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FUNDRAISING 101:

HOW TO RAISE A SEED ROUND
D AV I D C H A N G
@ C H A N G D S
Fundraising
Basics
How to Raise
a Round
Tips
BACKGROUND
STARTUP EXPERIENCES
Direct Via Syndicate/Fund
ANGEL INVESTMENTS
PORTFOLIO LIFE
Building Investing Connecting
Fundraising
Basics
How to Raise
a Round
Tips
WHAT OBSTACLES STAND IN YOUR
WAY?
BUSINESS TRAJECTORY
• Lifestyle or social good
• Linear growth or revenue fueled
• High growth, scalable venture
Source: Jean Hammond & MassChallenge
Size
Cost
Equipment Financing
Traditional VC
Micro VC
Angel Groups
AngelList
Angels
C...
VENTURE CAPITAL STAGES
Growth Equity
Early Stage
Angel
Friends & Family
VENTURE CAPITAL DYNAMICS
Skewed return distribution
VCs must swing for the fences
RAISING A ROUND
HOW MUCH TO RAISE
• Basic financial model of
cost drivers and revenue
• Forecast monthly for 2
years
• Fundraise rule of t...
USE OF PROCEEDS
• Build out the product
• Grow the team
• Marketing
• Customer acquisition
• Working capital
MILESTONES
See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
Team
Product Development
Market Demand
...
Fundraising
Basics
How to Raise
a Round
Tips
Prep Target Socialize Raise Close
FUNDRAISING CAMPAIGN
BASIC PREP
✓ Legal representation
✓ Founders agreements
✓ Financials and budget
✓ Teaser (1 page)
✓ Pitch deck (10 pages)
Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter
TARGET CRITERIA
BUILD PIPELINE
SOCIALIZE
• Prioritize sequence
• Find strongest connections to 30+ targets
• Tactics: lead gen, cold calling, warm intros...
DON’T ASK FOR MONEY!
“I’m not ready to raise”
“Who would be helpful?”
“Who else should I talk to?”
REFINE PITCH
• Incorporate feedback
• Double down on consistent themes
• Avoid whiplash changes
GO FOR THE ASK
• Approach your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to ...
CREATE URGENCY
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet
STRUCTURE
Equity
Debt
STRUCTURE
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference
• Control over sale, new opti...
CLOSING THE DEAL
Seed A B
$15
$6
$1
$30
$12
$5
VALUATION & DILUTION
?
Dilution: what’s your end stake?Valuation ($M)
?
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...
FINAL DEAL POINTS
• Rolling close vs. set close
• Not done until money is in
the bank
Key terms
❑ Board composition
❑ Opti...
HOW LONG DOES IT TAKE?
• Longer than you expect
• 3-6 months
• Speed limited by access to investors
• Your ability to find...
FIND THE RIGHT INVESTORS
FUNDRAISING 101:

HOW TO RAISE A SEED ROUND
D AV I D C H A N G
@ C H A N G D S
Fundraising
Basics
How to Raise
a Round
Tips
KNOW YOUR AUDIENCE
ADJUST FOR STYLE
SHARE YOUR SUMMIT & BASECAMP
DON’T SHARE EVERYTHING AT ONCE
• 1 Sentence
• 1 Paragraph
• 1 Page
• 1 Light Deck
• 1 Follow-up Deck
Articulate in 90 seconds
Why you’re the right team
Know numbers and
business model cold
KEVIN O’LEARY
pexels.com
thenounproject.com
TYPICAL PARTS
Overview Problem Solution Market
Traction
Marketing
Strategy
Team
Competition Conclusion
Financial
Projectio...
www.nextviewventures.com/blog/free-startup-pitch-decks-template
www.bestpitchdecks.com
RESOURCES
• Legal
• Goodwin Procter www.foundersworkbench.com
• Foley & Lardner www.foley.com
• Pierce Atwood
• Techstars ...
MassChallenge: How to Raise a Seed Round - Sept 2019
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MassChallenge: How to Raise a Seed Round - Sept 2019

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Overview of tech/startup fundraising basics, a 5-step how-to tactics on raising a seed round, and general pitch tips/lessons learned

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MassChallenge: How to Raise a Seed Round - Sept 2019

  1. 1. 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 Tips
  3. 3. BACKGROUND
  4. 4. STARTUP EXPERIENCES
  5. 5. Direct Via Syndicate/Fund ANGEL INVESTMENTS
  6. 6. PORTFOLIO LIFE Building Investing Connecting
  7. 7. Fundraising Basics How to Raise a Round Tips
  8. 8. WHAT OBSTACLES STAND IN YOUR WAY?
  9. 9. BUSINESS TRAJECTORY • Lifestyle or social good • Linear growth or revenue fueled • High growth, scalable venture
  10. 10. 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
  11. 11. VENTURE CAPITAL STAGES Growth Equity Early Stage Angel Friends & Family
  12. 12. VENTURE CAPITAL DYNAMICS Skewed return distribution VCs must swing for the fences
  13. 13. RAISING A ROUND
  14. 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. 15. USE OF PROCEEDS • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital
  16. 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. 17. Fundraising Basics How to Raise a Round Tips
  18. 18. Prep Target Socialize Raise Close FUNDRAISING CAMPAIGN
  19. 19. BASIC PREP ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Teaser (1 page) ✓ Pitch deck (10 pages)
  20. 20. Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter TARGET CRITERIA
  21. 21. BUILD PIPELINE
  22. 22. SOCIALIZE • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
  23. 23. DON’T ASK FOR MONEY! “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
  24. 24. REFINE PITCH • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
  25. 25. 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
  26. 26. CREATE URGENCY • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
  27. 27. STRUCTURE Equity Debt
  28. 28. 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
  29. 29. CLOSING THE DEAL
  30. 30. Seed A B $15 $6 $1 $30 $12 $5 VALUATION & DILUTION ? Dilution: what’s your end stake?Valuation ($M) ?
  31. 31. 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
  32. 32. 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
  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)
  34. 34. FIND THE RIGHT INVESTORS
  35. 35. FUNDRAISING 101:
 HOW TO RAISE A SEED ROUND D AV I D C H A N G @ C H A N G D S
  36. 36. Fundraising Basics How to Raise a Round Tips
  37. 37. KNOW YOUR AUDIENCE
  38. 38. ADJUST FOR STYLE
  39. 39. SHARE YOUR SUMMIT & BASECAMP
  40. 40. DON’T SHARE EVERYTHING AT ONCE • 1 Sentence • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
  41. 41. Articulate in 90 seconds Why you’re the right team Know numbers and business model cold KEVIN O’LEARY
  42. 42. pexels.com
  43. 43. thenounproject.com
  44. 44. 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
  45. 45. www.nextviewventures.com/blog/free-startup-pitch-decks-template
  46. 46. www.bestpitchdecks.com
  47. 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
  • hiloaloha

    Dec. 5, 2019

Overview of tech/startup fundraising basics, a 5-step how-to tactics on raising a seed round, and general pitch tips/lessons learned

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