1. BABSON SUMMER VENTURE PROGRAM
HOW 2 RAISE A SEED ROUND
JULY 2019
DAVID CHANG @CHANGDS

2. Fundraising
Basics
How to Raise
a Round
Tips
Student
Entrepreneurs

3. BACKGROUND

4. STARTUP EXPERIENCES

5. Direct Via Syndicate/Fund
ANGEL INVESTMENTS

6. TODAY

8. Fundraising
Basics
How to Raise
a Round
Tips
Student
Entrepreneurs

9. WHAT OBSTACLES STAND IN YOUR
WAY?

10. BUSINESS TRAJECTORY
• Lifestyle or social good
• Linear growth or revenue fueled
• High growth, scalable venture

11. 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

12. VENTURE CAPITAL STAGES
Growth Equity
Early Stage
Angel
Friends & Family

13. VENTURE CAPITAL DYNAMICS
Skewed return distribution
VCs must swing for the fences

14. RAISING A ROUND

15. 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

16. USE OF PROCEEDS
• Build out the product
• Grow the team
• Marketing
• Customer acquisition
• Working capital

17. 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

18. Fundraising
Basics
How to Raise
a Round
Tips
Student
Entrepreneurs

19. Prep Target Socialize Raise Close
FUNDRAISING CAMPAIGN

20. BASIC PREP
✓ Legal representation
✓ Founders agreements
✓ Financials and budget
✓ Teaser (1 page)
✓ Pitch deck (10 pages)

21. Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter
TARGET CRITERIA

22. BUILD PIPELINE

23. SOCIALIZE
• Prioritize sequence
• Find strongest connections to 30+ targets
• Tactics: lead gen, cold calling, warm intros
• Network over 2-3 months

24. DON’T ASK FOR MONEY!
“I’m not ready to raise”
“Who would be helpful?”
“Who else should I talk to?”

25. REFINE PITCH
• Incorporate feedback
• Double down on consistent themes
• Avoid whiplash changes

26. GO FOR THE ASK
• Approach your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to tell investors about each
other

27. CREATE URGENCY
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet

28. STRUCTURE
Equity
Debt

29. STRUCTURE
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference
• Control over sale, new options
• Debt that becomes preferred equity
when you raise it
• No valuation, but the “cap” is a
ceiling
• Interest accrues, rate <10%
• Conversion discount
Equity
Preferred Stock
Debt
Convertible Notes, SAFEs

30. CLOSING THE DEAL

31. Seed A B
$15
$6
$1
$30
$12
$5
VALUATION & DILUTION
?
Dilution: what’s your end stake?Valuation ($M)
?

32. VALUATION & DILUTION
37%
See www.ownyourventure.com
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

33. 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

34. 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)

35. FIND THE RIGHT INVESTORS

36. BABSON SUMMER VENTURE PROGRAM
HOW 2 RAISE A SEED ROUND
JULY 2019
DAVID CHANG @CHANGDS