SlideShare a Scribd company logo
1 of 43
Download to read offline
To all who attended Wed night at GA: Thanks! Hope you enjoyed it and gained something.
Feedback welcome.

FYI .The next class I will teach at GA is: The Seed Stage Pitch: the Art and Science of
Good Communication Monday 4/15 at 7PM. Link/follow me on LinkedIn and/or Twitter for
updates, etc. (Page 31 of this deck has my details) .Cheers, -TW


                Seed Fundraising for Tech Entrepreneurs:
                       Mastering the Art and the Science
      Insights on successful fundraising from an active angel investor
                                              and fellow entrepreneur


                                                                    General Assembly Seminar




                         Tom Wisniewski
                      RosePaul Investments



                                                       Wednesday March 13, 2013
Agenda



                 I. Kick-off and Introduction

                 II. Seed Fundraising

                 III. Additional Q&A, Feedback and Beverages




September 2011                                                 1
                                            confidential
I. Kick-Off and Introduction
      Seminar Rationale: Why are we hear?
       Based on my experiences and feedback from other investors and entrepreneurs   .

                     Raising money is difficult        .especially for early stage ventures.
                  Why? At least part of the answer is:
                 • The “market” for early stage investment is complex, nuanced
                   and can be “bewildering” .especially for 1st timers.
                 • Finding investors is difficult  getting investors to write a check
                   (can seem) nearly impossible: “1% of start-ups get funded”
                 • Lots of “noise” no shortage of advice
                  What will help?
                 • Understand the marketplace, people and processes that are at
                   work
                 • Leverage existing expertise and network (thoughtfully).
                 • Interpret and utilize the wealth of resources that already exist.
                 • Improve / adapt your venture and approach.

                 •       ..Become a “student” of the art and science of fundraising (and
                       entrepreneurship generally)
September 2011                                                                                 2
                                                   confidential
What would I like you to walk away with?
      Well, this will obviously be different depending on your past experiences and the stage of your venture
      but .


                 Better understanding of the marketplace: fundraising process,
                 sources of capital, do’s and don’ts, etc.
                 A set of specific insights that will *change* what you are doing in
                 fundraising.
                 A “to-do” list: starting point(s), actions, things to try.
                 A set of recommended resources to consult and learn more
                 from.
                 A few new relationships with others in the NYC start-
                 up/fundraising ecosystem: fellow entrepreneurs, investors, etc.
                 Answers to specific questions about fundraising that you might
                 have.
September 2011                                                                                                  3
                                                      confidential
Tom Wisniewski: My background
                  Born in NYC; grew-up in Montclair, NJ
                  Physics and Philosophy major undergrad
                  (Clark University); MBA at Tuck School
                  (Dartmouth)
                  1st Job: Programmer at Morgan Stanley then
                  moved to Investment Banking
                  After B-school: joined a start-up management consulting firm Mitchell Madison
                  Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing,
                  private equity/VC clients (1993 to 2000)
                  Walker Digital: helped set-up and run an early “internet incubator” (2000)
                  Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio
                  company strategy and new investments; joined the management team of two
                  companies
                  Currently:
                 • Early stage investor and advisor to start-ups
                 • Investor and advisor to VC and PE funds
                 • Member and director at New York Angels
                  Recent Investments: Sociocast (social/behavioral analytics), LiveLook (Saas, live
                  collaboration, co-browsing); Movio (Digital “RedBox” ); Bizodo (Saas, paperwork
                  automation); Social Starts (seed fund for start-ups); Brooklyn Bridge Ventures
                  (Charlie O’Donnell); Entrepreneurs Roundtable Accelerator (ERA)
September 2011                                                                                        4
                                                    confidential
Additional Introductions


                 Ellie Wheller (Greycroft)
                 Charlie O’Donnell (Brooklyn Bridge Ventures)
                 Heather Miles (Venture Lawyer Extraordinaire)
                 Other Guests




September 2011                                                   5
                                       confidential
So .what questions do you have about Seed fundraising?



                 Demitri Source of capital, MVP, stage need to be
                 Preyas What do I have for a investor discussion
                 Ranjan level of detail e.g numbers
                 Shashi .Friend and Family, timeline
                 Wendy .Best way meet/into to investors
                 John .how much to Discolose, NDAs
                 Paul .Persistance and annoying
                    .where to get details/research, full business case
                 Darrel .Patents and IP
                 John .prof/services to product/venture
                 Pierre .valuation
                   .See market for Med tech
                 Shefali .legal structure: angel vs. VC
                 Lannie Non-tech, how different?
                   .Accedicated
                 Bryan .Debt vs. Equity

September 2011                                                           6
                                         confidential
II. Seed Fundraising
  Sources of Investment: Seed Fundraising, Angels and VC’s
   Earlier Stage                                                       “Seed”                                             Later Stage


        “You”             Friends and
   aka Bootstrapped                                     Angel Investment                               Venture Capital
                             Family
                                                                                     “Seed” VC          “Traditional Series A” VC
Round Size $:         • $10’s of K               • $100’s of K                  • $500K to                 • $5M-$15M
                       to $100K                  to $1M+                          $1.5M
Investment Size $:    $5K – $10’s of K           • $25K – $75K                  • $250K-$750K              • $3M – $5M
Valuation (Pre-       • < $1 M                   • $1 – 5 M                     • $5-10 M                  • $10 – 25 M
Mon):
Stage (Pre-Round):    • An idea, initial/rough   • Detailed b-plan,                          • Significant variation among firms
• Expected to           b-plan                   • Key founders (bus & tech) full-time         but . Angel req. +:
  have:               • Initial founders, key    • Prototype/alpha done and tested,            - Anchor clients on board, revenue
                        advisors                 • Some piloting (paying?)                       growth (B2B),
                      • Path to ???                customers, some revenues?,                  - Growing base of users, with strong
                                                 • All legal documentation in place,             usage trends (B2C)
                                                   board of directors                          -   ..Growth potential! Credible
                                                 • Path to break-even or next funding            path to $100M Rev
• Don’t Expect:       • $ Rev, Customers,        • Income (e.g. cash flow positive);         • Income (e.g. cash flow positive)
                        Minimum Viable             all key management ; completely
                        Product (MVP); full        developed business model (e.g.
                        legal documentation        understand it will change)

Who/what are          • People you already       • Experienced early stage                   • Firm with multiple professionals that
they?                   know, that trust           investors (individuals or a group)          raises, invests and manages
                        you, and (maybe)         • Accredited Investors.                       individual funds (other people’s $)
                        understand your          • Angel investing is not their “job”;       • Working F/T (this is their job )
                        venture                    may not be F/T endeavor                   • E.g.: Greycroft, RRE, Union Square
September 2011
                                                 • E.g.: NY Angels, GoldenSeeds
                                                                                                                                        7
                                                                 confidential
Who are these “Angels”? What do they look like?

                 Experienced, successful entrepreneurs: frequently multiple exits
                  • Some from “tech-start-ups” some from other businesses
                  • Usually some link to
                 Successful “corporate” business people: CEO or CxO-types
                 Older: most are in the 40-60 age group. But there are also notable angels
                 in their 20’s and 30’s e.g. newly minted start-up millionaires
                 3 – 10+ Angel Investments
                 ~10% of investible capital in Angel Investments
                 Differ *widely* in: Industry/Functional Experience, Investment Expience,
                 Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal
                 do’s/don’ts and hot buttons.
                 Lists? Not many. All are partial. AngelList? Gust? Other?




September 2011                                                                               8
                                                 confidential
Active, NYC Early-Stage Tech Investors

                 Active VCs in NYC (TW list and opinions)                            Investment Size by Investor Type
                  • Lerer Ventures (Seed)                                               •   Series A VC: Definitely
                  • Quotidien Ventures (Seed)                                               >$1M, $3-5 M sweet spot
                  • RRE Ventures (Seed)                                                 •   Seed VC: <$1M , $250K-
                  • First Round (Seed)                                                      750K frequently
                  • Brooklyn Bridge Ventures (Seed)
                                                                                        •   Super Angels / Micro: up
                  • iNovia Capital (Seed)                                                   to $250K? , lots of $25’s –
                  • Union Square Ventures (Series A & B)                                    100K’s ?
                  • Greycroft (Series A & B)
                  • DFJ Gotham (Series A & B)                                           •   Angles: <$100K, typically
                                                                                            $10-50K
                  • FirstMark Capital
                  • Village Ventures

                 Angels, Super Angels, Angel Groups and Micro VCs: [see links
                 below]


       Angel/VC List: https://docs.google.com/spreadsheet/ccc?key=0Ap5XbqUM9nICdG40LXVVamRyN19zZHlTU3E2SmdDTkE#gid=0
       .




       NYC VC: http://under30ceo.com/top-new-york-based-venture-capitalists-you-should-know/
       Angel Groups: https://gust.com/find-investors?keywords=&sort=distance&grouptype=ANGEL_GROUP&region=STATE
September 2011                                                                                                            9
                                                           confidential
Who are the “right” investors? Where is there a “fit”?
          Just do it? Just go pitch some investors? ..Nope. Fit is critical.
         • Wrong question: How do I pitch “investors”?
         • Right question: Who are the “right” investors? .*then* . How do I pitch this
            specific, individual investor?

          Reality Check. As a general rule, “people invest in things that they
          understand and have experience with”
         • Find investors that come from industries, sectors, business models etc. that
            are same/similar to your venture and the customer markets it serves.
         • If I have never invested in Caribbean real estate, oil wells .or communication
            hardware, it is very unlikely that I will do it with you.
         • For Angels/Angel Groups: use online bio’s / LinkedIn / AngelList to identify
            likely “good fit” Angels
         • For VCs: Find the right person at the fund; Individuals at the fund focus on
            different sectors. The web site often spells it out.

