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Fundraising guide

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Fundraising guide for founders

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Fundraising guide

  1. 1. Fundraising Guide For Founders 1
  2. 2. Reasons to Fundraise 1. To fund growth 2. To finance a realization event 3. Because you can* 4. Because you have no money 2 * Capital is offered on fair terms
  3. 3. When and How Much to Raise • 3-6 months before need capital in bank • When business is ready for target investor • When capital is offered at a fair price • Always 3 • Enough to meet next major milestones then raise next round • Ideally want ~18 months of runway • As much as you can on reasonable terms When to Raise Capital How Much to Raise
  4. 4. Running a Fundraising Process 4 Create a Pipeline Prepare Materials Get Introduced Follow-up • Friends • Relatives • Grants • Crowdfunding? • Angellist • Crunchbase • Investors and executives in your sector • CB Insights • Deck • One-pager • E-mail • Projections • Market sizing • References • Find connections to everyone in the pipeline • Ask for introductions • Take notes in or after each conversation • Ask about decision process • Respond to questions or requests immediately • Be polite and persistent
  5. 5. Funding Sources 5 • Personal (savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
  6. 6. Funding Sources 6 • Personal (savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks Okay to approach because you have no money Approach with solid money-making opportunity
  7. 7. Funding Sources 7 Work from the top down • Personal (savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
  8. 8. Funding Sources 8 • Personal (savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
  9. 9. Angels 9 Definition Wealthy individuals who invest own money in startups Check Size $25-100k Financing Profile $100-500k for 10-30% in common stock Criteria • Chemistry with founder(s) • Enthusiasm for product/concept • $1B+ Total Addressable Market (TAM) • 20-30x return potential
  10. 10. Accelerators 10 Definition Three- to six-month boot camp that provides capital, mentorship, and usually office space Check Size $20-150k Financing Profile • Generally invest alone* • 3-6% for capital and services Criteria • Well-rounded founding team • Demonstrable product • $1B+ Total Addressable Market (TAM) • ~20x return potential in <7 years * May include outside investors as part of standard financing
  11. 11. Venture Capital* 11 Definition Institutions run by professional investors who invest in startups on behalf of organizations and wealthy individuals Check Size $100k-1M Financing Profile $250k-2M for 10-30% in preferred stock Criteria • Well-rounded founding team • Product in some form of release • Some users or customers • Scalable business model with 50-80% gross margins • $1B+ Total Addressable Market (TAM) • ~10-20x return potential in <7 years * Slide focuses on Pre-seed and Seed-stage VCs
  12. 12. Venture Capital 12 Limited Partners General Partner (VC) Portfolio Company A Portfolio Company B Portfolio Company C Investment Fees Carry Returns Less Fees and Carry $ Stock Family offices Pensions Foundations Fund of funds Endowments Corporations Wealthy individuals
  13. 13. Types of Securities 13 Definition Convertible Note Stock SAFE Loan that turns into stock later Shares representing ownership Simple Agreement for Future Equity Key Terms • Discount (~20%) • Cap (Valuation) • Maturity • Interest • Valuation • Preferred vs. common • Preference • Participation • Control • Financing event • Liquidity event • Dissolution event Advantages • Speed • Cost • Control • Valuation • Rolling close • Alignment • Clarity • Engagement • Speed • Cost • No maturity • No interest • Rolling close Issues • Maturity • Interest • Cost • Speed • Single close • Novelty
  14. 14. Pitch Meetings 14 Bring • Deck (tablet okay) • No more than one other co-founder Ask • Typical investment size? • Investment criteria? • Decision-making process? • Next steps? Do • Have a conversation but prepare for a presentation • Rehearse/role play with friends before first pitch • Listen • Answer all questions succinctly • Say “I don’t know” Do Not • Bring an agent, investor or adviser • Show up late • Dress up (unless the venue requires it) • Act defensive or “sell”
  15. 15. Resources • The Fundraising Rules by Mark Davis • Venture Deals by Brad Feld • Mastering the VC Game by Jeff Bussgang 15 • Chris Dixon, A16Z • Brad Feld, Foundry Group • First Round Review • Paul Graham, Y Combinator • Mark Suster, Upfront • Hunter Walk, Homebrew • Fred Wilson, Union Square Ventures • Convertible note • Preferred stock • SAFE Books Blogs Documents
  16. 16. About Me 16 • 10+ prior years in venture capital: 18 investments – Gotham Ventures – North Hill Ventures • Sometimes angel investor: 12 investments Current Roles Prior Roles Investing Interests Personal • Partner at CoVenture • Investor-in-Residence at Cornell Tech Marketplaces, finance, education, clean web, health, future of work • Grew up in Nebraska • Cornell, Wharton • Boston sports
  17. 17. My Day Job: CoVenture 17 • Seed and pre-seed investments • Founded 2013 • 16 investments and counting • Software + capital – ~$25k cash investments – Web and mobile design and development • Team: NYC (3) and Lahore (40) • Sectors: education, finance, health, commerce • Criteria – Founder-market fit – Market validation – Venture scale – Purpose
  18. 18. 18 Thank You @thatcherbell thatcherbell.com

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