HBS Field Y: Fundraising 101 - Feb 2019
•1 like•607 views
Report
Share
Download to read offline
For this semester's HBS Field Y class, we’ll cover the basics of raising money from angel investors and VCs, walk through a 5-step “how-to” series of tactics, talk about the unique perspective of student entrepreneurs, and finish with pitch tips.
Recommended
More Related Content
What's hot
What's hot(20)
Similar to HBS Field Y: Fundraising 101 - Feb 2019
Similar to HBS Field Y: Fundraising 101 - Feb 2019(20)
More from David Chang
More from David Chang(8)
Recently uploaded
Recently uploaded(6)
HBS Field Y: Fundraising 101 - Feb 2019
- 1. FUNDRAISING 101: HOW TO PITCH AND LAND YOUR FIRST INVESTORS FINANCING YOUR STARTUP & YOURSELF DAVID CHANG @CHANGDS H B S F I E L D Y
- 2. Fundraising Basics How to Raise a Round Tips Student Entrepreneurs
- 3. BACKGROUND
- 5. Direct Via Syndicate/Fund ANGEL INVESTMENTS
- 6. Fundraising Basics How to Raise a Round Tips Student Entrepreneurs
- 7. WHAT OBSTACLES STAND IN YOUR WAY?
- 8. BUSINESS TRAJECTORY • Lifestyle or social good • Linear growth or revenue fueled • High growth, scalable venture
- 9. 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 CAPITAL SOURCES
- 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. Fundraising Basics How to Raise a Round Tips Student Entrepreneurs
- 17. Prep Target Socialize Raise Close FUNDRAISING CAMPAIGN
- 18. BASIC PREP ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Teaser (1 page) ✓ Pitch deck (10 pages)
- 19. Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter TARGET CRITERIA
- 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. FIND THE RIGHT INVESTORS
- 34. Fundraising Basics How to Raise a Round Tips Student Entrepreneurs
- 35. 38 A bachelor’s or advanced degree is the cost of admission to the workforce, but the skyrocketing cost of education is putting that price out of reach. College Tuition vs Median Income $52,000 $53,500 $55,000 $56,500 $58,000 $0 $5,000 $10,000 $15,000 $20,000 2005 2006 2007 2008 2009 2010 2011 2012 Cost of College Median Income 1https://college-education.procon.org/view.resource.php?resourceID=005532
- 36. Feeling the Weight of Loans? $37,000 The average student debt for the 7 out of 10 graduates who leave college with student loans1. 1 million Parents each year who take out loans to send their children to college2. 55% Respondents who say that student loans have impacted their ability to buy a house3. 55% Parents who expect their child will have to rely on student loans to fund their college education4. 1Thttps://www.debt.org/students 2http://time.com/money/4846020/popular-college-loans-guide/ 3Life Delayed: The Impact of Student Debt on the Daily Lives of Young Americans 4 https://www.credible.com/blog/student-loans/parents-expect-kids-will-take-out-student-loans/
- 39. Good Time to Seek for Jobs Unemployment Rate 0.0% 2.5% 5.0% 7.5% 10.0% Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13Sept-13Apr-14 Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Unemployment Rate 1https://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=LN_cpsbref3
- 40. Job Hopping 44% Millennials who intend to quit their jobs within the next two years1. 3 million Number of Americans who leave their jobs voluntarily each month2. 90%-200% Percentage of an employees’ annual salary that it costs to replace them3. 73% Employees are open to hearing about new job opportunities4. 1The Deloitte Millennial Survey 2017 2https://www.bls.gov/news.release/jolts.nr0.htm 3Retaining Talent: A Guide to Analyzing and Managing Employee Turnover; Society of Human Resources Management. 4https://blog.accessperks.com/2017-employee-engagement-loyalty-statistics#1
- 41. START OR JOIN A COMPANY
- 42. PEOPLE BONDS > COMPANY BOUNDARIES
- 45. Fundraising Basics How to Raise a Round Tips Student Entrepreneurs
- 48. 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.
- 49. 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.
- 51. ADJUST FOR STYLE
- 52. SHARE YOUR SUMMIT & BASECAMP
- 53. DON’T SHARE EVERYTHING AT ONCE • 1 Sentence • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
- 54. Articulate in 90 seconds Why you’re the right team Know numbers and business model cold KEVIN O’LEARY
- 55. pexels.com
- 57. 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
- 60. 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
- 61. FUNDRAISING 101: Q&A DAVID CHANG @CHANGDS H B S F I E L D X