           Thought Exercise:
         • “What would the “perfect” investor look like?”
         •    he/she probably doesn’t exist but this will help you :
             - target, prioritize, know one when you see them”
             - To be specific (and effective!) when asking for referrals
September 2011                                                                         10
                                            confidential
How to “get” a pitch meeting?
                   Find .Fit? Does this investor have “fit”? Do they invest in ventures like mine?
                    ......if not, then move on. (or at least prioritize accordingly)

                   Prep!
                    • Know your audience. What have they invested in? Recently? What can you
                      find out about their background? Interests? Hot buttons?
                          - How? Duh .Google: Blogs, Quora, YouTube, CrunchBase; talk to
                            people they know, better talk to those they have invested in.
                    • Create a good pitch:
                          - What would they want to know?
                          - How can I say what’s unique/ compelling
                          - Make it easy. Think “executive summary” and KISS (Keep It Simple
                            Stupid)
                          - adapt pitch to fit the situation.
                    • Don’t be lazy; invest some time.

                   Connect. The hard part.
                    • Avoid “cold-calls”; look for “warm introductions”
                    • Networking. Who do you know that knows them?
                    • Find them at an event. (Email sucks!)


   Tips on getting a meeting: http://www.quora.com/David-S-Rose-1/How-does-someone-get-a-meeting-with-angel-investor-David-S-Rose


September 2011                                                                                                                      11
                                                                 confidential
How to “get” a pitch meeting?

                                             Wrong Question
                                              Right Question:

                          How do I build a relationship first?
                 Why?
                  • Pitching by its very nature can be awkward. “This guy wants
                    something from me.”
                  • Having a pitch be the first thing someone hears from you can be
                    off-putting. “Do I know you?”
                  • Most investors mean-well, and would like to help but
                        - they are real busy
                        - its very challenging to understand new ventures quickly
                        - Its tough to say “no” (easy to avoid, or say maybe)

                 Solution: Build a relationship before you need to pitch. OK,
                 How?
                  • Give, don’t Ask: what can you do for them?
                  • “Ask for advice, not money” . Turn people into advisors ..then
                    investors.
                  • Debate / Discuss a topic, Ask opinion about X.
                  • Find ways to “show” rather than “tell”: show me your smart, don’t
September 2011      tell me your smart               confidential
                                                                                        12
What do I say? How do I say it?                            Communication is critical.


          Why? Potential investors (or potential employees, customers, etc.) usually start
          out knowing nothing about you or your venture.
         • Getting someone “from 0 to 60 mph” is very challenging: too much to say,
             don’t know where to start.
         • If you loose someone’s interest in the “first minute” , you usually loose them.
         • If you don’t understand someone's “perspective” e.g. expertise (they have 6
             Saas investments vs. they can’t spell Saas) you will be ineffective
             - People generally understand things by association (to things they know).
             - That’s why so many start-up taglines are “XYZ corp is the Uber for the
                 ABC industry”
          Principles. Principles of good communication are the same. Much of the
          content will be the same; the format (e.g. pitch deck vs. elevator pitch) and level
          of detail will vary by Situation.
         • A few principles of effective communication: Audience, Messages, Storyline,
             Goals.
         • Messages and Storyline will tend to be similar across formats (e.g. deck vs. 1-
             pager). However good communication is tailored to the Situation.
         • Situation. It’s the Audience, Time Allowed, Relationship, Past
             Communication, Goals
         • Mostly, level of detail varies.
September 2011                                                                               13
                                             confidential
Common “Forms” of Pitch Communication. What are they? Which should I use?

         “Document”                 Simplistic Description                     Common Situation/ Use
     1-pager                  “1 pager Exec Summary, Word              •   Email attachment or handout
                              doc”                                     •   Online platforms e.g. Gust, AngelList
     Email Brief              “Teaser paragraph of text / bullets”     •   “In the intro email” (w/ attachments)

     Business Plan            “10-40 page Word doc”                    •   Detailed discussions (similar use)
                                                                       •   Stand-alone, due diligence
     Pitch Deck               “10 page PowerPoint                      •   “15 minute stand-up presentation”
                              presentation”                            •   Email attachement
     Long-Form Pitch          “20-40 page version of 10 pager;         •   “60-90 minute follow-up meeting with
     Deck                     PowerPoint presentation”                     smaller group”
     Elevator Pitch           “No document, just you talking for       •   Your quick intro after you meet
                              60 seconds”                                  someone in person
     “Video” Pitch            “10 minute video of your deck/           •   Email attachment
                              demo w/ you voice”                       •   Online platforms e.g. Gust, AngelList
     Due Diligence Docs       “All the detailed spreadsheets,          •   For detailed discussions with
                              data, etc. that back-up your pitch”          interested investors, usually post-
                              e.g. Financial Projections, Sales            term-sheet
                              Funnel, Legal Docs                       •   Online platforms e.g. Gust, AngelList

           The Good News:
           • you don’t need to have all of them (maybe ever, certainly 1 or 2 to start is fine)
           • much of the content, messages, storylines can be shared and reused
September 2011 Preparing thoughtful docs
           •                                 refines your thinking and your venture.                               14
                                                        confidential
Good Pitch Deck

           From “Triple Play” of VC Presentations by                   Adapted from “10 Slides to an Awesome
           Mark Suster (former entrepreneur, now VC)                   Pitch” by Dave McClure, 500 Start-Ups

                 Slide 1 – Team Bio                                    1. Elevator Pitch
                 Slide 2 – 50k foot view of your company               2. The Problem
                 Slide 3 – Problem Definition                          3. Your Solution (Demo Here!)
                 Slide 4 – How do you solve the problem?               4. Market Size
                 Demo Web Version and                                  5. Business Model ($)
                 a Demo Video Example                                  6. Proprietary Tech
                 Slide 5 – Market Sizing                               7. Competition
                 Slide 5 warning: (Market Sizing Pitfalls)             8. Marketing Plan
                 Slide 6 – Competition                                 9. Team / Hires
                 Slide 7 – Customer Adoption / Traction                10. Money / Milestones
                 Slide 8 – Team
                 Slide 9 – Financial projections
                 Slide 10 – Use of Proceeds
                 Slide 11 – Fund raising process / Next steps
                 Appendix – Back-up slides
                 How to deal with the dreaded question of
                 valuation?                                                 http://www.slideshare.net/dmc500h
                                                                            ats/how-to-pitch-a-vc-sept-2010
            http://www.bothsidesofthetable.com/pitching-a-vc/


September 2011                                                                                                  15
                                                        confidential
What does a successful investor pitch meeting look
       like?

       From “Triple Play” of VC Presentations by Mark Suster

                    Act I: Discussion. The warm-up. Share. Listen. Build rapport.

                    Act II: Pitch

                    Act III: Demo



          This one opinion. One order of things. Everything varies by Situation (e.g. Audience). You will
          adapt based on your presentation “style” and comfort level.




          http://www.bothsidesofthetable.com/2009/09/12/do-you-need-a-powerpoint-deck-for-a-vc-meeting/




September 2011                                                                                              16
                                                                   confidential
What do investors care about? What do the want to
       see?

       My (TW) List for                           What do VC’s want? By                              Many, many others
       Evaluation                                 Sheetal Shah
                                                                                                     •     Elements of the B-
       1) Market                                  •     Big Opportunities / Big                            Plan
          Opportunity                                   Visions                                      •     Lots of personal
       2) Product                                 •     Idea/Founder                                       preference
       3) Traction                                      Authenticity
       4) Team                                    •     Founder Profile:
                                                        Missionary Passion,
                                                        Balanced Ego, Trust
                                                  •     Objectivity
                                                  •     A-Teams




          http://upstart.bizjournals.com/resources/author/2012/07/19/what-do-venture-capitalists-want.html?page=all
September 2011                                                                                                                  17
                                                                     confidential
Angel Groups: How do they differ?
             Member Profile: What does the “typical” member look like? What industries, sectors,
             companies do they come from?

             Sector Focus. What types of companies are they investing in?
         •     Internet, software (vs. Hardware vs. Pharma / Bio-tech vs. Clean/Green-tech)
         •     B2C vs. B2B, Saas, Cloud-based, Content-based
         •     How does their Portfolio compare to their stated strategy?
         •     What is their “sweet spot”? Vs. their “also do”?

          Stage. What is the target “stage” for prospective investments? What completed
          milestones and characteristics are they looking to see?
         • Revenues vs. Pre-Revenue? Product/Tech development? MVP complete?
         • Customer/market validation? Anchor accounts? User levels?

          Valuations/ Investment Size: Pre-Money valuation range and size initial investment
         • “We typically invest $200 – 500K at valuations in the $1-3 Million level.”

          Group Structure / Investment Decisions. How is the Angel Group structured? Most
          importantly, how are investment decisions made? Who makes them?
         • Network: Angel Group runs the process, individuals make independent “opt in”
            decisions to invest on a deal-by-deal basis.
         • Democratic: Angels commit $ to the group, $ decisions are made based on voting
         • Fund structure: Angels commit $ to the group, and an “investment committee” makes
            all/most funding decisions. Additional Opt-in co-investments available.
September 2011                                                                                     18
                                                  confidential
NY Angels Profile
 www.newyorkangels.com

            Member Profile: ~80 investor/members; several early-stage funds; Member
            backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:
            software, e-commerce, ad-tech, finance, media

            Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC
            Area.

