Early-stage Fundraising 101 & How Not to Screw it Up - from a VC perspective. Presented by Gerrit Jurilj (btov Partners)

1. Early-stage Fundraising 101 & How Not to Screw it Up
- a VC perspective -
Gerrit Jurilj, btov Partners, 21.08.2018

2. btov at a glance
| More than 250 btov investors (private individuals,
family office, and corporates)
| On average >40 transactions p.a.
| 25-30 pre-screened ventures presented p.a.
| Investing around EUR 15-20m annually
btov…
| was established in 2000
| has about EUR 375m
assets under management
| managed 51 transactions
(follow-on rounds and new
investments) in 2017
| makes 80% of its
investments in DACH, and
about 20% in Europe,
Israel, the U.S. and Asia
| has 23 dedicated
employees working in rather
unusual offices in Berlin,
Luxembourg, Munich, and
St. Gallen
| One team focussing on Digital Tech
| EUR 75m Digital Tech Fund (currently investing)
| EUR 30m btov Growth Fund (currently investing)
| One team focussing on Industrial Tech
| EUR 75m–100m Industrial Tech Fund (currently
investing)
| Ringier Digital Ventures, Zurich
| Helvetia Venture Fund, Berlin/St. Gallen
| Mandate for a major Swiss family office
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3. § Business background (ESB Business School & Lancaster University)
§ Work experience in M&A and various B2C startups
§ Joined btov as an Analyst in early 2015
§ Mostly focused on Digital Tech, but relatively industry and stage-agnostic
§ Some investments so far: Movu (www.movu.ch/), Volocopter (www.volocopter.com), Mymoria
(www.mymoria.de), Trellis (https://www.trellis.ag/), Ava (www.avawomen.com/)
§ Connect and say hi! https://www.linkedin.com/in/gerritjurilj/
Meet Gerrit
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4. 1) Should you raise VC?
2) Preparing your funding round
I – General considerations
II – Fundraising documents
III – Identifying potential investors
3) Approaching and communicating with VCs
I – Ways of establishing contact
II – Following up/receiving feedback
III – Initial pitch, ongoing DD
4) [Excursus] Preparing for negotiations
Agenda
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5. Should you raise VC?

6. Put venture capital on the map
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7. § Not all startups require external funding – unless you really need it, carefully consider if you want it!
§ Generally, consider raising VC (only) if:
- You want to build something massive (EUR 100m+ revenues).
- You have a solid plan for the use of new funds. Do not raise the stakes without a solid strategy.
- You need the money right now, e.g. because your company will structurally be cashflow negative
for long or because the market is getting crowded & you need to box out competitors.
§ Benefits of external funding
- Cash: Faster growth & staying power, competitive positioning, etc.
- Value-add investors: Customer & partner introductions (Keiretsu effect), Management &
fundraising expertise; strategic, operational and HR support; credibility.
§ Downsides of external funding
- Not “your own boss” – reporting, board, drag-along, etc.
- Not able to really participate in your venture’s success until exit [excl. secondaries]
- Enhanced risk of being left empty-handed due to VC terms and misalignment of incentives
Want to raise VC? Consider what you sign up for.
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See e.g. Nick Bonatsos: „Should you raise Venture Capital right now?” https://medium.com/@bonatsos/should-you-raise-venture-capital-right-now-46ae869af913

8. § VC compensation structure:
- ~2% management fee
- 6-8% compound hurdle rate
- 20% Carry
§ Goal: 4x return across your portfolio over a 10-year period (top quartile)
§ A 2x on your investment probably will hardly get you in the carry.
§ VC is an outlier business; no interest in low risk/low return profiles!
How VCs think [as opposed to e.g. business angels]
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See e.g. https://bothsidesofthetable.com/how-to-build-a-startup-understanding-venture-capital-54ba55abf1e6, Slide 24 ff.

