Upload
michael-skok
View
373
Download
6
Embed Size (px)
Citation preview
Proprietary and Confidential
START UP SECRETS
An insider’s guide to unfair competitive advantage
Funding Strategies to Go the Distance
@underscorevc #startupsecrets startupsecrets.com
Proprietary and Confidential
AgendaMany ways to fund your startup Develop a funding strategy Remove the mystique of VC
Proprietary and Confidential
Have a question? Tweet them!
@underscorevc#startupsecrets
Proprietary and Confidential 4
Sex, Relationships
& Money
This could get complicated, but it needn’t!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 5
Raising money is like sex.
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Everyone wants to know about it.Few people talk about it openly.
Proprietary and Confidential 6
Everyone wants to know about it.Few people talk about it openly.People are afraid to ask …
Raising money is like sex.
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 7
Everyone wants to know about it.Few people talk about it openly.People are afraid to ask …It’s fun once you get it!
Raising money is like sex.
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 8
Should you even raise money?• If you don’t know, the answer is no!• Do the work first
Example reasons for a “no”• No need!• Personal: risk aversion, lifestyle, control• Business: small potential• Other: not for profit, or research
Funding Strategy
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 9
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Overview
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 10
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Overview
Increasing VALUE
Decreasing RISK
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 11
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Overview
Increasing VALUE
Decreasing RISK
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 12
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Overview
Increasing VALUE
Decreasing RISK
Product Market
Fit
PrototypeProblem Fit
Value PropIdea Fit
MVP & MVSCustomer Fit
CompanyExecution Fit
CompanyPublic Market Fit
Company
Business Model
Fit
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 13
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Overview
Increasing VALUE
Decreasing RISK
The two best times to raise capital
With all the potentialor
Plenty of proof
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential
Funding vectors – matching expectations & outcomes
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 19
Equity• Angel• Accelerators• Seed, Venture Capital (including Strategic / Corporate investors)• Growth, Private Equity• Public Markets
Other• Bootstrap• Friends & Family• Debt• Grants, subsidies, off balance sheet
Alternatives• Business Crowdfunding (e.g. AngelList), Products/Services (e.g.
Kickstarter)
Typical Sources
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 20
What’s right for you?
LargeSmall
Capital
Potential
Intense
Efficient
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 35
Sex, Relationships & Money
This could get complicated, but it needn’t! simplified.
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 36
What’s right for you?
LargeSmall
Capital
Potential
Intense
Efficient
VC
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 37
Venture CapitalSeed: ~ $100K to $1-3m• See later
A to IPO• $Millions, multiple rounds
Stage development participation, involvement• Active (board seat)• Passive (follow “lead” investors)
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 38
VCs receive ‘000s of plans
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 39
This is what happens to most
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 40
Research
Fit: Geography, Sector, Stage Portfolio: Complementary, competitive? Partner(s) Track Record Capital, free capital, reserves
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 41
Target, be selective and focus Fit: Geography, Sector, Stage Portfolio: Complementary, competitive? Partner(s) Track Record Capital, free capital, reserves
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 42
Build a relationship
You could be partners for several years …
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 43
Triangulate ways to connect
Find someone who knows the VCGet a warm introductionInteract on lineUse your initiative!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 44
Process?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 45
Process FrameworkYou
• Research• Connect• Meet• Motivate• Diligence• Fit check• Pitch• Legal• Celebrate (briefly!)
The VC
• Thesis• Qualify• Meet• Prioritize• Engage• Socialize• Partner meeting• Final diligence• Fund
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 46
First connection: Who, what, why?
Make a connectionEstablish• Who are you (relevant experience)• What do you do (uniquely well for who)• Why does it matter (market opportunity)
Investors often have ADD• Not value add – A.D.D. !• Limit the agenda, control the discussion, get the first meeting!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 47
First meeting
Tell your story …
See “Getting behind the perfect pitch”
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 48
Process – build momentumYou
• Research• Connect• Meet• Motivate• Diligence• Fit check• Pitch• Legal• Celebrate (briefly!)
The VC
• Thesis• Qualify• Meet• Prioritize• Engage• Socialize• Partner meeting• Final diligence• Fund
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 49
Incomplete stand outs are better than complete stand ups.We looking for outstanding:• People• Technology or other disruption• Market opportunity
One outstanding of the above literally stands out vs. all good, but none great
We don’t expect complete• Team• Product• Value prop• GTM plan• Business model
Entrepreneurs don’t need all the answers!• Self aware, listening, leaders ….