            Stage. Mostly early stage (with some customers/revs), some seed stage (pre-revenue)

          Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M;
          investments tend to range from $250K to $1M+;
         • For larger rounds, NYA often leads the deal and helps find the rest of the capital by
            sharing/syndicating the deal with other Angel Groups

          Group Structure / Investment Decisions. NYA core structure is as a group of individual
          investors. Individual investors “opt in” to deals and make their own investment decisions.
         • Typical member invests $25-50K in a deal.
         • In addition to the core “opt-in” model, NYA has just closed a small seed fund that will
             operate in parallel (using a “democratic model” for investment decisions)

          History/Background. NYA has invested $45M+ in 70+ companies.
         • We are very active in the NYC entrepreneurial / early-stage ecosystem
September 2011                                                                                      19
                                                  confidential
A “Typical” Angel Group Process for Entrepreneurs

       1.        Find the right group(s) to pitch          What is typical success
                                                           rate for funding?
       2.        Apply online                              • Industry data for angel
                                                               groups and VCs:
       3.        Get invited to screening                      0.5% - 2% of
                                                               companies submitting
       4.        Meet with screening panel                     b-plans get funded

                                                           What can increase the
       5.        Get invited to present
                                                           speed and success
                                                           rate?
       6.        Present to full group(s)                  • Member referral
                                                           • Investor referral
       7.        Get invited to due diligence session      • Lead Investor /Term
                                                               Sheet
       8.        Deep dive w/ interested investors         • Have good pitch and
                                                               due diligence docs
       9.        Get presented a draft term sheet          • Well practiced,
                                                               thoughtful pitch
       10.       Negotiate the term sheet

September 2011                                                                         20
                                            confidential
Variations on the Theme: Other Players
                 “Super Angel” (vs. Angels, Angel Groups). Sophisticated angel investor with a large portfolio
                 of early stage investments (30? 50?) and that is investing frequently (10 + per year). E.g. David
                 Rose, Fabrice Grinda

                 Microfund or Micro VC Fund. Small VC fund ($1-10 M) often run by a single person typically
                 making “angel” size investments in early stage companies.

                 Seed Fund. VC fund focused on “seed” (aka Angel) stage investments: often pre-revenue,
                 pre-product. Some VC’s that typically invest in “Series A” rounds will reserve a portion of their
                 fund for seed investments: e.g. $250 – 750K investments at $1-5 Million valuations

                 Incubator/Accelerator. Entity that provides non-monetary support/services (in addition to $’s)
                 to early stage ventures. Typical support/services can include: space, IT infrastructure, shared
                 admin service, advice/feedback, introductions/networking. Public vs. private, independent vs.
                 captive. Examples: TechStars, ER Accelerator, DreamIT, Y-Combinator

                 Strategic Partner/Investor. Some operating companies will invest in ventures. Typically it is
                 in an industry/ sector / product-space similar to theirs (sometime with an eye toward potential
                 acquisition in the future)

                 Crowd Funding Platforms. Currently this is financing via donation or “pre-sale” of products.
                 Equity financing under JOBS Act is TBD. Not obvious this will be a good match for most Tech

                 AngelList. Similar to an angel group, but without centralized control. More of a open
                 “marketplace” of individual investors and ventures to facilitate funding.

                 Gust. Software platform that most angel groups utilize (and many small VC’s) to run their
                 investment process and connect angel groups together to share deals.
September 2011                                                                                                       21
                                                         confidential
Legal Primer for Start-ups: What’s Important?
                 The 5 W's + 1H of Formation - When to form (timing/tax issues? What
                 to form (choice of entity)? Where to form (choice if jurisdiction?) Why to
                 form (tax and legal issues)? Who to form with (co-founder equity and
                 vesting)? How to Form (DIY v. lawyer)

                 IP 101 - Overview of intellectual property law:
                  • Government filings and timing (Trademark, Patents)
                  • Contractual IP law (PIIAs, licensing agreements)

                 Advisory board 101s - How important, what is appropriate
                 compensation - I find most companies think the advisory board is more
                 important than it is. I also have found an increase in charlatan
                 "advisors" who ask for a lot of equity and have NO connection to the
                 VC world or have any value to add.

                 Deal terms - Debt v. Equity.
                  • Debt - How notes work and what terms matter (valuation and cap)?
                  • Equity - Common v. Preferred Stock features. Board structure.



     Source: Heather Miles heather@hmileslaw.com
September 2011                                                                                22
                                                   confidential
Investor Perspective: Notes vs. Preferred Equity
  This is really the subject of a separate dedicated class. That said .
                 History. Preferred Equity is standard for both Angel/Seed and VC (Series A, B, etc.).
                 Convertible Notes were used as a “bridge” to a [reasonably well defined, high probability]
                 upcoming financing.
                  • Now: Convertible Debt much more popular at Angel/Seed round
                 Preferred Equity. Equity (stock) that has defined “preferences” over common stock.
                  • Establishes a value for the company e.g. [$3.5M] pre-money valuation
                  • Liquidation Preferences. Most commonly used is “non-participating preferred” aka
                    “straight preferred”. E.g. a [1x] liquidation preference. Means investors get their invested
                    money back plus [1x] before common equity holders. In the event of success, everyone
                    converts to common and shares pari passu. Liquidation preference is really downside
                    protection for investors
                  • Investor rights. E.g. approval of key company decisions
                 Convertible Note. Debt that converts to equity when a next financing round occurs. As
                 Debt, typically: carries interest rate (e.g. 8%); has preference to all equity: gets paid back
                 1st; secured by assets of company
                  • Converts to equity at “same terms” as next round ..except the Note usually has
                        - Discount [10-30%] to the valuation (in the next round)
                        - Cap on valuation (in the next round); means “valuation not to exceed $__”.
                  • Terms of conversion
                        - Upon “qualified financing”, e.g. financing of a least [$2M]
                        - End of the Note’s term [18 months]
                        - At the option of investors
                 Other Key Terms. Employee option pool, board composition, dividends, anti-dilution
                 provisions, pro-rata investment rights, capped legal expenses.
     Source: NY Angels Educational Meetup
September 2011                                                                                                     23
                                                        confidential
Key Success Factors and Take-Away’s
 for attracting Seed Investment
          Pitch, Get Feedback, Revise. Repeat. No venture idea was built in a
          vacuum. The ONLY way to develop business ideas is to share them, solicit
          feedback, make adjustments, develop/refine/add and ..DO IT AGAIN!
         • Many ventures fail to gain investor attention because there are too many gaps
            (perceived and real).

          Find Good Advisors. To get good, detailed feedback and input you need to be
          talking to right people, with the right experiences: Experienced entrepreneurs
          and investors, prospective clients and partners.
         • Networking, networking, networking .

            Communication is Paramount. Potential investors (or potential employees,
            customers, etc.) usually start out knowing nothing about you or you venture.
            Getting someone up to speed: a challenge. Getting someone to write a check:
            a big challenge. At the core is effective communication.




September 2011                                                                         24
                                            confidential
Key Success Factors and Advice .continued
            Find Investors that Fit. People invest in things that they know, understand,
            have experience with. Find ones that match. [see previous pages]

          Find “Lead” Investor(s). Its critical to get one or more investors on board
          who can take the lead in driving the investment process: due diligence, term
          sheet, investor commitments, closing documents/process
         • Investors trust ..other investors. Their interests are aligned. Lead
            investors help attract additional “followers”. With Angel Groups: use available
            bios / LinkedIn to
           Understand (and Manage) the Process. You are more likely to succeed if you
           really understand what’s happening (or should be happening) For each step
           (e.g. investor search, screening, presentation, due diligence, term sheets, etc.):
         • What is happening or needs to?
         • Why? What’s the rationale?
         • Who is doing what? How do perspectives and motivations differ?
         •         now, what can I do to make it work for me?




September 2011                                                                             25
                                              confidential
Key Success Factors and Advice .continued



          Valuation (and Key Terms). Be realistic. Be Flexible. Realize this is a
          professional (not personal) discussion ; there will be back and forth. Ultimately
          the “market” sets the price/terms.
         • There is more to investment terms than valuation .Important to understand.

          Timing. Am I ready for Angel Investment?......A few probing questions:
         • Have you covered the key success factors mentioned here? Do you have a
            compiling business opportunity with huge growth potential?
         • Do you really need the money? Now? The more that you can accomplish on
            your own, the more compelling your case (and valuation) will be ..
         • Are you ready to work for a someone else? e.g. the investors, the board of
            directors
         • Fund raising is “brain damage”. It wastes valuable time that could be spent
            growing the business. Avoid it, minimize it, delay it if you can.




September 2011                                                                                26
                                             confidential
What would I like you to walk away with?
      Well, this will obviously be different depending on your past experiences and the stage of your venture
      but .


                 Better understanding of the marketplace: fundraising process,
                 sources of capital, do’s and don’ts, etc.
                 A set of specific insights that will *change* what you are doing in
                 fundraising.
                 A “to-do” list: starting point(s), actions, things to try.
                 A set of recommended resources to consult and learn more
                 from.
                 A few new relationships with others in the NYC start-
                 up/fundraising ecosystem: fellow entrepreneurs, investors, etc.
                 Answers to specific questions about fundraising that you might
                 have.
September 2011                                                                                                  27
                                                      confidential
Other Classes


        • TW Follow-on classes:

                 • The Seed Stage Pitch: the Art and Science of
                   Communication Monday 4/15 at 7PM
                 • Introduction to VCs: A Primer for Entrepreneurs
                   [Timing TBD]
                 • Start-up Strategy: Marrying Effective Strategic
                   Thinking to the Real World of Early-Stage Tech
                   [Timing TBD]

        • Other GA Classes
           • Essentials of Start-up Law (Course by WSGR) ??