9. When VC goes wrong…
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Source: https://www.businessinsider.com/fanduel-founders-likely-to-lose-out-from-paddy-power-acquisition-2018-7

10. Preparing your funding
round
I – General considerations

11. § Manage the financing process as a project, not as something that you do “on the side”. In
early stages, fund raising is a full-time job and a key responsibility of the CEO.
§ Talk to as many people with fundraising experience (on both sides of the table) as you
can. Get feedback on your documents/investor shortlist/term sheet etc. by trusted and
experienced parties.
§ Be empathetic of all other involved parties.
§ Think positively about the financing process – attitude carries you a long way.
§ Be humble yet confident, and always courteous and professional.
§ Embrace and learn from rejection.
§ Don’t try to bulls**t (market size, risks, interested parties).
§ VCs are chatty and well-connected. This can be really good or really bad for you.
§ Good preparation and execution basically require zero talent and may get you into a
position of power – increased likeliness of getting desired investors, strike favourable
terms, etc.
Still keen? Great. Here are some general guidelines!
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12. Timeline:
§ Raise money when you can, not when you have to (Sun Tzu – “In times of peace, prepare for war”)
§ Your runway determines when you have to start. Plan ahead and consider the following draft timeline:
1. Prepare fundraising documentation & identify potential investors – 6 weeks
3. Approach relevant VCs – 6 weeks
4. Due diligence and further meetings – 6 weeks
5. Full partner pitch and issue of term sheet – 2 weeks
6. Legal work – 4 to 10 weeks
7. Sign deal and money in the bank – 4 weeks
àTotal: ~6-8 months from start to finish
Target funding volume:
§ Simply put: Should provide runway for the next 18-24 months.
Timeline and target funding volume
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When to start and how much to raise
Slight deviation of https://jenslapinski.com/2008/06/20/vc-fund-raising-manual/. Make sure to check the linked pages for further details on each step.

13. Preparing your funding
round
II – Fundraising documents

14. What you will need as soon as you kick off the process:
§ [Short presentation or executive summary (.pdf)]
§ Long Pitchdeck of 15-20ish slides (.pdf)
§ Financial plan/Business case (.xls)
§ Cap table (.xls)
What you will NOT need to prepare J:
§ NDA, Written business plan
What you can/should already prepare for filling your data room (examples):
§ Scans of all relevant legal documents (key employee contracts, CoI & trade register excerpt,
ESOP, ISHA, Articles, organization chart, financial performance, Docs regarding Sales/traction
(LOIs, lead pipeline), Product roadmap, founder CVs and 1-2 professional references,
customer/user references, etc. pp.
§ Ideally, you will have a person you trust to prove-read whatever document you prepare –
especially an (ex-)VC, business angel, or a founder who successfully raised capital in the past.
What documents you will need to prepare
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15. § Goal is to get people interested and provide a solid outline/basis for intro call and pitch. Don’t go into
too much detail. Don’t get too technical. Average Reading time: 3:44min
§ Should include:
§ DO NOT:
- Bulls**t about market size. Define your addressable market as accurately as possible.
- Underestimate or even exclude competition. Will lead to irritations down the road.
§ Bonus points: Include “Risks and mitigation”-slide, prove VC relevance (e.g. large funding rounds
carried out in the market, significant and recent exits)
Pitchdeck contents
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See e.g. DocSend: “What we Learned from 200 Startups who raised $360m” - https://www.slideshare.net/DocSend/docsend-fundraising-research-
49480890
Various good sources for creating your pitchdeck (+ further sources/insights on the process): https://medium.com/techstars/a-step-by-step-guide-to-
prepare-your-series-a-fundraising-f9d51ba27f6
• PROBLEM (unsolved for a reason; your
solution),
• PRODUCT (Value proposition,
demo/screenshots [if applicable], user
testimonials),
• USP (Secret Sauce),
• MARKET (Initial + potential markets;
addressable [!] market volume; competition),
• BUSINESS MODEL (CLV/CAC)
• MARKETING/SALES (acquisition
channels/marketing strategy; sales pipeline &
HR),
• FINANCIALS (18-24m),
• ROADMAP (18-24m) + VISION,
• INVESTMENT CASE & EXIT CHANNELS
• TEAM

