TCN Fundraising Strategy for Female Founders 2022.pdf

The Capital Network
12 Apr 2022

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TCN Fundraising Strategy for Female Founders 2022.pdf

  1. Own Your Raise: Creating a Fundraising Strategy for Female Founders
  2. Fundraising is hard. You don’t have to do it alone. Designed for entrepreneurs, The Capital Network (TCN) provides workshops, events, mentorship and a network to support YOU, the founder. Let TCN help you OWN YOUR RAISE! Fundraising Preparedness Workshops ● Open to all early stage founders ● Workshops, bootcamps, events on fundraising Fellowship For Female Founders ● For a cohort of 10-16 female founders per fellowship program ● 6+ months of fundraising education, mentorship, resources, and networking ● Since 2016, our 75+ fellows (50% BIPOC) have raised $45M+ Investment & Inclusion Series ● Open to all ● Ongoing series of open conversations to explore effective practices in DEI, Capital and the future of fundraising ● Held in partnership with the VC Inclusion Lab of Brown University
  3. Terence Craig Startup Investor, Investor in Residence at The Idea Village @terencecraig @TCNupdate Lisa Frusztajer Investor in Residence at TCN, Investment Committee at Portfolia, Angel Investor at Pipeline Angels and Next Wave Ventures @TCNUpdate @Portfolia1 Marie Meslin Executive Director at The Capital Network & & Creator of the Fellowship For Female Founders @marie_meslin @TCNupdate Pauline Roteta Co-Founder & CEO at Pasito, Entrepreneur in Residence at TCN @joinpasito
  4. Purpose of this workshop ● To understand the landscape of raising money for female founders ● To understand what raising from investors means for you and your business ● To understand how to best prepare, plan and execute a strategy that makes sense for you and your company. ● To learn about resources and meet other female founders raising capital ● Be prepared + Not desperate for cash = Sound decisions ● Tell us what you want to know! MM
  5. You will gain a better understanding of: ● Fundraising landscape ● What raising money means for you and your business ● Prepare, plan, execute the right strategy for you ● Resources, meet other female founders raising capital ● Preparation + Not being desperate for cash = Sound decisions Tell us what you want to know! MM
  6. Sections 1. Setting the scene: The landscape for female founders raising capital 2. What does raising capital mean? 3. Am I / is my company ready? 4. Raising Capital: DOCUMENTS 5. Raising Capital: THE RAISE 6. Raising Capital: TIMELINE 7. Raising Capital: NETWORKS 8. Strategies for Success / Resources MM
  7. 1. Setting the scene
  8. Fundraising While Female 2% 0.43% 15.4% In 2021, only 2% of venture capital dollars went to startups founded solely by women, the lowest percentage since 2016. Black and Latinx women received 0.43% of the $166 billion in VC funding given out in 2020. In 2021, about 15.4% of GPs of VC firms are women, a 3.5% increase from 2019. Women founders also face biased questions, and even harassment and abuse by male investors LF
  9. The Pandemic has a disproportionate impact on female entrepreneurs COVID impacted female founders harder than it did male founders and the overall venture market. It went beyond deal activity. It impacted valuations, as well. For the first time in over a decade, valuations of female-founded companies at the early stage diverged significantly from the overall market, with a gap emerging in both 2020 and 2021. The median valuation for all early-stage startups increased 15.4% between 2019 and 2020, despite the pandemic. For female-founded companies at that stage, the median rose by 4.0%. The result was a $4.0 million chasm between the overall market and female-founded companies Source: PitchBook 2021 Report LF
  10. Gender Gap LF Companies founded solely by women only received 2% of dollars invested in VC-backed startups in the US in 2021
  11. Women Founders - The State of the Union ● As of 2019, there were nearly 13 million women-owned businesses in the U.S., representing 42% of all U.S. businesses. Women of color make up 50% of all women-owned businesses. ● Over the past two decades, the number of women entrepreneurs has increased by 114%. ● As of 2019, women-owned businesses employed almost 9.4 million people and generated $1.9 trillion in revenue. Women-of-color-owned businesses generated 23% of total women-owned businesses’ revenue ● Women drive 83% of all U.S. consumption, through both buying power and influence. (Source: Morgan Stanley) ● Before the pandemic, 60% of women-owned businesses ranked the overall health of their business as “good”. But by July 2020, just 47% (15% less compared to male-owned) of female-owned businesses said their businesses was “good”. (Source: US Chamber of Commerce) ● 28% of startups have at least one female founder (Source: SVB) ● Increased numbers of investment groups and firms aimed at women-run companies (Female Founders Fund, BBG Ventures, Harbinger Ventures, Halogen Ventures, AllRaise, XFactor Ventures, Astia Angels, Chloe Capital, Portfolia) Source: 35 Women-Owned Business Statistics You Need to Know in 2021 LF
  12. New Majority Founders Woefully Under-represented Source: RateMyInvestor LF
  13. Black Founders LF Crunchbase data shows that Black founders received only 1.2% of the record $147 bln in VC investment in U.S. startups in the first half of 2021. That compares with the more than 13% of the U.S. population that is Black or African American.
