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Investment Workshop - Big Booster Boston Bootcamp

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Overview of tech/startup fundraising basics, some how-to tactics on raising a seed round, and general pitch tips/lessons learned

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Investment Workshop - Big Booster Boston Bootcamp

  1. 1. Investment Workshop David Chang @changds Harvard Business School, Entrepreneur-in-Residence PersonalVC, Co-founder Feb 14, 2017
  2. 2. Background
  3. 3. Startup Experiences
  4. 4. Direct Via Syndicate/Fund Angel Investments
  5. 5. Fundraising Basics How to Raise a Round Tips
  6. 6. What Obstacles Stand in Your Way?
  7. 7. 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)
  8. 8. Growth trajectory of your business? Lifestyle business Personal raise – loan, add folks to cap table Growth oriented business Crowdfunding and personal raise High growth scalable business Venture capital
  9. 9. Venture Capital Stages Friends and Family Angel Early Stage Growth Equity
  10. 10. Venture Capital Dynamics Skewed return distribution VCs must swing for the fences Source: @DawnUmlah
  11. 11. Amount to Raise How much funding do you need? •Basic financial model 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
  12. 12. 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
  13. 13. 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 See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
  14. 14. How to Raise a Round
  15. 15. Fundraising Campaign Prep Target Socialize Raise Close
  16. 16. Basic Prep  Legal representation  Founders agreements  Financials and budget  Teaser (1 page)  Pitch deck (10 pages)
  17. 17. Target List of Investors Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter
  18. 18. 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?”
  19. 19. 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
  20. 20. Closing the Deal •Rolling close vs. set close •Reference check investors •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
  21. 21. Structure Preferred Stock • Preferences over common • Board seat or 2 • Option pool • Liquidation preference- they get their $ first • Control over sale, new 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
  22. 22. Negotiating Valuation
  23. 23. Valuation & Dilution ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise ?
  24. 24. 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
  25. 25. 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)
  26. 26. Choose Investors Carefully
  27. 27. 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 • www.soulmix.com/remix/619 • Legal • Foley & Lardner www.foley.com • Goodwin Proctor www.foundersworkbench.com • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com
  28. 28. Tips
  29. 29. Share Your Summit & Basecamp
  30. 30. Leverage Your Natural Presentation Style
  31. 31. Adjust for Your Audience
  32. 32. No Blind Spots Pricing Customer Collaborators Funding Promotion Product / Service Context Place Company Concept Competition
  33. 33. Pitch Materials for Each Level •1 Sentence •1 Paragraph •1 Page •1 Light Deck •1 Follow-up Deck
  34. 34. Function Size Know Yourself Location Industry
  35. 35. Start or Join a Company
  36. 36. People Bonds > Company Bonds
  37. 37. Amplify Your Network
  38. 38. Investment Workshop David Chang @changds Harvard Business School, Entrepreneur-in-Residence PersonalVC, Co-founder Feb 14, 2017

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