Presentation from a New York Angels Educational Meetup webinar on seed fundraising, Feb 2014

1. Thanks to all that
participated today in
the online Webinar.
My contact info is on
p.20.
Insider’s Guide to Raising Seed Capital:
An Introduction
Cheers,
-TW
Insights on successful fundraising from an active venture investor
and fellow entrepreneur
NY Educational Meetup Webinar
Tom Wisniewski
RosePaul Investments
Thursday, February 27, 2014

2. Agenda
I. Kick-off and Introduction
II. Seed Fundraising
III. Additional Q&A
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3. I. Kick-Off and Introduction
Seminar Rationale: Why are we here?
 Raising money is difficult…….especially for early stage ventures.
 Why? At least part of the answer is:
• The “market” for early stage investment is complex, nuanced
and can be “bewildering”….especially for 1st timers.
• Finding investors is difficult……getting investors to write a check
(can seem) nearly impossible: “1% of start-ups get funded”
• Lots of “noise” no shortage of advice
 What will help?
• Understand the marketplace, people and processes that are at
work
• Leverage existing expertise and network (thoughtfully).
• Interpret and utilize the wealth of resources that already exist.
• Improve / adapt your venture and approach.
•
…..Become a “student” of the art and science of fundraising (and
entrepreneurship generally)
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4. So….what questions do you have about Seed fundraising?
 Please use the JoinMe Chat feature to voice your questions
to me and the group!
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5. What would I like you to walk away with?
 Better understanding of the marketplace: fundraising process,
sources of capital, do’s and don’ts, etc.
 A set of specific insights that will *change* what you are doing in
fundraising.
 A “to-do” list: starting point(s), actions, things to try.
 A set of recommended resources to consult and learn more
from.
 [A few new relationships with others in the NYC startup/fundraising ecosystem: fellow entrepreneurs, investors, etc. ]
 Answers to specific questions about fundraising that you might
have.
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6. Tom Wisniewski: My background

Born in NYC; grew-up in Montclair, NJ

Physics and Philosophy major undergrad
(Clark University); MBA at Tuck School
(Dartmouth)

1st Job: Programmer at Morgan Stanley then
moved to Investment Banking

After B-school: joined a start-up management consulting firm Mitchell Madison
Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing,
private equity/VC clients (1993 to 2000)

Walker Digital: helped set-up and run an early “internet incubator” (2000)

Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio
company strategy and new investments; joined the management team of two
companies

