Fundraising 101:
How to land your seed round
David Chang
Harvard Business School, Entrepreneur-in-Residence
@changds

My
Journey
Raising a
Seed Round
Lessons
Learned

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

Direct Via Syndicate/Fund
My Angel Investments

Raising a
Seed Round

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 –
no plans for big hiring
Personal raise –
loans
Growth oriented
business
Crowdfunding and
personal raise
High growth scalable
business Venture capital

Venture Capital Stages
Friends
and
Family
Angel
Early
Stage
Growth
Equity

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 modeling 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

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
• Legal
• Foley & Lardner https://www.foley.com
• Goodwin Proctor www.foundersworkbench.com
• Techstars www.techstars.com/docs
• www.seriesseed.com
• General
• www.soulmix.com/remix/619
• www.robkornblum.com