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How to Raise a Seed Round - The Players Impact - June 2021

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How to Raise a Seed Round - The Players Impact - June 2021

  1. 1. The Players Impact Fundraising 101: How to raise a seed round D AV I D C H A N G @ C H A N G D S
  2. 2. Fundraising Basics How to Raise a Round Rookie Mistakes
  3. 3. Background
  4. 4. Startup Experiences
  5. 5. Angel Investments Direct Syndicate/Fund TBD Angels
  6. 6. What obstacles stand in your way?
  7. 7. What’s the business trajectory? Lifestyle or social good Linear growth or revenue fueled High growth, scalable venture
  8. 8. Where to get that first dollar? Revenue Equity Partners Grants Debt
  9. 9. 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
  10. 10. 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
  11. 11. Raising during a pandemic • Active investors are out there • Active VC List, DocSend • Investors meeting during COVID-19 • Plan for longer runway • Valuations hit 20-30%
  12. 12. Venture capital stages Growth Equity Early Stage Angel Friends & Family
  13. 13. How the VC game works Skewed return distribution VCs must swing for the fences
  14. 14. Raising a Round
  15. 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. 16. Use of Proceeds • Build product • Grow team • Marketing • Customer acquisition • Working capital
  17. 17. 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
  18. 18. Fundraising Basics How to Raise a Round Rookie Mistakes
  19. 19. Prep Target Socialize Raise Close Run a 5-step fundraising campaign
  20. 20. Basic Prep ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides)
  21. 21. Hone in on target criteria Stage Location Industry Vertical Investment Thesis Business Model Social / Trust Filter
  22. 22. Tools to build the pipeline
  23. 23. 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
  24. 24. Socialize • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
  25. 25. 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?”
  26. 26. Refine pitch • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
  27. 27. 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”
  28. 28. Structure Equity Debt
  29. 29. 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
  30. 30. 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
  31. 31. Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake? Valuation ($M) ?
  32. 32. 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
  33. 33. 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?
  34. 34. 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?
  35. 35. Fundraising Basics How to Raise a Round Rookie Mistakes
  36. 36. Players Tips
  37. 37. Ideas alone are worthless
  38. 38. Don’t go solo
  39. 39. Find the right co-founders
  40. 40. Function Size Location Industry Recruit team based on today’s fit
  41. 41. Engineer Product Management Marketing Investor Corporate Development Business Development Make yourself obsolete
  42. 42. Execution Tips
  43. 43. Value builds in steps Team Product Development Market Demand Product / Market Fit Business Model Execution
  44. 44. Focus your experiments
  45. 45. 1.10^ 12 = 3.1 1.01^ 365 = 37.8 Shorten iteration cycles for big payoffs
  46. 46. Focus vs. Pivot
  47. 47. Stay true to the guiding north star
  48. 48. Pitch Tips
  49. 49. Anchor your summit & basecamp
  50. 50. Don’t share everything at once • 1 Sentence • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
  51. 51. pexels.com
  52. 52. thenounproject.com
  53. 53. Typical Parts Overview Problem Solution Market Opportunity Go-to-Market Traction Revenue & Business Model Team Competition Differentiators Financials Ask & Use of Proceeds
  54. 54. www.nextviewventures.com/blog/free-startup-pitch-decks-template
  55. 55. www.bestpitchdecks.com
  56. 56. 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
  57. 57. Q&A Fundraising 101: How to raise a seed round D AV I D C H A N G @ C H A N G D S

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