September 2011                                                       28
                                        confidential
III. Additional Q&A, Feedback and Beverages

      Feedback on this class:
          What did you like most about this seminar?




          What could be added and improved to make it better?




          What other topics would you like to see a seminar conducted on ?




September 2011                                                               29
                                             confidential
Thanks!
      Thomas Wisniewski
      Contact Info

         Email: twisniewski@newyorkangels.com
         LinkedIn: http://www.linkedin.com/in/thomaswis
         Twitter: @thomaswis

          This presentation: http://www.slideshare.net/Thomaswis/

      New York Angels www.newyorkangels.com

      New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/

      Heather Miles (start-up lawyer) heather@hmileslaw.com




September 2011                                                               30
                                               confidential
Additional Slides




September 2011                            31
                           confidential
Another view of the funding “marketplace” .
           $100M
                                                                                      IPO
                                            Strategic Partners

             $10M

                                                             Venture Capital


                 $1M                                                               Banks

                                                                Angel Groups
                                     SBIR/STTRGrants
                                     Gov /State Grants

            $100K

                        Friends, Family
                            & Fools        Angel Investors


Source:                 Idea       Plan    Prototype         Beta     Sales    Profitability
Tom Stephenson, Verge

September 2011                                                                                 32
                                              confidential
Deal Volume and Stage: VC’s vs. Angels


                 Late                      VC
                                    Mostly later stage
                                       3,400 deals
                                      $0.5-1.0B per
                                          Year
                              Angels
                           49,000 deals
                         Mostly early-stage
                 Early




                          $20B per Year

September 2011                                           33
                                 confidential
Other Definitions for     . VC’s vs. Angels

                  Venture Capitalists
                  “Professional fund managers who invest
                  large pools of other people’s money for an
                  economic return.”

                  Angel Investors
                  “Rich(-ish) people who invest their own
                  money for economic and other reasons.”

                  Non-$ Value added: “Many entrepreneurs
                  have expressed to me that the value of the
                  time that angels invest .exceeds the value
     Source:
                  of their money”
     David Rose, Bill Payne

September 2011                                                 34
                                   confidential
Average Profile of an Angel
                 Age 57                                9 years investing

                 Masters degree                        10 investments

                 15 year entrepreneur                  2 exits/closures so far

                 2.7 ventures founded                  10% of wealth in angel
                                                       investments

      Also worth noting    ..within the “average” there are “newly minted”
      angels: entrepreneurs post sale of their company/ IPO.


       “Accredited Investor” (SEC definition)
          $1 million in assets (not including home) or
          $200,000 annual income in past two years

September 2011                                                                   35
                                        confidential
Annual Sources of Start-up Funding
                                                                      $22
             Venture Capital ~$.3 billion                             $20
                                                                      $18
             State Funds     ~$.5 billion                             $16
             Angel Investors ~$20 billion                             $14
                                                                      $12
                                                                      $10
                                                                       $8
             Angels: 90% of outside                                    $6
             equity for start-ups?                                     $4
                                                                       $2
                                                                       $0    1




             Friends & Family ~$60 billion
           Sources: MoneyTree, NASVF, multiple studies on informal capital


September 2011                                                                   36
                                                       confidential
New Company Formation
                 Source of Equity Funds – Typical Year


                                 500 Classic VCs

                                 1000-2000 Seed Funds

                                         >50,000 Angels

                                                       >200,000 Friends & Family

                                          500,000 Startup Companies

                        0       100,000      200,000       300,000    400,000   500,000

September 2011                                                                            37
                                                       confidential
Companies Backed by American Angels




September 2011                                         38
                                  confidential
Average = 43.6
                 Investors Per Group                                         Median = 32.5
             30

             25

             20

             15

             10

                 5

                 0
                     2 to 10    11 to 25       26 to 50           51 to 75      76 to 100       101+

                                                                                        Percent of Groups

            Source: 2009 ACA Confidence Survey and 2008 Member Directory

September 2011                                                                                              39
                                                   confidential
Average Preferred Investment Per Round - 2008
                          < $150,000

                  $150,000 - $250,000

                  $250,000 - $500,000

                  $500,000 - $750,000

                          > $750,000

                                        0        10               20   30     40       50

                                                                                      Percent of
           Source: 2009 ACA Angel Group Confidence Survey and 2008 Member Directory   Groups

September 2011                                                                                     40
                                                   confidential
Growth in Number of American Angel Groups                                                          Likely Drivers (the
                 300                                                                                        Benefits of Angel
                                                                                                            Groups)
                 250
                                                                                                            •  Shared expertise
                                                                                                               in:
                 200                                                                                          • Angel investing
                                                                                                              • Companies /
                 150                                                                                              sectors
                                                                                                              • Bus. functions
                 100                                                                                              (IT, Sales, Fin)
                                                                                                            • Scale (more
                 50                                                                                            investment $)
                                                                                                            • Deal flow (quality
                  0                                                                                            and quantity)
                       1999   2000   2001    2002    2003    2004    2005       2006   2007   2008   2009

        Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-09 data)




September 2011                                                                                                                    41
                                                                 confidential
Additional Thoughts ..

                 Lots of start-up advice out there. Lots about the art of fundraising.
                  • Huge volume of blogs, articles, Quora-posts, etc.
                  • Well        .that’s good, right? Yes.
                  • But why doesn’t it help?
                        - Overwhelming
                        - Conflicting
                        - Not specific
                        - Not enough context
                        - It’s just advice, ideas, ..not interactive, not experience.
                  • Need to understand the “why” behind it all and adapt it to your venture, your situation.

                 Beware of simple answers, absolutes. As you are reading and listening to all these
                 opinions, data sources
                  • For any “fact” “rule” “truth” if you don’t understand how it is both true/false, you don’t
                    really understand the point.
                        - Under what circumstances is this “rule for fundraising” “true”? Where does it apply
                          well With whom?
                        - How and when is it not true (Or less true)?




September 2011                                                                                                   42
                                                       confidential

More Related Content

What's hot

Sources of Seed-Stage Capital: A Framework
Sources of Seed-Stage Capital:  A FrameworkSources of Seed-Stage Capital:  A Framework
Sources of Seed-Stage Capital: A Framework
Thomas Wisniewski
 

What's hot (20)

Sources of Seed-Stage Capital: A Framework
Sources of Seed-Stage Capital:  A FrameworkSources of Seed-Stage Capital:  A Framework
Sources of Seed-Stage Capital: A Framework
 
Angel Investing & Incubators: Lessons Learned
Angel Investing & Incubators: Lessons Learned Angel Investing & Incubators: Lessons Learned
Angel Investing & Incubators: Lessons Learned
 
SVMN October 2007 Meeting - Calvert Foundation & eBay Microplace (Shari Beren...
SVMN October 2007 Meeting - Calvert Foundation & eBay Microplace (Shari Beren...SVMN October 2007 Meeting - Calvert Foundation & eBay Microplace (Shari Beren...
SVMN October 2007 Meeting - Calvert Foundation & eBay Microplace (Shari Beren...
 
Guide to nyc techv3
Guide to nyc techv3Guide to nyc techv3
Guide to nyc techv3
 
Building Startup Ecosystems (Guadalajara, July 2015)
Building Startup Ecosystems (Guadalajara, July 2015)Building Startup Ecosystems (Guadalajara, July 2015)
Building Startup Ecosystems (Guadalajara, July 2015)
 
Moneyball: A Quantitative Approach to Angel Investing (DC - Sept 2012)
Moneyball: A Quantitative Approach to Angel Investing (DC - Sept 2012)Moneyball: A Quantitative Approach to Angel Investing (DC - Sept 2012)
Moneyball: A Quantitative Approach to Angel Investing (DC - Sept 2012)
 
VC Evolution: Software Eats Private Equity
VC Evolution: Software Eats Private EquityVC Evolution: Software Eats Private Equity
VC Evolution: Software Eats Private Equity
 
VC Evolution: Geeks Got Next
VC Evolution: Geeks Got NextVC Evolution: Geeks Got Next
VC Evolution: Geeks Got Next
 
Techstars Patriot Boot Camp Fundraising Preso
Techstars Patriot Boot Camp Fundraising PresoTechstars Patriot Boot Camp Fundraising Preso
Techstars Patriot Boot Camp Fundraising Preso
 
Techstars Patriot Boot Camp 2015
Techstars Patriot Boot Camp 2015Techstars Patriot Boot Camp 2015
Techstars Patriot Boot Camp 2015
 
When & How to Raise Venture Capital
When & How to Raise Venture CapitalWhen & How to Raise Venture Capital
When & How to Raise Venture Capital
 
Building Startup Ecosystems (Baku, Nov 2014)
Building Startup Ecosystems (Baku, Nov 2014)Building Startup Ecosystems (Baku, Nov 2014)
Building Startup Ecosystems (Baku, Nov 2014)
 
Moneyball: A Quantitative Approach to Angel Investing (Austin, TX - Aug 2012)
Moneyball: A Quantitative Approach to Angel Investing (Austin, TX - Aug 2012)Moneyball: A Quantitative Approach to Angel Investing (Austin, TX - Aug 2012)
Moneyball: A Quantitative Approach to Angel Investing (Austin, TX - Aug 2012)
 
Raising a Seed Round from Lerer Ventures
Raising a Seed Round from Lerer VenturesRaising a Seed Round from Lerer Ventures
Raising a Seed Round from Lerer Ventures
 
