: [financial_statements, budgets, forecasts]
        legal_documents: [incorporation, contracts, ip_portfolio]
        operational_documents: [org_chart, processes, systems]
    
      management_presentations:
        business_overview: {Company history and positioning}
        market_opportunity: {Market size and competitive landscape}
        financial_model: {Revenue model and unit economics}
        growth_strategy: {Expansion plans and roadmap}
    ```

### Investor Due Diligence
- **Financial Due Diligence:** {Financial performance and projections review}
- **Commercial Due Diligence:** {Market and competitive analysis}
- **Technical Due Diligence:** {Technology and IP assessment}
- **Legal Due Diligence:** {Legal structure and compliance review}
- **Management Due Diligence:** {Team assessment and references}

### Risk Assessment
    ```yaml
    risk_evaluation:
      business_risks:
        market_risk: {Market size and competition risks}
        execution_risk: {Management and operational risks}
        financial_risk: {Cash flow and profitability risks}
    
      investment_risks:
        valuation_risk: {Overvaluation and pricing risks}
        liquidity_risk: {Exit timeline and liquidity concerns}
        dilution_risk: {Future funding and ownership dilution}
    ```

## Fundraising Process

### Process Framework
    ```yaml
    fundraising_process:
      preparation_phase:
        duration: {Process preparation timeline}
        activities: [materials_preparation, advisor_engagement]
        deliverables: [pitch_deck, financial_model, data_room]
    
      outreach_phase:
        duration: {Investor outreach timeline}
        activities: [investor_targeting, initial_meetings]
        metrics: [meetings_scheduled, interest_generated]
    
      due_diligence_phase:
        duration: {Due diligence timeline}
        activities: [data_room_access, management_meetings]
        milestones: [term_sheet, final_due_diligence]
    
      closing_phase:
        duration: {Documentation and closing timeline}
        activities: [legal_documentation, final_negotiations]
        completion: [funding_close, capital_deployment]
    ```

### Investor Relations
- **Investor Targeting:** {Ideal investor profile and sourcing strategy}
- **Pitch Development:** {Compelling investment story and presentation}
- **Relationship Building:** {Long-term investor relationship strategy}
- **Communication Strategy:** {Regular updates and transparency}

### Negotiation Strategy
    ```yaml
    negotiation:
      negotiation_priorities:
        primary: [valuation, control_provisions, board_composition]
        secondary: [liquidation_preferences, anti_dilution, information_rights]
    
      negotiation_tactics:
        preparation: {Market research and comparable analysis}
        leverage: {Creating competitive tension}
        compromise: {Win-win negotiation approach}
    ```

## Capital Deployment

### Fund Utilization
    ```yaml
    capital_deployment:
      deployment_schedule:
        immediate_needs: {Working capital and immediate priorities}
        short_term: {3-6 month funding allocation}
        medium_term: {6-18 month growth investments}
    
      milestone_funding:
        milestone_1: {Initial deployment targets}
        milestone_2: {Growth achievement targets}
        milestone_3: {Expansion milestone targets}
    
      performance_monitoring:
        metrics: [revenue_growth, customer_acquisition, market_expansion]
        reporting: {Regular performance updates to investors}
        adjustments: {Capital reallocation based on performance}
    ```

### Governance and Oversight
- **Board Governance:** {Board structure and decision-making processes}
- **Investor Reporting:** {Regular financial and operational reporting}
- **Performance Monitoring:** {KPI tracking and milestone achievement}
- **Strategic Advisory:** {Leveraging investor expertise and networks}

## Exit Strategy

### Exit Planning
    ```yaml
    exit_strategy:
      exit_options:
        - option: {Strategic Acquisition}
          timeline: {Typical exit timeline}
          valuation_multiple: {Expected valuation range}
          strategic_rationale: {Acquisition logic}
    
        - option: {Financial Sale}
          buyers: [private_equity, financial_buyers]
          process: {Sale process approach}
    
