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Raising Capital stotts-aug2017


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Matthew Stotts’s intimate knowledge of venture capital firms and the way in which their partnerships take form and how their individual partners perform, provides founders with a wholly unique advantage in the capital formation process. He maps the dynamic investing landscape of today to a startup’s future potential and current business metrics, identifying the critical factors that accelerate fundraising while mitigating the risks of over communication or strategic errors that set back founders and close off optimal paths to growth.

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Raising Capital stotts-aug2017

  1. 1. Matthew Stotts Strategic Advisor Educator Infrequent Investor
  2. 2. Tools, Tips & Tricks for Raising Capital
  3. 3. Topics ❏ Fundraising Myths and Maxims ❏ The Deck - Your Story - Your Credibility ❏ The Prospects ❏ The Process ❏ Getting to Auction
  4. 4. Myths and Maxims
  5. 5. THE DYNAMICS OF RAISING EQUITY ❏ Angels versus Devils (err...VCs) ❏ Where and why they invest ❏ A time-tested maxim ❏ seek $, get ?; ask ?, get $ ❏ Offers versus Auctions ❏ Myth or Magic? ❏ We all have our favorites: Andy Bechtolscheim’s $100K to googol
  6. 6. Your Story
  7. 7. Is your company’s story credible? ❏ Do you have awareness, buzz or cache? ❏ Is anyone telling your story? Any part of it? ❏ Have you built long-term relationships with investors? ❏ Are you a favor maker or a favor taker? ❏ Have you referred employees, advisors, agencies and other startups? ❏ Have you demonstrated expertise, drive or insane passion in anything? ❏ It actually doesn’t matter where. Why do iBanks hire NCAA athletes? ❏ Are you methodical? ❏ Having a process is a little like having “a policy:” people respect it.
  8. 8. Your “Intro” Slide Deck ❏ Build Two ❏ #1: The interest deck. A “leakable” version for friends and family ❏ #2: The investment deck for investors with traction numbers, stealth customers, projections, etc. ❏ NO NDAs ❏ BIG FONTS ❏ BRIEF <10 Slides ❏ EXAMPLES: from 2004 and from 2017
  9. 9. MUST HAVES in rough order 1. Company Mission and Vision 2. Market Size and Scope 3. Customer Problem 4. Power Team 5. The Product 6. Traction 7. Economics 8. Use of Proceeds
  10. 10. Prospects
  11. 11. The Fundraising Process ❏ Build a database of potential investors ❏ Screen by geography, stage, sector focus ❏ Filter out those with direct competitors in their portfolio ❏ If targeting VC firm, find appropriate partner or contact person ❏ Create a target list prioritized by best matched investors ❏ Develop a systematic outreach plan to tell your story ❏ Look for connections who can introduce ❏ Seek “warm” introductions from cold outreach to your target’s connections ❏ Schedule cluster of meetings with interested investors ❏ arrange pitch meetings; present business plan ❏ Schedule follow-on meetings, create auction dynamic, manage due diligence, receive term sheets ❏ Execute share purchase agreement!!!
  12. 12. Building the Database 1. Search for whom? a. Build an investor persona. (tip: also define their networks) 2. Where to search? a. Crunchbase, LinkedIn, and etc. b. Equity crowd-funding sites like: c. FundersClub, crowdfunder, Wefunder, Indiegogo, SeedInvest, Kickstarter, Gust,, OurCrowd, CircleUp i. Tip: trawl the comments looking for investors who’ve identified themselves (esp. Kickstarter, Indiegogo) d. Non-investment social media where investors self-identify: Medium, Quora and Twitter. 3. Tools: LeadIQ or Lead411 can help you find emails for people you don’t know
  13. 13. Crunchbase
  14. 14. Linkedin Advanced Search
  15. 15.
  16. 16. Process
  17. 17. A Systematic Outreach Plan a. Engaging i. Cold Outreach v. Warm Intros b. Managing i. Persisting w/o pestering ii. Tools (SOLO: Boomerang Top Inbox, ReBump, TEAMS:, iii. Tips and Tricks 1. Double opt-in 2. BCC you later c. Signaling and Socializing your “deal” // Starting the Auction process
  18. 18. INTROS: Cold Outreach COLD (from focused research) ❏ Suzie, I'm building a new company to go after grilled foods (a x$B market in the US) and am stuck on an engineering question related to sourcing raw materials. I think you may have solved a similar problem with [Prior Company] or [Current Company], so I was hoping we could talk briefly about what we're facing and hear your thoughts.
  19. 19. INTROS: Warm Intros (also double opt-in) WARM (from an intro) ❏ Thanks Bill (to bcc). Suzie, I was so impressed your work at [Prior Company] in part because I'm facing a similar problem with my company [NewCo]. We're building a PRODUCT to go after the (a $HUGE TAM) MARKET and I'm trying to choose a new vendor to provide critical parts for our product. Would you be able to talk with me briefly about your experience on the board at [Prior Company] - I hope to glean a little bit from your experience to help us over this hurdle.