16. § Plan bottom-up alongside variables that drive you business and play around with those you can
influence yourself, e.g. marketing spend, headcount
§ Make reasonable assumptions. You will get judged on plausibility of assumptions rather than
achievability of your topline!
§ Include P+L, Balance Sheet, Cash Flow statement, HR roadmap/payroll
§ Fill in actuals as soon as available. Update regularly. Under promise, over deliver.
§ Don’t plan too flat, don’t exaggerate on your hockey stick. If you feel like slow growth is the realistic
outcome, consider not approaching VCs.
Financial plan
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A good template for SaaS companies can e.g. be found here: http://christophjanz.blogspot.com/2016/03/saas-financial-plan-20.html

17. Preparing your funding
round
III – Identifying potential investors

18. § First of all: Secure soft commitments from existing investors, if any (SIGNALING!)
§ Many (many many) irritations and frustrations of founders are caused by an insufficient preparation of
the investment process and lack of information about the investors; prepare your team and “profile” the
investors that you want to talk to!
§ Create a Long list:
- Research dedicated public sources with search filters, e.g.:
- Bundesverband Deutscher Kapitalbeteiligungsgesellschaften (https://www.bvkap.de/ /
Germany only)
- GlassDollar (https://glassdollar.com/)
- Crunchbase (https://www.crunchbase.com)
- Techstars – Investors in Europe (GREAT STARTING POINT!)
(https://docs.google.com/spreadsheets/d/1neWbVEVm5nefBMw4xrx9eQLP4YTcfGf2OVulL0
QrZRE/edit#gid=0)
- Utilize your network (personal contacts, university, former employers, etc.)
§ You should end up with a list of some 80-120 potential investors.
§ Now analyze the profiles, then select the ~20-30 most relevant ones (focus, geography, good personal
access). Long list à Short list
Identifying suitable investors (1/2)
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Tapping the right data sources, Long list

19. § Put the names of the most relevant potential investors into an excel
§ Research the (initially) shortlisted firms, i.e.:
- What other deals have they done recently?
- Who is the right guy to talk to? à Plan out who you want to meet at each firm and who is the best
person to introduce you to that person.
- Read blog articles if available. Protipp: Blog posts hint what they are interested in and cautious
about, what aspects they may view critical in your pitch, what questions they (and others) may
ask later on. Work with this information and consider adapting your documents if need be.
- “Red flags”: Are they already invested in a direct competitor? Are there indications that they can’t
invest at the moment?
§ Now and based on your extended research, fill in your Short List in Excel with e.g. the following
columns (template: see below): Fund Name, Country, Ranking (A,B,C), Priority of approaching (1-3),
Fund Size, Ticket Size, Domain, Contact Person, Position, Email, Phone, Contact via, Status, Notes.
See template in footnote.
§ Ranking: A = Dream Investor, B = Good investor, C = co-investor or less relevant than A/B. Approach B
investors first.
Identifying suitable investors (2/2)
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Template: https://docs.google.com/spreadsheets/d/11MgELQ4HZXrGMN1GKK2ALT7lVkO6zojgVJiiMRCjIw4/edit#gid=0

