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Raising Your First Round: Finding the Right Investors & Preparing for the Pitch

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Materials to help a first time entrepreneur raise their first round of capital

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Raising Your First Round: Finding the Right Investors & Preparing for the Pitch

  1. 1. Raising Your First Round: Finding the Right Investors & Preparing for the Pitch
  2. 2. Raising your first round is a daunting process, especially for 1st time entrepreneurs 2 Confidential - Developing a fundraising plan - Determining what types of investors to target - Optimizing how you approach investors - Doing your homework for investor pitches However, planning ahead can (hopefully) make the process go a bit more smoothly; I recommend the following
  3. 3. I’ve launched my business and want to raise capital – what do I do? 3 Confidential If you answer “YES!” (not “yes?” but “YES!”) to the above, then: 1. Do I know why I’m raising money? 1. Do I want investors involved in my business (i.e. am I OK giving up control)? 2. Do I know how I would spend the money? Determine if your ready to raise outside capital by asking yourself 3 key questions: Step 1 1 2 3 Develop a fundraising planStep 2
  4. 4. Developing a fundraising plan 4 Confidential Your fundraising plan should include: Raise Details Target Investors Fundraise Timing Investor Outreach Strategy • Gaining access to target investors • Communication and storytelling • Cadence and relationship building • Type • Focus, expertise, or thesis • Stage and check size • When to start the process • Target close date • Drop dead close date • $ Amount • Target valuation • Key terms • Use of funds 1 2 43
  5. 5. Determining raise details 5 Confidential • Ultimately “the market” (aka investors) will determine many of the key characteristics/terms of your fundraising • However, every fundraising entrepreneur should have their target term sheet (not just amount and valuation) planned out beforehand Example framework for how to evaluate select key decisions Key decision(s) Key factors Raise Amount • How much should I try to raise? • How much do I need to raise? • Milestones needed to raise next round • Use of funds - resources/cash & time needed for milestones Valuation • What is my target valuation range? • What is the lowest price I’d accept? • Comps in the market / macro factors • Team, market, progress, tech, etc. Financing instrument • Debt vs. equity • Size of raise and investor preference • Cost & speed vs. “cleaness” Other key Terms • Control, preference, and governance • Investors, company needs, what’s “market”
  6. 6. Evaluating potential sources of capital 6 Confidential There are many different types of investors Description Motivation Typical Check size Friends & family Stage Individual Angels Angel Groups Venture Capital Crowd- funding • Friends, family, colleagues • Digital platform aggregating angels • People investing their own money • Angels that aggregate capital • Dedicated fund investing others’ money • Financial return• Financial return; get involved • Get involved; have fun; financial return • Have fun• Support the founder • $100K-$1M**• $100K-$500K• $10K-$100K• Up to $500K*• $0-$100K *Assumes a syndicate ** For seed rounds • Seed to Series A • Seed to Series A • Pre-seed to Series A • Pre-seed to Series A • Pre-founding to pre-seed
  7. 7. Which type of investor is right for you? 7 Confidential Have you launched the business? Do you have prior startup success? Do you have a completed product? Do you customers? Are they paying you? NOYES NO YES YES YES YES NO NO NO = Friends & family = Angel group = VC= Angel ILLUSTRATIVE
  8. 8. Which specific investors to target 8 Confidential Key investment decision factors Finding the right angels Finding the right VC Key investment decision factors • Past experience with founder • Strong referral from trusted source • Subject matter expertise / feeling they can help the company • Experience investing in similar companies 1 2 The potential non-starters Investment Theses HPVP Example Midwest based, tech Stage Seed, Series A The factors that drive “fit” 4 Partnership expertise 5 Working styles 3 Competitive investments Various B2B SW, GTM, marketplaces Tenacious, responsive, accountable, etc.
  9. 9. Connecting with target investors 9 Confidential Descendingorderofvalue 1 Current / past portfolio company CEO Example introduction sources 2 Trusted colleague, partner, friend of investor 3 Another investor in the current round 4 Advisor / mentor from founder’s network 5 An investor who’s not investing Cold outreach6
  10. 10. Building the investor relationship 10 Confidential Build relationships Active fundraising Adjust terms / strategy Target close Drop dead clo Timing Activities Messaging Key players • 3 months • Start 6 months before target close • 3 months • Start 3 months before target close • 3 months • 6 months before out of money • Informal meeting with target investors/ funds • We’ll be raising in 6 months, think you/your fund is a good fit and want to introduce ourselves • Angels, groups, VCs (Associates and higher) • Formal investor pitches • Deal structuring • We’re raising • We’re awesome, here’s why • Angels, groups • VCs, include full partnership • Reconnecting with interested parties not yet committed • I know you were interested before • We’ve adjusted terms, reconnect? • Angels, groups • VCs, include full partnership
  11. 11. Preparing for the pitch 11 Confidential Build relationships Active fundraising Meeting prep • Learn investors’ bios, expertise, and past investments • Craft your message, have key metrics top of mind, and clear fundraising plan During meeting • At minimum, be prepared for - how the business got started  current commercial progress  where the business is going • Listen to feedback and questions • Articulate near-term goals to achieve before active fundraising Follow up • Add interested investors to regular investor updates Meeting prep • Have up-to-date key metrics, historical and forward-looking financials • Prepare to address prior questions / feedback from investor(s) During meeting • Be prepared to walk through deck and also “go off script” • Bring all key team members to meeting • Develop clear & concise pitch deck = problem  solution  market  traction  team  raise details • If new investors in room, likely need to retell much of the story  don’t assume all knowledge shared amongst partnership
  12. 12. Thanks & questions? 12 Confidential Thank you! Please reach out with any questions greg@hydeparkvp.com Twitter: @greg_barnes

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