Corporate VC Innovation: Strategies That Don't Suck
Corporate VC Innovation: Strategies That Don't SuckCorporate VC Innovation: Strategies That Don't Suck
Corporate VC Innovation: Strategies That Don't Suck
 
Skip the J-Curve: An Intro to Venture Capital Secondary
Skip the J-Curve: An Intro to Venture Capital SecondarySkip the J-Curve: An Intro to Venture Capital Secondary
Skip the J-Curve: An Intro to Venture Capital Secondary
 
The value-add of VCs
The value-add of VCsThe value-add of VCs
The value-add of VCs
 
Women Helping Women in Entrepreneurship at MassChallenge
Women Helping Women in Entrepreneurship at MassChallengeWomen Helping Women in Entrepreneurship at MassChallenge
Women Helping Women in Entrepreneurship at MassChallenge
 
Building Startup Ecosystems & The Rise of Micro-VCs
Building Startup Ecosystems & The Rise of Micro-VCsBuilding Startup Ecosystems & The Rise of Micro-VCs
Building Startup Ecosystems & The Rise of Micro-VCs
 
The Lean Investor: Lots of Little Bets (Melbourne, Dec 2014)
The Lean Investor: Lots of Little Bets (Melbourne, Dec 2014)The Lean Investor: Lots of Little Bets (Melbourne, Dec 2014)
The Lean Investor: Lots of Little Bets (Melbourne, Dec 2014)
 

Similar to General Assembly Class: Insiders Guide to Seed Fundraising

The 5 ps to finding capital and attracting investors to your business
The 5 ps to finding capital and  attracting investors to your business The 5 ps to finding capital and  attracting investors to your business
The 5 ps to finding capital and attracting investors to your business
AP DealFlow
 
Entrepreneurial ecosystem p5 angels
Entrepreneurial ecosystem p5   angelsEntrepreneurial ecosystem p5   angels
Entrepreneurial ecosystem p5 angels
Michael Burcham
 
Philip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
Philip Stehlik at TechTalks.ph - Fundraising in Silicon ValleyPhilip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
Philip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
Philip Stehlik
 
Getting investor ready
Getting investor readyGetting investor ready
Getting investor ready
Mark MacLeod
 

Similar to General Assembly Class: Insiders Guide to Seed Fundraising (20)

Angel Investing: Some of the Important Rules Have Changed
Angel Investing: Some of the Important Rules Have ChangedAngel Investing: Some of the Important Rules Have Changed
Angel Investing: Some of the Important Rules Have Changed
 
Understanding VCs
Understanding VCsUnderstanding VCs
Understanding VCs
 
Spjimr Social Ventures Contest Jan 21,2012
Spjimr Social Ventures Contest Jan 21,2012Spjimr Social Ventures Contest Jan 21,2012
Spjimr Social Ventures Contest Jan 21,2012
 
Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell) Understanding and Making the Most of Business Angels (Alan Barell)
Understanding and Making the Most of Business Angels (Alan Barell)
 
128 Icg 10.2009
128 Icg 10.2009128 Icg 10.2009
128 Icg 10.2009
 
angel and incubator lessons - Dave McClure.pdf
angel and incubator lessons - Dave McClure.pdfangel and incubator lessons - Dave McClure.pdf
angel and incubator lessons - Dave McClure.pdf
 
Effective Communication with Angel Investors
Effective Communication with Angel InvestorsEffective Communication with Angel Investors
Effective Communication with Angel Investors
 
Getting Your Venture "Game Ready" for Funding
Getting Your Venture "Game Ready" for FundingGetting Your Venture "Game Ready" for Funding
Getting Your Venture "Game Ready" for Funding
 
The 5 ps to finding capital and attracting investors to your business
The 5 ps to finding capital and  attracting investors to your business The 5 ps to finding capital and  attracting investors to your business
The 5 ps to finding capital and attracting investors to your business
 
Entrepreneurial ecosystem p5 angels
Entrepreneurial ecosystem p5   angelsEntrepreneurial ecosystem p5   angels
Entrepreneurial ecosystem p5 angels
 
Venture Capital Financing Basics
Venture Capital Financing BasicsVenture Capital Financing Basics
Venture Capital Financing Basics
 
Angels, VCs and Fundraising in China 2010
Angels, VCs and Fundraising in China 2010Angels, VCs and Fundraising in China 2010
Angels, VCs and Fundraising in China 2010
 
Intro To Portland Ten
Intro To Portland TenIntro To Portland Ten
Intro To Portland Ten
 
Angel Funding Part 2 - Due Diligence April 2018
Angel Funding Part 2 - Due Diligence April 2018Angel Funding Part 2 - Due Diligence April 2018
Angel Funding Part 2 - Due Diligence April 2018
 
Inside The Mind Of The Venture Capitalist: An Introduction to Venture Capital
Inside The Mind Of The Venture Capitalist: An Introduction to Venture CapitalInside The Mind Of The Venture Capitalist: An Introduction to Venture Capital
Inside The Mind Of The Venture Capitalist: An Introduction to Venture Capital
 
How To Raise Your First Round of Capital
How To Raise Your First Round of CapitalHow To Raise Your First Round of Capital
How To Raise Your First Round of Capital
 
Philip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
Philip Stehlik at TechTalks.ph - Fundraising in Silicon ValleyPhilip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
Philip Stehlik at TechTalks.ph - Fundraising in Silicon Valley
 
Getting investor ready
Getting investor readyGetting investor ready
Getting investor ready
 
Tech inno3.0
Tech inno3.0Tech inno3.0
Tech inno3.0
 
[ACA webinar] Investor Experiences with Online Equity Platforms
[ACA webinar] Investor Experiences with Online Equity Platforms[ACA webinar] Investor Experiences with Online Equity Platforms
[ACA webinar] Investor Experiences with Online Equity Platforms
 

Recently uploaded

一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
atedyxc
 
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
atedyxc
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdf
allysaamping
 
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
atedyxc
 
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
atedyxc
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
atedyxc
 
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
atedyxc
 

Recently uploaded (20)

Indirect tax .pptx Supply under GST, Charges of GST
Indirect tax .pptx  Supply under GST, Charges of GSTIndirect tax .pptx  Supply under GST, Charges of GST
Indirect tax .pptx Supply under GST, Charges of GST
 
International economics – 2 classical theories of IT
International economics – 2 classical theories of ITInternational economics – 2 classical theories of IT
International economics – 2 classical theories of IT
 
New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024New Stratus Corporate Presentation May 2024
New Stratus Corporate Presentation May 2024
 
Maximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice DiscountingMaximize Your Business Potential with Falcon Invoice Discounting
Maximize Your Business Potential with Falcon Invoice Discounting
 
一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
一比一原版(UC Berkeley毕业证书)加利福尼亚大学伯克利分校毕业证成绩单学位证书
 
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
一比一原版(Cornell毕业证书)康奈尔大学毕业证成绩单学位证书
 
L1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdfL1 2024 Prequisite QM persion milad1371.pdf
L1 2024 Prequisite QM persion milad1371.pdf
 
Abhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and LeadershipAbhay Bhutada: A Journey of Transformation and Leadership
Abhay Bhutada: A Journey of Transformation and Leadership
 
wiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdfwiley-cpa-review-focus-notes revieww.pdf
wiley-cpa-review-focus-notes revieww.pdf
 
Economics - Development 01 _ Handwritten Notes.pdf
Economics - Development 01 _ Handwritten Notes.pdfEconomics - Development 01 _ Handwritten Notes.pdf
Economics - Development 01 _ Handwritten Notes.pdf
 
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
一比一原版(WashU毕业证书)圣路易斯华盛顿大学毕业证成绩单学位证书
 
how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.how do i convert pi coins to usdt easily.
how do i convert pi coins to usdt easily.
 
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
一比一原版(Concordia毕业证书)康卡迪亚大学毕业证成绩单学位证书
 
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
一比一原版(UPenn毕业证书)宾夕法尼亚大学毕业证成绩单学位证书
 
How can I withdraw my pi coins to real money in India.
How can I withdraw my pi coins to real money in India.How can I withdraw my pi coins to real money in India.
How can I withdraw my pi coins to real money in India.
 
how do i sell pi coins in Pakistan at the best rate.
how do i sell pi coins in Pakistan at the best rate.how do i sell pi coins in Pakistan at the best rate.
how do i sell pi coins in Pakistan at the best rate.
 
how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.how do I cash out pi network coin in 2024.
how do I cash out pi network coin in 2024.
 