20. Approaching and
communicating with VCs
I – Ways of establishing contact

21. § There are a couple of ways that founders and investors get in touch with one another:
(1) Introduction from a member of your network
- Most promising way to get in touch. ~90% of a VC’s investments will come through network.
(2) A founder reaches out to the investor directly (mail)
- The odds are against you: >90% of a VC’s dealflow, but <5% of deals done.
àMake sure to initiate contact as smoothly as possible!
(3) Meeting at conferences, meetups, etc.
(4) The investor reaches out to founders (mail)
- Won’t happen a lot, but a lot more often as you start fundraising
- Investor motivation: Either keen about learning about
- your particular company (which is amazing) or
- about the market you operate in (à clarify if they already eyeball another company!!)
For all outbound approaches (esp. 2-3):
§ Contact potential investors consecutively [e.g. batches of 5-6] and not all at once. You can’t provide a
good process for >10 active parties. Start approaching more as some fade out.
§ Contact the (seemingly) less relevant investors (B) on your shortlist first in order to gather initial feedback
and probably a first term sheet!
Ways of approaching (or being approached by) investors
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22. § Try to find someone in your network who can intro to
any of the firms on your shortlist (e.g. Linkedin)
àfirst investors, a (non-paid!!) advisor, a new investor
looking for a lead or co-investor or your friends in the
startup community, like fellow entrepreneurs that may
have received an investment or have been in touch
with such investor already.
§ Create a forwardable mail [!]
§ Understand the necessity of double-opt-ins.
§ If you receive an intro, follow up fastly, concisely,
politely and with a call to action (e.g. intro call or
coffee/lunch).
§ After one week or so, politely inquire if the mail has
been sent (“for record purposes”) and provide a very,
very gentle reminder.
Introductions 101
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Source: https://alexiskold.net/2015/06/24/how-to-write-a-forwardable-introduction-email/

23. “Moin & Grüezi boys,
Everything okay in St. Gallen and Berlin? From our network this name was brought to us along with the
question whether it would be possible to establish a contact to btov: www.[COMPANY].org .
They are always looking for contact to renowned VCs for funding and we thought that if you are interested we
can do an intro.
Kind regards
Julian”
Introductions: Make sure that your reference is a believer!
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A “rerefence” without conviction won’t help you at all

24. Reachout via mail – how not to do it
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VC is not always equal to sales. Keep it personal, quality over quantity.

25. Structure:
§ Mention your company + stage and
keywords in headline
§ State clearly why you contact this exact
firm/person (i.e. existing contact, their
investment focus, big fan of their blog, etc.)
§ Brief and concise pitch to get them exited
(problem solved, opportunity, the ask, …)
§ Clear call to action (!)
Reachout via mail – how to actually do it
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Clear structure, brief pitch, call to action
See e.g. https://medium.com/kima-ventures/introduction-template-for-the-startups-founders-their-vcs-investors-33df3ca11c6

26. § Great way to establish initial contact, but somewhat risky due to personal contact.
§ Be wary of your time and resources. If you decide to go to some event, come with a goal in mind.
§ Have your elevator pitch ready at all times.
§ Behave professionally at EVERY part of the conference, including dinner, afterparty, etc.!
§ This may not only bring you potential business leads, but also warm contacts to investors. Use them
wisely.
§ Important: When pitching to an investor [or potential customer], don’t “pin them down”. Read their
body language etc.!
How to behave at conferences, meetups, dinners, etc.
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27. II - Follow-up / Receiving feedback
Approaching and
communicating with VCs

28. § You’re likely to be rejected, either from the start or after a brief intro call.
§ Feedback on your pitch may be confusing for founders:
- The VC is not excited about your deal – why this is normal
- The VC seems to be paranoid – why this is normal (minimizing Type I error)
- The VC seems to be schizophrenic – why this is normal
- The VC provides very superficial feedback despite your good exchange – why this is (sadly) normal
§ Keep in mind: Investors’ feedbacks are, in 99.9% of all cases, not personal, but purely deal-related.
§ If rejected, do not try to change the outcome. It’s like arguing with the referee. Plus, you’re probably
shooting the messenger.
§ It pays off to be nice. Kindly ask the VC to proactively provide further feedback, appreciate that he or
she is busy. Do not follow up.
§ If you have not received feedback within 2 weeks, feel free to follow up gently.
§ You’re invited to an initial pitch? Well done!!
VC Feedback and how to respond
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29. § Project cannot be funded within the constraints imposed by the VCs investment strategy
à Wrong stage/industry/geography
§ Product or service already exist and are provided by established companies in the market
§ It will take years to break-even
§ Assumptions regarding the company’s development are simply not realistic
§ The long-term value proposition towards customers is unclear
§ Not a venture capital business profile (e.g. other asset class, other type of financing)
§ No convincing exit story
§ Low or no market-entry barriers for competitors / or innovation can be copied easily
§ Key people of the venture are active in other projects, too / no real commitment
§ 90% of the funding will go into marketing
§ Product or service is not scalable
§ Team has insufficient industry & market know-how
§ Company has already talked to most VCs in the market and has been rejected constantly
à Don’t be surprised about any of these coming up as reasoning. Reflect on your deck and intro
call (if any) and figure if you want to make adjustments!
Common reasons for rejections by VCs
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Source: Prof. Dr. Stefan Jugel, «Was man bei der Erstellung eines Businessplans richtig und falsch machen
kann», Vortragsfolien. Criteria of rejected proposals (sorted by frequency)