Currently:
• Early stage investor and advisor to start-ups
• Investor and advisor to VC and PE funds
• Member and director at New York Angels
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7. So….what questions do you have about Seed fundraising?
 ….[Let’s review some of the questions asked]
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8. II. Seed Fundraising
Sources of Investment: Seed Fundraising, Angels and VC’s
Earlier Stage
“You”
aka Bootstrapped
Later Stage
“Seed”
Friends and
Family
Angel Investment
Venture Capital
“Seed” VC
“Traditional Series A” VC
Round Size $:
• $10’s of K
to $100K
• $100’s of K
to $1M+
• $500K to
$1.5M
• $5M-$15M
Investment Size $:
$5K – $10’s of K
• $25K – $75K
• $250K-$750K
• $3M – $5M
Valuation (PreMon):
Stage (Pre-Round):
• Expected to
have:
• < $1 M
• $1 – 5 M
• $5-10 M
• $10 – 25 M
• An idea, initial/rough
b-plan
• Initial founders, key
advisors
• Path to ???
•
•
•
•
Detailed b-plan,
Key founders (bus & tech) full-time
Prototype/alpha done and tested,
Some piloting (paying?)
customers, some revenues?,
• All legal documentation in place,
board of directors
• Path to break-even or next funding
• Significant variation among firms
but…. Angel req. +:
- Anchor clients on board, revenue
growth (B2B),
- Growing base of users, with strong
usage trends (B2C)
- …..Growth potential! Credible
path to $100M Rev
• Don’t Expect:
• $ Rev, Customers,
Minimum Viable
Product (MVP); full
legal documentation
• Income (e.g. cash flow positive);
all key management ; completely
developed business model (e.g.
understand it will change)
• Income (e.g. cash flow positive)
Who/what are
they?
• People you already
know, that trust
you, and (maybe)
understand your
venture
• Experienced early stage
investors (individuals or a group)
• Accredited Investors.
• Angel investing is not their “job”;
may not be F/T endeavor
• E.g.: NY Angels, GoldenSeeds
• Firm with multiple professionals that
raises, invests and manages
individual funds (other people’s $)
• Working F/T (this is their job…)
• E.g.: Greycroft, RRE, Union Square
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9. Who are these “Angels”? What do they look like?
 Experienced, successful entrepreneurs: frequently multiple exits
• Some from “tech-start-ups” some from other businesses
• Usually some link to
 Successful “corporate” business people: CEO or CxO-types
 Older: most are in the 40-60 age group. But there are also notable angels
in their 20’s and 30’s e.g. newly minted start-up millionaires
 3 – 10+ Angel Investments
 ~10% of investible capital in Angel Investments
 Differ *widely* in: Industry/Functional Experience, Investment Expience,
Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal
do’s/don’ts and hot buttons.
 Lists? Not many. All are partial. AngelList? Gust? Other?
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10. Tom Wisniewski: Investor Profile

Direct “Angel” Investor in Companies
• $25K-250K investments; Typical valuations: $1-5 Million,
• Typical Stage: at least some “product” done, some customer/sales traction
• Sector focus: Opportunistic generally within internet/software space;
- fair amount of Saas B2B, and consumer “marketplace” models, ecommerce enablers.
- NOT (or not much?): hardware, heathcare/pharma, cleantech
• NYC based: 50% investments in NYC area companies; total of ~80% NE overall (e.g
Boston, DC), 20% West Coast.
• Examples:
- Sociocast (social/behavioral big data analytics)
- LiveLook (Saas, live collaboration sales/service platform)
- Anvato (Ad insertion to live video streaming via proprietary machine vision)
- Moveline (Uber for the moving industry)
- Bizodo (Saas, paperwork automation; “Adobe 2.0” internet document sharing)
- Movio (Digital “RedBox”; content delivery via “last 100 ft” of wifi internet)
- HeTexted (Relationship advice forum generating content, media opportunities)
- Wanderu (Kayak for ground transportation)
- DealFlicks (a “Priceline” or “Hotel.com” for movie theater tickets)
- iCharts (tool that enables engaging, sharable, embedible chart content)

Investor in Funds
• In addition to direct investments in start-ups, invest in VC and PE funds.
• Examples:
- Social Starts (Seed fund for start-ups leveraging the Social Web)
- Brooklyn Bridge Ventures (Charlie O’Donnell’s fund)
- Entrepreneurs Roundtable Accelerator (ERA Fund)
- Greycroft Partners (Venture Fund)
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11. NY Angels Profile
www.newyorkangels.com

Member Profile: ~100 investor/members; several early-stage funds; Member
backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:
software, e-commerce, ad-tech, finance, media

Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC
Area.

Stage. Mostly early stage (with some customers/revs), some pre-revenue

Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M;
investments tend to range from $250K to $1M+;
• For larger rounds, NYA often leads the deal and helps find the rest of the capital by
sharing/syndicating the deal with other Angel Groups

Group Structure / Investment Decisions. NYA core structure is as a group of individual
investors. Individual investors “opt in” to deals and make their own investment decisions.
• Typical member invests $25-50K in a deal.
• In addition to the core “opt-in” model, NYA has just closed a small seed fund that will
operate in parallel (using a “democratic model” for investment decisions)

