Babson How2Tuesdays: How to Raise a Seed Round - Feb 2020
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Babson How2Tuesdays: How to Raise a Seed Round - Feb 2020
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Small Business & Entrepreneurship
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
David ChangFollow
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Babson How2Tuesdays: How to Raise a Seed Round - Feb 2020
- HOW 2 RAISE A SEED ROUND FEB 18, 2020 DAVID CHANG @CHANGDS
- Fundraising Basics How to Raise a Round Key Tips
- Background
- Startup Experiences
- Direct Via Syndicate/Fund Angel Investments
- Student Entrepreneurs
- What Obstacles Stand in Your Way?
- Which Business Trajectory? • Lifestyle or social good • Linear growth or revenue fueled • High growth, scalable venture
- 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
- Venture Capital Stages Growth Equity Early Stage Angel Friends & Family
- Venture Capital Dynamics Skewed return distribution VCs must swing for the fences
- Raising a Round
- 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
- Use of Proceeds • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital
- 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
- Fundraising Basics How to Raise a Round Key Tips
- Prep Target Socialize Raise Close Fundraising Campaign
- Basic Prep ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides)
- Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter Target Criteria
- Build Pipeline
- 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
- Socialize • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
- Don’t Ask for Money! “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
- Refine Pitch • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
- 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
- Structure Equity Debt
- Closing the Deal
- Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake?Valuation ($M) ?
- 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
- 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
- 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)
- Find the Right Investors
- Fundraising Basics How to Raise a Round Key Tips
- Share your summit & basecamp
- Stay true to the guiding north star
- 1.10 ^ 12 = 3.1 1.01 ^ 365 = 37.8 Shorten your iteration cycles for big paybacks
- pexels.com
- thenounproject.com
- 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
- www.bestpitchdecks.com
- 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
- HOW 2 RAISE A SEED ROUND FEB 18, 2020 DAVID CHANG @CHANGDS