  14. Latinx Founders LF Crunchbase data shows that while funding to Latinx founders has increased from $1.7 bln in 2017 to $6.8 bln in 2021, that growth only slightly outpaced the overall increase in U.S. VC investments, leaving Latinx startup funding stuck stubbornly at around 2 percent of the overall startup investment pie.
  15. Allies LF
  16. 2. What does raising a round mean?
  17. Fundraising lifecycle Friends/Family Ultra high risk Bet on founders Limited expectation for return’ ~$250K Pre-Seed Angel investors Very few VCs * Founder Centric, based on vision,qualitative not quantitative $1M - $2M Seed Angels, Angel Groups, Family Offices, Some VCs Founder-centric, needs some traction, still based on vision, qualitative not quantitative $1M-$5M (Varies) Series B Institutional: VCs, Large Family Offices Focused on previous growth metrics, future return projections. Quantitative Series A Angel Groups, Family Offices, VCs; Primarily institutional Based on traction, past performance, domain expertise,TAM Less qualitative but not enough data to be truly quantitative $5M-$30M Growth Equity Large VC, Private Equity and Large Family Offices Focused on previous growth metrics and future return projections. Late Stage Large VCs, Private Equity, Specific Late stage Investment Banks Financially driven entirely Exit: IPO/Acquisition Large Companies, Investment Banks Debt Financing Venture Debt Funds Commercial Banks TC
  18. What does raising money from individual Angels mean? For the Entrepreneur More than just money… ● A key partner ● Strategic connections ● Guidance ● Can provide credibility with investors & customers For the Angel: ● Mentor ● High risk / high reward (typically convertible note/SAFE) ● Use expertise and industry knowledge to catalyze growth & stay in the game TC
  19. Other options to raising capital • Bootstrap • Customer Contracts & Sales • Family & Friends (Watch TCN Workshop Recording) • Pitch / Biz Plan Competitions • Crowdfunding (Kickstarter / I Fund Women) (Watch TCN Workshop Recording) • Equity Crowdfunding (WeFunder / NetCapital) (Watch TCN Workshop Recording) • Revenue Based Financing • Grants & Other Non-Dilutive Grants (SBIR etc) (Watch TCN Workshop Recording) TC
  20. 3. Am I / Is my company ready?
