1. Visit
evisors.com
to browse all mentors who
can help you with:
• Informational Interviews
• Resumes & Cover Letters
• Mock Interviews
…and more!
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2. Financing a Startup
The Who, What, When and How’s
featuring:
Michael Horowitz
Associate
Hosted by:
Caitlin Quan
Evisors Marketing & Operations Associate
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3. Disclaimer
Everything you are about to hear represents
my own personal opinions and not those of
my employer or colleagues.
For the sake of time, I’m also generalizing a
lot – don’t take any of my comments as
applying specifically to any one firm.
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4. Agenda
1. About Me
2. Sources of Capital – Know Your Audience
3. How to Pitch a VC
4. Financing Considerations
5. Q&A
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5. About Me
• Associate @ Bessemer
• University of Pennsylvania | 2010
• Goldman Sachs (SSG) | 2009
• BlackRock (PMG) | 2008
• Weather Risk Solutions (Startup) | 2006 - 2010
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6. Before you raise money…
• Do I really want to do this?
– Lifestyle change
– Committing to a larger exit
– Dilution
– Loss of control
• And is now the right time?
– Do I have a team? Product? Customers?
– Am I approaching key inflection points that might significantly raise the value of my
business?
• That said…
– VC’s can add lots of value:
• Cash to grow more quickly
• Recruiting help
• Customer or advisor intros
• Strategy and benchmarking advice – we’ve been there before!
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7. Where should you look?
• How much do you need?
– <$50k
• Friends and family – Common source for initial funding; be wary of ruining relationships
• Seed programs (Y Combinator, TechStars, RockHealth, ImagineK12…) – money, space and mentoring
– $50 - 250k
• Individual angel investors - often past or current CEOs or successfully founders
– $250k - $1m
• Syndicates of angel investors, super angel funds (SV Angel, Chris Sacca, Box Group, 500 Startups…)
– $1m - $3m
• Early-stage venture funds (First Round, True Ventures, Felicis Ventures, Thrive, Lerer Ventures…)
– $3m - $20m
• Venture funds (Bessemer, Accel, Sequoia, Benchmark, Matrix, Redpoint, NEA…)
• What about…
– Banks
• Banks generally want to lend against predictable, proven businesses
– Crowdfunding
• Kickstarter – non dilutive funding
• FundersClub, Seedinvest and others
– AngelList
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8. What do these people want?
• Know Your Audience
– Angel investors are looking for a return, but generally are looser with terms than venture firms
(no board seats, small positions, limited protections)
– Venture funds will be more heavily involved – on your board, owning more of the company,
obtaining more rights and protections
– Angels and funds have sector and stage focuses – be sure they fit with your company!
• Also consider…
– What is the fund’s approach to making follow-on investments (and does it have the funds)?
– Who is the specific person you will be working with and how well do you get along?
– What are your/the investor’s expectations for how involved they will be?
…and how can I find them?
• NETWORK, NETWORK, NETWORK
– Most investors get way more inbound inquires than they can spend time on
– We don’t have time to read and evaluate long business plans (or even short ones)
– The best way to get in touch is through a connection – LinkedIn, startup lawyers, connections
in the VC’s portfolio, social media engagement, conferences…
– Always be ready with a QUICK (30 second) elevator pitch
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9. How to pitch an investor
• The Perfect Pitch Deck
– ~10 slides
– Clearly stated problem – is this something people care about?
– Market – is the market big enough?
– Solution (tech/product explanation) – demos are good if they are short and they work – just
convince me you’re taking an interesting / reasonable approach
– Team – do you have the right people for the job?
– Business model – can this make money?
– Competition – who else is doing it and why are you better?
– Traction – share whatever data you have that shows your business is working
– Financial info – have you raised money before? What are the company’s financials?
• Common mistakes
– “We have no competition”
– “We conservatively project $100m revenue in 3 years”
– “If we just get 1% of this massive market we’ll be a big company…”
– “I can’t tell you more until you sign an NDA”
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10. What are you being judged upon?
• A lot of it is YOU!
• Then it depends on the stage of the company
– Pre-product: Team + Market
– Pre-launch product: Team + Market + Product
– Recently launched product: Team + Market + Product + Initial Traction
• What is “traction”?
– Downloads/Signups/Registrations
– User engagement (# of visits, frequency of visits, number of interactions/visit…)
– Monetization (free to paid %, customer lifetime value, churn…)
– User acquisition cost
• BVP has some great resources:
– 10 Laws of Cloud Computing
– 10 Laws of eCommerce
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11. What to know about financing
• Convertible Notes vs. Priced Rounds
– Convertible notes delay pricing of the round (generally for a discount in the future)
– Deal docs are simpler
– Can work out poorly in tough financing environments
• Liquidation Preferences
– Common, Preferred and Participating Preferred
• Option pools and vesting
– Often come out of the founder’s stake
• Protective provisions:
– Standard blocks on exits, issuance of new stock, sale of assets…
– Anti-dilution protection
– Redemption rights
– ROFR’s
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12. A note on hardware startups
• A lot of the pre-presentation questions were about hardware startups
• They still get funded, but it can be difficult
• Lower margins than software, require a lot of $$$ to scale
• When you can build Instagram on a few million…
• Some current successful hardware startups: Nest, Lytro, e la
carte, Sonos, Jawbone, Fitbit, Pinnacle Engines*
• Who’s funding them? Redpoint, Andreessen, Foundry, KPCB, Khosla, *Bessemer…
• Kickstarter can be your best friend here – prove demand, raise non-dilutive funds
• Lemnos Labs – hardware incubator
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13. Connect
Book your one-on-one session with Michael at
www.evisors.com/expert/1975
Michael Horowitz
Associate
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14. Questions & Answers
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15. Questions & Answers
Question 1:
Is there an age limit where venture capital
firms are reluctant to invest in?
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16. Questions & Answers
Question 2:
Can you advise on how to gauge the timing
and depth of financing?
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17. Questions & Answers
Question 3:
Are there any models that combine crowd-
funding with angel investing?
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18. Questions & Answers
Question 4:
What methods are there to measure the cost
of customer acquisition?
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19. Questions & Answers
Question 5:
Would you suggest working for a few years
vs. moving straight into your venture?
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20. Questions & Answers
Question 6:
Situational funding question
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21. Questions & Answers
Question 7:
How do you create proposals that fit the
objectives of the person who has the
money?
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22. Questions & Answers
Question 8:
Are there important cultural differences
between the USA and Europe when raising
capital?
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