Mike Wilner (AWS) - Fundraising 201

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Fundraising 201:
Raising a seed round efficiently
Mike Wilner
AWS Startup BD
@mwil20

What is seed funding?

It’s more than just Venture Capital
Non-VC
• Non-dilutive grants
• Friends and Family
• Angels
• Angel Funds and Groups
• Accelerators
VC
• Pre-seed VCs
• Seed VCs
• Multi-stage VCs
• Corporate VCs

How long should fundraising take?

Experienced founders can put a seed
round together in as quickly as a month

The Secret
Generate authentic competition for your round, giving investors FOMO (fear
of missing out) and a sense of urgency

What we’ll cover
1. When to raise seed capital
2. Establishing ground rules
3. Drafting your round composition
4. Crafting your fundraising narrative
5. Building your initial funnel
6. Initiating fundraising mode and stacking meetings
7. Pitching and closing

1. When To Raise Seed Capital

Don’t fundraise because you think you should;
only do it as a means to an end.

Only raise money when the following are true:
1. You have a compelling fundraising narrative and capital is the constraint to
achieving your next milestone
2. You’re standing on solid ground (either momentum or optionality)
3. You have strong conviction that you’ll be successful fundraising (which
usually means you know a few investors who would be in)

2. Four Ground Rules for
Raising a Seed Round

Rule #1:
You’re either in full fundraising mode
or you’re not

Rule #2:
Fundraising should be
one person’s full-time job

Rule #3:
Fundraise in parallel (not in sequence) and put
yourself in a position to say “no”

3:1

Rule #4:
Time kills all deals

3. Drafting your
round composition

Create scarcity by
working backwards from
your ideal cap table
$2M
Seed round
1
Lead VC:
$800k
2
Follow VCs: $600K
5
Angels:
$600K

Understanding types of investors

Being a successful VC is hard
$10M
Fund size
33
# of investments

Being a successful VC is hard
10
Startups fail
11
1x
6
3x
3
5x
2
20x
1
50x

The Seed VC Rule of Thumb:
Every investment needs to have the
potential to return the entire fund (~50x)

Seed VCs will want you to
keep climbing the VC path

Understanding Angel Investors

Angel Investors have more
diverse motivations

Angel Investors have a lower
bar for a “good” outcome

Angel Investors may be
more passively involved

Round composition takeaways
• Understand how the investor’s business works
• Make sure your goals are aligned with investors’
• Be deliberate about the types of investors you want in your round
• Draft your round composition before you start talking to investors

4. Crafting your
fundraising narrative

What is a fundraising narrative?
A concise explanation of what you do, what’s most compelling about your
business, why you’re raising money, and your long-term vision.

A good narrative can do the
following in 30 seconds
First 15 seconds
1. Simply explain what you do
2. Communicate the central thesis behind
the investment (AKA why you will win)
Second 15 seconds
3. Outline your progress-to-date, future
milestones, and long-term vision

Bad example
“We provide data and analytics in a
comprehensive project management
suite, enabling audio content creators to
glean insights that inform decisions
throughout the production cycle.”

“We’re an analytics tool for podcasters”
Good example

2. Communicate the central thesis behind the investment
(AKA why you will win)
What is the one reason that an investor should invest?
• Unlocked traction
• The ideal team
• Unique insight on distribution or workflow adoption
• Case Study proving incredible efficacy
• Customer Feedback showing you’ve built something people love

Good example
“We’re an analytics tool for podcasters,
and we’re a team of former podcast producers
who produced 5 of the 20 most downloaded
podcasts of all time.”

3. Articulate “milestones of de-risking” to show your progress
and future plans
1. Progress to date – what have you figured out?
2. Next milestone – what is the biggest risk you need to address?
3. The future – if you de-risk that, what could the future hold?

Bad Example
“We have 20 customers and we’re raising $2M
to continue building out our product and hire a
sales team.”

Good example
“We’ve found product market fit on a small scale with 20
independent podcasters paying for our product and using it for
all of their shows.
Now, we’re raising $2M to find a repeatable customer
acquisition strategy so we start dominating the independent
podcaster market.
Once we do that, we can go upmarket to podcast studios which
will give us the most advanced podcast dataset in the world.”

Support your narrative
with a financial model
Goal #1:
Verify the story you’re telling
Goal #2:
Show the assumptions you’re making

Fundraising narrative takeaways
• Keep it simple and concise
• Frame progress and future milestones in terms of de-risking
• Back up your narrative with math

5. Building your
initial funnel

Work backwards from the 3:1 rule
Lead VC’s
(20)
Follow VC’s
(40)
Angels
(100)
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $120k
Angel #2: $120k
Angel #3: $120k
Angel #4: $120k
Angel #5: $120k
Cap table
Prospect
(20:1)
Initial Meeting (10:1) Final Diligence
(3:1)
Closed
(1:1)

Staggering can work to your advantage
Lead VC’s
(20)
Follow VC’s
(40)
Angels
(100)
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $120k
Angel #2: $120k
Angel #3: $120k
Angel #4: $120k
Angel #5: $120k
Cap table
Prospect
(20:1)
Initial Meeting (10:1) Final Diligence
(3:1)
Closed
(1:1)

People > Firms
• Fundraising is about relationships
• Focusing on people is more effective than firm-hunting
• People have different roles and investment focuses

Prospecting Tactics

Prospecting Tactic #1: Research

Prospecting Tactic #2:
Other Founders

Tips for building relationships pre-fundraise
• Spend 10% of your time building relationships with value-adders
• Genuinely seek help from those who can help with specific challenges
• Show them the ROI of their time/advice/network
• Allow them to look like someone with early access to startups

Prospecting takeaways
• 20 prospects for every spot available
• Focus your prospecting on people – not just firms
• Get prospects through research and relationships
• Build genuine relationships with investors and founders before raising

6. Initiating fundraising mode
and start stacking meetings

1. Build relationships before
turning on fundraising mode

2. Make sure you have your materials
• Teaser deck
• Full Presentation deck and Readable deck
• Supporting financial model
• SAFE/Convertible note

3. Quietly close at least one investor,
then turn on fundraising mode

4. Keep filling the top of the funnel

7. Pitching and closing

Goals for the first meeting
1. Discover if there’s goal alignment
2. Learn about their decision-making process
3. Get them excited about the opportunity

Rules for the first meeting

First Meeting Rule #1:
Ask questions before you
start pitching

Don’t discuss valuation

Keep it conversational

Questions you should ask in the first meeting
• What is a good outcome for you?
• What is your typical check size and/or ownership target?
• What is your investment process?

Typical VC Process

“No” is better than “maybe”

Summary
• You’re giving up scarce equity in your company, not asking for money
• Create a sense of urgency by cultivating authentic competition
• Startup <> Investor fit goes both ways
• Build relationships before you need to fundraise
• Put yourself in a position where you’ll have to say “no” to investors
• This is a full-time process that should be done as quickly as possible
• Remember the 3:1 rule

Questions?

Mike Wilner (AWS) - Fundraising 201

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