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Funding Strategies to Go the Distance

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Startup Secrets presents a lecture on how to build effective funding strategies to go the distance! Learn more about raising money from seed to exit.

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Funding Strategies to Go the Distance

  1. 1. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Funding Strategies to Go the Distance startupsecrets.com
  2. 2. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Workshops Full descriptions of each at startupsecrets.com 1. What’s Your Roadmap to Success? 2. Building a Compelling Value Proposition 3. Turning Products into Companies 4. Culture, Mission and Vision 5. Hiring A+ Talent 6. Game-Changing Business Models 7. Go to Market Strategies 8. Getting Behind the Perfect Investor Pitch 9. Funding Strategies to go the Distance 10. Have You Got What It Takes? 11. Mastering Mutual Mentorship
  3. 3. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Agenda Many ways to fund your startup Develop a funding strategy Remove the mystique of VC
  4. 4. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 4 Sex, Relationships & Money This could get complicated, but it doesn’t have to!
  5. 5. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 5 Raising Money Is Like Sex. Everyone wants to know about it. Few people talk about it openly.
  6. 6. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 6 Everyone wants to know about it. Few people talk about it openly. People are afraid to ask … Raising Money Is Like Sex.
  7. 7. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 7 Everyone wants to know about it. Few people talk about it openly. People are afraid to ask … It’s fun once you get it! Raising Money Is Like Sex.
  8. 8. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 8 Should you even raise money? • If you don’t know, the answer is no! • Do the work first Example reasons for a NO: • No need! • Personal: risk aversion, lifestyle, control • Business: small potential • Other: not for profit, or research Funding Strategy
  9. 9. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 9 Overview Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
  10. 10. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Overview 10 Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability Increasing VALUE DecreasingRISK
  11. 11. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Overview 11 Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability Increasing VALUE DecreasingRISK
  12. 12. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 12 Overview Increasing VALUE DecreasingRISK Product Market Fit Prototype Problem Fit Value Prop Idea Fit MVP & MVS Customer Fit Company Execution Fit Company Public Market Fit Company Business Model Fit Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
  13. 13. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 13 Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability The two best times to raise capital: With all the potential or Plenty of proof Startup Secret! The Best Times to Raise Capital Increasing VALUE DecreasingRISK
  14. 14. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Funding Vectors: Matching Expectations & Outcomes 14
  15. 15. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 15 Equity • Angel • Accelerators • Seed, Venture Capital (including Strategic / Corporate investors) • Growth, Private Equity • Public Markets Other • Bootstrap • Friends and Family • Debt • Grants, subsidies, off balance sheet Alternatives • Business Crowdfunding (e.g., AngelList), Products / Services (e.g., Kickstarter) Typical Sources
  16. 16. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 16 What’s Right For You? LargeSmall Capital Potential Intense Efficient
  17. 17. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 17 Sex, Relationships & Money This could get complicated, but it doesn’t have to! simplified.
  18. 18. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 18 What’s Right For You? LargeSmall Capital Potential Intense Efficient VC
  19. 19. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 19 Venture Capital Seed: ~ $100K to $1-3m • See later A to IPO • $Millions, multiple rounds Stage development participation, involvement • Active (board seat) • Passive (follow “lead” investors)
  20. 20. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 20 VCs Receive Thousands of Plans
  21. 21. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 21 This Is What Happens to Most
  22. 22. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 22 Research  Fit: Geography, Sector, Stage  Portfolio: Complementary, competitive?  Partner(s)  Track Record  Capital, free capital, reserves
  23. 23. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 23 Target, Be Selective, and Focus  Fit: Geography, Sector, Stage  Portfolio: Complementary, competitive?  Partner(s)  Track Record  Capital, free capital, reserves
  24. 24. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 24 Build a Relationship You could be partners for several years …
  25. 25. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 25 Triangulate Ways to Connect Find someone who knows the VC Get a warm introduction Interact online Use your initiative!
  26. 26. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 26 Process?
  27. 27. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 27 Process: Framework You • Research • Connect • Meet • Motivate • Diligence • Fit check • Pitch • Legal • Celebrate (briefly!) The VC • Thesis • Qualify • Meet • Prioritize • Engage • Socialize • Partner meeting • Final diligence • Fund
  28. 28. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 28 First Connection: Who, What, Why? Make a connection Establish • Who are you (relevant experience) • What do you do (uniquely well for who) • Why does it matter (market opportunity) Investors often have ADD • Not value add – A.D.D. ! • Limit the agenda, control the discussion, get the first meeting!
  29. 29. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 29 First Meeting Tell your story … See “Getting Behind the Perfect Pitch”
  30. 30. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 30 Process: Build Momentum You • Research • Connect • Meet • Motivate • Diligence • Fit check • Pitch • Legal • Celebrate (briefly!) The VC • Thesis • Qualify • Meet • Prioritize • Engage • Socialize • Partner meeting • Final diligence • Fund
