Harvard Law
Entrepreneurship Project
Lunch Talk: Fundraising 101
Nov 11, 2016
David Chang
@changds

My
Journey
Fundraising
Basics
How to Raise
a Round

$80
$4
$42
$7
$17
$110
$210
$270
$1
$135
Funding Exit
My Startups – Venture Returns

Direct Via Syndicate/Fund
My Angel Investments

Now
Building
Investing
Connecting

Fundraising
Basics

What Obstacles
Stand in Your Way?

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)

Growth trajectory of your business?
Lifestyle business
Personal raise – loan,
add folks to cap table
Growth oriented
business
Crowdfunding and
personal raise
High growth scalable
business Venture capital

Venture Capital Stages
Friends and Family
Angel
Early Stage
Growth Equity

Investors
Seed
Early
Growth

Venture Capital Dynamics
•Skewed return distribution
•VCs must swing for the fences
Source: @DawnUmlah

Amount to Raise
How much funding do you need?
•Basic financial model of
cost drivers and revenue
streams
•Forecast monthly for 18
months
•Fundraise rule of thumb:
12-18 months’ cash
How
Much
For
What
To
Prove

Use of Proceeds
What will you use the money for?
•Build out the product
•Grow the team
•Marketing
•Customer acquisition
•Working capital
How
Much
For
What
To
Prove

Milestones
What will be proven that de-risks the business?
•Product development
•Market demand
•Product / market fit
•Business model
•Execution
How
Much
For
What
To
Prove

How to Raise
a Round

Fundraising Campaign
Prep Target Socialize Raise Close

Basic Prep
ü Legal representation
ü Founders agreements
ü Financials and budget
ü Teaser (1 page)
ü Pitch deck (10 pages)

Target List of Investors
Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter

Socialize
•Get warm intros
• Find strongest mutual connections to 30+ potential
investors
• Network over 2-3 months
•Ask for referrals, not money
•Refine pitch
• Incorporate feedback, but avoid whiplash changes
“I’m not ready to raise”
“Who would be helpful?”
“Who else should I talk to?”

Raise: Go for the Ask
•Talk to your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to tell investors about each
other
•Create urgency
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet

Closing the Deal
•Rolling close vs. set close
•Reference check investors
•Not done until money is in
the bank
Key terms
q Board composition
q Option pool
q Voting rights
q Founder vesting
q Change of control
q Redemption rights
q Information rights
q Anti-dilution

Structure
Preferred Stock
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference- they
get their $ first
• Control over sale, new options
Convertible Debt
• Debt that becomes preferred
equity when you raise it
• No valuation, but the “cap” is
a valuation ceiling
• Interest accrues, rate <10%
• Conversion discount

Negotiating Valuation

Valuation & Dilution
?
$12
$30$6
$15
Seed A B
Valuation ($M) Dilution: what’s your end stake?
$1M raise $6M raise $15M raise
?

Valuation & Dilution
?
$12
$30$6
$15
Seed A B
Valuation ($M) Dilution: what’s your end stake?
$1M raise $6M raise $15M raise
37%
See www.ownyourventure.com
Raise $1M on $5M pre
33%Raise $1M on $3M pre
34%Raise $1.5M on $5M pre

How Long Does it Take?
•Longer than you expect
• 3-6 months
•Speed limited by access to investors
• Your ability to find them
• Their calendar availability (surprisingly hard)
• Bigger raises = more diligence (up to 30 days)

Resources
• Pitch
• www.pitchenvy.com
• www.bestpitchdecks.com
• Guy Kawasaki: 10 slides / 20 minutes / 30 point font
• NextView www.nextviewventures.com/blog/free-startup-pitch-decks-template/
• www.mjskok.com/resource/getting-behind-perfect-pitch
• www.soulmix.com/remix/619
• Legal
• Foley & Lardner https://www.foley.com
• Goodwin Proctor www.foundersworkbench.com
• Techstars www.techstars.com/docs
• www.seriesseed.com
• General
• www.jddavids.com
• www.robkornblum.com

Q&A

Pitch Tips

Share Your Summit & Basecamp

Leverage Your Natural Presentation Style

Adjust for Your Audience

No Blind Spots
Pricing
Customer
Collaborators
Funding
Promotion
Product / Service
Context
Place
Company
Concept
Competition

Pitch Materials for Each Level
•1 Sentence
•1 Paragraph
•1 Page
•1 Light Deck
•1 Follow-up Deck

Function
Size
Know Yourself
Location
Industry

Start or Join a Company

People Bonds > Company Bonds

Find the Right Co-founders

Choose Investors Carefully

Amplify Your Network

Doing Business in Boston

http://bostontechguide.com

Local Pillar Tech Companies
http://bostontechguide.com

Big Tech Companies with Local Presence
http://bostontechguide.com

Industry Clusters of Expertise
Marketing
Tech e-commerce Cybersecurity Cloud
Travel Mobile Ed Tech Robotics
Life Sciences Health IT Energy
http://www.slideshare.net/bussgang/boston-startup-scene-fall-2015

Accelerators / Incubators
Co-working
Corporate University Independent

Development Shops
http://bostontechguide.com

University Resources
http://bostontechguide.com

Events & Networking
http://bostontechguide.com

www.greenhornconnect.com/events/

Media
http://bostontechguide.com

Community Groups & Trade Organizations
http://bostontechguide.com

@changds @scottbaileyBTV
www.AdClubBrandathon.com

Talent
EcosystemCapital