What are the most important tactics for raising capital to fund a new startup? I break it down into 6 easy (or at least relatively simplified) steps, and highlight the key decision points that an entrepreneur will encounter.
Accredited investor: income over $200K in past two years or joint income over $300K; or has liquid assets >$1 million
How to Raise Startup Capital in 6 Easy Steps
How to Raise StartupCapital in 6 Easy Steps by Eric M. Jackson CEO of CapLinked; author of The PayPal Wars
6 Steps to Funding1. Structure Your Deal2. Prepare Your Documents3. Identify Your Leads4. Make Your Pitch5. Follow Up6. Close the Deal
#1: Structure Your Deal Size of the Deal Valuation Pre-Money vs. Post-Money 20% Rule of Thumb Equity or Debt Stock: Common vs. Preferred Convertible Notes When Do You Close? Important: Work with an Attorney!
#2: Prepare Your Documents Slide Deck vs. Business Plan Capitalization Table Financial Projections Transaction Documents: Term Sheet Purchase Agreement Shareholder Rights Agreement or Convertible Note
#3: Identify Your Leads Put Your Network to Work What Do You Mean You Don’t Know Anyone?!? Ask for Referrals Accredited Investors Regulation D + Subsequent Rounds VCs vs. Angels vs. Super Angels Other Investor Sources: Angel Groups (TCA, Pasadena, Maverick) 3rd Party Sites: LinkedIn, AngelList, CapLinked
#4: Make Your Pitch Get an Intro (don’t cold email) Share Information w/ Them (slides, deal room) Set up a Meeting or Call (only if interested) Meeting Checklist: Elevator Pitch Problem You’re Solving Market Size Business Model Traction Listen!!!
#5: Follow Up Sorry, You’re Not That Hot… (So Persistence Will Be Required!!!) Track Your Leads Send Updates Due Diligence Make Sure Questions are Clear Getting an Answer Angels Don’t Like to Say No
#6: Close the Deal From Slow to Fast Let Prospects Know as Round Fills Up Typical Closing Process: Collect Signed Documents Confirm Wires Counter-Sign Documents Announce to Media Start Working on Next Round