What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024What exchange can I sell my pi coins in 2024
What exchange can I sell my pi coins in 2024
 
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
一比一原版(UW毕业证书)华盛顿大学毕业证成绩单学位证书
 
Human Capital: Education and Health in Economic Development
Human Capital:  Education and Health      in Economic DevelopmentHuman Capital:  Education and Health      in Economic Development
Human Capital: Education and Health in Economic Development
 

General Assembly Class: Insiders Guide to Seed Fundraising

  • 1. To all who attended Wed night at GA: Thanks! Hope you enjoyed it and gained something. Feedback welcome. FYI .The next class I will teach at GA is: The Seed Stage Pitch: the Art and Science of Good Communication Monday 4/15 at 7PM. Link/follow me on LinkedIn and/or Twitter for updates, etc. (Page 31 of this deck has my details) .Cheers, -TW Seed Fundraising for Tech Entrepreneurs: Mastering the Art and the Science Insights on successful fundraising from an active angel investor and fellow entrepreneur General Assembly Seminar Tom Wisniewski RosePaul Investments Wednesday March 13, 2013
  • 2. Agenda I. Kick-off and Introduction II. Seed Fundraising III. Additional Q&A, Feedback and Beverages September 2011 1 confidential
  • 3. I. Kick-Off and Introduction Seminar Rationale: Why are we hear? Based on my experiences and feedback from other investors and entrepreneurs . Raising money is difficult .especially for early stage ventures. Why? At least part of the answer is: • The “market” for early stage investment is complex, nuanced and can be “bewildering” .especially for 1st timers. • Finding investors is difficult getting investors to write a check (can seem) nearly impossible: “1% of start-ups get funded” • Lots of “noise” no shortage of advice What will help? • Understand the marketplace, people and processes that are at work • Leverage existing expertise and network (thoughtfully). • Interpret and utilize the wealth of resources that already exist. • Improve / adapt your venture and approach. • ..Become a “student” of the art and science of fundraising (and entrepreneurship generally) September 2011 2 confidential
  • 4. What would I like you to walk away with? Well, this will obviously be different depending on your past experiences and the stage of your venture but . Better understanding of the marketplace: fundraising process, sources of capital, do’s and don’ts, etc. A set of specific insights that will *change* what you are doing in fundraising. A “to-do” list: starting point(s), actions, things to try. A set of recommended resources to consult and learn more from. A few new relationships with others in the NYC start- up/fundraising ecosystem: fellow entrepreneurs, investors, etc. Answers to specific questions about fundraising that you might have. September 2011 3 confidential
  • 5. Tom Wisniewski: My background Born in NYC; grew-up in Montclair, NJ Physics and Philosophy major undergrad (Clark University); MBA at Tuck School (Dartmouth) 1st Job: Programmer at Morgan Stanley then moved to Investment Banking After B-school: joined a start-up management consulting firm Mitchell Madison Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing, private equity/VC clients (1993 to 2000) Walker Digital: helped set-up and run an early “internet incubator” (2000) Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio company strategy and new investments; joined the management team of two companies Currently: • Early stage investor and advisor to start-ups • Investor and advisor to VC and PE funds • Member and director at New York Angels Recent Investments: Sociocast (social/behavioral analytics), LiveLook (Saas, live collaboration, co-browsing); Movio (Digital “RedBox” ); Bizodo (Saas, paperwork automation); Social Starts (seed fund for start-ups); Brooklyn Bridge Ventures (Charlie O’Donnell); Entrepreneurs Roundtable Accelerator (ERA) September 2011 4 confidential
  • 6. Additional Introductions Ellie Wheller (Greycroft) Charlie O’Donnell (Brooklyn Bridge Ventures) Heather Miles (Venture Lawyer Extraordinaire) Other Guests September 2011 5 confidential
  • 7. So .what questions do you have about Seed fundraising? Demitri Source of capital, MVP, stage need to be Preyas What do I have for a investor discussion Ranjan level of detail e.g numbers Shashi .Friend and Family, timeline Wendy .Best way meet/into to investors John .how much to Discolose, NDAs Paul .Persistance and annoying .where to get details/research, full business case Darrel .Patents and IP John .prof/services to product/venture Pierre .valuation .See market for Med tech Shefali .legal structure: angel vs. VC Lannie Non-tech, how different? .Accedicated Bryan .Debt vs. Equity September 2011 6 confidential
  • 8. II. Seed Fundraising Sources of Investment: Seed Fundraising, Angels and VC’s Earlier Stage “Seed” Later Stage “You” Friends and aka Bootstrapped Angel Investment Venture Capital Family “Seed” VC “Traditional Series A” VC Round Size $: • $10’s of K • $100’s of K • $500K to • $5M-$15M to $100K to $1M+ $1.5M Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K • $3M – $5M Valuation (Pre- • < $1 M • $1 – 5 M • $5-10 M • $10 – 25 M Mon): Stage (Pre-Round): • An idea, initial/rough • Detailed b-plan, • Significant variation among firms • Expected to b-plan • Key founders (bus & tech) full-time but . Angel req. +: have: • Initial founders, key • Prototype/alpha done and tested, - Anchor clients on board, revenue advisors • Some piloting (paying?) growth (B2B), • Path to ??? customers, some revenues?, - Growing base of users, with strong • All legal documentation in place, usage trends (B2C) board of directors - ..Growth potential! Credible • Path to break-even or next funding path to $100M Rev • Don’t Expect: • $ Rev, Customers, • Income (e.g. cash flow positive); • Income (e.g. cash flow positive) Minimum Viable all key management ; completely Product (MVP); full developed business model (e.g. legal documentation understand it will change) Who/what are • People you already • Experienced early stage • Firm with multiple professionals that they? know, that trust investors (individuals or a group) raises, invests and manages you, and (maybe) • Accredited Investors. individual funds (other people’s $) understand your • Angel investing is not their “job”; • Working F/T (this is their job ) venture may not be F/T endeavor • E.g.: Greycroft, RRE, Union Square September 2011 • E.g.: NY Angels, GoldenSeeds 7 confidential
  • 9. Who are these “Angels”? What do they look like? Experienced, successful entrepreneurs: frequently multiple exits • Some from “tech-start-ups” some from other businesses • Usually some link to Successful “corporate” business people: CEO or CxO-types Older: most are in the 40-60 age group. But there are also notable angels in their 20’s and 30’s e.g. newly minted start-up millionaires 3 – 10+ Angel Investments ~10% of investible capital in Angel Investments Differ *widely* in: Industry/Functional Experience, Investment Expience, Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal do’s/don’ts and hot buttons. Lists? Not many. All are partial. AngelList? Gust? Other? September 2011 8 confidential
  • 10. Active, NYC Early-Stage Tech Investors Active VCs in NYC (TW list and opinions) Investment Size by Investor Type • Lerer Ventures (Seed) • Series A VC: Definitely • Quotidien Ventures (Seed) >$1M, $3-5 M sweet spot • RRE Ventures (Seed) • Seed VC: <$1M , $250K- • First Round (Seed) 750K frequently • Brooklyn Bridge Ventures (Seed) • Super Angels / Micro: up • iNovia Capital (Seed) to $250K? , lots of $25’s – • Union Square Ventures (Series A & B) 100K’s ? • Greycroft (Series A & B) • DFJ Gotham (Series A & B) • Angles: <$100K, typically $10-50K • FirstMark Capital • Village Ventures Angels, Super Angels, Angel Groups and Micro VCs: [see links below] Angel/VC List: https://docs.google.com/spreadsheet/ccc?key=0Ap5XbqUM9nICdG40LXVVamRyN19zZHlTU3E2SmdDTkE#gid=0 . NYC VC: http://under30ceo.com/top-new-york-based-venture-capitalists-you-should-know/ Angel Groups: https://gust.com/find-investors?keywords=&sort=distance&grouptype=ANGEL_GROUP&region=STATE September 2011 9 confidential
  • 11. Who are the “right” investors? Where is there a “fit”? Just do it? Just go pitch some investors? ..Nope. Fit is critical. • Wrong question: How do I pitch “investors”? • Right question: Who are the “right” investors? .*then* . How do I pitch this specific, individual investor? Reality Check. As a general rule, “people invest in things that they understand and have experience with” • Find investors that come from industries, sectors, business models etc. that are same/similar to your venture and the customer markets it serves. • If I have never invested in Caribbean real estate, oil wells .or communication hardware, it is very unlikely that I will do it with you. • For Angels/Angel Groups: use online bio’s / LinkedIn / AngelList to identify likely “good fit” Angels • For VCs: Find the right person at the fund; Individuals at the fund focus on different sectors. The web site often spells it out. Thought Exercise: • “What would the “perfect” investor look like?” • he/she probably doesn’t exist but this will help you : - target, prioritize, know one when you see them” - To be specific (and effective!) when asking for referrals September 2011 10 confidential
  • 12. How to “get” a pitch meeting? Find .Fit? Does this investor have “fit”? Do they invest in ventures like mine? ......if not, then move on. (or at least prioritize accordingly) Prep! • Know your audience. What have they invested in? Recently? What can you find out about their background? Interests? Hot buttons? - How? Duh .Google: Blogs, Quora, YouTube, CrunchBase; talk to people they know, better talk to those they have invested in. • Create a good pitch: - What would they want to know? - How can I say what’s unique/ compelling - Make it easy. Think “executive summary” and KISS (Keep It Simple Stupid) - adapt pitch to fit the situation. • Don’t be lazy; invest some time. Connect. The hard part. • Avoid “cold-calls”; look for “warm introductions” • Networking. Who do you know that knows them? • Find them at an event. (Email sucks!) Tips on getting a meeting: http://www.quora.com/David-S-Rose-1/How-does-someone-get-a-meeting-with-angel-investor-David-S-Rose September 2011 11 confidential