History/Background. NYA has invested $45M+ in 70+ companies.
• We are very active in the NYC entrepreneurial / early-stage ecosystem
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12. Active, NYC Early-Stage Tech Investors
 Some Active VCs in NYC
• Lerer Ventures (Seed)
• Quotidien Ventures (Seed)
• RRE Ventures (Seed)
• First Round (Seed)
• Brooklyn Bridge Ventures (Seed)
• ff Ventures (Seed)
• BoldStart (Seed)
• Union Square Ventures (Series A & B)
• Greycroft (Series A & B)
• DFJ Gotham (Series A & B)
• FirstMark Capital
• Village Ventures
Investment Size by Investor Type
•
Series A VC: Definitely
>$1M, $3-5 M sweet spot
•
Seed VC: <$1M , $250K750K frequently
•
Super Angels / Micro: up
to $250K? , lots of $25’s –
100K’s ?
•
Angels: <$100K, typically
$10-50K
 Angels, Super Angels, Angel Groups and Micro VCs: [see links
below]
Angel/VC List: https://docs.google.com/spreadsheet/ccc?key=0Ap5XbqUM9nICdG40LXVVamRyN19zZHlTU3E2SmdDTkE#gid=0
NYC VC: http://under30ceo.com/top-new-york-based-venture-capitalists-you-should-know/
Angel Groups: https://gust.com/find-investors?keywords=&sort=distance&grouptype=ANGEL_GROUP&region=STATE
.
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13. Who are the “right” investors? Where is there a “fit”?
 Just do it? Just go pitch some investors? …..Nope. Fit is critical.
• Wrong question: How do I pitch “investors”?
• Right question: Who are the “right” investors? ….*then*…. How do I pitch this
specific, individual investor?
 Reality Check. As a general rule, “people invest in things that they
understand and have experience with”
• Find investors that come from industries, sectors, business models etc. that
are same/similar to your venture and the customer markets it serves.
• If I have never invested in Caribbean real estate, oil wells….or communication
hardware, it is very unlikely that I will do it with you.
• For Angels/Angel Groups: use online bio’s / LinkedIn / AngelList to identify
likely “good fit” Angels
• For VCs: Find the right person at the fund; Individuals at the fund focus on
different sectors. The web site often spells it out.
 Thought Exercise:
• “What would the “perfect” investor look like?”
• …he/she probably doesn’t exist but this will help you :
- target, prioritize, know one when you see them”
- To be specific (and effective!) when asking for referrals
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14. How to “get” a pitch meeting?
 Find….Fit? Does this investor have “fit”? Do they invest in ventures like mine?
......if not, then move on. (or at least prioritize accordingly)
 Prep!
• Know your audience. What have they invested in? Recently? What can you
find out about their background? Interests? Hot buttons?
- How? Duh….Google: Blogs, Quora, YouTube, CrunchBase; talk to
people they know, better…talk to those they have invested in.
• Create a good pitch:
- What would they want to know?
- How can I say what’s unique/ compelling
- Make it easy. Think “executive summary” and KISS (Keep It Simple
Stupid)
- adapt pitch to fit the situation.
• Don’t be lazy; invest some time.
 Connect. The hard part.
• Avoid “cold-calls”; look for “warm introductions”
• Networking. Who do you know that knows them?
• Find them at an event. (Email sucks!)
Tips on getting a meeting: http://www.quora.com/David-S-Rose-1/How-does-someone-get-a-meeting-with-angel-investor-David-S-Rose
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15. How to “get” a pitch meeting?
Wrong Question…
Right Question:
How do I build a relationship first?
 Why?
• Pitching by its very nature can be awkward. “This guy wants
something from me.”
• Having a pitch be the first thing someone hears from you can be
off-putting. “Do I know you?”
• Most investors mean-well, and would like to help…but
- they are real busy
- its very challenging to understand new ventures quickly
- Its tough to say “no” (easy to avoid, or say maybe)
 Solution: Build a relationship before you need to pitch. OK,
How?
• Give, don’t Ask: what can you do for them?
• “Ask for advice, not money” . Turn people into advisors…..then
investors.
• Debate / Discuss a topic, Ask opinion about X.
• Find ways to “show” rather than “tell”: show me your smart, don’t
