How-to guide on raising startup capital (VC, angel, seed) as a structured process. Part of a 3-part lecture series given at General Assembly in San Francisco by Nathan Beckord, Founder of www.venturearchetypes.com
Raising startup capital - fundraising as a process general assembly sf oct 4 2012
1. Raising Startup Capital
Session 3- The Fundraising Process
Nathan Beckord @startupventures
General Assembly
San Francisco
October 4, 2012
2. HELLO.
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Follow us on Twitter at @GA_SF for the latest news
on classes, courses, and events in San Francisco, and
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Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
2 Nathan Beckord @startupventures October 4, 2012
3. Hi. My name is...
Nathan
Beckord,
CFA.
Principal,
www.VentureArchetypes.com
• My
Job:
Startup
CFO,
Advisor,
and
BD
Guy
• 100+
Startup
clients
over
the
past
eight
years
• E.g.
Kickstarter,
Clicker,
Autonet,
Zerply,
GetHired,
etc.
• Clients
have
raised
over
$98
million
in
seed
capital
and
achieved
5
exits
• Example:
I
ran
financial
modeling
for
Clicker.com,
which
raised
2
rounds
of
VC
and
sold
for
$100m
in
3
years.
• Previously:
Technology
ValuaYon
|
Investment
Banking
|
Venture
Capital
• Chartered
Financial
Analyst
(CFA)
and
MBA
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
3 Nathan Beckord @startupventures October 4, 2012
4. Do you really want to raise $$?
+
Plus
+
-‐
Minus
-‐
•Fuel
for
Growth •DiluYon
•Credibility •Misalignment
of
Goals
•Hiring
Boost •ReporYng
DuYes
/
“Boss”
•Advice,
Network •Exit
ObligaYon
•Extended
Runway •ProtecYve
Provisions
•PR
/
PosiYve
Signaling •Loss
of
Control
•Rainy
Day
Fund •Founders
Get
Fired
Reality
Check:
less
than
5%
of
companies
successfully
raise
capital
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
4 Nathan Beckord @startupventures October 4, 2012
5. Are you sure you want VC?
IPO
$ 100M
Strategic Partners
Decreasing Return
$ 50M Venture Capital
Banks
$ 1M
Angels
FFF Gov’t
Business Plan Beta Profitability
Idea Prototype Sales
Decreasing Risk
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
5 Nathan Beckord @startupventures October 4, 2012
6. Let’s talk about the...
Funding Process
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
6 Nathan Beckord @startupventures October 4, 2012
7. But first, how NOT to do it
This pretty much sums up what most do (wrong)...
Instead: treat the fundraising game as what it really is:
SALES 101: Lead-Gen, Qualification, and Closing
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
7 Nathan Beckord @startupventures October 4, 2012
Itʼs very important to target the right investors
Finding (and qualifying) the right investors takes a tremendous amount of work
This is your job, not your advisors, friend, etc.
8. Sales process snapshot
Generate initial, broad database of potential investors
Screen by geography, stage, sector focus;
Filter out those with direct competitors
Select appropriate partner or
contact person within firm
Generate target list
YOUR
JOB
is
to
Filter by best matches; seek
herd
investors
“warm” introductions
from
the
top
of
the
funnel
(Leads)
Initiate investor outreach
Arrange pitch meetings
to
the
Close
Present business plan
(Shares
Sold) Follow-on meetings
Due diligence
Term sheets
Execute share
purchase
agreement
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
8 Nathan Beckord @startupventures October 4, 2012
Sales 101
9. Step 1: Pick a leader
Who’s the designated driver?
CEO CFO VP BD
is
oden
the
“sales
as
“finance
guy”
is
oden
the
guy/gal”
in
early
this
fits
job
role;
‘startup
hustler’
startups
=
skillset
but
few
startups
and
skillset
crosses
match have
a
CFO both
categories
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
9 Nathan Beckord @startupventures October 4, 2012
Supporting team: CTO / VP engineering.
Many engineers are now hustlers too.