  21. Am I ready? You might be at the right stage to think about investment but… ❏ Is there alignment between your vision for your company and the kind of money you are seeking? ❏ Do you have outside support and mentoring from your personal and professional environment? ❏ What are your family considerations? Can you take more on? ❏ What are your financial considerations? Resources: The Founder’s Dilemma & HBS PR
  22. Am I ready? You might be at the right stage to think about investment but… ❏ Alignment – your vision, money you are seeking? ❏ Outside support / mentoring? ❏ Family / personal / financial Resources: The Founder’s Dilemma & HBS PR
  23. Is my company ready? Should you be raising capital from investors? Checklist to see if you are ready for investment: ❏ Am incorporated as a for-profit business? ❏ Have I validated my assumptions and shown market demand? ❏ Is my business scalable? ❏ Do I have a clear brand? ❏ Do I have a team in place with clear roles and duties? ❏ Do I have clear goals/milestones I want to reach with my business ❏ Do I have an end goal / payout for the business? ❏ Am I clear on all the parties that have a stake in my company? PR
  24. Is My Company Ready? You might be at the right stage to think about investment but… ❏ Is angel or institutional the right option? ❏ Grants / non-dilutive? ❏ University resources? ❏ Accelerators / incubators? PR
  25. 4. The Documents
  26. What you need A. One paragraph overview B. One-pager: Also called an Executive Summary C. Two versions of your Deck: a. Presentations b. Sharing digitally D. Financial model E. Product presentation or demo F. Email template - a ‘Forwardable’ update tailored to each recipient MM Resource: Startup Templates
  27. The ‘About’ Paragraph The paragraph as your MISSION STATEMENT: In 3-4 sentences: ● Why this - What is the problem I am trying to solve + how are you solving it ● Why me - Why am I the best person to solve this problem ● Why now - What is going on in the market, trends, regulations etc to make this the right time to create this business ● OR Who Cares? - Why is this important - why you should care about this too. MM
  28. The ‘About’ Paragraph - Pasito Why this: Companies are struggling to hire and retain talent. At the same time, they spend 30% of their budgets on benefits that employees don’t understand or use. For employees, most of their financial life is tied to their employer (salary, retirement, health, care, transport). But when they don’t get the financial or tax advice they need (and 3/4 of Americans don’t), they leave thousands of dollars on the table each year. Why me: Why not me? I experienced it first hand and knew I could solve this problem. I believed in my ability to build an amazing team to make a difference. Why now? 1) Great resignation 2) Financial inequalities exposed by Covid 3) Regulatory changes PR
  29. The ‘About’ Paragraph - Mombox Why this: As a first-time mom I was baffled (and personally let down) by the lack of care new moms received, starting with the labor and delivery essentials. I realized this was a needed convenience going unnoticed in a convenience economy. Why me: Why not me? I experienced it first hand and knew I could solve this problem, and have extensive knowledge regarding lifestyle brands, content creation and marketing strategy. Why now? 1) 80% of babies born today are born to millennial women -- who are also the prime subscribers of subscription boxes. 2) COVID shifted the medical care landscape and everything that could be done at home, needed to be done at home. We realized quickly how more convenient we could make care, without sacrificing quality. I didn't see the future of postnatal care returning to pre-COVID norms. PR
  30. Sample Fundraising Paragraph ● What is the business (how do you make money) ● What is your traction to date, your achievements ● What are some clear financial data points (if you have revenue) ● What’s next for you / you want to achieve / your vision for the company ● What is the $ you are raising (talk about opportunities not asks) Think about what is unique about your company / team / solution / business model PR