        - option: {IPO}
          requirements: [revenue_scale, growth_rate, market_conditions]
          preparation: {IPO readiness timeline}
    
      value_optimization:
        growth_strategies: {Value-enhancing growth initiatives}
        operational_improvements: {Efficiency and margin improvements}
        market_positioning: {Competitive differentiation}
    ```

### Investor Returns
- **Return Expectations:** {Target investor returns and multiples}
- **Exit Timeline:** {Expected holding period and exit timing}
- **Value Creation:** {Strategies to maximize investor returns}
- **Distribution Strategy:** {Proceeds distribution and reinvestment}

## Validation
*Evidence that funding strategy meets capital requirements, achieves favorable terms, and supports business objectives*

## Quality Standards

### Bronze Level (Minimum Viable)
- [ ] Basic funding strategy with capital requirements analysis
- [ ] Simple valuation and deal structure framework
- [ ] Basic due diligence preparation
- [ ] All required metadata fields completed

### Silver Level (Investment Ready)
- [ ] Comprehensive funding strategy with multiple source analysis
- [ ] Detailed valuation methodology and negotiation framework
- [ ] Structured due diligence and investor relations process
- [ ] Capital deployment plan with milestone tracking

### Gold Level (Operational Excellence)
- [ ] Sophisticated funding optimization with strategic investor alignment
- [ ] Advanced valuation modeling with scenario analysis
- [ ] Comprehensive investor relations and governance framework
- [ ] Strategic exit planning with value optimization initiatives

## Common Pitfalls

1. **Inadequate preparation**: Poor fundraising materials and unprofessional process
2. **Unrealistic valuation**: Overvaluation leading to difficult future rounds
3. **Wrong investor fit**: Misaligned investors creating strategic conflicts
4. **Poor terms negotiation**: Accepting unfavorable terms that constrain future options

## Success Patterns

1. **Strategic investor alignment**: Investors who add strategic value beyond capital with industry expertise and networks
2. **Efficient fundraising process**: Well-prepared process that minimizes time and maximizes competitive tension
3. **Balanced term optimization**: Negotiating fair terms that balance founder and investor interests
4. **Capital efficiency focus**: Maximizing business outcomes while minimizing dilution and maintaining control

## Relationship Guidelines

### Typical Dependencies
- **FIN (Financial Model)**: Financial projections drive funding requirements and investor presentations
- **VAL (Valuation)**: Valuation analysis drives pricing negotiations and deal structure
- **STR (Strategy)**: Business strategy drives funding use and investor targeting
- **FOR (Forecasts)**: Financial forecasts drive funding timeline and amount requirements

### Typical Enablements
- **INV (Investment)**: Funding enables investment decisions and capital allocation
- **MET (Metrics)**: Funding requirements drive performance measurement and investor reporting
- **REP (Reporting)**: Funding obligations drive financial reporting and transparency requirements
- **GOV (Governance)**: Investor participation drives governance structure and board composition

## Document Relationships

This document type commonly relates to:

- **Depends on**: FIN (Financial Model), VAL (Valuation), STR (Strategy), FOR (Forecasts)
- **Enables**: INV (Investment), MET (Metrics), REP (Reporting), GOV (Governance)
- **Informs**: Capital structure, investor relations, growth strategy
- **Guides**: Fundraising execution, investor selection, term negotiation

## Validation Checklist

- [ ] Executive summary with clear purpose, funding amount, type, and timeline
- [ ] Funding strategy with capital requirements, philosophy, and use of funds
- [ ] Funding sources with equity, debt, and alternative funding options
- [ ] Valuation and deal structure with framework, terms, and investment structure
- [ ] Due diligence process with preparation, investor review, and risk assessment
- [ ] Fundraising process with framework, investor relations, and negotiation strategy
- [ ] Capital deployment with utilization plan, governance, and oversight
- [ ] Exit strategy with planning framework and investor return expectations
- [ ] Validation evidence of funding effectiveness, favorable terms, and business objective alignment

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## Related Documents

- [Back to Document Types](/docs/document-types)
- [Domain: Financial & Investment](/docs/domains/financial-investment)
- [Full Specification](/spec/v1-0-0)