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Babson How2Tuesdays: How to Raise a Seed Round - Feb 2020

Overview of tech/startup fundraising basics, a 5-step how-to on the tactics of raising a seed round from angels/VCs, and some key pitch tips/lessons learned

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Babson How2Tuesdays: How to Raise a Seed Round - Feb 2020

  1. 1. HOW 2 RAISE A SEED ROUND FEB 18, 2020 DAVID CHANG @CHANGDS
  2. 2. Fundraising Basics How to Raise a Round Key Tips
  3. 3. Background
  4. 4. Startup Experiences
  5. 5. Direct Via Syndicate/Fund Angel Investments
  6. 6. Student Entrepreneurs
  7. 7. What Obstacles Stand in Your Way?
  8. 8. Which Business Trajectory? • Lifestyle or social good • Linear growth or revenue fueled • High growth, scalable venture
  9. 9. Source: Jean Hammond & MassChallenge Size Cost Equipment Financing Traditional VC Micro VC Angel Groups AngelList Angels Corporate / Strategic Venture Customers Jobs Bill Portal Crowdfunding Vendors Founder Friends & Family Crowdfunding Grants- Gov & Foundation Venture Debt Bank Loans Personal Loans Private Equity Competitions Accelerators & Contests Impact Angels & VCs Capital Sources
  10. 10. Venture Capital Stages Growth Equity Early Stage Angel Friends & Family
  11. 11. Venture Capital Dynamics Skewed return distribution VCs must swing for the fences
  12. 12. Raising a Round
  13. 13. How Much to Raise • Basic financial model of cost drivers and revenue • Forecast monthly for 2 years • Fundraise rule of thumb: 12-18 months’ cash
  14. 14. Use of Proceeds • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital
  15. 15. Milestones See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone Team Product Development Market Demand Product / Market Fit Business Model Execution
  16. 16. Fundraising Basics How to Raise a Round Key Tips
  17. 17. Prep Target Socialize Raise Close Fundraising Campaign
  18. 18. Basic Prep ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides)
  19. 19. Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter Target Criteria
  20. 20. Build Pipeline
  21. 21. Tech Healthcare / Life Sciences Seed Stage Growth Stage Early Stage Angel Groups Corporate VC Corporate VC Energy bit.ly/boston-area-investors-firms Local Investors
  22. 22. Socialize • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
  23. 23. Don’t Ask for Money! “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
  24. 24. Refine Pitch • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
  25. 25. Go for It! Create FOMO • Approach your top candidates at the same time • Decide whether to tell investors about each other • Land anchor investor as the first domino • Use triggering events to get or improve term sheets
  26. 26. Structure Equity Debt
  27. 27. Closing the Deal
  28. 28. Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake?Valuation ($M) ?
  29. 29. Valuation & Dilution 37% See ownyourventure.com See dlopuch.github.io/venture-dealr Raise $1M on $5M pre 33%Raise $1M on $3M pre 34%Raise $1.5M on $5M pre Dilution: what’s your end stake?Valuation ($M) Seed A B $15 $6 $1 $30 $12 $5
  30. 30. Final Deal Points • Rolling close vs. set close • Not done until money is in the bank Key terms ❑ Board composition ❑ Option pool ❑ Voting rights ❑ Founder vesting ❑ Change of control ❑ Redemption rights ❑ Information rights ❑ Anti-dilution
  31. 31. How Long Does it Take? • Longer than you expect • 3-6 months • Speed limited by access to investors • Your ability to find them • Calendar availability (surprisingly hard)
  32. 32. Find the Right Investors
  33. 33. Fundraising Basics How to Raise a Round Key Tips
  34. 34. Share your summit & basecamp
  35. 35. Stay true to the guiding north star
  36. 36. 1.10 ^ 12 = 3.1 1.01 ^ 365 = 37.8 Shorten your iteration cycles for big paybacks
  37. 37. pexels.com
  38. 38. thenounproject.com
  39. 39. Typical Parts Overview Problem Solution Market Traction Marketing Strategy Team Competition Conclusion Financial Projections
 (high level) Money Being Raised and
 Use of Funds Revenue Model & Business Model
  40. 40. www.bestpitchdecks.com
  41. 41. Resources • Legal • Goodwin Procter www.foundersworkbench.com • Foley & Lardner www.foley.com • Pierce Atwood • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com bit.ly/startresources
  42. 42. HOW 2 RAISE A SEED ROUND FEB 18, 2020 DAVID CHANG @CHANGDS

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Overview of tech/startup fundraising basics, a 5-step how-to on the tactics of raising a seed round from angels/VCs, and some key pitch tips/lessons learned

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