  31. Sample Fundraising Paragraph - Warm Intro Email EMAIL TITLE: A founder you should meet EMAIL BODY: I would like to connect you with (a friend of mine / an ex-colleague / an amazing founder I’ve come across), Pauline Roteta. She is the Co-Founder & CEO of a startup called Pasito. Pasito is building an app that combines health and wealth to personalize employee total rewards. Through Pasito, employees get personalized financial and health benefit support that leads to better appreciation for total compensation, and companies save money on payroll and health premiums. Pasito delivered on successful paid pilots with fast-growing tech companies - saved employees $1,900 on average, achieved 79 NPS, 3.5x ROI for companies. Their team is amazing (ex-Amazon CTO, ex-Appfolio CGO, backed by HRtech and fintech founders). They’re raising a pre-seed to develop their technology, integrate with payroll APIs and scale sales. PR LF
  32. Sample Fundraising Paragraph - Warm Intro Email About us XXXX What we've accomplished - Built our employee-facing app - Regulatory analysis - Strong team of seven in the US (ex-N26, Epsilon, Seal Team 5, Monzo). - X.Xk sign-ups / $XXXk transactions / Xx AUM growth in 2021 / organically growing X% WoW What we're raising - $XM on a SAFE ($XXM pre-money cap, XX% discount). XX% committed Goals for the raise - Add more key engineering resources to the team to move faster - Evolve product based on insights and level up user experience - Test marketing channels and scale You can find our deck here
  33. Sample Fundraising Paragraph - Cold Email EMAIL TITLE: EMAIL BODY: Mombox is a DTC postnatal wellness startup that ships labor and delivery kits to new moms. Mombox continues to grow at roughly 100% YoY and is on track to gross $200k this year without any marketing spend. Given this traction, we're raising a seed round to expand the existing one-time care kit into a complete at-home, postnatal wellness program. Mombox is opening a $1M seed round the first week of August and I would love the opportunity to connect and tell you more. PR LF
  34. 5. The Raise
  35. How much? ❏ KPIs, milestones ❏ Too conservative vs. too aggressive ❏ Cash runway ❏ Target vs. actual ❏ Deal Dynamics from an Investor’s perspective ❏ Valuations & Down Rounds Two approaches: Raise only what you need ● Decreases overall dilution ● Higher risk Raise as much as possible now ● Increases overall dilution ● Decreases risk and provides breathing room TC LF
  36. What Instrument To Use TC ❏ SAFE - very coastal instrument ❏ Convertible Note ❏ Priced Round
  37. 6. The Timeline
  38. When to Fundraise Some times are better than others! Plan accordingly. January February March April May June July August September October November December LF Angels vs VC
  39. Timeline for raising from investors. (It’ll take longer than you think!) Basic Timeline: ● Network & Intros ● Cultivate warm intros ● Process Starter ● 2-4 intros per day ● Diligence ● Negotiations ● Waiting for check to clear Month 1-2 Month 2-3 Month 3-5 Month 5-6 LF ● DATA ROOM w/ Docs ● Pitch Deck Practiced Before You Open Your Round ● List Of Investor Targets ● Network & Intros
  40. Your timeline Think of the fundraising process as a crescendo: 1. Set clear start and end date a. Schedule first round meetings within a few weeks of one another. b. Move everyone through the process at a similar pace. 2. Orchestrate and time your intros. LinkedIn Is Your Friend! a. Meet with your connectors in the weeks before the process for buy-in. 3. Think about strategically placed announcements, metrics and media to build interest, prove traction and demonstrate demand. 4. Don’t forget to run the day to day of your business! PR LF
  41. Creating traction Pasito story - Start with market validation - Secure paying customers & deliver manually - Make those customers love and refer you - Build your team of high-performers - Constantly expand your network of investors and commercial partners - Always lean on metrics - Make decisions easy for every stakeholders - unique offering, save money, deliver a package PR
  42. 7. Networks
  43. Finding Investors (pt. 1) Research potential investors Where to look before reaching out: ● TCN Angel & VC database: -database/ ● Crunchbase ● Their website/portfolio companies ○ Particularly failures! ● Angelist ● Social media/medium/blogs ● LinkedIn TC Research potential investors What to look for: ● Common threads ● Connections ● Competitors PR
