MEMSI June 2018: Building a company: Equity, Fundraising and more
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In this session we discuss considerations when dividing up the founder equity between multiple founders. We then have a look at the current fundraising landscape for hardware startups, and discuss do's and don'ts.
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MEMSI June 2018: Building a company: Equity, Fundraising and more
- 1. MIT Entrepreneurship and Maker Skills Integrator Building a company June 2018 Elaine Chen, Brian Yen
- 3. How to raise a healthy company 1 part team 1 part money 1 part luck 3
- 4. TEAM 4
- 6. Founding Team ⢠Building a startup is like raising a baby ⢠Commitment in a founding team is like being married ⢠Very personal ⢠Easy to loose objectivity 6
- 7. What binds founders ⢠Shared aspirations ⢠Friendship ⢠Trust ⢠Complimentary resources ⢠Marriage of convenience ⢠Lack of a better choice ⢠Desperation 7
- 8. What destroys teams ⢠Nervous Breakdown ⢠Directional disagreement ⢠Ill defined responsibilities ⢠Unfulfilled expectation ⢠Unrealistic expectation ⢠Lack of appreciations of otherâs contribution ⢠Falling out of love ⢠Greed 8
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- 10. Role definitions ⢠RACI! ⢠Division of Labor ⢠CEO, CTO, VP Sales, VP Marketing ⢠Be clear on responsibility ⢠Equal shares does not mean equal responsibility on every issues 10
- 12. How might we divide up the pie? ⢠Why split ⢠How to split ⢠When to split ⢠Vesting 12 ITâS A DIFFICULT CONVERSATION. BEWARE SIGNALING IMMATURITY. Points to ponder: Idea premium Intellectual Property Reputation Contribution to date Commitment level âŚ
- 13. âCap Tableâ case study: Internet of Wings 13Source: Techcrunch.com At this point, they decide to raise $5M
- 14. Sources of funds (HT Donna Levin) Founders FFF Sales Grants Debt Angels 14 +CVCs
- 15. Stages: Angel, Seed, A/B/C⌠15 Source: Funders and Founders
- 16. Back to our buffalo wings 16Source: Techcrunch.com 18 months later, they raise $7m on $15m. The seed investment converts with terms previously discussed.
- 18. Example fund raising history: Fitbit (Consumer electronics in health and wellness) 18 Source: Crunchbase Founded in 2007 $66M total in 7y IPO 2015
- 19. Example 2: Rethink Robotics 19
- 21. 21 A word on the VC business model Small $450M Fund 10 year fund 10-100x return expected 20 investments (new + pro-rata) Thus: âGo big or go homeâ 20% will yield most of the returns Also: The 2% and 20% And: VCs network
- 22. Is this a good seed stage VC for you? 22
- 23. How about this other one? 23
- 24. Or this one? 24
- 25. Doâs and Dontâs DO ⢠When you raise, you raise. When you are done raising, focus on the biz. ⢠Practice milestone based fund raising. ⢠Raise more than you think you need. ⢠Choose your investors carefully. Have they invested in companies like yours? 25 DONâT ⢠Trickle fund-raise (your soul will be destroyed) ⢠Take coffee with VCs when you are not ready to pitch (you are new once) ⢠Ask for $15M in your first 60s elevator pitch with a VC ⢠1 min >> 15 min >> 45 min >> partner meeting etc
- 26. The role of crowdfunding: Cynthiaâs story 26 $2.3M+
- 27. AS FOR LUCK â WE CANâT REALLY HELP YOU THERE. GOOD LUCK! 27
- 28. Resources ⢠Founders dilemmas ⢠Read Chapter 6 of Noam Wassermanâs âThe Foundersâ Dilemmasâ ⢠Founders issues on the Trust Center FAQ with links to articles containing formulas for the split ⢠Fund raising ⢠Rob go on how to raise a seed round http://nextviewventures.com/blog/how-to-raise-seed-capital/ ⢠Donna Levinâs January 2016 talk on fund raising (see Google Drive) ⢠Trust Center: FAQ section on fund raising 28
- 29. 29 AUA (Ask us anything)
Hinweis der Redaktion
- Hubspot - $4.4b â unicorn Waypoint â delta v team 2018 â sold to PTC less than 1 year after company formation Biobot Analytics â delta v alum, YC alum, raised $2.5m and Mariana here has not even graduated.
- 10000000 shares of common valued at 0.001 â 10k valuation at founding, Delaware company Simple Agreements for Future Equity (or âSAFE notesâ)
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- 10000000 shares of common valued at 0.001 â 10k valuation at founding, Delaware company Simple Agreements for Future Equity (or âSAFE notesâ) Opaque Ventures invested $2.5 million in a SAFE with the ability to purchase shares at a 20 percent discount to the pre-money valuation at Series A. The Series A price is $1.50 per share ($15 million pre-money valuation divided by 10 million shares, the number of shares originally created when the firm was incorporated, which we noted earlier), so at a 20 percent discount ($1.20 per share), Opaque Venturesâ $2.5 million investment converts to 2,083,333 shares ($2.5 million divided by $1.20 per share) valued at $3.125 million, a 1.25x multiple on invested capital. In the seed round, BlackBox Capital invested $2.5 million in a SAFE with a valuation cap of $10 million. This allows them to purchase shares at $1.00 per share ($10 million cap / 10 million shares outstanding), resulting in the purchase of 2.5 million shares from their seed investment. At the new $1.50 share price, BlackBox Capitalâs seed investment is now valued at $3.75 million, a 1.5x multiple on invested capital.
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- Brian and elaine