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Boston New Technology:

Founder Lessons, Learned the Hard Way
DAVID CHANG
@CHANGDS
BACKGROUND
STARTUP EXPERIENCES
Direct Via Syndicate/Fund
ANGEL INVESTMENTS
How to Raise
a Round
Pitch

Tips
Execution &
Scaling Tips
Founders

Tips
How to Raise
a Round
Pitch

Tips
Execution &
Scaling Tips
Founders

Tips
IDEAS ALONE ARE WORTHLESS
DON’T GO SOLO
FIND THE RIGHT CO-FOUNDERS
WORK THE NETWORK
Feasible
Viable
Desirable
Feasible
ViableDesirable
START OR JOIN A COMPANY
PEOPLE BONDS > COMPANY BOUNDARIES
Engineer
Product
Management
MarketingInvestor
Corporate
Development
Business
Development
EXPAND YOUR SKILLS
Function
Size
Location
Industry
WHAT ROLE FITS BEST?
How to Raise
a Round
Pitch

Tips
Execution &
Scaling Tips
Founders

Tips
VALUE BUILDS IN STEPS
Team
Product Development
Market Demand
Product / Market Fit
Business Model
Execution
See www.techcru...
IN-MARKET EXPERIMENTS
1.10 ^ 12
= 3.1
1.01 ^ 365
= 37.8
FOCUS PIVOT
ARE YOU ON THE RIGHT PATH?
CHOOSE WHEN & HOW TO EXIT
How to Raise
a Round
Pitch

Tips
Execution &
Scaling Tips
Founders

Tips
1:1 PITCH EXERCISE
SCENARIO 1: COFFEE SHOP
Instructions for Audience
You love everything the pitcher tells you.
You get so excited that you r...
SCENARIO 2: GROCERY STORE
Instructions for Audience
You ripped your pants 5 minutes ago.
So you desperately want to leave ...
KNOW YOUR AUDIENCE
ADJUST FOR STYLE
SHARE YOUR SUMMIT & BASECAMP
DON’T SHARE EVERYTHING AT ONCE
• 1 Sentence
• 1 Paragraph
• 1 Page
• 1 Light Deck
• 1 Follow-up Deck
www.nextviewventures.com/blog/free-startup-pitch-decks-template
TYPICAL PARTS
Overview Problem Solution Market
Traction
Marketing
Strategy
Team
Competition Conclusion
Financial
Projectio...
www.bestpitchdecks.com
pexels.com
thenounproject.com
How to Raise
a Round
Pitch

Tips
Execution &
Scaling Tips
Founders

Tips
WHAT OBSTACLES STAND IN YOUR
WAY?
BUSINESS TRAJECTORY
• Lifestyle or social good
• Linear growth or revenue fueled
• High growth, scalable venture
CAPITAL SOURCES
Source: Jean Hammond & MassChallenge
Size
Cost
Equipment Financing
Traditional VC
Micro VC
Angel Groups
An...
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 t...
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
...
Prep Target Socialize Raise Close
FUNDRAISING CAMPAIGN
BASIC PREP
✓ Legal representation
✓ Founders agreements
✓ Financials and budget
✓ Teaser (1 page)
✓ Pitch deck (10 pages)
Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter
TARGET CRITERIA
BUILD PIPELINE
SOCIALIZE
• Prioritize sequence
• Find strongest connections to 30+ targets
• Tactics: lead gen, cold calling, warm intros...
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 THE ASK
• Approach your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to ...
CREATE URGENCY
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet
STRUCTURE
Equity
Debt
STRUCTURE
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference
• Control over sale, new opti...
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 www.ownyourventure.com
Raise $1M on $5M pre
33%Raise $1M on $3M pre
34%Raise $1.5M on $5M pre...
FINAL DEAL POINTS
• Rolling close vs. set close
• Not done until money is in
the bank
Key terms
❑ Board composition
❑ Opti...
HOW LONG DOES IT TAKE?
• Longer than you expect
• 3-6 months
• Speed limited by access to investors
• Your ability to find...
FIND THE RIGHT INVESTORS
RESOURCES
• Legal
• Goodwin Procter www.foundersworkbench.com
• Foley & Lardner www.foley.com
• Pierce Atwood
• Techstars ...
Boston New Technology:

Founder Lessons, Learned the Hard Way
DAVID CHANG
@CHANGDS
Boston New Technology - Founder Lessons - Feb 2019
Boston New Technology - Founder Lessons - Feb 2019
Boston New Technology - Founder Lessons - Feb 2019
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Boston New Technology - Founder Lessons - Feb 2019

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Some founder lessons, execution and scaling tips for startups, and a 5-step “how-to” series of fundraising tactics