  20. 20. INTROS: Following Up We’re all busy. Following up can be helpful. ❏ Your goal is to be persistent but polite. If you don’t get an immediate response follow-up in 2, 4 and 7 days. After that… ❏ A non-responsive cold contact is COLD. Try getting a warm intro. ❏ A non-responsive contact from a warm intro is BUSY. Get insight from your intro. Did they double optin? If none, try again in 30 days. (add “SORRY”) ❏ Hit the reset button if you reach a major business milestone. CAUTION: There are many cold-email marketers who have lots of follow-up advice. THIS IS NOT THAT. Don’t copy them. THEY SUCK!
  21. 21. INTROS: Responding to Responses How to read the tea leaves: ❏ 0 response = busy (see previous slide) ❏ Not Interested = NO. ❏ Too busy - NO. ❏ Not my space, sector, stage, expertise. = NO. ❏ Contact me when… (YES! - reach out when you hit that milestone) ❏ ?? what cryptic messages have you heard ??
  22. 22. The Auction
  23. 23. Creating an Auction Process At its most basic, effective fundraising is an auction in which multiple investors bid for a place and a price to participate. Credibility (slide 9) and scarcity create the optimal auction environment. Give yourself a timeline: ❏ Six months out prepare your database and know your TAM of investors ❏ 3-4 months prior to ideal fund close, reach contacts and outreach to prospects seeking advice ❏ Remember seek $, get ?; ask ?, get $ (eventually, hopefully) ❏ 1-2 months out follow-up to investors/advisors with an update showing how you have taken their advice or met their milestones ❏ When you get your first explicit investor interest (“I’d like to invest”) put them off and tell them you have a number of people to talk with ❏ Work through the rest of your list repeating that you already have investor interest and you’d like to meet to learn if they too are interested. ❏ Auction lets interested buyers negotiate; you don’t negotiate (as much).
  24. 24. What does success look like?
  25. 25. What an active investor sees 1000s 100s 10s 1s
  26. 26. THANK YOU
  27. 27. The Business Model
  28. 28. Brief Agenda ❏ The Dynamics of Raising Equity Financing ❏ The Deck - Your Story ❏ z ❏ y ❏ The Prospects ❏ The Process ❏ Getting to Auction
  29. 29. Provider CustomerPartners OWNER
  30. 30. Key partners Who are your key partners/suppliers? What are the motivations for the partnerships? Key activities What key activities does your value proposition require? What are the most important activities needed to manage distribution channels, customer relationships, revenue stream…? Value Proposition What core value do you deliver to the customer? Which customer needs are you satisfying? Customer Relationship What type of relationship do target customers expect you to establish? How can you integrate that into your business in terms of cost and format? Customer Segment How many and which segments are you creating values for? Who is your most important customer? Key Resources What key resources does your value proposition require? What resources are most important the most in distribution channels, customer relationships, revenue stream…? Distribution Channel Through which channels do your customers want to be reached? Which channels work best? How much do they cost? How can they be integrated into your and your customers’ routines? Cost Structure What are the costs (greatest to least) in your business? Which key resources / activities are most expensive? Revenue Stream For what value are your customers willing to pay? What and how do they recently pay? How would they prefer to pay? How much does every revenue stream contribute to the overall revenues?
  31. 31. Competitive Review
  32. 32. COMPETITIVE ANALYSIS for POSITIONING What are you seeing? Who to customers and providers talk about? Notes:
  33. 33. Marketing Review
  34. 34. It’s Sales v. Marketing - not Sales & Marketing so which is it? Are we marketing intensive or sales intensive? Or what’s the ratio? cheap<PRICE>expensive many<MARKET>few simple<PRODUCT>complex high<FIT>low B2C<CUSTOMER>B2B transactional<RELATIONSHIP>lifetime low<TOUCH>high 10 9 8 7 6 5 4 3 2 1 - 0 - 1 2 3 4 5 6 7 8 9 10
  35. 35. Marketing Process Review which of these funnels will you run? or which elements from both?
  36. 36. Customer / Provider PERSONAS
  37. 37. CUSTOMERS: IT Departments PROVIDERS: IT Techs
  38. 38. “WeWork” WHERE ARE YOUR CUSTOMERS? Community Banks Brick-Mortar Retailers %ofMarketPenetration
  39. 39. x WHERE ARE YOUR PROVIDERS? z y %ofMarketPenetration
  40. 40. Product Plan
  41. 41. Company Organization