Basics of startup fundraising, a "how-to" process, and general pitch tips

1. MassChallenge 2016 Bootcamp
Fundraising Intro
Shereen Shermak, Good Growth Capital
shereen@goodgrowthcap.com
@shrcubed
David Chang, PersonalVC
david@personalVC.com
@changds

2. Pitch
Tips
Fundraising
Basics
How to Raise
a Round
@shrcubed @changds

3. About Shereen
Background Experience Investments Today
@shrcubed @changds

4. About David
Background Experience Investments Today
@shrcubed @changds

5. Fundraising
Basics
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6. Your Fundraising
Experiences
@shrcubed @changds

7. Capital Sources
You hear a lot about…
• Venture Capital
• Angel Groups
• Crowdfunding
• Friends and Family
• Customers
• Accelerators
• Competitions
But less about...
• SBA Loans and Personal Debt
• Grants
• Corporate Venture
• Vendors or Equipment Finance
• Bootstrapping (creatively)
@shrcubed @changds

8. Growth trajectory of your business?
’Lifestyle business’–
no plans for big hiring
Personal raise – loan,
add folks to cap table
@shrcubed @changds
Growth oriented
business
Crowdfunding and
personal raise
High growth
scalable business
Venture capital

9. Venture Capital Dynamics
• Skewed return distribution
• VCs must swing for the fences
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10. Venture Capital Stages
Bootstrap
Angel
Early Stage
Growth
Equity
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11. Local Investors
Seed
Early
Growth

12. Amount to Raise
How much funding do you need?
• Basic financial modeling 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
@shrcubed @changds

13. 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
@shrcubed @changds

14. 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
@shrcubed @changds

15. How to Raise
a Round

16. Fundraising Campaign
Prep Target Socialize Raise Close
@shrcubed @changds

17. Basic Prep
ü Legal representation
ü Founders agreements
ü Financials and budget
ü Teaser (1 page)
ü Pitch deck (10 pages)
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18. Target List of Investors
Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter
@shrcubed @changds

19. 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?”
@shrcubed @changds

20. 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
@shrcubed @changds

21. Closing the Deal
• Rolling close vs. set close
• Reference check investors
• Not done until money is in
the bank
Key terms
q Board composition
q Option pool
q Voting rights
q Founder vesting
q Change of control
q Redemption rights
q Information rights
q Anti-dilution
@shrcubed @changds

22. Negotiating Valuation
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23. Valuation (sort of) Matters
?
$12
$30$6
$15
Seed A B
Valuation ($M) Dilution
Example: 50/50 founder split
What’s your end stake?
• $3M à 17%
• $5M à 19%
• $7M à 19%
• $1.5M raise @$3M à 15%
See www.ownyourventure.com
$1M raise $6M raise $15M raise
@shrcubed @changds

24. Questions?
Shereen Shermak
shereen@goodgrowthcap.com
@shrcubed
David Chang
david@personalVC.com
@changds