How to Raise Capital for Your Startup with Social Media

The Virtual Handshake: How to Raise Capital with Social Media David Teten Partner, ff Venture Capital ffventure.com blog: teten.com @dteten New York, NY info@teten.com http://www.flickr.com/photos/roblee/133498854/© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps • Introduction • Traditional Methods of Raising Capital • Social Media • Signals of People and Funds You Want to Know • Capital Network • Next Steps© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps David Teten Biography (teten.com) • Partner, ff Venture Capital, early-stage technology venture capital fund • Founder and Chairman, Harvard Business School Angels of New York • Founder and Chairman, Navon Partners, startup focused on sourcing deals for private equity funds • Managing Director, Evalueserve, through September 2008. 2,500-person finance-focused research and analytics firm. • Founder and CEO, Circle of Experts (investment research firm), sold to Evalueserve • Founder and CEO, Teten Executive Recruiting, sold to Accolo, #42 on 2007 Inc. 500 • Founder and CEO, GoldNames, domain name investment bank, based in Israel • Technology/Defense Investment Banking, Bear Stearns (#1 group at Bear investment banking by revenues) • Lead author, The Virtual Handshake: Opening Doors and Closing Deals Online (TheVirtualHandshake.com) • Harvard MBA 1998, Yale BA, both with honors. • Contact: info@teten.com© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps How do investors find you? David Teten recently completed the first-ever research project on “Best Practices in Private Equity and Venture Capital Deal Origination”. His coauthor for some of the research is Chris Farmer, cofounder and Managing Partner, Ventures, of Ignition Search Partners, and formerly Vice President, Bessemer Venture Partners. David and Chris have published their findings in the Journal of Private Equity (Winter 2010); Harvard Business Review (June 2010); and Institutional Investor (October 2010). These slides provide some of the learnings and underlying data from the research study. Evalueserve, a global research firm and the acquirer of David’s former company (Circle of Experts), provided supporting research and analytics in the initial phases of this study. We also thank Yujin Chung (Andreessen Horowitz) and Neha Kumar (Anklesaria Group), our research associates who provided invaluable support, and interns Corentin Roux dit Buisson, Dan Clark, Nitin Gupta, and Nikhil Iyer .© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps We interviewed over 150 private equity and venture capital funds globally for our study. Analysis of Private Equity and Venture Capital Funds in Study© 2011 David Teten. More at ffventure.com and teten.com David Teten, Chris Farmer, Evalueserve, Yujin Chung, Neha Kumar

Intro Tradition Social Media Signals Network Next Steps Investors earn higher returns by investing in people they know well. Mutual Fund Managers’ Excess Returns in Companies Run by College/Graduate School Classmates vs. All Other Companies Excess return=total gain minus the Treasury bill return Connected Holdings=Stocks for which managers had the strongest connection to senior officials (same school at same time with same degree) Source: The Small World of Investing: Board Connections and Mutual Fund Returns; Lauren Cohen, Andrea Frazzini, and Christopher Malloy, 2008 Study of 2,501at ffventure.com of 1,648 actively managed equity funds that specialized in aggressive growth, growth, or growth and income stocks between January 1990 and December 2006© 2011 David Teten. More portfolio managers and teten.com

Intro Tradition Social Media Signals Network Next Steps Traditional Capital-Raising Methods for Startups Personal networks of “Friends, family, and fools” principals Direct outreach Can work very well, but only through introduction Advisory board Be careful about paying a retainer Conferences/ industry Legal ways to broadly market associations Communications with Monthly email with your metrics existing investors/friends Business relationships with Existing/potential customers are the best potential investors Online marketing to investor Unusual, but easy and cheap (if legally risky) communities© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Web 2.0 Company Map “Social media is a communications medium that relies on its audience to create, modify, or distribute the medium’s content - Nick Gonzalez, SocialMedia.com© 2011 David Teten. More at ffventure.com and teten.com http://www.flickr.com/photos/briansolis/2735401175/sizes/l/, http://blog.socialmedia.com/how-should-we-define-social-media/. /

Intro Tradition Social Media Signals Network Next Steps Online networks are a more efficient way to get business done. Benefits of Online Networks • Searchable • Crosses boundaries of time and space • Passive presence • Ease of forming groups • Reduced time and expense • Greater visibility© 2011 David Teten. More at ffventure.com and teten.com http://www.flickr.com/photos/uaeincredible/3333223048/sizes/o/

