Boston Startup Week: Fundraising 101
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How to pitch and land your first investors
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Boston Startup Week: Fundraising 101
- 1. FUNDRAISING 101: HOW TO PITCH AND LAND YOUR FIRST INVESTORS DAVID CHANG @CHANGDS B O S T O N S TA R T U P W E E K
- 2. BACKGROUND
- 4. Direct Via Syndicate/Fund ANGEL INVESTMENTS
- 6. Fundraising Basics How to Raise a Round Pitch Tips
- 7. WHAT OBSTACLES STAND IN YOUR WAY?
- 8. CAPITAL SOURCES You hear a lot about • Venture Capital • Angel Groups • Crowdfunding • Friends and Family • Customers • Accelerators • Competitions Not much about • SBA Loans and Personal Debt • Grants • Corporate Venture • Vendors or Equipment Finance • Bootstrapping (creatively)
- 9. BUSINESS TRAJECTORY Lifestyle business Bootstrap Loans Growth oriented business Crowdfunding Personal raise High growth scalable business Venture Capital
- 10. VENTURE CAPITAL STAGES Growth Equity Early Stage Angel Friends & Family
- 11. VENTURE CAPITAL DYNAMICS Skewed return distribution VCs must swing for the fences
- 12. RAISING A ROUND
- 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. USE OF PROCEEDS • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital
- 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. How to Raise a Round
- 17. FUNDRAISING CAMPAIGN Prep Target Socialize Raise Close
- 18. BASIC PREP ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Teaser (1 page) ✓ Pitch deck (10 pages)
- 19. TARGET CRITERIA Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter
- 20. BUILD PIPELINE
- 21. SOCIALIZE • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
- 22. DON’T ASK FOR MONEY! “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
- 23. REFINE PITCH • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
- 24. 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
- 25. CREATE URGENCY • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
- 27. 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
- 28. CLOSING THE DEAL
- 29. Seed A B $15 $6 $1 $30 $12 $5 VALUATION & DILUTION ? Dilution: what’s your end stake?Valuation ($M) ?
- 30. 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
- 31. 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
- 32. 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)
- 33. FINDING THE RIGHT INVESTORS
- 34. Pitch Tips
- 36. ADJUST FOR THEIR STYLE
- 37. LEVERAGE YOUR NATURAL STYLE
- 38. SHARE YOUR SUMMIT & BASECAMP
- 39. DON’T SHARE EVERYTHING AT ONCE • 1 Sentence • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
- 42. RESOURCES • Pitch • The Best Startup Pitch Decks www.bestpitchdecks.com • NextView www.nextviewventures.com/blog/free-startup-pitch-decks-template • Guy Kawasaki: 10 slides / 20 minutes / 30 point font • www.mjskok.com/resource/getting-behind-perfect-pitch • Legal • Pierce Atwood • Foley & Lardner www.foley.com • Goodwin Procter www.foundersworkbench.com • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com
- 43. FUNDRAISING 101: Q&A DAVID CHANG @CHANGDS B O S T O N S TA R T U P W E E K