Uploaded byThatcher Bell
Fundraising guide
This document provides guidance for founders on fundraising. It recommends raising capital 3-6 months before needed, when the business is ready for investors and capital is available at a fair price. The optimal amount is enough to reach the next milestones, around 18 months of runway. Sources to consider include personal funds, friends/family, grants, crowdfunding, angels, accelerators, and VCs. Angels typically invest $25k-100k for 10-30% equity, while VCs invest $250k-2M for similar equity stakes. Founders should create a pipeline of potential investors and prepare a deck, financials, and pitch to secure funding.
More Related Content
Fundraising guide
- 1.
- 2. Reasons to Fundraise 1.To fund growth 2. To finance a realization event 3. Because you can* 4. Because you have no money 2 * Capital is offered on fair terms
- 3. When and HowMuch to Raise • 3-6 months before need capital in bank • When business is ready for target investor • When capital is offered at a fair price • Always 3 • Enough to meet next major milestones then raise next round • Ideally want ~18 months of runway • As much as you can on reasonable terms When to Raise Capital How Much to Raise
- 4. Running a FundraisingProcess 4 Create a Pipeline Prepare Materials Get Introduced Follow-up • Friends • Relatives • Grants • Crowdfunding? • Angellist • Crunchbase • Investors and executives in your sector • CB Insights • Deck • One-pager • E-mail • Projections • Market sizing • References • Find connections to everyone in the pipeline • Ask for introductions • Take notes in or after each conversation • Ask about decision process • Respond to questions or requests immediately • Be polite and persistent
- 5. Funding Sources 5 • Personal(savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
- 6. Funding Sources 6 • Personal(savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks Okay to approach because you have no money Approach with solid money-making opportunity
- 7. Funding Sources 7 Work fromthe top down • Personal (savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
- 8. Funding Sources 8 • Personal(savings, credit cards, loans) • Friends & family • Grants • Customers • Small Business Administration • Crowds • Angels • Accelerators • VCs • Banks
- 9. Angels 9 Definition Wealthy individualswho invest own money in startups Check Size $25-100k Financing Profile $100-500k for 10-30% in common stock Criteria • Chemistry with founder(s) • Enthusiasm for product/concept • $1B+ Total Addressable Market (TAM) • 20-30x return potential
- 10. Accelerators 10 Definition Three- tosix-month boot camp that provides capital, mentorship, and usually office space Check Size $20-150k Financing Profile • Generally invest alone* • 3-6% for capital and services Criteria • Well-rounded founding team • Demonstrable product • $1B+ Total Addressable Market (TAM) • ~20x return potential in <7 years * May include outside investors as part of standard financing
- 11. Venture Capital* 11 Definition Institutionsrun by professional investors who invest in startups on behalf of organizations and wealthy individuals Check Size $100k-1M Financing Profile $250k-2M for 10-30% in preferred stock Criteria • Well-rounded founding team • Product in some form of release • Some users or customers • Scalable business model with 50-80% gross margins • $1B+ Total Addressable Market (TAM) • ~10-20x return potential in <7 years * Slide focuses on Pre-seed and Seed-stage VCs
- 12. Venture Capital 12 Limited Partners General Partner (VC) Portfolio CompanyA Portfolio Company B Portfolio Company C Investment Fees Carry Returns Less Fees and Carry $ Stock Family offices Pensions Foundations Fund of funds Endowments Corporations Wealthy individuals
- 13. Types of Securities 13 Definition ConvertibleNote Stock SAFE Loan that turns into stock later Shares representing ownership Simple Agreement for Future Equity Key Terms • Discount (~20%) • Cap (Valuation) • Maturity • Interest • Valuation • Preferred vs. common • Preference • Participation • Control • Financing event • Liquidity event • Dissolution event Advantages • Speed • Cost • Control • Valuation • Rolling close • Alignment • Clarity • Engagement • Speed • Cost • No maturity • No interest • Rolling close Issues • Maturity • Interest • Cost • Speed • Single close • Novelty
- 14. Pitch Meetings 14 Bring •Deck (tablet okay) • No more than one other co-founder Ask • Typical investment size? • Investment criteria? • Decision-making process? • Next steps? Do • Have a conversation but prepare for a presentation • Rehearse/role play with friends before first pitch • Listen • Answer all questions succinctly • Say “I don’t know” Do Not • Bring an agent, investor or adviser • Show up late • Dress up (unless the venue requires it) • Act defensive or “sell”
- 15. Resources • The FundraisingRules by Mark Davis • Venture Deals by Brad Feld • Mastering the VC Game by Jeff Bussgang 15 • Chris Dixon, A16Z • Brad Feld, Foundry Group • First Round Review • Paul Graham, Y Combinator • Mark Suster, Upfront • Hunter Walk, Homebrew • Fred Wilson, Union Square Ventures • Convertible note • Preferred stock • SAFE Books Blogs Documents
- 16. About Me 16 • 10+prior years in venture capital: 18 investments – Gotham Ventures – North Hill Ventures • Sometimes angel investor: 12 investments Current Roles Prior Roles Investing Interests Personal • Partner at CoVenture • Investor-in-Residence at Cornell Tech Marketplaces, finance, education, clean web, health, future of work • Grew up in Nebraska • Cornell, Wharton • Boston sports
- 17. My Day Job:CoVenture 17 • Seed and pre-seed investments • Founded 2013 • 16 investments and counting • Software + capital – ~$25k cash investments – Web and mobile design and development • Team: NYC (3) and Lahore (40) • Sectors: education, finance, health, commerce • Criteria – Founder-market fit – Market validation – Venture scale – Purpose
- 18.