Intro Tradition Social Media Signals Network Next Steps Use news alerts to highlight funds that are appropriate targets. • Funds focused on your particular industry/geo graphy • Fast growth funds© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity • Introduction • Traditional Methods of Raising Capital • Social Media • Signals of People and Funds You Want to Know • Capital Network • Next Steps© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Corporate Network Valuation Formula Ch = Character Co = Your Firm’s Competence R = Relevance of the contact S = Strength of your relationship I = Information N = Number of people D = Diversity N = D * ∑ (Chn*Con *Rn* Sn*In) n=1© 2011 David Teten. More at ffventure.com and teten.com David Teten and Scott Allen, The Virtual Handshake: Opening Doors and Closing Deals Online (www.TheVirtualHandshake.com)

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Strength must be balanced against number. Average Strength = Minutes Available / Person Number = # People therefore… Average Strength * Number = Total Minutes Available vs.© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Biography analysis software allows searches by common affinity and more effective subsequent outreach. Leading Providers of Biography Analysis Data • Boardex • Jigsaw • Pipl • Tracked • Honestly • ZoomInfo© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Corporate analysis software provides an insider view of the org chart, compensation, and customer views of a company. Leading Providers of Corporate Analysis Data • CogMap • Glassdoor • TheFunded • TheOfficialBoard • Tracked© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Case study: A set of angel investors sourced a transaction and invested $8m via an alumni email list. • Daniel Zumino, founder of BCG Paris and angel investor, had made a small investment in a startup • November 1999: He sent email to Stanford GSB alumni list seeking capital for the startup • March 2000: Raised $8m through referral from alumni, via this listserv© 2011 David Teten. More at ffventure.com and teten.com David Teten and Scott Allen, The Virtual Handshake: Opening Doors and Closing Deals Online (www.TheVirtualHandshake.com)

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Using multiple media channels promotes stronger trust- building. Major Media Channels for Origination (descending order of importance) • Phone • Email • Web conferencing • Instant messaging • Internet telephony (e.g., Skype) • SMS • Twitter© 2011 David Teten. More at ffventure.com and “Strong, Weak, and Latent Ties and the Impact of New Media,” The Information Society, 18 ( 2002) 385–401. http://flickr.com/photos/re-ality/41676755/sizes/o/ Caroline Haythornthwaite, teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity You can identify potential startup investors through any of multiple online databases. Selected Searchable Databases of VC Funds • AngelList • TheFunded* • BoogarLists • VCProDatabase • CB Insights • VentureDeal • CrunchBase* • VentureXpert • Galante’s • vFinance • Grey House • VCGate • PWC MoneyTree * Has the most data for free© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Effective capital-raisers are data hounds. Tools for Assimilating Data into Your CRM System Data source Selected technology for inserting into CRM Business Cardscan, IRIScan, Neatco, Plustek Cards Emails Contact Capture, eGrabber, Gwabbit Cloud Plaxo, LinkedIn© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Senior executives prefer to interact online behind barriers to lower-level personnel, just as they do within traditional networks. Sample Gated Communities for Executives • IERGOnline.com • Executive-Forum.org • INMobile.org • Some LinkedIn groups© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Investors can also connect with one another via online gated communities. Sample Gated Communities for Investors Angels Private Equity Public Markets Angelsoft.net ACG.org FTAlphaville.FT.com/ longroom AngelList Finemrespice.com/ SumZero.com subrosa Village.Albourne.com ValueInvestorsClub.com Village.Albourne.com© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity More senior executives use LinkedIn more frequently and have more connections. Leading Online Network Platforms • Groups.Yahoo.com • Groups.Google.com • Grouply • LinkedIn • Xing (c) 2008 Anderson Analytics, Linkedin, SPSS http://www.marketingcharts.com/interactive/linkedin-users-have-high-personal-financial-success-6743/linkedin-anderson-analytics-busy-decision-makers-august-2008jpg/© 2011 David Teten. More at ffventure.com and teten.com

Intro Tradition Social Media Signals Network Next Steps Character – Competence – Relevance – Strength – Information – Number – Diversity Target investors who are one step removed from you. • By industry • By geography • By personal characteristics© 2011 David Teten. More at ffventure.com and teten.com http://flickr.com/photos/extranoise/169187125/sizes/l/

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How to Raise Capital for Your Startup with Social Media

by David Teten on Jan 25, 2009

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How to Raise Capital for Your Startup with Social Media — Presentation Transcript