  44. Finding Investors (pt. 2) Investor pipelines Spreadsheet Investing is Sales proper qualification is essential Warm introductions are your best weapon Finding a Champion: ● Building a relationship ● Connections in investor space - key figure in the space. ● Expert in whatever you are doing (especially in obscure sectors). Communicating with investors: Cadence on communication - how when to answer NDAs? NOPE! https:/ / 0fde0a46 TC
  45. TCN’s Angel & VC Database LF
  46. 3 Pretty good, somewhat in the space, possible fit 2 Good! Very closely matched 1 The best of the best Investor Tranches What does this mean for women? LF TC
  47. Sample investor pipeline 47 Name Firm Title Tranche Typical Check Size Why they would be interested Potential intro from Can Make Intro Intro Made Comments Jane Investor Best Ventures MD 1 $500K-$1 M Invested in similar company, focuses on our industry Tyler Wild Yes Jackie Angel Angel Investor 2 $50K - $100K Background in our industry, exited a company in the space Shelby West Yes Yes Interested! Katie Venture Varied Ventures Associ ate 3 $100k- $500k Thesis focuses on our tech Jon Dumont Yes Upon return from Vaca LF
  48. Finding a Champion: How ● A champion is a huge asset! ● Look for key mentors, people you have worked with for a long time, leaders in your space ● Chemistry, ideological alignment ● Doesn’t have to be a woman! ● You’ll know them by their passion for your business & advocacy for you What do I do if I don’t have someone? ● Find one! :) ● Not a stranger - build a relationship LF
  49. Finding a Champion: ● The right champion is a huge asset! ● Key mentors, people you have worked with closely, leaders in your space ● Chemistry, ideological alignment ● Doesn’t have to be a woman! ● Passion for your business, advocacy What do I do if I don’t have someone? ● Find one! :) ● Not a stranger - build a relationship LF How Characteristics of a champion: ● Expert in the space ● Respected investor ● Willing to support you and provide assistance, for free or as an advisor ● Trusted BY YOU (& by others) Who
  50. Finding a Lead: LF How - Research - Create pipeline - Founder referrals - Warm intros Who - Financial partner and advocate - Investment strategy - Business partner and advocate - Champion vs. Lead
  51. Terence Craig Startup Investor, Investor in Residence at The Idea Village @terencecraig @TCNupdate Lisa Frusztajer Investor in Residence at TCN, Investment Committee at Portfolia, Angel Investor at Pipeline Angels and Next Wave Ventures @TCNUpdate @Portfolia1 Marie Meslin Executive Director at The Capital Network & & Creator of the Fellowship For Female Founders @marie_meslin @TCNupdate Pauline Roteta Co-Founder & CEO at Pasito, Entrepreneur in Residence at TCN @joinpasito ASK YOUR QUESTIONS
  52. Appendix: The Documents
  53. Needs to include: Summary - Problem - Solution - Traction - Business Model - Team - One Pager / Executive Summary
  54. One Pager / Executive Summary Examples Resources: Create a Startup One-pager that Makes Investors Say “Yes!” HBR Strategy on One Page Pinterest 40 One Pager Designs More Templates & Design tools: Creative Market, Canva
  55. Your Investment ‘Pitch’ Deck Needs to include: 1. Intro slide - (Logo/Picture & 1 liner) 2. Problem - 3. Solution - 4. Business Model - 5. Go to Market - 6. Competitive Landscape - 7. Traction - 7. Future vision 8. Financial projections - 9. Team - 10. The Ask - 11. Use of funds - 12. Contact Info - 13. Appendix - Remember to tailor your deck to your audience! A pitch competition deck is not the same as an investor deck or an accelerator deck.
  56. Your Investment ‘Pitch’ Deck - Appendix Here are some questions your Appendix section should try and have clear answers for Investors are likely to ask you EXAMPLE: ● What really differentiates you from your competitors? ● How did you arrive to that pricing and how will you modify? ● How exactly do you plan to scale and market? ● What terms do you have for the round and when do you anticipate fundraising again? ● For consumer companies, what marketing tests have you run and what were the learnings? ● Who is your target customer and what do you know about them?
