How to Get Funded in 2017

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 150 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› $120M 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 beforeIntros: •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 yes

https://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

QUESTIONS?

Visit Our Websiteswww.lightercapital.comwww.foundersuite.com

Contact usinfo@lightercapital.comnathan@foundersuite.com