  31. 31. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Incomplete Stand Outs Are Better Than Complete Stand Ups!  Investors are looking for outstanding: • People • Technology or other disruption • Market opportunity  One outstanding of the above stands out versus all good, but none great  Investors don’t expect complete: • Team • Product • Value prop • GTM plan • Business Model  Entrepreneurs don’t need all the answers! • They just need to be self aware, listening, leaders! 31
  32. 32. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 32 Dating and Validating Why diligence is so important to YOU too!
  33. 33. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 33 Dating: Evaluating Investors Everyone’s money is the same color Get to know the partnership and their portfolio This is NOT an arranged marriage! Pick your partner. • Level of insight and experience • Track record is great but it’s history • Talk to others who have worked with them Will they be a balance for you? Good self-aware mentor? • Find someone who is genuinely motivated to set you up for success. • If you don’t have comfort and personal chemistry … KEEP LOOKING!
  34. 34. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 34 Expectations of Your VC? Operating experience? Investment experience? Hands on/off? Thoughts: • Team and board building • Remove roadblocks • Reveal opportunities to accelerate • Strategic insight • Access to resources, network
  35. 35. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 35 Validating the VC’s Work Get to know the team • Time, References, etc. Understand the business • Value proposition, business model Check under the hood • e.g., Expert opinion on tech Validate assumptions • GTM Strategy, speak to customers, partners
  36. 36. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 36 Process: Term Sheet Timing You • Research • Connect • Meet • Motivate • Diligence • Fit check • Pitch • Legal • Celebrate (briefly!) The VC • Thesis • Qualify • Meet • Prioritize • Engage • Socialize • Partner meeting • Final diligence • Fund Term sheet? Term sheet?
  37. 37. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 37 Funding Strategy Questions First Question • How much do you need?
  38. 38. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 38 How Much Do You Need? Run the numbers Build the assumptions Assess the dependencies Define the milestones Enough to build real value • 18 months of runway typically
  39. 39. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 39 More Important Than the Spreadsheet: Assumptions Things to test Minimally: cash flow projection Optimally: Financial forecast
  40. 40. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 40 Financials P&L Cash Flow • 6 quarters for cash flow, requirement For sizing the business, overall capital requirement (informs investor for their reserves) • Annual P&L, CF up to 5 years thereafter; Highlighting if applicable Cash flow positive Breakeven Suggested information / detail as needed for the above • Headcount • Bookings • Revenue May need to break out things like Services depending on your business • Gross Margin • Expenses Major categories like R&D, Sales, Marketing, G&A shown as needed • Profit / Loss • Cash
  41. 41. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 41 Realistic Optimists?
  42. 42. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 42 First Question • How much do you need? Second Question • How much do you want? Funding Strategy Questions
  43. 43. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 43 How Much Do You Want? Enough to build real value Define the milestones • Key hires • Product beta, ship • First customers • Channel Partners • Etc. 18 months of runway typically
  44. 44. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 44 First Question • How much do you need? Second Question • How much do you want? Final Question • What should you raise? Funding Strategy Questions
  45. 45. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 45 What Should You Raise? One strategy (dilution sensitive, risk tolerant) • Raise just what you need • Just before you need it? Another strategy (dilution insensitive, risk intolerant) • Raise more than you need • Well before you need it Either way • Timing is everything so plan • Assume the unexpected
  46. 46. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance  Predictability of your business • Your execution • Market adoption • Cash flows (business model) • Potential outcome (risk / return)  Competitors’ balance sheets  Valuation… 46 Factors
  47. 47. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance The sixty four million dollar question… Valuation 47
  48. 48. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Valuation Vectors 48
  49. 49. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Always be one round ahead in your thinking. Proof (Metrics, Milestones per earlier) Customers, Partners, GTM Strategy, Business Model, Product Allow for Unknowns Time to fundraise Capital to capitalize! 49 Startup Secret! Don’t Just Value…Evaluate!
  50. 50. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Ultimate Exit Potential (if you must) Potential acquirers • Their motivations • Recent transactions in the space - $ paid and valuations basis Independent beyond IPO • Comparable valuations – Data for these like revenues, growth rates, market cap 50
  51. 51. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance  Build relationships between financing rounds  Always ready to close ABC: Always Be Closing 51
  52. 52. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Human capital Invest in it with your option pool! 52 Startup Secret! The Most Important Capital You’ll Raise
  53. 53. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance  Investor fit  Amount of capital raised  Human Capital (option pool)  Timing (To clear the bar: Clean Terms) What Really Matters 53
  54. 54. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Raising Money Is Like Sex It doesn’t need to be complicated It’s fun when you get it! So pick your passion not your poison 54
  55. 55. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance info@startupsecrets.com
  56. 56. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance Funding Strategies to Go the Distance startupsecrets.com

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