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How to Get Funded in 2017 (and Beyond)
Presented By:
BJ Lackland, CEO of Lighter Capital
Nathan Beckord, CEO of Foundersuite
Today’s Agenda
What to raise
How to raise it
Tips on optimizing your capital raise
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As an investor:
› VC at Summit Energy Ventures
› Former member of Element8 Angels
› Funded 190+ companies at Lighter Capital
As a startup operator:
› CEO of Lighter Capital
› CFO of Power Efficiency Corporation
Speaker introduction
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As a startup operator:
› CEO of Foundersuite & VentureArchetypes.com
› $250M raised by startups using Foundersuite.com
› Prev: 100+ startup clients over the past 10 years
› Kickstarter, Clicker, Autonet, Zerply, GetHired, Launchrock
Previously:
› Technology valuation, investment banking, venture capital
› CFA & MBA
Speaker introduction
Today’s agenda
What to raise:
A look at your capital stack
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Capital stack for startups
Senior Debt
Mezzanine Debt
Convertible debt / Preferred
Stock
Common Stock
Bank
Venture Debt / RBF
Angel / VC
Entrepreneur
• Lowest risk & cost
• Highest priority in liquidation
• Highest risk & cost
• Lowest priority in liquidation
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Capital stack for startups - debt
• Term loan / LOC
• 8-12% IRR
• Pros: cheap & predictable
• Cons: covenants, PG
• High yield term loan + warrants
• 15-30% IRR (1.4–2X borrowed)
• Pros: no PG
• Cons: mon. payments, warrants
• Term loan with flexible pmts based on revenue
• 15-30% IRR (1.4–2X borrowed)
• Pros: flexible, no PG
• Cons: mon. payments
Senior Debt
Mezzanine Debt /
Venture Debt
Mezzanine Debt /
Revenue-Based
Financing
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Capital stack for startups - equity
• Debt that converts to equity at the
next fundraising event
• Zero to 10-20X over amount
borrowed + accrued interest
• Pros: easy to negotiate
• Cons: chasing small checks
• Special class of equity
• Zero to 10-20X over amount
invested
• Pros: large check size, mentorship
• Cons: loss of control
• Simple equity
• Zero to 5-10X over amount invested
• Pros: easy to raise
• Cons: last paid (highest risk)
Convertible Debt Preferred Stock
Common Stock (Founders)
VC Backed Non VC
Revenue
$5m
Series B
Corporate Venture
Established
Ideation
Launch &
Traction
Growth &
Scale
Breakout
Series C
Debt
Equity
Tech Banks/
Venture Debt
Series A Revenue-Based Financing
Blended
Series A
Series B
Tech Banks
Series C
Tech Banks /
Venture Debt
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Funding paths
Bootstrap / Friends & Family
Incubator / Angels
› Equity: Valuation? What % is worth taking on investment?
› Control: Are you the driver? Who makes key decisions?
› Value-add: More than just money?
› Risk Tolerance: Personal assets?
› Timeframe: How long will raising funds take?
› Horizon: Exit strategy? Build to exit? Build and hold?
› Culture: Is there alignment?
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Before you raise, ask yourself:
Today’s Agenda
How to raise:
Building your investor pipeline
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When fundraising, don’t do this
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Instead, treat fundraising as what it really is:
SALES 101:
Lead-Gen -> Qualify->Engage -> Closing
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Step 1: Build your funnel
Fundraising
is a numbers
game…
...aim for
150+ names
minimum. 100 pitches to
get 3-5
commitments is
not unusual.
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Step 2: Filter & qualify your leads
FOCUS here on
filtering down to
about 100 - 125
direct targets.
Filtering Criteria:
•Invested in competitors
•No dry powder (funds)
•No recent deals
•Wrong sector / stage
focus
•Wrong geo. location
•Has bad reputation
Tips:
http://blog.foundersuite.com
/seven-ways-to-pre-screen-
your-investors/
Diligently cut down your
list now for a better
hit rate later.
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Step 3: Map your contacts with
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…while you’re in add more leads
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Step 4: Create tracking system (google)
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Step 4: Create tracking system (foundersuite)
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Step 5: Start the conversation(s)
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Step 5: Start the conversation(s)
…this email is super-easy for Jeff to forward along.
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Step 6: Hustle like you’ve never hustled
before
Intros:
•Do intros in parallel
•Aim for concentrated
‘blitzkrieg’ approach
•Key goal: get momentum!
Pitch:
•A/B test your pitch
•Continually refine &
improve
Process:
•Leverage VCs off each
other
•Send regular progress
updates (use Foundersuite’s
Investor Updater tool :)
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Step 7: Go for the close
•Ask for interest level + ask
for next steps
•Make them chase you a bit
•Expect 3-6 meetings before
term sheet (more TS = more
leverage, faster close)
•Follow up frequently (it can
be hard to get an actual “no”)
•Use PG’s “handshake deal
protocol” when they say yeshttps://www.ycombinator.com/handshake/
•Don’t let up until the money
is actually in the bank
1. Run your fundraise as a sales process
2. Work your network (but do it efficiently)
3. Run it as a numbers game (but always
qualify leads)
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Optimizing your capital raise: Nathan
1. Skip a round of equity
2. Be capital efficient
3. Don’t limit yourself to VC
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Optimizing your capital raise: BJ
Get in touch
www.foundersuite.com
NEC25Monthly = 25% off for 3 months
NEC40= 40% off any annual plan
