This document provides guidance on fundraising for startups. It discusses preparing for fundraising by developing financial projections, legal documents, and a pitch deck. It recommends socializing your idea without asking for money to build connections and refine your pitch. When ready, the document advises raising from multiple potential investors in parallel and creating a sense of urgency. Key deal points include valuation, preferred shares versus common equity, option pools, and founder vesting schedules. The entire fundraising process can take 3-6 months.
8. 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)
24. GO FOR THE ASK
• Approach your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to tell investors about each
other
25. CREATE URGENCY
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet
27. STRUCTURE
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference
• Control over sale, new options
• Debt that becomes preferred equity
when you raise it
• No valuation, but the “cap” is a
ceiling
• Interest accrues, rate <10%
• Conversion discount
Equity
Preferred Stock
Debt
Convertible Notes, SAFEs
30. VALUATION & DILUTION
37%
See www.ownyourventure.com
Raise $1M on $5M pre
33%Raise $1M on $3M pre
34%Raise $1.5M on $5M pre
Dilution: what’s your end stake?Valuation ($M)
Seed A B
$15
$6
$1
$30
$12
$5
31. FINAL DEAL POINTS
• Rolling close vs. set close
• 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
32. HOW LONG DOES IT TAKE?
• Longer than you expect
• 3-6 months
• Speed limited by access to investors
• Your ability to find them
• Calendar availability (surprisingly hard)