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 50
Dating and Validating
Why diligence is so important to YOU too!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 51
Dating – evaluating investors:Everyone’s money is the same colorGet to know the partnership and their portfolioThis is NOT an arranged marriage! Pick your partner.• Level of insight and experience• Track record is great but it’s history• Talk to others who have worked with them
Will they be a balance for you?Good self-aware mentor?
• Find someone who is genuinely motivated to set you up for success.• If you don’t have comfort and personal chemistry … KEEP LOOKING!
See LinkedIn article here.
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 52
Expectations of your VC?Operating experience?Investment experience?Hands on/off?Thoughts:• Team and board building• Remove roadblocks• Reveal opportunities to accelerate• Strategic insight• Access to resources, network
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 53
Validating the VC’s workGet to know the team• Time, References, etc.
Understand the business• Value prop, biz model
Check under the hood• e.g. Expert opinion on TechValidate assumptions• GTM, speak to customers, partners
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 54
Process – term sheet timing …
You
• Research• Connect• Meet• Motivate• Diligence• Fit check• Pitch• Legal• Celebrate (briefly!)
The VC
• Thesis• Qualify• Meet• Prioritize• Engage• Socialize• Partner meeting• Final diligence• Fund
Term sheet?
Term sheet?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 56
Funding strategy questions
First question• How much do you need?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 57
How much do you need?Run the numbersBuild the assumptionsAssess the dependenciesDefine the milestones
Enough to build real value• 18 months of runway typically
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 58
More important than the spreadsheetAssumptionsThings to testMinimally: cash flow projectionOptimally: Financial forecast
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 59
FinancialsP&L Cash Flow• 6 quarters for cash flow, requirement
For sizing the business, overall capital requirement (informs investor for their reserves)• Annual P&L, CF up to 5 years thereafter;
Highlighting if applicableCash flow positiveBreakeven
Suggested information / detail as needed for the above• Headcount• Bookings• Revenue
May need to break out things like Services depending on your business• Gross Margin• Expenses
Major categories like R&D, Sales, Marketing, G&A shown as needed• Profit/Loss• Cash
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 60
Realistic optimists?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 61
Funding strategy questionsFirst question• How much do you need?
Second question• How much do you want?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 62
How much do you want?Enough to build real value
Define the milestones• Key hires• Product beta, ship• First customers• Channel Partners• Etc…
18 months of runway typically
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 63
Funding strategy questionsFirst question• How much do you need?
Second question• How much do you want?
Final question• What should you raise?
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential 64
What should you raise?One strategy (dilution sensitive, risk tolerant)• Raise just what you need• Just before you need it?
Another strategy (dilution insensitive, risk intolerant)• Raise more than you need• Well before you need it
Either way• Timing is everything so plan• Assume the unexpected
Funding Strategies to Go the Distance @underscorevc startupsecrets.com
Proprietary and Confidential
Predictability of your business• Your execution• Market adoption• Cash flows (business model)• Potential outcome (risk / return)
Competitors’ balance sheets Valuation…
Factors
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 65
Proprietary and Confidential
The sixty four million dollar question…
Valuation
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 66
Proprietary and Confidential
Valuation vectors
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 67
Proprietary and Confidential
Don’t just value – evaluate …Always be one round ahead in your thinking
Proof (Metrics, Milestones per earlier)Customers, Partners, GTM, BizModel, Product
Allow for UnknownsTime to fundraise
Capital to capitalize!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 68
Proprietary and Confidential
Ultimate exit potential (if you must)
Potential acquirers• Their motivations• Recent transactions in the space
- $ paid and valuations basis
Independent beyond IPO• Comparable valuations
– Data for these like revenues, growth rates, market cap
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 69
Proprietary and Confidential
Build relationships between financing rounds
Always ready to close
“ABC: Always Be Closing”
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 70
Proprietary and Confidential
The most important capital you’ll raise
Human capital
Invest in it with your option pool!
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 71
Proprietary and Confidential
Investor fit Amount of capital raised Human Capital (option pool) Timing
(To clear the bar: Clean Terms)
What really matters
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 72
Proprietary and Confidential
Raising money is like sex
It needn’t be complicatedIt’s fun when you get it!So pick your passion not your poison
Funding Strategies to Go the Distance @underscorevc startupsecrets.com 73
Proprietary and Confidential
T 617.303.0064 @underscorevc
53 State Street, 10th Fl Boston, MA 02109
Thank you!