30. III – Initial Pitch, ongoing DD
Approaching and
communicating with VCs

31. § Based on your long presentation and probably some further docs that you provided, i.e. business
case.
§ Once again: Preparation is key. Know who you’re talking to, anticipate likely questions.
§ Be on time. Dress appropriately. Don’t look stressed.
§ Stay calm under pressure. Accept flaws in your model. Don’t panic when you can’t address a specific
question just now.
§ If you bring team members along: Let them shine!
§ After the pitch: Discuss next steps. Align regarding your timeline.
§ Create a sense of urgency, but never, never, never try to bulls**t to apply pressure. Don’t namedrop
(investor cartel might form behind your back and push their terms).
§ When asked the “valuation question”: Waiting for market feedback is a valid response. Be very, very
cautious about anchoring!
Initial pitch
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32. § There will be a lot (like, a LOT!) of calls with various team members, expert references, etc. . Don’t stress
out. Get used to repeating yourself.
§ Make sure to address all questions timely. Make clear when some requested documents will take time to
deliver. Always under promise, over deliver re timeline.
§ As you may be in various DD processes: Make sure that all requests of all investors are adhered to;
having only one data room and providing all requested docs for all interested parties at once might make
sense.
§ Now is a good time to do your investor due diligence, i.e. demand portfolio references.
Ongoing due diligence
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33. [Excursus] Preparing
negotiations

34. § Get familiar with the following terms:
- Valuation
- Liquidation Preference
- Anti-Dilution Protection
- Milestones, Ratchets, etc.
- Vesting
- Drag-along, tag-along, Right of First Offer
- Reps & Warranties
- Important Shareholder Matters
§ Read up on the market standards: See e.g. standard term sheet at
https://www.seca.ch/Templates/Templates/VC-Model-Documentation.aspx
§ Make sure to act out of a positon of power so that you can move things in your favour.
§ Don’t overoptimize. Sign the Term Sheet with your dream investor and, as long as there’s no serious
deviation between TS and legal documents to your disadvantage, move fast. Protipp: Settle disputes
with the investor.
§ Protip: Don’t let the lawyers talk too much to each other. Align with the other parties to find an
agreement, then instruct the lawyers to execute promptly.
[Excursus] Preparing negotiations & what to expect
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35. § Preparing and executing your fundraising process well requires a lot of work and attention, but zero talent
§ Doing well in your process can significantly improve your company’s development and the valuation of
your personal stake in it!
§ Be organized yet flexible. Adjust your documents and hypotheses as to who is the best partner along the
way.
§ Get your investor DD right.
§ Always keep in mind that you’re striving for a position of power in the final negotiations.
§ If you haven’t closed a deal despite a smooth and well-executed process, reflect on investor feedback,
bootstrap and – if you’re still keen – try raising again after pivoting and showing traction.
Closing remarks
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36. Thank you!
Gerrit Jurilj
Investment Manager
gerrit.jurilj@btov.vc
https://www.linkedin.com/in/gerritjurilj/
Connect and say hi!
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btov Partners
Meinekestr. 5
D-10719 Berlin
www.btov.vc