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MenuWhat is the best way to learn more about startup fundraising?
It seems to be fairly complex, looking for a good introduction and overview with real examples if possible.
Answers
When it comes to raising money you must remember that risk is a perception. Your job is to drain the risk!
Below is a link to a resource I provide my investors. The 50 questions are specific to product design/development but the 15 categories are questions that apply to any industry.
If you can answer these questions about your deal you will have gone a long way to "drain the risk" for your investors and get funded.
http://www.jaredjoyce.com/freetreats/50questions.pdf
Once you have answered the questions for your deal schedule a call with me and I can help you integrate the answers into your investor pitch.
The best way to learn is to go to industry events put on by both angel and VC forums. For example, in the SF Bay Area this company regularly sponsors events to understand the space https://sv.tie.org/initiative/tie-angels. You can also check out SARTA in the Sacramento region.
If you're looking to actually get involved in raising money that's a different question.
This book can be a good starting point:
Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist
http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/1118443616
The best way to learn about startup fundraising is to get a mentor/advisor. They will be able to take you through a number of realistic scenarios, including if your startup is fundable, and at what stage your startup is. They should also be able to tell you where you should seek your investment, what type of investment and network your to the right investor.
Some information intake is great but the only way you can really learn the process is to go through it your self.
I have 25 years of experience working with early stage technology companies and investors.
I’m often asked about fundraising strategies for VC funds and angel investors. After raising capital and exiting from multiple startups and investing through 15 venture funds and dozens of angel investments I have seen thousands of deals.
I’ve found that the most productive use of time for both of us is scheduling a call through my profile.
Related Questions
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When raising money how much of equity do you give up to keep control? Is it more important to control the board or majority of shares?
It entirely depends on the kind of business you have. If you have a tech startup for example, there are pretty reliable assumptions about each round of funding. And a business plan and financial forecasts are almost totally irrelevant to sophisticated tech investors in the early stages of a company's life. Recent financial history is important if the company is already generating revenue and in that case, a twelve-month projection is also meaningful, but pre-revenue, financial forecasts in tech startups mean nothing. You shouldn't give up more than 10-15% for your first $100,000 and from that point forward, you should budget between 10-20% dilution per each round of subsequent dilution. In a tech startup, you should be more nervous about dilution than control. The reality of it is that until at least a meaningful amount of traction is reached, no one is likely to care about taking control of the venture. If the founding team screws-up, it's likely that there will be very little energy from anyone else in trying to take-over and fix those problems. Kevin is correct in that the board is elected by shareholders but, a board exerts a lot of influence on a company as time goes-on. So board seats shouldn't be given lightly. A single bad or ineffective board member can wreak havoc on a company, especially in the early stages of a company's life. In companies outside of tech, you're likely going to be dealing with valuations that are far lower, thus likely to be impacted with greater dilution and also potentially far more restrictive and onerous investment terms. If your company is a tech company, I'm happy to talk to you about the financing process. I am a startup entrepreneur who has recently raised angel and VC capital and was also formerly a VC as part of a $500,000,000 investment fund investing in every stage of tech and education companies.TW
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What roles should the CEO and CTO have in a VC meeting?
The more important first impressions to leave a VC with are: 1) That you both are credible and inspire confidence that you can execute the plan you're fundraising on. 2) That there is good chemistry and a great relationship between the two of you; 3) That you can adequately address the concerns/objections/questions the VC raises. The CEO is expected to do most of the talking because the CEO should be the best person in the company at articulating the vision and value of the product and company you're building. If your CTO is comfortable presenting part of the pitch, it would be ideal for the CTO to speak to the product slides. The most important thing is for the CTO not to be a "bump on the log" meaning that you don't want them sitting there for most of the presentation with nothing to say. If you feel that's the case, you really shouldn't bring your CTO. Most VC meetings will not get technical and under the hood. Each question answered should be answered by the person best qualified to speak to that question. You should make eye-contact with your partner and use subtle body language to find a way to cue the other person to speak to that question or simply offer "CTO, would you like to answer that?" Bottom line, make sure that the CTO can speak confidently enough about the product and vision, otherwise -unless specifically asked by the VC - come alone. Fundraising is a big distraction to building and a good VC will always respect that in a first meeting, the CTO can be excused from attending in priority of building product. Happy to talk to you both on a call about helping get you feeling a bit more confident and prepared before your meeting. I was formerly a VC associate for a $500m fund and have raised money from VCs as a serial entrepreneur.TW
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How important is a co-founder when it comes to raising capital?
I'm a single founder who was raised angel and venture capital. If your business is compelling enough, you could raise angel funding. But there is little chance you can raise venture funding without a team in-place. It's a negative signal to institutional investors that you haven't been able to lock down a committed team. That said, depending on the nature of your product and traction, it sounds like you might be past the stage of recruiting a cofounder and more into hiring a great team of employees. The differentiation being less title and more the amount of equity. It sounds like you are selling a physical product so the question is whether you have built the capacity to scale. If not, the importance of having someone on your team who has done that at scale, even at the angel level of funding, could be helpful if not required. Happy to do a quick call and give you more contextual advice.TW
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What happens to a convertible note if the company fails?
Convertible notes are by no means "earned." They are often easier to raise for early-stage companies who don't want to or can't raise an equity round. Equity rounds almost always require a simultaneous close of either the whole round or a defined "first close" representing a significant share of the raised amount. Where there are many participants in the round comprised mostly of small seed funds and/or angel investors, shepherding everyone to a closing date can be very difficult. If a company raises money on a note and the company fails, the investors are creditors, getting money back prior to any shareholder and any creditor that doesn't have security or statutory preference. In almost every case, convertible note holders in these situations would be lucky to get pennies back on the dollar. It would be highly unusual of / unheard of for a convertible note to come with personal guarantees. Happy to talk to you about the particulars of your situation and explain more to you based on what you're wanting to know.TW
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How do I grow from a one man startup when I don't have the money to hire & don't have skills or time for investors?
Stop thinking you don't have the skills to do something. You can learn anything if you decide to, but assuming up front that you can't (forever) is dangerous. my2centsDM
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