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6. Fundraising Process

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Dive into Startups.be overview of the fundraising process, prepared by Thibau Claes (thibaut@startups.be). Learn more and get investor-ready: www.startups.be/fundraising

Dive into Startups.be overview of the fundraising process, prepared by Thibau Claes (thibaut@startups.be). Learn more and get investor-ready: www.startups.be/fundraising

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6. Fundraising Process

  1. 1. Startup fundraising process Thibaut Claes thibaut@startups.be
  2. 2. Agenda • First remarks • Process • Timeline (average) Fundraising process www.startups.be 2
  3. 3. Reviewed by Patrick Polak Partner Fundraising process www.startups.be 3 Marc Fournier Partner
  4. 4. First remarks • Each investor can have a different process • Angels could make decisions faster than VCs Fundraising process www.startups.be 4
  5. 5. Process 1. Have an introduction 2. First meeting (with an analyst / associate) 3. Second meeting (with analyst & partner) 4. Third – and further meetings 5. Term sheet 6. Due diligence 7. Closing 8. Preparation is key 9. 6-12 months process Fundraising process www.startups.be 5
  6. 6. Process (average) – 1% success rate from 1st meeting 1000 startups send an email to a VC fund 250 got a 1st meeting (25%) 75 got a 2nd meeting (25-30%) 45 go from 3rd to 5th meeting 10 pitch to Investment Comitee (<20%) 7 got a Term Sheet (70%) 5 go to Due Diligence (70%) 3 close (60%) • If you pitch an angel, you have better meetings’ rate and more chances to close Fundraising process www.startups.be 6
  7. 7. Have an introduction • Investors receive a lot of solicitations (1.000-5.000 startups /year) • Only 20-25% of the startups that send an e-mail get a meeting • Best way to get into an investor’s office is to be introduced by someone who knows both of you (mutual connection) and that investor trusts (portfolio company, co-investor, lawyer, broker,…) Fundraising process www.startups.be 7
  8. 8. 1st meeting • « The goal of a 1st meeting is to have a 2nd one, not to receive a check » • You will probably first meet with an associate/analyst who is the « filter » for the partners • Get him/her excited/interested or at least willing to study your startup further • (S)he should have the feeling that you have something or the FOMO feeling Fundraising process www.startups.be 8
  9. 9. 1st meeting • Don’t go deep in the details. Give an helicopter view of : • Team • Market/competition • Product • Traction • Roadmap and plan • It should be more a conversation than a « presentation » • Shouldn’t be more than 1 hour, idealy 45 minutes Fundraising process www.startups.be 9
  10. 10. 1st meeting Founder’s tips • If the investor doesn’t know the sector/market that much, educate him/her. Most of the time (s)he doesn’t, then take time to explain it concretely. If (s)he doesn’t get it, (s)he will skip the deal • Be credible and trustworthy. Show ambition and knowledge • Don’t try to make the deal now Fundraising process www.startups.be 10
  11. 11. To go to 2nd meeting • To know if you could got a 2nd meeting, check the investor’s reaction in the next 24h after 1st meeting • Looked your Linkedin profile • Gave a call/ sent mail • A retweet,… • You should have a go / no go for a second meeting in the next 7-10 days MAX • Otherwise, send an email but be sure at 98% that it’s dead Fundraising process www.startups.be 11
  12. 12. 2nd meeting • Second meeting will be with a partner and the analyst/associate you already met with • Even if associate already explained what you do, best is to explain the basics again • Follow the same schema as the first meeting • Partners have more experience then could ask more precise questions that way you will go deeper in the business Fundraising process www.startups.be 12
  13. 13. 2nd meeting • Goal of the second meeting is to have the interest of a senior manager in the fund and to start to go deeper in the business • Investors will ask for more detailed questions about metrics in order to reinforce their interest • If they don’t see major objections (competition, market, low growth, non-convincing answers to key elements) you should go and go to the second part of the process (meetings #3 and further) Fundraising process www.startups.be 13
  14. 14. 3rd meeting and further • From this moment, you have the interest of an associate/analyst and a partner • Your « case » was discussed two times (at least) during the « Partners meeting » Note : « Partners meeting » is the weekly meeting when/where all the members of the VC fund gather in order to discuss all the startups that are in their pipeline to know if they go further Fundraising process www.startups.be 14
  15. 15. 3rd meeting and further • Investors will look deeply at your business and will more prepare the meetings • Before the meeting(s), you will probably need to send • Detailed financial projections • Detailed metrics and KPI’s • Reference from your customers, your providers Fundraising process www.startups.be 15