  57. Email etiquette ● Let key mentors, existing investors, and allies know when you are starting the process. (See Process Starter email.) ● Engage them thoughtfully, 1:1, to discuss your pipeline. ● Give them a starting point! No open ended requests!!! ● Volunteer the forwardable email process once someone has offered an intro. Investor Communication ● Responses expected within 4-8 Hours ● Follow up personally, no blanket emails ○ Monthly updates are great, but make sure you personally engage folks 57
  58. To: From: Subject: Company X fundraising process Hi Nick, As you may recall, we are at Company X and we met on October 24th at a TCN event. Company X provides customers with the best way to network. We have $20,000 in MRR and since the Spark Intensive have grown revenue 3X and secured 5 new paid pilots. We are opening up a $750K seed round and plan to come to Boston at the end of the month. We’re targeting angels and seed funds focused on revenue-generating SaaS businesses. In Boston, it looks like Angel Angelino and Awesome Partner at Super Seed Fund could be a good fit. Does that sound right? Would love to find 15 minutes to discuss other ideas you may have and/or if either of those two feel right I can send a forwardable to you. Please let me know if I can send more info to you and thanks a ton for thinking about this. Happy to also share our full investor pipeline if you’d like to review it. Best, Founder who is about to successfully raise a bundle The process starter email
  59. Forwardable Email EMAIL BODY: Hello Simone, Thank you for offering to send this forwardable to Elliot. I love the Techstars network, and it is so awesome to see founders willing to help each other! Best, Founder X Hello Elliot, Congratulations on the recent PillPack acquisition! I am working with a Techstars company that is building out a marketplace for institutions and pharma companies to share large capital equipment like genome sequencers. They are currently moving towards our seed round and would love your guidance and experience from your time in Techstars! I know you must be incredibly busy post acquisition, but would you be free in the coming weeks to grab a coffee and chat with them? Thank you very much! Best, Clem
  60. Appendix: The Pitch
  61. Networks: Top tips for pitching SETTING UP vs IN THE ROOM ● In the room : what gets the investor excited. Ask! ● Angel: What other deals have you done - where do you feel you add the most value. ● VC: fund structured? Understand where you fall in the fund. Want to make sure you understand its a fit - PRACTICE answering questions, including the sexist ones (refer to Dana Kanze’s TED Talk) for tips - Watch our recording on Tip Pitch Tips - Watch our Investment & Inclusion panel on ‘The Pitching Problem’ - Avoid rambling or not answering the question. - If you have multiple co-founders, know who answers what questions: the dynamic between founders is important.
  62. The Founder Says: Strategies for Success: Notes for Female Founders Female founders: ● Think of your pitch not as just telling about your idea/company, but as answering the question “how will your company make the investor a big return?”. ● Own your numbers- if applicable, know the metrics and data to back up your story. ● Financial projections “ what you think you can hit” ○ Q: if everything goes right - what do you think this could be (doable & optimistic) to not get discounted
  63. The Data Says: Strategies for Success: Notes for female founders ● Don’t discount the possibilities for your business and how it can scale - investors need a financial return that only comes from big businesses ● Look at your numbers - women tend to be more conservative with their financial projections ● Look for advisors / mentors / etc. who care about supporting women founders (and do something about it) ● Beyond sector and stage, make sure your list of targets includes either: ○ Angel groups focused on women-run companies, or ○ VCs with women partners and/or who have invested in women-run companies ● Think about how you’ll respond to sexist questions in pitch meetings
  64. Resources
  65. Key Terminology Series A Seed Pre- seed Syndication Angel Bridge Round Milestones KPIs Micro VC Twitter Pitch RESOURCE: TCN Glossary Of Startup Terms
  66. Types of Investors ● Family & Friends ● Angels ● Angel Groups ● Micro VC ● Venture Capital ● Mega VC ● Growth Equity ● Private Equity ● Banks ● Debt Funds ● Family Office RESOURCES 8 Types of Investors for Startups Funding Options for Startups
  67. TCN Webinar Recordings Watch HERE
  68. From TCN Advisor Erik Bullen: 300+ Fundraising and Development Resources for Black, Latinx, and Women Founders
  69. More Resources ● Pillar VC: How to Raise Seed Funding Guide ● I'm Black. I'm a Woman. Let's Talk About Raising Venture Capital ● 10,000 Women Free online business education program ● Common Reasons VC's Pass on startups ● Capital resources for women entrepreneurs ● 51 VCs Who Want To Invest In Women, Black And Latinx, And LGBTQ+ Founders ● Dana Kanze’s TED Talk ● The DIANA IMPACT REPORT 2020 ● Angel & VC database + Accelerator database ● Pitch Support: Scroobious Pitch it Plan, PitchDNA ● Investors’ Perspectives ● What All Founders Should do Before and When Asking for Investor Intros ● Podcasts: Fundraising Stories with Women Entrepreneurs ● Terence Craig: Why investors won’t sign NDAs
  70. Apply for Fellowship for Female Founder! Apply: https:/ /