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How to Get Funded in 2017

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Two startup fundraising experts discuss the different funding options available to tech entrepreneurs today, and what's the best way to build an investor pipeline and approach investors.

Published in: Technology

How to Get Funded in 2017

  1. 1. How to Get Funded in 2017 Presented By: BJ Lackland, CEO of Lighter Capital Nathan Beckord, CEO of Foundersuite
  2. 2. Today’s Agenda What to raise How to raise it Tips on optimizing your capital raise 2
  3. 3. 3 As an investor: › VC at Summit Energy Ventures › Former member of Element8Angels › Funded 150 companies at Lighter Capital As a startup operator: › CEO of Lighter Capital › CFO of Power Efficiency Corporation Speaker introduction
  4. 4. 4 As a startup operator: › CEO of Foundersuite & VentureArchetypes.com › $120M raised by startups using Foundersuite.com › Prev: 100+ startup clients over the past 10 years › Kickstarter,Clicker,Autonet,Zerply,GetHired,Launchrock Previously: › Technology valuation, investment banking, venture capital › CFA& MBA Speaker introduction
  5. 5. Today’s agenda What to raise: A look at your capital stack 5
  6. 6. 6 Capital stack for startups Senior Debt Mezzanine Debt Convertible debt / Preferred Stock Common Stock Bank Venture Debt / RBF Angel / VC Entrepreneur • Lowest risk & cost • Highest priority in liquidation • Highest risk & cost • Lowest priority in liquidation
  7. 7. 7 Capital stack for startups - debt • Term loan / LOC • 8-12% IRR • Pros: cheap & predictable • Cons: covenants, PG • High yield term loan + warrants • 15-30% IRR (1.4–2X borrowed) • Pros: no PG • Cons: mon. payments, warrants • Term loan with flexible pmts based on revenue • 15-30% IRR (1.4–2X borrowed) • Pros: flexible, no PG • Cons: mon. payments Senior Debt Mezzanine Debt / Venture Debt Mezzanine Debt / Revenue-Based Financing
  8. 8. 8 Capital stack for startups - equity • Debt that converts to equity at the next fundraising event • Zero to 10-20X over amount borrowed + accrued interest • Pros: easy to negotiate • Cons: chasing small checks • Special class of equity • Zero to 10-20X over amount invested • Pros: large check size, mentorship • Cons: loss of control • Simple equity • Zero to 5-10X over amount invested • Pros: easy to raise • Cons: last paid (highest risk) Convertible Debt Preferred Stock Common Stock (Founders)
  9. 9. VC Backed Non VC Revenue $5m Series B Corporate Venture Established Ideation Launch & Traction Growth & Scale Breakout Series C Debt Equity Tech Banks/ Venture Debt Series A Revenue-Based Financing Blended Series A Series B Tech Banks Series C Tech Banks / Venture Debt 9 Funding paths Bootstrap / Friends & Family Incubator / Angels
  10. 10. › Equity: Valuation? What % is worth taking on investment? › Control: Are you the driver? Who makes key decisions? › Value-add: More than just money? › Risk Tolerance: Personal assets? › Timeframe: How long will raising funds take? › Horizon: Exit strategy? Build toexit? Build and hold? › Culture: Isthere alignment? 10 Before you raise, ask yourself:
  11. 11. Today’s Agenda How to raise: Building your investor pipeline 11
  12. 12. 12 When fundraising, don’t do this
  13. 13. 13 Instead, treat fundraising as what it really is: SALES 101: Lead-Gen -> Qualify->Engage -> Closing
  14. 14. 14 Step 1: Build your funnel Fundraising is a numbers game… ...aim for 150+ names minimum. 100 pitches to get 3-5 commitments is not unusual.
  15. 15. 15 Step 2: Filter & qualify your leads FOCUS here on filtering down to about 100 - 125 direct targets. Filtering Criteria: •Invested in competitors •No dry powder (funds) •No recent deals •Wrong sector / stage focus •Wrong geo. location •Has bad reputation Tips: http://blog.foundersuite.com /seven-ways-to-pre-screen- your-investors/ Diligently cut down your list now for a better hit rate later.
  16. 16. 16 Step 3: Map your contacts with
  17. 17. 17 …while you’re in add more leads
  18. 18. 18 Step 4: Create tracking system (google)
  19. 19. 19 Step 4: Create tracking system (foundersuite)
  20. 20. 20 Step 5: Start the conversation(s)
  21. 21. 21 Step 5: Start the conversation(s) …this email is super-easy for Jeff to forward along.
  22. 22. 22 Step 6: Hustle like you’ve never hustled before Intros: •Do intros in parallel •Aim for concentrated ‘blitzkrieg’ approach •Key goal: get momentum! Pitch: •A/B test your pitch •Continually refine & improve Process: •Leverage VCs off each other •Send regular progress updates (use Foundersuite’s Investor Updater tool :)
  23. 23. 23 Step 7: Go for the close •Ask for interest level + ask for next steps •Make them chase you a bit •Expect 3-6 meetings before term sheet (more TS = more leverage, faster close) •Follow up frequently (it can be hard to get an actual “no”) •Use PG’s “handshake deal protocol” when they say yes https://www.ycombinator.com/handshake/ •Don’t let up until the money is actually in the bank
  24. 24. 1. Run your fundraise as a sales process 2. Work your network (but do it efficiently) 3. Run it as a numbers game (but always qualify leads) 24 Optimizing your capital raise: Nathan
  25. 25. 1. Skip a round of equity 2. Be capital efficient 3. Don’t limit yourself to VC 25 Optimizing your capital raise: BJ
  26. 26. QUESTIONS? Visit Our Websites www.lightercapital.com www.foundersuite.com Contact us info@lightercapital.com nathan@foundersuite.com

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