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Harvard Business School FIELD X
This document provides guidance on fundraising for a seed round of funding. It outlines key steps including preparing financials and pitch materials, identifying target investors, socializing your idea, conducting the fundraising campaign, and closing the deal. Important considerations are determining how much funding is needed based on financial projections, establishing milestones to prove business model risks are mitigated, and negotiating valuation and equity stakes. The process typically takes 3-6 months and success relies on building relationships, finding investors, and addressing their diligence needs.
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Harvard Business School FIELD X
- 1. Fundraising 101: How toland your seed round David Chang Harvard Business School, Entrepreneur-in-Residence @changds
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- 9. Direct Via Syndicate/Fund MyAngel Investments
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- 11. What Obstacles Stand inYour Way?
- 12. Capital Sources You heara lot about… • Venture Capital • Angel Groups • Crowdfunding • Friends and Family • Customers • Accelerators • Competitions Not much about… • SBA Loans and Personal Debt • Grants • Corporate Venture • Vendors or Equipment Finance • Bootstrapping (creatively)
- 13. Growth trajectory ofyour business? Lifestyle business – no plans for big hiring Personal raise – loans Growth oriented business Crowdfunding and personal raise High growth scalable business Venture capital
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- 15. Venture Capital Dynamics •Skewed return distribution • VCs must swing for the fences Source: @DawnUmlah
- 16. Amount to Raise Howmuch funding do you need? • Basic financial modeling of cost drivers and revenue streams • Forecast monthly for 18 months • Fundraise rule of thumb: 12-18 months’ cash How Much For What To Prove
- 17. Use of Proceeds Whatwill you use the money for? • Build out the product • Grow the team • Marketing • Customer acquisition • Working capital How Much For What To Prove
- 18. Milestones What will beproven that de-risks the business? • Product development • Market demand • Product / market fit • Business model • Execution How Much For What To Prove
- 19. Fundraising Campaign Prep TargetSocialize Raise Close
- 20. Basic Prep ĂĽ Legalrepresentation ĂĽ Founders agreements ĂĽ Financials and budget ĂĽ Teaser (1 page) ĂĽ Pitch deck (10 pages)
- 21. Target List ofInvestors Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter
- 22. Socialize • Get warmintros • Find strongest mutual connections to 30+ potential investors • Network over 2-3 months • Ask for referrals, not money • Refine pitch • Incorporate feedback, but avoid whiplash changes “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
- 23. Raise: Go forthe Ask • Talk to your top candidates at the same time • Run conversations in parallel • Decide whether / when to tell investors about each other • Create urgency • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
- 24. Closing the Deal •Rolling close vs. set close • Reference check investors • Not done until money is in the bank Key terms q Board composition q Option pool q Voting rights q Founder vesting q Change of control q Redemption rights q Information rights q Anti-dilution
- 25. Structure Preferred Stock • Preferencesover common • Board seat or 2 • Option pool • Liquidation preference- they get their $ first • Control over sale, new options Convertible Debt • Debt that becomes preferred equity when you raise it • No valuation, but the “cap” is a valuation ceiling • Interest accrues, rate <10% • Conversion discount
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- 27. Valuation & Dilution ? $12 $30$6 $15 SeedA B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise ?
- 28. Valuation & Dilution ? $12 $30$6 $15 SeedA B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise 37% See www.ownyourventure.com Raise $1M on $5M pre 33%Raise $1M on $3M pre 34%Raise $1.5M on $5M pre
- 29. How Long Doesit Take? • Longer than you expect • 3-6 months • Speed limited by access to investors • Your ability to find them • Their calendar availability (surprisingly hard) • Bigger raises = more diligence (up to 30 days)
- 30. Resources • Pitch • www.pitchenvy.com •www.bestpitchdecks.com • Guy Kawasaki: 10 slides / 20 minutes / 30 point font • NextView www.nextviewventures.com/blog/free-startup-pitch-decks-template/ • www.mjskok.com/resource/getting-behind-perfect-pitch • Legal • Foley & Lardner https://www.foley.com • Goodwin Proctor www.foundersworkbench.com • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.soulmix.com/remix/619 • www.robkornblum.com