  16. 16. 3rd meeting and further • Before the meeting(s), they will • Call your current customers to know what they think about you • Have more reference calls with current/potential investors • Look at your financial projections and check if it makes sense • Check what your metrics look like, how you calculate it,… • They will analyze your product (can be part of due diligence) • Ask CTO’s from portfolio company (or others) to look at the code • Ask customers about what they think about it • Test scalability and sustainability of product Fundraising process www.startups.be 16
  17. 17. 3rd meeting and further • Before the meeting(s), they will analyze the market • They will read reports on it • Interview their network about it, know the trends • Before the meeting(s), they will carefuly analyze competition • What’s their market shares? • Who are they? • How can you concretely beat them? • Sometimes, call them anonymously to have info Fundraising process www.startups.be 17
  18. 18. 3rd meeting and further • They will at least once come into your office • To understand the atmosphere in the office • To look how the people work • To check if people stay late in the evening • Interview your team and check the background of key people (with reference calls) • Be prepared to be challenged on each point mentioned previously (plus the ones from our other presentations) and to give accurated and convincing answers if they have doubts Fundraising process www.startups.be 18
  19. 19. Investment comitee • After weeks of meetings and discussions the partner is convinced by your company • You need to convince the whole team because to make a deal you need the approval of the all the partners • New objections will come because • Other partners don’t know you and your startup • Other partners have other concerns • All partners are not equal and some’s choices are more questioned Fundraising process www.startups.be 19
  20. 20. Investment comitee • This pitch can be short (1h30) or longer because it’s normaly the last « big test » • It’s the last time the biggest concerns can come • It’s more difficult because you have multiple points of view and need to adress all • Idealy, the partner and associate you already know briefed you a bit on how to behave. They want the deal to be done Fundraising process www.startups.be 20
  21. 21. Term Sheet Proposal & Negociation • You convinced all the investment comitee, they are now willing to invest in your company • The lead investor will propose a Term Sheet to you in order to sum up the clauses and conditions of the investment • Take your time to discuss it, you will need to negociate it • Don’t accept every clause but don’t « fight » for all clauses Fundraising process www.startups.be 21
  22. 22. Term Sheet Proposal & Negociation • It’s a hard period because you are alone again • Ideally you need a lawyer to help you in the negociation • Don’t take too long to discuss it. Idealy you should have one or two discussions about it • Negociate by phone or face to face, confirm the negociation by mail just after Fundraising process www.startups.be 22
  23. 23. Due Diligence • When you have signed the Term Sheet (pre- shareholder agreement) you still have work to do • Investors want to have the last checks to be sure that the startup, they are investing in, is clean • Some investors do that before proposing a Term Sheet, others after Fundraising process www.startups.be 23
  24. 24. Due Diligence • With lawyers, investors will look at • Employees contracts (salary, IP given to company, nonc- competitive agreement,…) • Freelancers contracts • IP rights (if any) • Commercial contracts you have signed with partners • Cleaness of cap table • With auditors, investors will look at • Actual/current financial situation of the company • Accounts of the company (different kind of debts,…) Fundraising process www.startups.be 24
  25. 25. Closing • Once everything is ok, you will sign the shareholders’ agreement • It’s a contract, similar to the term sheet but being binding (it’s a real contract, not a letter of intent) • Once the agreement is signed, you can expect money on your bank account 1 month after Fundraising process www.startups.be 25
  26. 26. Preparation • Before to start your roadshow, prepare • Your slide deck • One pager • Introduction mail to investor • Your metrics • The terms that you would like to have in your Term Sheet • During the roadshow and after the first meetings, prepare • Employees’ / freelance / sales / partnerships’ contracts • Other legal documents • Patents (if needed) Fundraising process www.startups.be 26
  27. 27. Timeline (average) • Preparation -> 2-6 weeks • Roadshow (meeting with multiple investors and got 1-3 term sheets) -> 3-6 months • Term sheet negociation -> 2 weeks • Due Diligence -> 2-4 weeks • Closing -> 4-8 weeks Fundraising process www.startups.be 27
  28. 28. Any question(s)? 28 Thibaut Claes thibaut@startups.be @thibclaes
  29. 29. Appendix • If you contact 30 funds or investors • 7 will be too busy at that moment • 8 can’t invest because out of investment thesis or competiting startup in portfolio • 15 will be open to discussion Fundraising process www.startups.be 29
  30. 30. Appednix • When to NOT contact them • They are off • You have contacted them in the last 6 months and they were not interested Fundraising process www.startups.be 30

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