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Startup Fundraising Strategies: The Good, The Bad, and The Ugly

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Most entrepreneurs assume that VC is the typical fundraising path for startups. However, most startups go another route. In this presentation I review the pros and cons of several different startup fundraising approaches, using my own seven startups as specific case studies.

This presentation was given 2018-03-07 to entrepreneurship students at the University of Wyoming.

Published in: Business
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Startup Fundraising Strategies: The Good, The Bad, and The Ugly

  1. 1. Startup Fundraising Bryan Guido Hassin @guido23
  2. 2. Startup fundraising is incredibly straight-forward
  3. 3. Whoops, actually, no it isn’t Source: AVC.com
  4. 4. I have led seven startups with various fundraising strategies Antmachine • Bootstrapped R7 Solutions • Customer finance TNR • $30M VC Vinopedia • Bootstrapped Poken • $6M VC GIVEWATTS • Crowdfunded Smart OES • $1.7M Angel
  5. 5. Bootstrapping keeps control but can limit growth Pros • Maintain ownership / control • Focus on operating business Cons • Can limit growth • Undiversified financial risk • 2/2 [small] exits • Share financial burden Lessons learned
  6. 6. Customer finance is a great deal if you can get it Pros • Maintain ownership / control • Customer validation Cons • Sometimes strings attached • Negotiate no-cost value to provide the customer Lessons learned
  7. 7. Crowdfunding can be powerful for consumer startups Pros • Maintain ownership / control • Customer validation Cons • Letting the cat out of the bag • 3:1 planning:execution ratio for success Lessons learned
  8. 8. Debt is a good deal but often inaccessible to startups Pros • Maintain ownership / control • Lower cost than equity Cons • Security sometimes untenable • Finance inventory with debt Lessons learned
  9. 9. Outside investors can help – but at a cost Pros • Fuel for growth • Credibility • Additional value-add Cons • Most expensive capital • Lose ownership / control • Asshole risk • Can limit options • 2/2 less than awesome outcomes with VC Lessons learned
  10. 10. Lessons learned from outside investors Fundraising is a skill in and of itself Less is more; don’t overwhelm investors When you get to “yes,” STFU Raise from the heart, not the mind Investors invest in lines, not dots
  11. 11. Lessons learned from outside investors Plan on at least six months to raise capital Raise enough to support 18-24 months • Make sure you can hit a significant milestone in that time “Pull” rather than “Push.” Create sense of scarcity/urgency Plan THEN execute fundraising for momentum • [Many] investors are sheep But FF&F are investing in YOU
  12. 12. Smart OES has raised three rounds of angel funding $8,000 $13,000 $25,000 $11,000 $21,000 $34,000 $55,000 $80,000 $300,000 $150,000 $250,000 $1,308,750 $150K SEED $250K ANGEL 1 $1.3M ANGEL 2 SMART OES INVESTOR SOURCE Median Mean Max Total • It takes just as long to close a $5k investor as a $300k investor.
  13. 13. Former colleagues have invested the most in Smart OES $55,000 $32,000 $533,250 $43,400 $32,500 $332,500 $35,000 $15,000 $216,500 $10,000 $100,000 $25,000 $6,600 $72,500 $201,500 $150K SEED $250K ANGEL 1 $1.3M ANGEL 2 SMART OES INVESTOR SOURCE Colleague Rice IMD FFF 2nd Deg • Significant trust built when working with someone • Same with former classmates
  14. 14. Second Degree connections become more valuable over time $55,000 $32,000 $533,250 $43,400 $32,500 $332,500 $35,000 $15,000 $216,500 $10,000 $100,000 $25,000 $6,600 $72,500 $201,500 $150K SEED $250K ANGEL 1 $1.3M ANGEL 2 SMART OES INVESTOR SOURCE Colleague Rice IMD FFF 2nd Deg • Engage “connected” investors early on • They are invested in your success, so leverage them!
  15. 15. Repeat investors become more valuable over time $0 $30,000 $300,000 $150,000 $220,000 $1,008,750 $150K SEED $250K ANGEL 1 $1.3M ANGEL 2 SMART OES INVESTMENTS Repeat New • Engage investors with capability to follow on
  16. 16. Lessons learned from Smart OES angel fundraising Angel groups are largely useless social clubs • Make sure to have a champion when pitching them Seek out smart $$$ • But validate how smart it actually is – dumb money is EXPENSIVE Never EVER pay to pitch Never let an asshole invest There is no “Golden Rule” Honesty & integrity is the only thing you take with you
  17. 17. Startup Fundraising Bryan Guido Hassin @guido23

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