  • 13. How to “get” a pitch meeting? Wrong Question Right Question: How do I build a relationship first? Why? • Pitching by its very nature can be awkward. “This guy wants something from me.” • Having a pitch be the first thing someone hears from you can be off-putting. “Do I know you?” • Most investors mean-well, and would like to help but - they are real busy - its very challenging to understand new ventures quickly - Its tough to say “no” (easy to avoid, or say maybe) Solution: Build a relationship before you need to pitch. OK, How? • Give, don’t Ask: what can you do for them? • “Ask for advice, not money” . Turn people into advisors ..then investors. • Debate / Discuss a topic, Ask opinion about X. • Find ways to “show” rather than “tell”: show me your smart, don’t September 2011 tell me your smart confidential 12
  • 14. What do I say? How do I say it? Communication is critical. Why? Potential investors (or potential employees, customers, etc.) usually start out knowing nothing about you or your venture. • Getting someone “from 0 to 60 mph” is very challenging: too much to say, don’t know where to start. • If you loose someone’s interest in the “first minute” , you usually loose them. • If you don’t understand someone's “perspective” e.g. expertise (they have 6 Saas investments vs. they can’t spell Saas) you will be ineffective - People generally understand things by association (to things they know). - That’s why so many start-up taglines are “XYZ corp is the Uber for the ABC industry” Principles. Principles of good communication are the same. Much of the content will be the same; the format (e.g. pitch deck vs. elevator pitch) and level of detail will vary by Situation. • A few principles of effective communication: Audience, Messages, Storyline, Goals. • Messages and Storyline will tend to be similar across formats (e.g. deck vs. 1- pager). However good communication is tailored to the Situation. • Situation. It’s the Audience, Time Allowed, Relationship, Past Communication, Goals • Mostly, level of detail varies. September 2011 13 confidential
  • 15. Common “Forms” of Pitch Communication. What are they? Which should I use? “Document” Simplistic Description Common Situation/ Use 1-pager “1 pager Exec Summary, Word • Email attachment or handout doc” • Online platforms e.g. Gust, AngelList Email Brief “Teaser paragraph of text / bullets” • “In the intro email” (w/ attachments) Business Plan “10-40 page Word doc” • Detailed discussions (similar use) • Stand-alone, due diligence Pitch Deck “10 page PowerPoint • “15 minute stand-up presentation” presentation” • Email attachement Long-Form Pitch “20-40 page version of 10 pager; • “60-90 minute follow-up meeting with Deck PowerPoint presentation” smaller group” Elevator Pitch “No document, just you talking for • Your quick intro after you meet 60 seconds” someone in person “Video” Pitch “10 minute video of your deck/ • Email attachment demo w/ you voice” • Online platforms e.g. Gust, AngelList Due Diligence Docs “All the detailed spreadsheets, • For detailed discussions with data, etc. that back-up your pitch” interested investors, usually post- e.g. Financial Projections, Sales term-sheet Funnel, Legal Docs • Online platforms e.g. Gust, AngelList The Good News: • you don’t need to have all of them (maybe ever, certainly 1 or 2 to start is fine) • much of the content, messages, storylines can be shared and reused September 2011 Preparing thoughtful docs • refines your thinking and your venture. 14 confidential
  • 16. Good Pitch Deck From “Triple Play” of VC Presentations by Adapted from “10 Slides to an Awesome Mark Suster (former entrepreneur, now VC) Pitch” by Dave McClure, 500 Start-Ups Slide 1 – Team Bio 1. Elevator Pitch Slide 2 – 50k foot view of your company 2. The Problem Slide 3 – Problem Definition 3. Your Solution (Demo Here!) Slide 4 – How do you solve the problem? 4. Market Size Demo Web Version and 5. Business Model ($) a Demo Video Example 6. Proprietary Tech Slide 5 – Market Sizing 7. Competition Slide 5 warning: (Market Sizing Pitfalls) 8. Marketing Plan Slide 6 – Competition 9. Team / Hires Slide 7 – Customer Adoption / Traction 10. Money / Milestones Slide 8 – Team Slide 9 – Financial projections Slide 10 – Use of Proceeds Slide 11 – Fund raising process / Next steps Appendix – Back-up slides How to deal with the dreaded question of valuation? http://www.slideshare.net/dmc500h ats/how-to-pitch-a-vc-sept-2010 http://www.bothsidesofthetable.com/pitching-a-vc/ September 2011 15 confidential
  • 17. What does a successful investor pitch meeting look like? From “Triple Play” of VC Presentations by Mark Suster Act I: Discussion. The warm-up. Share. Listen. Build rapport. Act II: Pitch Act III: Demo This one opinion. One order of things. Everything varies by Situation (e.g. Audience). You will adapt based on your presentation “style” and comfort level. http://www.bothsidesofthetable.com/2009/09/12/do-you-need-a-powerpoint-deck-for-a-vc-meeting/ September 2011 16 confidential
  • 18. What do investors care about? What do the want to see? My (TW) List for What do VC’s want? By Many, many others Evaluation Sheetal Shah • Elements of the B- 1) Market • Big Opportunities / Big Plan Opportunity Visions • Lots of personal 2) Product • Idea/Founder preference 3) Traction Authenticity 4) Team • Founder Profile: Missionary Passion, Balanced Ego, Trust • Objectivity • A-Teams http://upstart.bizjournals.com/resources/author/2012/07/19/what-do-venture-capitalists-want.html?page=all September 2011 17 confidential
  • 19. Angel Groups: How do they differ? Member Profile: What does the “typical” member look like? What industries, sectors, companies do they come from? Sector Focus. What types of companies are they investing in? • Internet, software (vs. Hardware vs. Pharma / Bio-tech vs. Clean/Green-tech) • B2C vs. B2B, Saas, Cloud-based, Content-based • How does their Portfolio compare to their stated strategy? • What is their “sweet spot”? Vs. their “also do”? Stage. What is the target “stage” for prospective investments? What completed milestones and characteristics are they looking to see? • Revenues vs. Pre-Revenue? Product/Tech development? MVP complete? • Customer/market validation? Anchor accounts? User levels? Valuations/ Investment Size: Pre-Money valuation range and size initial investment • “We typically invest $200 – 500K at valuations in the $1-3 Million level.” Group Structure / Investment Decisions. How is the Angel Group structured? Most importantly, how are investment decisions made? Who makes them? • Network: Angel Group runs the process, individuals make independent “opt in” decisions to invest on a deal-by-deal basis. • Democratic: Angels commit $ to the group, $ decisions are made based on voting • Fund structure: Angels commit $ to the group, and an “investment committee” makes all/most funding decisions. Additional Opt-in co-investments available. September 2011 18 confidential
  • 20. NY Angels Profile www.newyorkangels.com Member Profile: ~80 investor/members; several early-stage funds; Member backgrounds are generally representative of the tech / entrepreneurs / industries in NYC: software, e-commerce, ad-tech, finance, media Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC Area. Stage. Mostly early stage (with some customers/revs), some seed stage (pre-revenue) Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M; investments tend to range from $250K to $1M+; • For larger rounds, NYA often leads the deal and helps find the rest of the capital by sharing/syndicating the deal with other Angel Groups Group Structure / Investment Decisions. NYA core structure is as a group of individual investors. Individual investors “opt in” to deals and make their own investment decisions. • Typical member invests $25-50K in a deal. • In addition to the core “opt-in” model, NYA has just closed a small seed fund that will operate in parallel (using a “democratic model” for investment decisions) History/Background. NYA has invested $45M+ in 70+ companies. • We are very active in the NYC entrepreneurial / early-stage ecosystem September 2011 19 confidential
  • 21. A “Typical” Angel Group Process for Entrepreneurs 1. Find the right group(s) to pitch What is typical success rate for funding? 2. Apply online • Industry data for angel groups and VCs: 3. Get invited to screening 0.5% - 2% of companies submitting 4. Meet with screening panel b-plans get funded What can increase the 5. Get invited to present speed and success rate? 6. Present to full group(s) • Member referral • Investor referral 7. Get invited to due diligence session • Lead Investor /Term Sheet 8. Deep dive w/ interested investors • Have good pitch and due diligence docs 9. Get presented a draft term sheet • Well practiced, thoughtful pitch 10. Negotiate the term sheet September 2011 20 confidential
  • 22. Variations on the Theme: Other Players “Super Angel” (vs. Angels, Angel Groups). Sophisticated angel investor with a large portfolio of early stage investments (30? 50?) and that is investing frequently (10 + per year). E.g. David Rose, Fabrice Grinda Microfund or Micro VC Fund. Small VC fund ($1-10 M) often run by a single person typically making “angel” size investments in early stage companies. Seed Fund. VC fund focused on “seed” (aka Angel) stage investments: often pre-revenue, pre-product. Some VC’s that typically invest in “Series A” rounds will reserve a portion of their fund for seed investments: e.g. $250 – 750K investments at $1-5 Million valuations Incubator/Accelerator. Entity that provides non-monetary support/services (in addition to $’s) to early stage ventures. Typical support/services can include: space, IT infrastructure, shared admin service, advice/feedback, introductions/networking. Public vs. private, independent vs. captive. Examples: TechStars, ER Accelerator, DreamIT, Y-Combinator Strategic Partner/Investor. Some operating companies will invest in ventures. Typically it is in an industry/ sector / product-space similar to theirs (sometime with an eye toward potential acquisition in the future) Crowd Funding Platforms. Currently this is financing via donation or “pre-sale” of products. Equity financing under JOBS Act is TBD. Not obvious this will be a good match for most Tech AngelList. Similar to an angel group, but without centralized control. More of a open “marketplace” of individual investors and ventures to facilitate funding. Gust. Software platform that most angel groups utilize (and many small VC’s) to run their investment process and connect angel groups together to share deals. September 2011 21 confidential
