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Covers raising capital for startup companies.
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A guide for First-Time Founders
Raising Capital for Startups"
Image: @TaxCredits
Hi. I am… Bryan Starbuck Former CEO & Founder of TalentSpring (Acquired in 2010) Currently: CEO & Founder at SPARKON.com [email protected]
My talk 1st The Key to Pitching
2nd Managing the process
Your pitch will cover the common bases
but… There is something
critical to cover
Image: @5imon
Investors start off pessimistic
Inte
rest
Start Make this happen
Low
High
Image: @Theodore Scott
This is what investors expect
A company targeting a
$40m to $80m year business model
Image: @Theodore Scott
95 of 100 companies go after too small of a market
Image: @Theodore Scott
This is what they want
Able to reach > $100m rev for Angels. VCs want > $400m or > $800m
They don’t care about the rest of your business
Until they TRULY BELIEVE the market size is big enough
Focus on WOWing these 4:"There is a REAL & significant problem for the customer"1"
2"
3"
4"
This company has a real solution. "No other solution exists in the market"
People will pay "(this company’s prices)"
This is a HUGE market"
After that, demonstrate that the rest is rock solid
2nd Part: Managing the fund raising process
Process with Angels"Pitch & Demo"
They review Financials"Due Diligence (If angel group)"3
Get all of their questions answered"4Rapport & trust"5
Sign legal docs & close, close, close"6
21
!
VCs: A single VC firm"! Pitch & demo!! Meeting #2 to #4. !! Sometimes with others at the firm!
! Present to Monday partner meeting!! Get term sheet!
! Negotiate & sign term sheet!! Sheppard details until big stack of legal docs signed!
!
Important (1 of 2)"! Herd mentality:!
! If they see other investors moving and they might lose out, the investor will move!
! True for both Angels and VCs!
! You need to force enough demand from investors to get the deal closed!
! Have polished pitch deck, pitch and financials!
! Angel groups are good outside of the bay area!
! Quote from the bay area, “Pitching to a bay area angel group is a sign of a bad company”!
!
Important (2 of 2)"! Get a rent-a-CFO for Projected financials:!! $150 to $270 per hour!! 3 to 7 hours to create very detailed projected
financials!! Asked for a fixed price project!
! Get a very high quality one. They don’t cost very much more!
!
The “process” – aka many VC "! Progress in batches of ~6 VC firms!
! Hold first meeting!
! See which progress!
! Start another batch as a smaller number progress to later stages!
! In 2 months, work to have several batches progress so more than one arrive to a term-sheet!
! More than one greatly improves chances of any funding and improving terms!
! After 4 months, VCs will have heard about you and likely think you are a “stale deal”. Then meeting with them will likely be ineffective!
!
Pre-Money Valuation"If raising under $2 million…!
If raising over $2 million from VCs:!! Often valuation above PLUS capital raised!! Investors get ~33% to 48% of round!
!
Lessons about funding"$1m to $2 round is often better than a $500k round!
Funding goes hot and cold!
! Startups are cheap to run early, but…!! So it costs $50k to $70k per month!
"Year 1! "
" Fund raising is hard! Near impossible! "
"Idea !Validate! !Alpha !Beta !Launch! !Traction Building! "Year 2! "Small traction !Medium Traction ! !Huge traction / Profitable!Raising your series A after your Seen round closes!
THE END""
Backup slides"
Finding Investors"
Finding Angels"! AngelList!
! BEST: Great advisors and your network!
! Top big law firms can make some intros!
! It is hard to scale, but doable. (Lots of work)!
! Requires tons of networking!
! Often with CEOs who have raised capital before!
! Move to the bay area for 5 months!
! Linked-In!
! Tons of scouting for people who fit the profile!
Finding VCs"! Research to find WHICH ones you want to target first!
! Very important: Pitching VCs who don’t match will block raising capital!
! Find ones that work at your stage, industry, etc.!
! Easy to find the list of VCs. TheFunded, AngelList, etc.!
! Top startup law firms can make intro, as a backup!
! Intro from CEO they funded is the best!
! Target the right partner. !
! Start with Partner and above. Not associates!
!
Pitch-Deck"! The Alliance of Angels pitch deck may be the best
template!
THE END""
Q & A"