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Boston New Technology - Founder Lessons - Feb 2019

  1. 1. Boston New Technology:
 Founder Lessons, Learned the Hard Way DAVID CHANG @CHANGDS
  2. 2. BACKGROUND
  3. 3. STARTUP EXPERIENCES
  4. 4. Direct Via Syndicate/Fund ANGEL INVESTMENTS
  5. 5. How to Raise a Round Pitch
 Tips Execution & Scaling Tips Founders
 Tips
  6. 6. How to Raise a Round Pitch
 Tips Execution & Scaling Tips Founders
 Tips
  7. 7. IDEAS ALONE ARE WORTHLESS
  8. 8. DON’T GO SOLO
  9. 9. FIND THE RIGHT CO-FOUNDERS
  10. 10. WORK THE NETWORK
  11. 11. Feasible
  12. 12. Viable
  13. 13. Desirable
  14. 14. Feasible ViableDesirable
  15. 15. START OR JOIN A COMPANY
  16. 16. PEOPLE BONDS > COMPANY BOUNDARIES
  17. 17. Engineer Product Management MarketingInvestor Corporate Development Business Development EXPAND YOUR SKILLS
  18. 18. Function Size Location Industry WHAT ROLE FITS BEST?
  19. 19. How to Raise a Round Pitch
 Tips Execution & Scaling Tips Founders
 Tips
  20. 20. VALUE BUILDS IN STEPS Team Product Development Market Demand Product / Market Fit Business Model Execution See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
  21. 21. IN-MARKET EXPERIMENTS
  22. 22. 1.10 ^ 12 = 3.1 1.01 ^ 365 = 37.8
  23. 23. FOCUS PIVOT
  24. 24. ARE YOU ON THE RIGHT PATH?
  25. 25. CHOOSE WHEN & HOW TO EXIT
  26. 26. How to Raise a Round Pitch
 Tips Execution & Scaling Tips Founders
 Tips
  27. 27. 1:1 PITCH EXERCISE
  28. 28. SCENARIO 1: COFFEE SHOP Instructions for Audience You love everything the pitcher tells you. You get so excited that you repeatedly interrupt them, trying to finish their sentences.
  29. 29. SCENARIO 2: GROCERY STORE Instructions for Audience You ripped your pants 5 minutes ago. So you desperately want to leave and try to end the conversation with the pitcher ASAP.
  30. 30. KNOW YOUR AUDIENCE
  31. 31. ADJUST FOR STYLE
  32. 32. SHARE YOUR SUMMIT & BASECAMP
  33. 33. DON’T SHARE EVERYTHING AT ONCE • 1 Sentence • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
  34. 34. www.nextviewventures.com/blog/free-startup-pitch-decks-template
  35. 35. 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
  36. 36. www.bestpitchdecks.com
  37. 37. pexels.com
  38. 38. thenounproject.com
  39. 39. How to Raise a Round Pitch
 Tips Execution & Scaling Tips Founders
 Tips
  40. 40. WHAT OBSTACLES STAND IN YOUR WAY?
  41. 41. BUSINESS TRAJECTORY • Lifestyle or social good • Linear growth or revenue fueled • High growth, scalable venture
  42. 42. CAPITAL SOURCES 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
  43. 43. VENTURE CAPITAL STAGES Growth Equity Early Stage Angel Friends & Family
  44. 44. VENTURE CAPITAL DYNAMICS Skewed return distribution VCs must swing for the fences
  45. 45. RAISING A ROUND
  46. 46. 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
  47. 47. USE OF PROCEEDS • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital
  48. 48. 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
  49. 49. Prep Target Socialize Raise Close FUNDRAISING CAMPAIGN
  50. 50. BASIC PREP ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Teaser (1 page) ✓ Pitch deck (10 pages)
  51. 51. Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter TARGET CRITERIA
  52. 52. BUILD PIPELINE
  53. 53. SOCIALIZE • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
  54. 54. DON’T ASK FOR MONEY! “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
  55. 55. REFINE PITCH • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
  56. 56. 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
  57. 57. CREATE URGENCY • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
  58. 58. STRUCTURE Equity Debt
  59. 59. 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
  60. 60. CLOSING THE DEAL
  61. 61. Seed A B $15 $6 $1 $30 $12 $5 VALUATION & DILUTION ? Dilution: what’s your end stake?Valuation ($M) ?
  62. 62. 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
  63. 63. 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
  64. 64. 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)
  65. 65. FIND THE RIGHT INVESTORS
  66. 66. 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
  67. 67. Boston New Technology:
 Founder Lessons, Learned the Hard Way DAVID CHANG @CHANGDS

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