Dive into Startups.be overview of the fundraising process, prepared by Thibau Claes (thibaut@startups.be). Learn more and get investor-ready: www.startups.be/fundraising
4. First remarks
• Each investor can have a different process
• Angels could make decisions faster than VCs
Fundraising process
www.startups.be 4
5. Process
1. Have an introduction
2. First meeting (with an analyst / associate)
3. Second meeting (with analyst & partner)
4. Third – and further meetings
5. Term sheet
6. Due diligence
7. Closing
8. Preparation is key
9. 6-12 months process
Fundraising process
www.startups.be 5
6. Process (average) – 1% success rate from 1st meeting
1000 startups send an email to a VC fund
250 got a 1st meeting (25%)
75 got a 2nd meeting (25-30%)
45 go from 3rd to 5th meeting
10 pitch to Investment Comitee (<20%)
7 got a Term Sheet (70%)
5 go to Due Diligence (70%)
3 close (60%)
• If you pitch an angel, you have better meetings’ rate and
more chances to close
Fundraising process
www.startups.be 6
7. Have an introduction
• Investors receive a lot of solicitations (1.000-5.000 startups
/year)
• Only 20-25% of the startups that send an e-mail get a
meeting
• Best way to get into an investor’s office is to be introduced by
someone who knows both of you (mutual connection) and
that investor trusts (portfolio company, co-investor, lawyer,
broker,…)
Fundraising process
www.startups.be 7
8. 1st meeting
• « The goal of a 1st meeting is to have a 2nd one, not to
receive a check »
• You will probably first meet with an associate/analyst who is
the « filter » for the partners
• Get him/her excited/interested or at least willing to study your
startup further
• (S)he should have the feeling that you have something or the
FOMO feeling
Fundraising process
www.startups.be 8
9. 1st meeting
• Don’t go deep in the details. Give an helicopter view of :
• Team
• Market/competition
• Product
• Traction
• Roadmap and plan
• It should be more a conversation than a « presentation »
• Shouldn’t be more than 1 hour, idealy 45 minutes
Fundraising process
www.startups.be 9
10. 1st meeting
Founder’s tips
• If the investor doesn’t know the sector/market that much,
educate him/her. Most of the time (s)he doesn’t, then take
time to explain it concretely. If (s)he doesn’t get it, (s)he will
skip the deal
• Be credible and trustworthy. Show ambition and knowledge
• Don’t try to make the deal now
Fundraising process
www.startups.be 10
11. To go to 2nd meeting
• To know if you could got a 2nd meeting, check the investor’s
reaction in the next 24h after 1st meeting
• Looked your Linkedin profile
• Gave a call/ sent mail
• A retweet,…
• You should have a go / no go for a second meeting in the
next 7-10 days MAX
• Otherwise, send an email but be sure at 98% that it’s dead
Fundraising process
www.startups.be 11
12. 2nd meeting
• Second meeting will be with a partner and the
analyst/associate you already met with
• Even if associate already explained what you do, best is to
explain the basics again
• Follow the same schema as the first meeting
• Partners have more experience then could ask more precise
questions that way you will go deeper in the business
Fundraising process
www.startups.be 12
13. 2nd meeting
• Goal of the second meeting is to have the interest of a senior
manager in the fund and to start to go deeper in the business
• Investors will ask for more detailed questions about metrics
in order to reinforce their interest
• If they don’t see major objections (competition, market, low
growth, non-convincing answers to key elements) you should
go and go to the second part of the process (meetings #3
and further)
Fundraising process
www.startups.be 13
14. 3rd meeting and further
• From this moment, you have the interest of an
associate/analyst and a partner
• Your « case » was discussed two times (at least) during the
« Partners meeting »
Note : « Partners meeting » is the weekly meeting when/where
all the members of the VC fund gather in order to discuss all
the startups that are in their pipeline to know if they go further
Fundraising process
www.startups.be 14
15. 3rd meeting and further
• Investors will look deeply at your business and will more
prepare the meetings
• Before the meeting(s), you will probably need to send
• Detailed financial projections
• Detailed metrics and KPI’s
• Reference from your customers, your providers
Fundraising process
www.startups.be 15
16. 3rd meeting and further
• Before the meeting(s), they will
• Call your current customers to know what they think about you
• Have more reference calls with current/potential investors
• Look at your financial projections and check if it makes sense
• Check what your metrics look like, how you calculate it,…
• They will analyze your product (can be part of due diligence)
• Ask CTO’s from portfolio company (or others) to look at the
code
• Ask customers about what they think about it
• Test scalability and sustainability of product
Fundraising process
www.startups.be 16
17. 3rd meeting and further
• Before the meeting(s), they will analyze the market
• They will read reports on it
• Interview their network about it, know the trends
• Before the meeting(s), they will carefuly analyze competition
• What’s their market shares?
