HBS Field Y - Fundraising 101 - How to raise a round - April 2021
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HBS Field Y - Fundraising 101 - How to raise a round - April 2021
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Overview of tech/startup fundraising basics, a 5-step how-to on the tactics of raising a seed round, and general pitch tips/lessons learned
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HBS Field Y - Fundraising 101 - How to raise a round - April 2021
- 1. HBS Field Y Fundraising 101: How to pitch and land your first investors D AV I D C H A N G @ C H A N G D S
- 2. Fundraising Basics How to Raise a Round Pitch Tips
- 3. Background
- 6. What obstacles stand in your way?
- 7. What’s the business trajectory? Lifestyle or social good Linear growth or revenue fueled High growth, scalable venture
- 8. Where to get that first dollar? Revenue
- 10. • Active VC List, DocSend • Investors meeting during COVID-19 • Plan for longer runway • Valuations hit 20-30%
- 11. Venture capital stages Growth Equity Early Stage Angel Friends & Family
- 12. How the VC game works Skewed return distribution VCs must swing for the fences
- 13. Raising a Round
- 14. 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
- 15. Use of Proceeds • Build product • Grow team • Marketing • Customer acquisition • Working capital
- 16. 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
- 17. Fundraising Basics How to Raise a Round Pitch Tips
- 18. Prep Target Socialize Raise Close Run a 5-step fundraising campaign
- 19. Basic Prep ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides)
- 20. Hone in on target criteria Stage Location Industry Vertical Investment Thesis Business Model Social / Trust Filter
- 21. Tools to build the pipeline
- 22. University Focused Corporate VC bit.ly/boston-area-investors-firms Local Investors Angel Groups Seed Stage Growth Stage Early Stage VC Tech VC Healthcare, Biotech, Energy
- 23. Socialize • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
- 24. Don’t ask for money! Improves hit rate Creates data points Doesn’t start the clock “Who else should I talk to?” “I’m not ready to raise” “Who would be helpful?”
- 25. Refine pitch • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
- 26. Go for it! Create FOMO • Approach your top candidates at the same time • Decide whether to tell investors about each other • Land anchor investor as the first domino • Use triggering events to get or improve term sheets “I’m closing a round”
- 27. Structure Equity
- 28. • 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
- 29. • 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
- 30. Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake? Valuation ($M) ?
- 31. 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
- 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) 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?
- 33. Choose your investors carefully What characteristics to look for in a venture partner?
- 39. • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
- 40. Articulate in 90 seconds Why you’re the right team Know numbers and business model cold Kevin O’Leary
- 41. www.garage.com/resources/perfecting-your-pitch 10 slides 20 minutes 30 point font Guy Kawasaki’s tips
- 42. pexels.com
- 44. Typical Parts Overview Problem Solution Market Opportunity Go-to-Market Traction Revenue & Business Model Team Competitive Landscape Financial Projections Ask & Use of Proceeds Conclusion
- 47. 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
- 48. Q&A D AV I D C H A N G @ C H A N G D S