Sales 101
10. Step 2: Build funnel
FOCUS
here
on
adding
names
to
Sources
for
Leads:
the
top
of
the
•Browsing
Angel
List
funnel...aim
for
•Friends
/
colleagues
100
minimum •PEHub,
VentureWire
•Conference
speakers
•TechCrunch
arYcles
We
will
filter
down
•Cross-‐referencing
funded
to
30
-‐
50
later deals
on
Crunchbase
•Quora,
CapLinked,
etc.
Start
to
look,
and
you’ll
UlYmately
ending
start
to
“see”
relevant
in
2-‐4
term
sheets investors
everywhere...
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
10 Nathan Beckord @startupventures October 4, 2012
Naval Ravikant sent me this tip for using AngelList: "Here's a killer feature for building a target list: http://
angel.co/people. Choose stage, market, location. Sort by paths. It'll create a personalized list of investors for
you to approach, sorted by how easy it is for you to get to them."
Sales 101
11. Step 3: Create tracking system (in
google
docs)
To-Dos / Task Task Alerts /
VC firm Investor Email Last contact Current status List Owner Due by Ref'd By
STRONG INTEREST
June 16, 2006 - Reviewed
presentation and provided positive
August Capital David Hornik hornik@augustcap.com feedback. Wants to be kept up-to-date. Send revised deck Ben 21-Sep Todd
Interested in further engagement
Salil Deshpande, Entrepreneur-in- July 21, 2006 - Email introduction with other partners at Bay; Ping him next week
Bay Partners Residence salil@baypartners.com to Blueprint Ventures. Referred to Blueprint Ventures. to sched mtg Jake Todd
Richard Yen, Principal/David
Frankel, Managing Director/
George Hoyem, Managing Richard@blueprintventures.co Aug. 18, 2006 - Meeting to review Intro him to our
Blueprint Ventures Director m financials. ???? seed investor Jake 19-Sep Nate
INTERESTED
Joyce Chung, General Partner Aug. 15, 2006 - Email exchange Follow up meeting scheduled for
Cardinal Venture Capital (Founding) joyce@cardinalvc.com on meeting to review technology. Aug. 24 at Kiptronic HQ. Follow up meeting Ben Todd
DSpreng@crescendoventures.
com/
David Spreng, General Partner/ jhable@crescendoventures.co July 14, 2006 - Email of financial
Crescendo Ventures Jason Hable, Associate m docs. Currently reviewing financial docs. N/A Todd Nate
Aug. 16, 2006 - Sent intro email Stalk him outside
Founders Fund Ken Howery, Partner ken@thefoundersfund.com based on mutual friend. Waiting for response. his apartment Ellen 26-Sep Jim
Plans to review docs and
schedule another session; Need
IDG Ventures Abhijit Pradhu aprabhu@idgventures.com July 24, 2006- Email of docs to reschedule meeting. N/A Todd Todd
NOT DEAD YET
Kayne Anderson Capital July 24, 2006 - Phone Send Google
Advisors Healy Jones kapi2@kaynecapital.com conversation Wants to be kept up-to-date. Analytics report Ben Nate
North Bridge Venture Aug. 22, 2006 - Update meeting
Partners Paul Santinelli pas@NBVP.COM Aug. 2, 2006 - Phone call scheduled Send new deck Jake 21-Sep Todd
Aug. 10, 2006 - Phone
Simeon Simeonov, General ssimeonov@polarisventures.c conversation; Put him in touch with Work back
Polaris Ventures Partner om Kiptronic partners. Follow up next week. channels Ben Todd
NEW LEADS
ravi@shastaventures.com/ Revise our Team
Shasta Ventures Ravi Mohan/Jason Pressman jason@shastaventures.com Met him years ago slide Ellen 21-Sep Nate
Trinity Ventures Jim Tybur jim@trinityventures.com Met him at Giant's game Ping him next week Jake Todd
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
11 Nathan Beckord @startupventures October 4, 2012
build it in docs.google.com
you can also build it in excel and upload it to google docs
Sales 101
12. Step 4: Filter down to direct hits
Filtering
Criteria:
•Invested
in
compeYtors
•No
dry
powder
(funds)
•Wrong
sector
focus
•Wrong
stage
FOCUS
here
on
•Wrong
geo.
locaYon
filtering
down
to
•Has
bad
reputaYon
about
30
direct
targets. Diligently
cut
down
the
list
now
for
a
beBer
hit
rate
later.