• Who are they?
• How can you concretely beat them?
• Sometimes, call them anonymously to have info
Fundraising process
www.startups.be 17
18. 3rd meeting and further
• They will at least once come into your office
• To understand the atmosphere in the office
• To look how the people work
• To check if people stay late in the evening
• Interview your team and check the background of key people
(with reference calls)
• Be prepared to be challenged on each point mentioned
previously (plus the ones from our other presentations) and to
give accurated and convincing answers if they have doubts
Fundraising process
www.startups.be 18
19. Investment comitee
• After weeks of meetings and discussions the partner is
convinced by your company
• You need to convince the whole team because to make a
deal you need the approval of the all the partners
• New objections will come because
• Other partners don’t know you and your startup
• Other partners have other concerns
• All partners are not equal and some’s choices are more questioned
Fundraising process
www.startups.be 19
20. Investment comitee
• This pitch can be short (1h30) or longer because it’s normaly
the last « big test »
• It’s the last time the biggest concerns can come
• It’s more difficult because you have multiple points of view
and need to adress all
• Idealy, the partner and associate you already know briefed
you a bit on how to behave. They want the deal to be done
Fundraising process
www.startups.be 20
21. Term Sheet Proposal & Negociation
• You convinced all the investment comitee, they are now
willing to invest in your company
• The lead investor will propose a Term Sheet to you in order to
sum up the clauses and conditions of the investment
• Take your time to discuss it, you will need to negociate it
• Don’t accept every clause but don’t « fight » for all clauses
Fundraising process
www.startups.be 21
22. Term Sheet Proposal & Negociation
• It’s a hard period because you are alone again
• Ideally you need a lawyer to help you in the negociation
• Don’t take too long to discuss it. Idealy you should have one
or two discussions about it
• Negociate by phone or face to face, confirm the negociation
by mail just after
Fundraising process
www.startups.be 22
23. Due Diligence
• When you have signed the Term Sheet (pre- shareholder
agreement) you still have work to do
• Investors want to have the last checks to be sure that the
startup, they are investing in, is clean
• Some investors do that before proposing a Term Sheet,
others after
Fundraising process
www.startups.be 23
24. Due Diligence
• With lawyers, investors will look at
• Employees contracts (salary, IP given to company, nonc-
competitive agreement,…)
• Freelancers contracts
• IP rights (if any)
• Commercial contracts you have signed with partners
• Cleaness of cap table
• With auditors, investors will look at
• Actual/current financial situation of the company
• Accounts of the company (different kind of debts,…)
Fundraising process
www.startups.be 24
25. Closing
• Once everything is ok, you will sign the shareholders’
agreement
• It’s a contract, similar to the term sheet but being binding (it’s
a real contract, not a letter of intent)
• Once the agreement is signed, you can expect money on
your bank account 1 month after
Fundraising process
www.startups.be 25
26. Preparation
• Before to start your roadshow, prepare
• Your slide deck
• One pager
• Introduction mail to investor
• Your metrics
• The terms that you would like to have in your Term Sheet
• During the roadshow and after the first meetings, prepare
• Employees’ / freelance / sales / partnerships’ contracts
• Other legal documents
• Patents (if needed)
Fundraising process
www.startups.be 26
27. Timeline (average)
• Preparation -> 2-6 weeks
• Roadshow (meeting with multiple investors and got 1-3 term
sheets) -> 3-6 months
• Term sheet negociation -> 2 weeks
• Due Diligence -> 2-4 weeks
• Closing -> 4-8 weeks
Fundraising process
www.startups.be 27
29. Appendix
• If you contact 30 funds or investors
• 7 will be too busy at that moment
• 8 can’t invest because out of investment thesis or competiting
startup in portfolio
• 15 will be open to discussion
Fundraising process
www.startups.be 29
30. Appednix
• When to NOT contact them
• They are off
• You have contacted them in the last
6 months and they were not interested
Fundraising process
www.startups.be 30