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MassChallenge 2016 Bootcamp - Fundraising Intro


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Basics of startup fundraising, a "how-to" process, and general pitch tips

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MassChallenge 2016 Bootcamp - Fundraising Intro

  1. 1. MassChallenge 2016 Bootcamp Fundraising Intro Shereen Shermak, Good Growth Capital @shrcubed David Chang, PersonalVC @changds
  2. 2. Pitch Tips Fundraising Basics How to Raise a Round @shrcubed @changds
  3. 3. About Shereen Background Experience Investments Today @shrcubed @changds
  4. 4. About David Background Experience Investments Today @shrcubed @changds
  5. 5. Fundraising Basics @shrcubed @changds
  6. 6. Your Fundraising Experiences @shrcubed @changds
  7. 7. Capital Sources You hear a lot about… • Venture Capital • Angel Groups • Crowdfunding • Friends and Family • Customers • Accelerators • Competitions But less about... • SBA Loans and Personal Debt • Grants • Corporate Venture • Vendors or Equipment Finance • Bootstrapping (creatively) @shrcubed @changds
  8. 8. Growth trajectory of your business? ’Lifestyle business’– no plans for big hiring Personal raise – loan, add folks to cap table @shrcubed @changds Growth oriented business Crowdfunding and personal raise High growth scalable business Venture capital
  9. 9. Venture Capital Dynamics • Skewed return distribution • VCs must swing for the fences @shrcubed @changds
  10. 10. Venture Capital Stages Bootstrap Angel Early Stage Growth Equity @shrcubed @changds
  11. 11. Local Investors Seed Early Growth
  12. 12. Amount to Raise How much funding do you need? • Basic financial modeling 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 @shrcubed @changds
  13. 13. 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 @shrcubed @changds
  14. 14. 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 @shrcubed @changds
  15. 15. How to Raise a Round
  16. 16. Fundraising Campaign Prep Target Socialize Raise Close @shrcubed @changds
  17. 17. Basic Prep ü Legal representation ü Founders agreements ü Financials and budget ü Teaser (1 page) ü Pitch deck (10 pages) @shrcubed @changds
  18. 18. Target List of Investors Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter @shrcubed @changds
  19. 19. 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?” @shrcubed @changds
  20. 20. 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 @shrcubed @changds
  21. 21. Closing the Deal • Rolling close vs. set close • Reference check investors • Not done until money is in the bank Key terms q Board composition q Option pool q Voting rights q Founder vesting q Change of control q Redemption rights q Information rights q Anti-dilution @shrcubed @changds
  22. 22. Negotiating Valuation @shrcubed @changds
  23. 23. Valuation (sort of) Matters ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution Example: 50/50 founder split What’s your end stake? • $3M à 17% • $5M à 19% • $7M à 19% • $1.5M raise @$3M à 15% See $1M raise $6M raise $15M raise @shrcubed @changds
  24. 24. Questions? Shereen Shermak @shrcubed David Chang @changds