Investment Workshop - Big Booster Boston Bootcamp
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Overview of tech/startup fundraising basics, some how-to tactics on raising a seed round, and general pitch tips/lessons learned
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Investment Workshop - Big Booster Boston Bootcamp
- 1. Investment Workshop David Chang @changds Harvard Business School, Entrepreneur-in-Residence PersonalVC, Co-founder Feb 14, 2017
- 2. Background
- 4. Direct Via Syndicate/Fund Angel Investments
- 5. Fundraising Basics How to Raise a Round Tips
- 6. What Obstacles Stand in Your Way?
- 7. Capital Sources You hear a lot about… • Venture Capital • Angel Groups • Crowdfunding • Friends and Family • Customers • Accelerators • Competitions Not much about… • SBA Loans and Personal Debt • Grants • Corporate Venture • Vendors or Equipment Finance • Bootstrapping (creatively)
- 8. Growth trajectory of your business? Lifestyle business Personal raise – loan, add folks to cap table Growth oriented business Crowdfunding and personal raise High growth scalable business Venture capital
- 9. Venture Capital Stages Friends and Family Angel Early Stage Growth Equity
- 10. Venture Capital Dynamics Skewed return distribution VCs must swing for the fences Source: @DawnUmlah
- 11. Amount to Raise How much funding do you need? •Basic financial model of cost drivers and revenue streams •Forecast monthly for 18 months •Fundraise rule of thumb: 12-18 months’ cash How Much For What To Prove
- 12. Use of Proceeds What will you use the money for? •Build out the product •Grow the team •Marketing •Customer acquisition •Working capital How Much For What To Prove
- 13. Milestones What will be proven that de-risks the business? •Product development •Market demand •Product / market fit •Business model •Execution How Much For What To Prove See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
- 14. How to Raise a Round
- 15. Fundraising Campaign Prep Target Socialize Raise Close
- 16. Basic Prep Legal representation Founders agreements Financials and budget Teaser (1 page) Pitch deck (10 pages)
- 17. Target List of Investors Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter
- 18. Socialize •Get warm intros • Find strongest mutual connections to 30+ potential investors • Network over 2-3 months •Ask for referrals, not money •Refine pitch • Incorporate feedback, but avoid whiplash changes “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
- 19. Raise: Go for the Ask •Talk to your top candidates at the same time • Run conversations in parallel • Decide whether / when to tell investors about each other •Create urgency • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
- 20. Closing the Deal •Rolling close vs. set close •Reference check investors •Not done until money is in the bank Key terms Board composition Option pool Voting rights Founder vesting Change of control Redemption rights Information rights Anti-dilution
- 21. Structure Preferred Stock • Preferences over common • Board seat or 2 • Option pool • Liquidation preference- they get their $ first • Control over sale, new Convertible Debt • Debt that becomes preferred equity when you raise it • No valuation, but the “cap” is a valuation ceiling • Interest accrues, rate <10% • Conversion discount
- 23. Valuation & Dilution ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise ?
