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Early stage fundraising


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Presentation to Endeavor entrepreneurs

Published in: Business

Early stage fundraising

  1. Fundraising A Silicon Valley Perspective Ariel Poler [email_address] @ariel
  2. I've been on both sides of the table... <ul><li>Started three Internet companies </li></ul><ul><li>     - I/PRO (1994): VCs & strategic investors (4 rounds) </li></ul><ul><li>     - Topica (1998): Angels, VCs and private equity investors (3 rounds) </li></ul><ul><li>     - TextMarks (2006): self financed to profitability. </li></ul><ul><li>Chairman or Active Board Member at 10 companies </li></ul><ul><li>     - Kana (VC, PE, IPO); LinkExchange (VCs); Freedom Financial (angels); Passporta (angels); Papilia (angels); Odeo (VC); StumbleUpon (angels); LOLapps (angels, VC); SpeedDate (angels, VC); Strava (angels, VC). </li></ul><ul><li>Angel in over 40 start-ups </li></ul><ul><li>     - NexTag, AdMob, Kongregate, SlideShare, Flixster, Rockyou, Xobni, Causes, Aptimus, Outright, Blippy, Digital Impact, Thumbtack, Viikii, Accept, Instructables, Groupspaces, Evite, WeGame… </li></ul>
  3. Silicon Valley is Another Planet! <ul><li>- Very unique, even within the US and California </li></ul><ul><li>- We have the process down to a science: </li></ul><ul><li>     - term sheets </li></ul><ul><li>     - compensation arrangements </li></ul><ul><li>     - partnerships </li></ul><ul><li>     - technologies & services </li></ul><ul><li>     - legal, banking, accounting, hr... </li></ul><ul><li>- You get to eat with the influencers every day! </li></ul>
  4. VCs and Angels only represent a tiny fraction of the financings in the world <ul><li>Most companies are bootstraped, funded by friends & family, credit cards, cash flow, etc. etc. </li></ul><ul><li>But: VCs & Angels do account for a large share of innovative technology start-ups in the US. </li></ul>
  5. It is not a Black and White distinction between Angels, VCs, Private Equity <ul><li>There are many shades of Grey... </li></ul><ul><li>- Angels with funds. </li></ul><ul><li>- VCs that focus on seed investments. </li></ul><ul><li>- VCs that participate in seed rounds. </li></ul><ul><li>- VCs with Private Equity like late stage funds </li></ul>
  6. On &quot;average&quot;, It takes 6 Months...  <ul><li>But averages are often meaningless </li></ul><ul><li>&quot;Hot deals&quot; are done in a few weeks, some times a few days </li></ul><ul><li>Most deals never get done. </li></ul><ul><li>And somehow the average is 6 months... </li></ul>
  7. International Companies have better changes of fundraising elsewhere <ul><li>Silicon Valley is the only region with too many good deals. Investors elsewhere HAVE TO invest outside their region, but we don't. So the bar is much higher... </li></ul>
  8. . Find investors who understand you <ul><li>- Who has invested in related companies? </li></ul><ul><li>Go through the web sites of top VCs and review portfolio companies and partners' histories. Do the same for angels. </li></ul><ul><li>It is never too early to develop relationships with potential investors – get their advice before their money… </li></ul>
  9. It is about the person, not the firm <ul><li>There are lousy people at the best firms and great people at 2nd tier firms... </li></ul>
  10. The Ideal Process <ul><li>- The right potential investors are identified </li></ul><ul><li>- Investors are contacted through someone who knows them. </li></ul><ul><li>     - Don't cold call!!! </li></ul><ul><li>- Don’t contact too many investors </li></ul><ul><li>- Enough information is provided to generate a meeting or call if there is a potential fit. </li></ul><ul><li>- From here, next steps vary depending on many factors, </li></ul>
  11. You Need a Forcing Function - a deadline <ul><li>Investors will take as much time as you give them. They will rarely commit unless you give them a deadline - or they feel they might be left out. </li></ul><ul><li>Their answer will be the same in two weeks or two months. </li></ul><ul><li>Forcing functions? other investors, self financing, M&A. </li></ul>
  12. &quot;You are too early for us...” and other excuses… <ul><li>Most investors do deals when they get excited by them. But they don't like to say &quot;i am not excited&quot;, so instead they use an easy excuse. </li></ul>
  13. Team builders vs. team replacers <ul><li>- Most investors hate to search for a new CEO or management team. We much rather invest in teams that will grow. </li></ul><ul><li>- Of course, there are exemptions. </li></ul>
  14. Typical deal points and terms <ul><li>- Check out </li></ul><ul><li>- Priced vs. convertible. </li></ul><ul><li>- Convertible: discounts vs. caps. </li></ul><ul><li>- Liquidation preference: participating vs not. 1x vs 2x. </li></ul><ul><li>- Anti dilution </li></ul><ul><li>- Employee pool </li></ul><ul><li>- Board </li></ul><ul><li>- Protective provisions </li></ul>
  15. The “YCombinators” <ul><li>Rent & Ramen money for three months plus advice and a network. </li></ul><ul><li>Silicon Valley: Ycombinator, AngelPad, i/o Ventures, Dogpatch Labs. </li></ul><ul><li>Other places: </li></ul><ul><ul><li>SeedCamp in Europe </li></ul></ul><ul><ul><li>TechStars in Colorado </li></ul></ul><ul><ul><li>NY, Atlanta, Sidney… </li></ul></ul>
  16. Control <ul><li>Most SV investors don't want control. </li></ul><ul><li>- they don't want to run the company. </li></ul><ul><li>- they don't want to replace the management team. </li></ul><ul><li>they can't really &quot;force&quot; management too much. </li></ul>
  17. Best thing you can do to get financing? <ul><li>Focus on the success of the company. The less you need the money the easier it will be to get it!!! </li></ul>
  18. Questions?