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
12 Nathan Beckord @startupventures October 4, 2012
For finding out about good / bad reputation, check out Thefunded.com
Also, ask founders of companies theyʼve funded for candid feedback.
Sales 101
13. Step 5: Organize your posse
Recruit
from:
•Startup
friends
•Anorney,
accountant
•Advisory
Board
•Professors
•Startup
‘connectors’
Tips:
•Play
to
their
ego
•Make
it
easy
/
low
risk
•Get
everyone
together
for
dinner
/
wine.
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
13 Nathan Beckord @startupventures October 4, 2012
Sales 101
14. Step 6: Degrees of Separation
LinkedIn
Angel
List
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
14 Nathan Beckord @startupventures October 4, 2012
Really
what
we’re
doing
here
is
mapping
our
social
graph
on
top
of
our
target
list
to
find
the
BEST
WARM
INTRO
Sales 101
15. Step 7: Polish your pitch & model
+
Angel
List
Profile
Page
(angel.co)
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
15 Nathan Beckord @startupventures October 4, 2012
Get
momentum
story
in
place
Build
really
slick,
fricYonless
pitch
Build
Angel
List
at
same
Yme
you
build
the
deck
(but
keep
stealth
for
a
bit)
16. Step 7.5: Hacking Angel List
1.Get
a
lead
investor
first
2.Build
mulYple
forms
of
social
proof
3.Peacock
your
profile
4.Hollywood
soundbite
5.Tweak
profile
+
status
6.Hustle
to
be
“ Trending”
7.Create
catalyst
Excerpted
from
hBp://www.seedstagecapital.com/2011/07/hacking-‐angel-‐list.html
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
16 Nathan Beckord @startupventures October 4, 2012
Geqng
lead
takes
80%
of
the
Yme
/
effort.
A
name
brand
lead
is
even
bener.
Social
proof
=
Advisors,
Board,
Referrer,
References,
Incubator,
Anorney.
Angels
rely
on
“who
you
know”
as
first
filter.
Get
these
people
to
follow,
share,
status
updates,
etc.
Peacocking
=
great
product
slides,
tracYon
slides,
team
bios,
etc.
Soundbite-‐-‐
either
X
for
Y
or
what
you
do
Use
catalyst
to
close
17. Step 8: Open ‘er up and let ‘em fly
Intros:
•Get
introduced
(v.
cold)
•Make
it
easy
for
your
posse
to
make
intros
Pitch:
•A/B
test
your
pitch
•ConYnually
refine
it,
improve
it
Process:
•Aim
for
concentrated
‘blitzkrieg’
approach
•Compress
meeYngs
into
short
Yme
frame
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
17 Nathan Beckord @startupventures October 4, 2012
Key
here
is
warm
leads,
plus
conYnually
improving
pitch
(like
interviewing)
and
packing
many
meeYngs
into
compressed
window,
all
to
get
your
mojo
on.
Build
momentum
for
the
deal.
18. Step 8.5: Making it easy
You
write
this
with
the
“ask”: ...and
have
your
“Hi Nathan, I see you are connected to Lewis at ACME
connector
write
this:
Ventures. I would love it if you could introduce us. “Lewis, Iʼd like to intro you to Scott
Shepherd, founder of CatBnB. Scott was
As you know, we launched CatBnB to make life better the engineer #3 at Facebook and his co-
for the 82m cat owners in the U.S. when they go on founder, Janet, was a top salesperson at
vacation. Since launching our closed beta 3 months Salesforce.
ago, we have had nearly a million cat owners register,
and 75k have already boarded a cat in their home. Iʼve been advising them since inception
Weʼve recently introduced our subscription model and to and they know how to execute; they are
our delight, 15% of our users have upgraded. It now (selectively) starting to talk to investors.
costs us $3 to acquire a new paying customer, each of Take a look at their AngelList profile
whom generates an average $12.50 ARPU. and their exec sum, attached. I will leave
it to you to to connect; let me know what
We will soon be looking for funding to scale. I see that transpires. Best, Nathan”
Lewis has a background in exotic cat breeding and has
just raised a new fund. Iʼd love to show him what weʼre
doing.”