  • 23. Legal Primer for Start-ups: What’s Important? The 5 W's + 1H of Formation - When to form (timing/tax issues? What to form (choice of entity)? Where to form (choice if jurisdiction?) Why to form (tax and legal issues)? Who to form with (co-founder equity and vesting)? How to Form (DIY v. lawyer) IP 101 - Overview of intellectual property law: • Government filings and timing (Trademark, Patents) • Contractual IP law (PIIAs, licensing agreements) Advisory board 101s - How important, what is appropriate compensation - I find most companies think the advisory board is more important than it is. I also have found an increase in charlatan "advisors" who ask for a lot of equity and have NO connection to the VC world or have any value to add. Deal terms - Debt v. Equity. • Debt - How notes work and what terms matter (valuation and cap)? • Equity - Common v. Preferred Stock features. Board structure. Source: Heather Miles heather@hmileslaw.com September 2011 22 confidential
  • 24. Investor Perspective: Notes vs. Preferred Equity This is really the subject of a separate dedicated class. That said . History. Preferred Equity is standard for both Angel/Seed and VC (Series A, B, etc.). Convertible Notes were used as a “bridge” to a [reasonably well defined, high probability] upcoming financing. • Now: Convertible Debt much more popular at Angel/Seed round Preferred Equity. Equity (stock) that has defined “preferences” over common stock. • Establishes a value for the company e.g. [$3.5M] pre-money valuation • Liquidation Preferences. Most commonly used is “non-participating preferred” aka “straight preferred”. E.g. a [1x] liquidation preference. Means investors get their invested money back plus [1x] before common equity holders. In the event of success, everyone converts to common and shares pari passu. Liquidation preference is really downside protection for investors • Investor rights. E.g. approval of key company decisions Convertible Note. Debt that converts to equity when a next financing round occurs. As Debt, typically: carries interest rate (e.g. 8%); has preference to all equity: gets paid back 1st; secured by assets of company • Converts to equity at “same terms” as next round ..except the Note usually has - Discount [10-30%] to the valuation (in the next round) - Cap on valuation (in the next round); means “valuation not to exceed $__”. • Terms of conversion - Upon “qualified financing”, e.g. financing of a least [$2M] - End of the Note’s term [18 months] - At the option of investors Other Key Terms. Employee option pool, board composition, dividends, anti-dilution provisions, pro-rata investment rights, capped legal expenses. Source: NY Angels Educational Meetup September 2011 23 confidential
  • 25. Key Success Factors and Take-Away’s for attracting Seed Investment Pitch, Get Feedback, Revise. Repeat. No venture idea was built in a vacuum. The ONLY way to develop business ideas is to share them, solicit feedback, make adjustments, develop/refine/add and ..DO IT AGAIN! • Many ventures fail to gain investor attention because there are too many gaps (perceived and real). Find Good Advisors. To get good, detailed feedback and input you need to be talking to right people, with the right experiences: Experienced entrepreneurs and investors, prospective clients and partners. • Networking, networking, networking . Communication is Paramount. Potential investors (or potential employees, customers, etc.) usually start out knowing nothing about you or you venture. Getting someone up to speed: a challenge. Getting someone to write a check: a big challenge. At the core is effective communication. September 2011 24 confidential
  • 26. Key Success Factors and Advice .continued Find Investors that Fit. People invest in things that they know, understand, have experience with. Find ones that match. [see previous pages] Find “Lead” Investor(s). Its critical to get one or more investors on board who can take the lead in driving the investment process: due diligence, term sheet, investor commitments, closing documents/process • Investors trust ..other investors. Their interests are aligned. Lead investors help attract additional “followers”. With Angel Groups: use available bios / LinkedIn to Understand (and Manage) the Process. You are more likely to succeed if you really understand what’s happening (or should be happening) For each step (e.g. investor search, screening, presentation, due diligence, term sheets, etc.): • What is happening or needs to? • Why? What’s the rationale? • Who is doing what? How do perspectives and motivations differ? • now, what can I do to make it work for me? September 2011 25 confidential
  • 27. Key Success Factors and Advice .continued Valuation (and Key Terms). Be realistic. Be Flexible. Realize this is a professional (not personal) discussion ; there will be back and forth. Ultimately the “market” sets the price/terms. • There is more to investment terms than valuation .Important to understand. Timing. Am I ready for Angel Investment?......A few probing questions: • Have you covered the key success factors mentioned here? Do you have a compiling business opportunity with huge growth potential? • Do you really need the money? Now? The more that you can accomplish on your own, the more compelling your case (and valuation) will be .. • Are you ready to work for a someone else? e.g. the investors, the board of directors • Fund raising is “brain damage”. It wastes valuable time that could be spent growing the business. Avoid it, minimize it, delay it if you can. September 2011 26 confidential
  • 28. What would I like you to walk away with? Well, this will obviously be different depending on your past experiences and the stage of your venture but . Better understanding of the marketplace: fundraising process, sources of capital, do’s and don’ts, etc. A set of specific insights that will *change* what you are doing in fundraising. A “to-do” list: starting point(s), actions, things to try. A set of recommended resources to consult and learn more from. A few new relationships with others in the NYC start- up/fundraising ecosystem: fellow entrepreneurs, investors, etc. Answers to specific questions about fundraising that you might have. September 2011 27 confidential
  • 29. Other Classes • TW Follow-on classes: • The Seed Stage Pitch: the Art and Science of Communication Monday 4/15 at 7PM • Introduction to VCs: A Primer for Entrepreneurs [Timing TBD] • Start-up Strategy: Marrying Effective Strategic Thinking to the Real World of Early-Stage Tech [Timing TBD] • Other GA Classes • Essentials of Start-up Law (Course by WSGR) ?? September 2011 28 confidential
  • 30. III. Additional Q&A, Feedback and Beverages Feedback on this class: What did you like most about this seminar? What could be added and improved to make it better? What other topics would you like to see a seminar conducted on ? September 2011 29 confidential
  • 31. Thanks! Thomas Wisniewski Contact Info Email: twisniewski@newyorkangels.com LinkedIn: http://www.linkedin.com/in/thomaswis Twitter: @thomaswis This presentation: http://www.slideshare.net/Thomaswis/ New York Angels www.newyorkangels.com New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/ Heather Miles (start-up lawyer) heather@hmileslaw.com September 2011 30 confidential
  • 33. Another view of the funding “marketplace” . $100M IPO Strategic Partners $10M Venture Capital $1M Banks Angel Groups SBIR/STTRGrants Gov /State Grants $100K Friends, Family & Fools Angel Investors Source: Idea Plan Prototype Beta Sales Profitability Tom Stephenson, Verge September 2011 32 confidential
  • 34. Deal Volume and Stage: VC’s vs. Angels Late VC Mostly later stage 3,400 deals $0.5-1.0B per Year Angels 49,000 deals Mostly early-stage Early $20B per Year September 2011 33 confidential
  • 35. Other Definitions for . VC’s vs. Angels Venture Capitalists “Professional fund managers who invest large pools of other people’s money for an economic return.” Angel Investors “Rich(-ish) people who invest their own money for economic and other reasons.” Non-$ Value added: “Many entrepreneurs have expressed to me that the value of the time that angels invest .exceeds the value Source: of their money” David Rose, Bill Payne September 2011 34 confidential
  • 36. Average Profile of an Angel Age 57 9 years investing Masters degree 10 investments 15 year entrepreneur 2 exits/closures so far 2.7 ventures founded 10% of wealth in angel investments Also worth noting ..within the “average” there are “newly minted” angels: entrepreneurs post sale of their company/ IPO. “Accredited Investor” (SEC definition) $1 million in assets (not including home) or $200,000 annual income in past two years September 2011 35 confidential
  • 37. Annual Sources of Start-up Funding $22 Venture Capital ~$.3 billion $20 $18 State Funds ~$.5 billion $16 Angel Investors ~$20 billion $14 $12 $10 $8 Angels: 90% of outside $6 equity for start-ups? $4 $2 $0 1 Friends & Family ~$60 billion Sources: MoneyTree, NASVF, multiple studies on informal capital September 2011 36 confidential
  • 38. New Company Formation Source of Equity Funds – Typical Year 500 Classic VCs 1000-2000 Seed Funds >50,000 Angels >200,000 Friends & Family 500,000 Startup Companies 0 100,000 200,000 300,000 400,000 500,000 September 2011 37 confidential
  • 39. Companies Backed by American Angels September 2011 38 confidential
  • 40. Average = 43.6 Investors Per Group Median = 32.5 30 25 20 15 10 5 0 2 to 10 11 to 25 26 to 50 51 to 75 76 to 100 101+ Percent of Groups Source: 2009 ACA Confidence Survey and 2008 Member Directory September 2011 39 confidential
  • 41. Average Preferred Investment Per Round - 2008 < $150,000 $150,000 - $250,000 $250,000 - $500,000 $500,000 - $750,000 > $750,000 0 10 20 30 40 50 Percent of Source: 2009 ACA Angel Group Confidence Survey and 2008 Member Directory Groups September 2011 40 confidential
  • 42. Growth in Number of American Angel Groups Likely Drivers (the 300 Benefits of Angel Groups) 250 • Shared expertise in: 200 • Angel investing • Companies / 150 sectors • Bus. functions 100 (IT, Sales, Fin) • Scale (more 50 investment $) • Deal flow (quality 0 and quantity) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-09 data) September 2011 41 confidential
  • 43. Additional Thoughts .. Lots of start-up advice out there. Lots about the art of fundraising. • Huge volume of blogs, articles, Quora-posts, etc. • Well .that’s good, right? Yes. • But why doesn’t it help? - Overwhelming - Conflicting - Not specific - Not enough context - It’s just advice, ideas, ..not interactive, not experience. • Need to understand the “why” behind it all and adapt it to your venture, your situation. Beware of simple answers, absolutes. As you are reading and listening to all these opinions, data sources • For any “fact” “rule” “truth” if you don’t understand how it is both true/false, you don’t really understand the point. - Under what circumstances is this “rule for fundraising” “true”? Where does it apply well With whom? - How and when is it not true (Or less true)? September 2011 42 confidential