HBS Field X - Fundraising Playbook for Founders - Nov 2023
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Overview of fundraising basics, a 3-step playbook of the tactics of raising a seed round, and general pitch tips for student founders
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HBS Field X - Fundraising Playbook for Founders - Nov 2023
- 1. Fundraising Playbook for Founders N O V E M B E R 2 0 2 3 davidchang.me/startup-tips David Chang @changds GM, Expert Network @Hunt Club Co-founder @TBD Angels
- 2. Fundraising Basics How to Raise a Round Pitch Tips
- 4. Startup operator and investor $150m raised 100 companies 5x return
- 5. High potential of new founders & innovators
- 6. Brings the wonderful to the yard
- 7. Starting a venture while at school
- 8. What’s the business trajectory? Lifestyle or social good Linear growth or revenue fueled High growth, scalable venture
- 9. Where to get that first dollar? Revenue Equity Partners Grants Debt
- 10. Where to get that first dollar? Revenue Prepaid product Crowdfunding Consulting service Equity Convertible notes SAFE Stock Partners Vendor services in advance Non-recoverable engineering Grants SBIR Pitch competitions Debt SBA loan Bank loan Personal note
- 11. Capital sources have tradeoffs 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 Size Cost Source: Jean Hammond & MassChallenge
- 12. Venture capital stages Growth Equity Early Stage Angel Friends & Family
- 13. How the VC game works 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 product • Grow team • Marketing • Customer acquisition • Working capital
- 17. Milestones See 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 Pitch Tips
- 20. You’ve got a business idea
- 21. What obstacles stand in your way?
- 22. Just hustle?
- 23. Aim for a tight target Break down barriers Create FOMO The ABC’s
- 25. Shotgun blast doesn’t work
- 26. Target investors using 6 filters
- 27. Stage
- 28. Stage Location
- 33. Social / Trust Thesis Business Model Industry Location Stage Your ideal investor meets 6 filters
- 34. bit.ly/boston-area-investors-firms University Focused Corporate VC Angel Groups Seed Stage Growth Stage Early Stage VC Tech VC Healthcare, Biotech, Energy Local Investors
- 35. Tools to build the pipeline
- 36. Prep the basics ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides) ✓ Financials and budget ✓ Legal representation ✓ Founders agreements
- 38. “Looking for feedback on the idea” “Who’s knowledgeable in this space?” “I’m not raising right now” “If you want money, ask for advice…”
- 39. Improves hit rate by 10x Doesn’t start the clock Creates trend from data points Why not just ask for money?
- 40. Don’t make knee-jerk changes Incorporate feedback Refine pitch Spot consistent themes
- 41. When to stop fishing?
- 42. C Create FOMO
- 44. Land the anchor investor “I’m closing a round” “Moving faster than expected” “Can I hold a space for you?”
- 45. Finish strong Full throttle to avoid mid-flight stall Leverage current investors to pull in new ones “Oversubscribe” optics
- 46. Close the deal • 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
- 47. Works for first-time founders too
- 48. Investor FOMO? Here's Everything Early-Stage Entrepreneurs Need To Know About Fundraising $250k $1.5m
- 50. Aim for a tight target Break down barriers Create FOMO The ABC’s
- 51. Fundraising Basics How to Raise a Round Pitch Tips
- 53. Define your target audience Investor Customer Partner Pitch Competition Showcase Event / Booth Media & General
- 55. Anchor your summit & basecamp
- 56. Don’t share everything at once 1 Sentence 1 Paragraph 1 Page 1 Deck 1 Follow-up Deck
- 57. Adapt content to the venue Home Office Coffee Shop
- 58. Don’t overreact to feedback Incorporate feedback Double down on consistent themes Avoid whiplash changes
- 59. Don’t be sloppy and miss details Typoos capitalization & punctuation, Font & sizes Alignment Color Design (icons, photography, clip art)
- 60. Typical Parts Intro Problem Solution Market Opportunity Product Go-to- Market Business Model Competition Traction Team Ask Appendix
- 68. bit.ly/startresources davidchang.me/startup-tips Marketing Press / Media Freelancers Agencies National Tech Journalists Boston Tech Journalists Legal Legal Templates Accounting Recruiters Real Estate Co-working Brokers Events Event Spaces Startup Events Listings Startup Community Groups Speakers/Mentors (WIP) Boston Women Leaders Investors Guides Lists Materials / Templates University Entrepreneurship Resources Competitions Student Groups Startup Resources General Guides Development Web Dev Shops Mobile App Dev Shops Tech Talent / Advisors Mobile App Development Tools Design / UX Graphic Design Resources Full-time Freelancers Agencies Product Pros Emerging Stars
- 69. Fundraising Playbook for Founders N O V E M B E R 2 0 2 3 davidchang.me/startup-tips David Chang @changds GM, Expert Network @Hunt Club Co-founder @TBD Angels
- 71. 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
- 72. Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake? Valuation ($M) ? Prep Target Socialize Ignite Close
- 73. Valuation & Dilution 37% See ownyourventure.com See dlopuch.github.io/venture-dealr Raise $1M on $5M pre 34% Raise $1.5M on $5M pre 33% Raise $1M on $3M pre Dilution: what’s your end stake? Valuation ($M) Seed A B $15 $6 $1 $30 $12 $5 Prep Target Socialize Ignite Close
- 74. 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) How soon to start, how long it takes, general timeline you can expect, how to reduce time between the initial outreach and closing a deal?
- 75. Choose your investors carefully What characteristics to look for in a venture partner? How find someone who is properly aligned with your business? Board dynamics with the venture partner, what to expect, what to protect against, how to go about that board relationship?