masschallenge 2016 bootcamp - fundraising intro
TRANSCRIPT
MassChallenge 2016 BootcampFundraising Intro
Shereen Shermak, Good Growth Capital
[email protected]@shrcubed
David Chang, PersonalVC
[email protected]@changds
PitchTips
Fundraising Basics
How to Raise a Round
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About ShereenBackground Experience Investments Today
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About DavidBackground Experience Investments Today
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Fundraising Basics
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Your Fundraising Experiences
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Capital SourcesYou hear a lot about…• Venture Capital• Angel Groups• Crowdfunding• Friends and Family• Customers• Accelerators• Competitions
But less about...• SBA Loans and Personal Debt• Grants• Corporate Venture• Vendors or Equipment Finance• Bootstrapping (creatively)
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Growth trajectory of your business?’Lifestyle business’ –no plans for big hiring
Personal raise – loan, add folks to cap table
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Growth oriented business
Crowdfunding and personal raise
High growth scalable business Venture capital
Venture Capital Dynamics• Skewed return distribution • VCs must swing for the fences
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Venture Capital Stages
Bootstrap
Angel
Early StageGrowth Equity
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Local InvestorsSeed
EarlyGrowth
Amount to RaiseHow much 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
ForWhat
To Prove
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Use of ProceedsWhat will you use the money for?
• Build out the product• Grow the team• Marketing• Customer acquisition• Working capital
How Much
For What
To Prove
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MilestonesWhat will be proven that de-risks the business?
• Product development• Market demand• Product / market fit• Business model• Execution
How Much
For What
To Prove
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How to Raise a Round
Fundraising Campaign
Prep Target Socialize Raise Close
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Basic Prepü Legal representation
ü Founders agreements
ü Financials and budget
ü Teaser (1 page)
ü Pitch deck (10 pages)
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Target List of Investors
Stage Location Industry Vertical
Business Model
Investment Thesis
Social / Trust Filter
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Socialize• Get warm intros
– 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?”
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Raise: Go for the 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
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Closing the Deal
• Rolling close vs. set close• Reference check investors• Not done until money is in
the bank
Key termsq Board compositionq Option poolq Voting rightsq Founder vestingq Change of controlq Redemption rightsq Information rightsq Anti-dilution
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Negotiating Valuation
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Valuation (sort of) Matters
? $12 $30 $6
$15
Seed A B
Valuation ($M) Dilution
Example: 50/50 founder splitWhat’s your end stake?• $3M à 17%• $5M à 19%• $7M à 19%• $1.5M raise @$3M à 15%
See www.ownyourventure.com
$1M raise $6M raise $15M raise
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