- 24. Valuation & Dilution ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise 37% See www.ownyourventure.com Raise $1M on $5M pre 33%Raise $1M on $3M pre 34%Raise $1.5M on $5M pre
- 25. How Long Does it Take? •Longer than you expect • 3-6 months •Speed limited by access to investors • Your ability to find them • Their calendar availability (surprisingly hard) • Bigger raises = more diligence (up to 30 days)
- 27. Resources • Pitch • www.pitchenvy.com • www.bestpitchdecks.com • Guy Kawasaki: 10 slides / 20 minutes / 30 point font • NextView www.nextviewventures.com/blog/free-startup-pitch-decks-template/ • www.mjskok.com/resource/getting-behind-perfect-pitch • www.soulmix.com/remix/619 • Legal • Foley & Lardner www.foley.com • Goodwin Proctor www.foundersworkbench.com • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com
- 28. Tips
- 30. Share Your Summit & Basecamp
- 31. Leverage Your Natural Presentation Style
- 32. Adjust for Your Audience
- 33. No Blind Spots Pricing Customer Collaborators Funding Promotion Product / Service Context Place Company Concept Competition
- 34. Pitch Materials for Each Level •1 Sentence •1 Paragraph •1 Page •1 Light Deck •1 Follow-up Deck
- 37. Start or Join a Company
- 38. People Bonds > Company Bonds
- 40. Investment Workshop David Chang @changds Harvard Business School, Entrepreneur-in-Residence PersonalVC, Co-founder Feb 14, 2017
Notes de l'éditeur
- …3 key periods in my professional life (1. Background, 2. Startups, 3. Angel Investing) First 10 years of professional life in NY Came to New England, thinking a great place to go to school
- …but never left Next 15 years Dumb luck: 1000+ amazing people, 5 startups/5 acquisitions My startup perspective shaped by where I’ve been
- Past 5 years – lucky to invest in other people Small checks - very early/seed level My motivation: networking/connections, sharing expertise (less financial) Focus: software, disproportionate knowledge, ONE THIRD in women Developed pattern recognition – what works and what doesn’t
- Fundraising 101 – How-to
- Past examples: How do I get funding in an industry when it’s out of favor (ad tech)? There’s lots of U.S. investment in clean tech. How do I connect with investors?
- Bootstrap, crowdfunding too Local angels and angel groups Seed stage VC firms Corporate VC arms Trends Angels alongside VCs Syndicates Contracts / financing terms Valuation methods – tech vs. knowledgeable First time entrepreneurs
- Out of 10 investments: 1 home run ($1B+ exit, >10x capital) – IS YOUR STARTUP ONE OF THEM? 2-3 modest returns (2-3x capital) The rest WILL FAIL Investors must * Own significant stake * Be able to change the team
- How much & who from? Not simply $500k, $1M Not simply 18 months Not simply salaries / costs
- Use of proceeds – pretty straightforward
- Buying information to de-risk How de-risk: what do you need to discover in order to de-risk the business? Can you build it, do people want it/traction, execution, etc. Confirm problem / solution fit? Find customer acquisition model that ROCKS? Test differing pricing models? These are “Milestones”, but the term is often misunderstood
- Fundraising 101 – How-to
- Also: Cap table Pitch materials
- WHO Strategy/approach Targets (broader than capital sources slide): Mix of angels vs. VCs vs. funds vs. syndicates, People, F&F, Banks, Partners Current investors to pull in new investors Stage / investment amount Location: HQ vs. your location Business model: B2B Enterprise, B2B SMB, B2C Investment thesis – type of innovation : business or technical risk
- HOW: Intros
- FOMO: momentum is a good thing Optics: oversubscribe
- First investors vs. last investors
- Example – you own 100% of company, raising your first $1M, what valuation? $5M 37% $3M 33% $1.5M raise @$5M 34% Valuation grows in step functions Less important than you think: don’t poison the relationship with greed Professional investors will offer a reasonable range Down rounds are ugly
- Example – you own 100% of company, raising your first $1M, what valuation? $5M 37% $3M 33% $1.5M raise @$5M 34% Valuation grows in step functions Less important than you think: don’t poison the relationship with greed Professional investors will offer a reasonable range Down rounds are ugly
- When to start? Raise when you can, not when you need to. Don’t get disheartened before you hit your goal: Don’t make a goal “miss” be your first fail
- Like getting married But hiring someone who can fire you
- People lessons Pitch lessons
- Need both – otherwise the investor is left guessing Path to the summit will change: pivot Presentation flow: fireside chat (end big), exec sum (start big)
- You shout or your slides shout?
- My 30-minute checklist (it takes me longer to interview someone) Think broad – internal consistency of levers Find your gaps
- …Starts by knowing yourself Broad vs. narrow lever Very handy when recruiting team members
- …Entrepreneurship isn’t just about starting a company Where connections (mini-PayPal mafia)
- Bonds with people, not companies Foreign concept for many College friend worried I couldn’t KEEP a job
- Everyone is 1 degree away Don’t be shy: Investors need you as much