Financing a Startup


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Financing a Startup

  1. 1. Visit to browse all mentors who can help you with: • Informational Interviews • Resumes & Cover Letters • Mock Interviews …and more! Hosted by: Career Advisors on
  2. 2. Financing a Startup The Who, What, When and How’s featuring: Michael Horowitz Associate Hosted by: Caitlin Quan Evisors Marketing & Operations Associate Hosted by: Career Advisors on
  3. 3. Disclaimer Everything you are about to hear represents my own personal opinions and not those of my employer or colleagues. For the sake of time, I’m also generalizing a lot – don’t take any of my comments as applying specifically to any one firm. Hosted by: Career Advisors on
  4. 4. Agenda 1. About Me 2. Sources of Capital – Know Your Audience 3. How to Pitch a VC 4. Financing Considerations 5. Q&A Hosted by: Career Advisors on
  5. 5. About Me • Associate @ Bessemer • University of Pennsylvania | 2010 • Goldman Sachs (SSG) | 2009 • BlackRock (PMG) | 2008 • Weather Risk Solutions (Startup) | 2006 - 2010 Hosted by: Career Advisors on
  6. 6. Before you raise money… • Do I really want to do this? – Lifestyle change – Committing to a larger exit – Dilution – Loss of control • And is now the right time? – Do I have a team? Product? Customers? – Am I approaching key inflection points that might significantly raise the value of my business? • That said… – VC’s can add lots of value: • Cash to grow more quickly • Recruiting help • Customer or advisor intros • Strategy and benchmarking advice – we’ve been there before! Hosted by: Career Advisors on
  7. 7. Where should you look? • How much do you need? – <$50k • Friends and family – Common source for initial funding; be wary of ruining relationships • Seed programs (Y Combinator, TechStars, RockHealth, ImagineK12…) – money, space and mentoring – $50 - 250k • Individual angel investors - often past or current CEOs or successfully founders – $250k - $1m • Syndicates of angel investors, super angel funds (SV Angel, Chris Sacca, Box Group, 500 Startups…) – $1m - $3m • Early-stage venture funds (First Round, True Ventures, Felicis Ventures, Thrive, Lerer Ventures…) – $3m - $20m • Venture funds (Bessemer, Accel, Sequoia, Benchmark, Matrix, Redpoint, NEA…) • What about… – Banks • Banks generally want to lend against predictable, proven businesses – Crowdfunding • Kickstarter – non dilutive funding • FundersClub, Seedinvest and others – AngelList Hosted by: Career Advisors on
  8. 8. What do these people want? • Know Your Audience – Angel investors are looking for a return, but generally are looser with terms than venture firms (no board seats, small positions, limited protections) – Venture funds will be more heavily involved – on your board, owning more of the company, obtaining more rights and protections – Angels and funds have sector and stage focuses – be sure they fit with your company! • Also consider… – What is the fund’s approach to making follow-on investments (and does it have the funds)? – Who is the specific person you will be working with and how well do you get along? – What are your/the investor’s expectations for how involved they will be? …and how can I find them? • NETWORK, NETWORK, NETWORK – Most investors get way more inbound inquires than they can spend time on – We don’t have time to read and evaluate long business plans (or even short ones) – The best way to get in touch is through a connection – LinkedIn, startup lawyers, connections in the VC’s portfolio, social media engagement, conferences… – Always be ready with a QUICK (30 second) elevator pitch Hosted by: Career Advisors on
  9. 9. How to pitch an investor • The Perfect Pitch Deck – ~10 slides – Clearly stated problem – is this something people care about? – Market – is the market big enough? – Solution (tech/product explanation) – demos are good if they are short and they work – just convince me you’re taking an interesting / reasonable approach – Team – do you have the right people for the job? – Business model – can this make money? – Competition – who else is doing it and why are you better? – Traction – share whatever data you have that shows your business is working – Financial info – have you raised money before? What are the company’s financials? • Common mistakes – “We have no competition” – “We conservatively project $100m revenue in 3 years” – “If we just get 1% of this massive market we’ll be a big company…” – “I can’t tell you more until you sign an NDA” Hosted by:See the rest at
  10. 10. What are you being judged upon? • A lot of it is YOU! • Then it depends on the stage of the company – Pre-product: Team + Market – Pre-launch product: Team + Market + Product – Recently launched product: Team + Market + Product + Initial Traction • What is “traction”? – Downloads/Signups/Registrations – User engagement (# of visits, frequency of visits, number of interactions/visit…) – Monetization (free to paid %, customer lifetime value, churn…) – User acquisition cost • BVP has some great resources: – 10 Laws of Cloud Computing – 10 Laws of eCommerce Hosted by:See the rest at
  11. 11. What to know about financing • Convertible Notes vs. Priced Rounds – Convertible notes delay pricing of the round (generally for a discount in the future) – Deal docs are simpler – Can work out poorly in tough financing environments • Liquidation Preferences – Common, Preferred and Participating Preferred • Option pools and vesting – Often come out of the founder’s stake • Protective provisions: – Standard blocks on exits, issuance of new stock, sale of assets… – Anti-dilution protection – Redemption rights – ROFR’s Hosted by:See the rest at
  12. 12. A note on hardware startups • A lot of the pre-presentation questions were about hardware startups • They still get funded, but it can be difficult • Lower margins than software, require a lot of $$$ to scale • When you can build Instagram on a few million… • Some current successful hardware startups: Nest, Lytro, e la carte, Sonos, Jawbone, Fitbit, Pinnacle Engines* • Who’s funding them? Redpoint, Andreessen, Foundry, KPCB, Khosla, *Bessemer… • Kickstarter can be your best friend here – prove demand, raise non-dilutive funds • Lemnos Labs – hardware incubator Hosted by:See the rest at
  13. 13. Connect Book your one-on-one session with Michael at Michael Horowitz Associate Hosted by:See the rest at
  14. 14. Questions & Answers Hosted by:See the rest at
  15. 15. Questions & Answers Question 1: Is there an age limit where venture capital firms are reluctant to invest in? Hosted by:See the answer at
  16. 16. Questions & Answers Question 2: Can you advise on how to gauge the timing and depth of financing? Hosted by:See the answer at
  17. 17. Questions & Answers Question 3: Are there any models that combine crowd- funding with angel investing? Hosted by:See the answer at
  18. 18. Questions & Answers Question 4: What methods are there to measure the cost of customer acquisition? Hosted by:See the answer at
  19. 19. Questions & Answers Question 5: Would you suggest working for a few years vs. moving straight into your venture? Hosted by:See the answer at
  20. 20. Questions & Answers Question 6: Situational funding question Hosted by:See the answer at
  21. 21. Questions & Answers Question 7: How do you create proposals that fit the objectives of the person who has the money? Hosted by:See the answer at
  22. 22. Questions & Answers Question 8: Are there important cultural differences between the USA and Europe when raising capital? Hosted by:See the answer at
  23. 23. Get the latest updates on upcoming webinars by following us: Register for live webinars and view all our recordings at: Hosted by:See the rest at