tell me your smart
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16. Key Success Factors and Take-Away’s
for attracting Seed Investment
 Pitch, Get Feedback, Revise. Repeat. No venture idea was built in a
vacuum. The ONLY way to develop business ideas is to share them, solicit
feedback, make adjustments, develop/refine/add and…..DO IT AGAIN!
• Many ventures fail to gain investor attention because there are too many gaps
(perceived and real).
 Find Good Advisors. To get good, detailed feedback and input you need to be
talking to right people, with the right experiences: Experienced entrepreneurs
and investors, prospective clients and partners.
• Networking, networking, networking….
 Communication is Paramount. Potential investors (or potential employees,
customers, etc.) usually start out knowing nothing about you or you venture.
Getting someone up to speed: a challenge. Getting someone to write a check:
a big challenge. At the core is effective communication.
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17. Key Success Factors and Advice….continued
 Find Investors that Fit. People invest in things that they know, understand,
have experience with. Find ones that match.
 Find “Lead” Investor(s). Its critical to get one or more investors on board
who can take the lead in driving the investment process: due diligence, term
sheet, investor commitments, closing documents/process
• Investors trust…..other investors. Their interests are aligned. Lead
investors help attract additional “followers”. With Angel Groups: use available
bios / LinkedIn to
 Understand (and Manage) the Process. You are more likely to succeed if you
really understand what’s happening (or should be happening) For each step
(e.g. investor search, screening, presentation, due diligence, term sheets, etc.):
• What is happening or needs to?
• Why? What’s the rationale?
• Who is doing what? How do perspectives and motivations differ?
• ……now, what can I do to make it work for me?
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18. Key Success Factors and Advice….continued
 Valuation (and Key Terms). Be realistic. Be Flexible. Realize this is a
professional (not personal) discussion ; there will be back and forth. Ultimately
the “market” sets the price/terms.
• There is more to investment terms than valuation….Important to understand.
 Timing. Am I ready for Angel Investment?......A few probing questions:
• Have you covered the key success factors mentioned here? Do you have a
compiling business opportunity with huge growth potential?
• Do you really need the money? Now? The more that you can accomplish on
your own, the more compelling your case (and valuation) will be…..
• Are you ready to work for a someone else? e.g. the investors, the board of
directors
• Fund raising is “brain damage”. It wastes valuable time that could be spent
growing the business. Avoid it, minimize it, delay it if you can.
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19. Other TW Classes
What: Show Me the Money – Series
Session 5: “What VCs are investing in and why?
When: Thursday, March 20th 6-9PM
Where: General Assembly in NYC (generalassemb.ly)
Speakers:
Link:
Ellie Wheller, Greycroft Ventures
John Frankel, ff Venture Capital
http://bit.ly/1fUU0gN
Next NYA EDU Webinar
What: All You Ever Wanted to Know About Term Sheets
When: Tuesday, March 11th, 9-10AM
Where: General Assembly in NYC (generalassemb.ly)
Speaker:
Link:
David Rose, RoseTech Ventures, Founder of NYA
http://bit.ly/TermSheets
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20. III. Additional Q&A, Feedback Welcome
Feedback on this class:
 What did you like most about this seminar?
 What could be added and improved to make it better?
 What other topics would you like to see a seminar conducted on ?
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21. Thanks!
Thomas Wisniewski
Contact Info
Email: thomas@rosepaul.com
LinkedIn: http://www.linkedin.com/in/thomaswis
Twitter: @thomaswis
This presentation: http://www.slideshare.net/Thomaswis/
New York Angels www.newyorkangels.com
New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/
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