Funding Your Startup

Silicon Valley NewTech Meetup – April 7, 2009 Bill Hunt - bill@whuntpartners.com Funding your Start-Up

What If I Don't Need Investment?
You’re NOT doing it without investment. Instead, you are choosing to be your own investor.
Investment principles exist, just as architecture/coding/etc principles exist.
Be a good investor and evaluate your business like an investor would.
Make changes based on this, or even scrap the idea and pick a better one if it doesn’t make sense from an investment perspective.

Get an Intro
Find someone who can introduce you to the Angel or VC
Have an elevator pitch prepared; you never know when you’ll have a 2 minute opportunity to pitch a potential investor.
Go to events you know VCs will be at. Give them the elevator pitch.

Know What The Investor Wants
What deal sizes do they do?
What markets do they focus on?
Do they have a competitive portfolio company?
Do they have complimentary portfolio companies?
Do they lead rounds?
Do they have money?
Look like the sort of company they invest in

The Problem You're Solving
What is the problem that exists?
How bad is the pain?
Focus on an individual.
Is this a problem for CEOs?
For CIOs?
For Product Managers? etc.
Whose problem is this? I.e. who will buy your product?
Sell Aspirin, not Vitamins.

Your Unique Solution
What is your solution to this problem?
Focus on the problem that you solve.

Do a demo
If possible, demo your product, or do a walkthrough in mock-ups.

Market Size
How many customers will pay for a solution like this?
Ideal answer will come from a third-party, such as an analyst.
If necessary, do the math yourself, based on the number of potential customers x how many would actually buy.
Make sure your financials (later) align with this. Don’t assume you can sell >50% of this market.

Market Validation
Quote from potential customer(s)
Ideal quote sounds like this:
“ If only I had the XYZ widget, I would buy 50 today. I need a solution to W, and XYZ has the best/only way to solve it.”

Monetization
It has to make money.
Advertising is not looked at favorably.

Team
Describe each of the team members
Why is each member fantastic for building this company?
Have you worked together before?
A team of one is bad. Support and Peer-pressure among founders keeps things strong.

Competition
What other solutions exist?
No competition is bad. This implies that the problem you’re solving isn’t real.
Too much competition is bad. Means the space is too crowded. (although if you have serious differentiation, you can cut through competition).
Common slide shows matrix with competitors along left and features along top. Checks for each feature, with your company having all checks.

Differentiation
Why are you better?
Be tough for others to duplicate:
patents that you have filed
existing market penetration
man-years of effort required
Focus patent efforts on paths that your competition will have to cross.

Go To Market Plan
How will you get your offering to your customers?
What channels will you use?
How much will you charge?
Where/how will you market to customers?

Financials
Chart of projected Revenue/Costs/Profit
Quarterly for first year. Yearly for next 2 years
Don’t be too aggressive:
Your company won’t smell right; will make VC believe you are naive.
VCs have a fantastic memory for these sorts of things, and later if you don’t meet up to your projections, you’ll be in trouble.

Listen during the presentation
Watch body language.
Note concerns, and do your best to address in the presentation. If you can’t, get back to them later with better answers.
Adjust pitch on the fly if necessary.

Be confident
Investor wants to see you as someone that can be counted on to manage a lot of their money. Be strong.
Run the meeting. If they ask about something that’s in your presentation later, give them a brief answer and say “I’ll cover that in a couple of slides.”

Keep it Simple
10 – 15 slides maximum
Don’t pour every detail into the presentation.
Focus on what’s important. If there is interest, there will be follow-up meetings to address details.
Presentation should be for 30 mins max, so you have another 30 mins for Q&A
The goal of the first meeting is to get a second meeting.

Have backup slides
Keep other slides in case you need them.
Being able to answer questions with backup slides makes you look prepared.

Get Feedback
Find out what their process is and what the next steps are.
Find out what they liked and didn’t like.
Internalize feedback to strengthen your company.
Adjust your presentation to the next Investor accordingly.

Interview the Investor
Make sure the investor adds value to your company.
Talk to CEOs of other companies that they have invested in.
Be sure they don’t show up at board meetings to watch their money. They should provide business advice, customers, partners, and acquisition partners

Silicon Valley NewTech Meetup – April 7, 2009 Bill Hunt - bill@whuntpartners.com Funding your Start-Up

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Funding Your Startup

by Bill Hunt

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