The document provides an overview of the fundraising process for startups, including preparation, pitching to investors, due diligence, term sheets, and closing. It discusses crafting an operating model and strategy, incorporating the company, creating pitch decks, making initial contact with investors through introductions or events, addressing investor concerns during due diligence, negotiating term sheets that outline economic and control terms, and shepherding the deal through to execution by responding quickly and managing legal fees. The overall process moves from preparation of materials, to pitching investors and securing meetings, to negotiations and closing the funding deal.

1. Echelon Thailand - Fundraising 101
May 2017

2. 2

3. 3

4. 4The Fundraising Process
Preparation Pitch
Due
diligence
Term Sheet Closing

5. 5
Preparation
• Know (or figure out) where you are headed
• Do your housekeeping
• Craft your pitch

6. 6Know where you are headed
• Before you even think about fundraising you should have:
• A vision for the company
• A plan to get from here to there
• Crystalize these in an operating model and (optionally) a strategy document
• “All models are wrong but some are useful”
• Key outputs:
• clear plans and capital requirements for the next 12-24 months
• understanding of primary levers in business

7. 7Do your (corporate) housekeeping
• Make sure your company is incorporated properly and has the necessary licenses
and trademarks
• Ensure employment contracts assign IP to the company and vesting schedules are
in place
• Store all physical documents securely and make soft copies
• Key outputs:
• Stay on the right side of the law.
• Data room of all corporate documents and contracts.

8. 8Craft your pitch
• Look up other pitch decks online
• Don’t forget to practice your delivery
• The deck just needs to get investors to the point where they are interested to
engage further with you – don’t stuff it with every single bit of information
• Key output:
• pitch deck
• practiced delivery
• Optional: have different versions of your deck for different uses
• Make sure all your decks are in PDF format

9. 9Pro tips
• Try to make sure you receive offers around the same time to so that you have
leverage in negotiations
• Approach your potential investors at the same time
• Set a timeline and communicate it to investors
• Raise the right amount of money
• Expect to dilute between 10-30% in each round
• Raise just enough to hit the next milestone (with a buffer)
• Typically, pre-product valuations in the region range from $500k-$2m

10. 10
Pitch
• Make contact with investors
• The pitch

11. 11Make contact with investors the right way
• Try to get warm introductions to investors you are interested in working with
• Write a short blurb about your company that can be forwarded to the investors
• If you cannot get a warm introduction, try to track down the investors and speak to
them at a conference or event
• Cold emails should be a last resort because they often get ignored
• The earlier you start to build a relationship the better
• Key output:
• First meetings with investors

12. 12The pitch
• You should have spent some time practicing your pitch so you can focus on the
conversation instead of worrying about your delivery
• Get a sense for the decision making process at each firm you speak to so you
know who you have to convince and what the timeline will look like
• Listen for questions and concerns that the investors have – you’ll need to address
these questions in the next stage of your discussions
• Key outputs:
• Second meetings set (decision maker should be present)
• List of items to address

13. 13Pro tips
• Try to get candid feedback from every investor you speak to
• Negative feedback is the most helpful for improving your business and
sharpening your pitch
• Follow up and maintain momentum
• Set reminders to follow up in your calendar – you will not remember
• Push for a decision to reject or move forward as soon as possible
• Don’t waste time on the VCs that have said no

14. 14
Due Diligence
• Get to a decision

15. 15Get to an offer
• Each VC will have different concerns about the business
• Address each concern but pay special attention to deal breakers
• Pay attention to the timing so that term sheets come around the same time
• Push harder to speed up the process for VCs who take longer, engage with
the quicker VCs at a more relaxed pace
• If you have been doing your corporate housekeeping, most DD requests should be
easy to fulfill.
• Key output:
• Term sheets submitted

16. 16
Term Sheet and Closing
• Term sheet primer
• Shepherd the deal through execution

17. 17The term sheet
• When a VC decides that they would like to invest, they will submit a term sheet that
lays out the proposed terms.
• Term sheets are non-binding but they act as a formal indication of interest. They
allow both you and the investor to discuss and agree on terms without incurring
excessive legal fees.
• After signing a term sheet, your counsel will draft the definitive agreements that are
legally binding.
• A VC investment will come in the form of preferred equity or convertible debt.
Because convertible debt documents can very short, VCs sometimes skip issuing
a term sheet and may just discuss the terms informally with you.

18. 18Types of terms
• Most terms in the term sheet fall into 2 broad buckets: economics and control
• Economic terms determine how much each shareholder receives in the event of an
exit
• Control terms determine how much control the investors will have over the
company
• Alignment of interests
• Most of the time, shareholding is enough to keep everyone on the same page
• Many terms govern decision making in situations in which interests diverge

19. 19Economics
• Pricing
• Valuation or cap
• Expect to dilute between 10-25%
• Liquidation preference
• Pro tip: never accept a participating liquidation preference
• Vesting
• Standard is 4 years
• ESOP
• Can be anywhere between 5-20% depending on key hires required
• Antidilution

20. 20Control
• Board of directors
• Expect to give 1 seat to the investors per financing round
• Protective provisions and reserve matters
• Board-level/share class-level
• Some standard items:
• Change of shareholding terms or structure
• Change of board membership
• Change of company bylaws
• Borrowing money
• Drag-along right
• Conversion

21. 21Other terms
• Information rights
• Right of first refusal (pro rata participation rights)
• Expenses
• Founder’s activities

22. 22Shepherding the deal through to execution
• Once you sign a term sheet, you’ve almost sealed the deal
• Make sure you respond quickly to any requests for information
• Don’t let lawyers from both sides negotiate back and forth on their own and run up
a huge bill
• When engaging a lawyer you should negotiate a cap on fees

23. 23Closing thoughts
• Lipstick on a pig
• Raising money from VCs is not always the best option
• There are no prizes for raising the most money

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Thank you kaspar@venturra.com