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
18 Nathan Beckord @startupventures October 4, 2012
19. Step 9: Pitch hard + Go for the close
TIps:
•Expect
3-‐6
meeYngs
per
VC
before
geqng
a
term
sheet
•More
term
sheets
=
more
leverage,
faster
close
•Follow
up
frequently
•It
can
be
very
hard
to
get
an
actual
“no”
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
19 Nathan Beckord @startupventures October 4, 2012
Live pitch meeting is usually an hour.
Goal is always to get to next step in process...always ask what that is at end of meeting
There will be progressively more people / partners in each successive meeting.
Be rapid in your responses and follow up. Be ready for DD.
If youʼre getting, “weʼd like to see... (traction / more team / deals / a lead ) thatʼs usually a “no”
20. Fundraising is just the beginning
Notes:
•Geqng
funded
is
just
the
start
of
what
is
(usually)
a
long
journey
•Now
you
have
an
obligaYon
to
perform,
so...
Go
Get
‘Em!
and
Have
Fun!
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
20 Nathan Beckord @startupventures October 4, 2012
Cheeky monkey
21. Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
21 Nathan Beckord @startupventures October 4, 2012
22. MVP (minimal viable pitch) Message:
What
you’re
More
people
than
ever
(78M!)
have
dogs.
They
✓
Problem
✓
Market
size
&
Trends
doing
&
why spend
$2bln/yr
puqng
dogs
in
kennels
but
it’s
✓
SoluYon
/
Product
expensive
&
dogs
hate
it.
We
are
“airbnb
for
dogs.” ✓
Clear
&
big
Vision
Samir-‐
VP
Engr,
prev.
@Adobe;
Samantha-‐
Designer,
✓
Solid
Team-‐-‐Hacker,
Hustler,
Designer
Who
are
you prev.
@Apple,
NYU;
Stewart-‐
Stanford
MBA;
✓
Pedigree,
Experience
✓Peer
reference
/
Advisors:
Steve
Blank,
Andrew
Chen.
“social
proof”
What’s
going
POC
in
SF,
NY,
Atlanta
(now);
Adding
3k
members
&
✓
Thesis
Validated
✓
TracYon
/
Growth
on
120
boarders
/
week
via
events,
AKC
partnership,
✓
MarkeYng
Plan
select
GOOG
ads.
Avg.
booking
$55
x
7%
=
$3.85
✓
Bus.
Model
✓
Momentum
What
you
$4m
Series
A
@$16m
pre
to
hit
6
more
geo.
mkts ✓
Sensible
UOF
✓
Strong
Future
Vision
want
Burning
$75k/mo.
Cash
Flow
B/E
@
2k
bookings
/
✓
Economics
Scale
✓
Path
to
Profitability
week
(2013).
LTV
>
CAC
($145
vs.
$33). ✓
RealisYc
ValuaYon
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
22 Nathan Beckord @startupventures October 4, 2012
each of these could easily be a slide, in 40 point font...add a title, add a clever image or a supporting chart or
diagram, and youʼre done. Killer MVP.
To note, I intentionally did not include a competition slide, as that can be a rathole. Make them ask about it,
make them bring it up. But def have a thoughtful analysis and appendix slide to answer.
23. Information progression
Level of Informational Detail!
Negotiations / Structuring / Close
st
! Due Diligence Documentation
re
te
In
or
st
ve Business Plan / Offering Memorandum
e In
siv
es
gr
P ro
Investor Presentation and Pitch Book
Investment Opportunity Summary
Elevator Pitch / Introductory Email Teaser
Timeline and Progression!
Raising Startup Capital -- Fundraising Process GENERAL ASSEMBLY
23 Nathan Beckord @startupventures October 4, 2012
this is a little outdated, but conveys the general idea that deeper information is transferred as you progress
with series of meetings.
Sales 101