What are the most important tactics for raising capital to fund a new startup? I break it down into 6 easy (or at least relatively simplified) steps, and highlight the key decision points that an entrepreneur will encounter.
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How to Raise Startup Capital in 6 Easy Steps
1. How to Raise Startup
Capital in 6 Easy Steps
by Eric M. Jackson
CEO of CapLinked; author of The PayPal Wars
2. 6 Steps to Funding
1. Structure Your Deal
2. Prepare Your Documents
3. Identify Your Leads
4. Make Your Pitch
5. Follow Up
6. Close the Deal
3. #1: Structure Your Deal
Size of the Deal
Valuation
Pre-Money vs. Post-Money
20% Rule of Thumb
Equity or Debt
Stock: Common vs. Preferred
Convertible Notes
When Do You Close?
Important: Work with an Attorney!
4. #2: Prepare Your Documents
Slide Deck vs. Business
Plan
Capitalization Table
Financial Projections
Transaction Documents:
Term Sheet
Purchase Agreement
Shareholder Rights
Agreement or Convertible
Note
5. #3: Identify Your Leads
Put Your Network to Work
What Do You Mean You Don’t Know Anyone?!?
Ask for Referrals
Accredited Investors
Regulation D + Subsequent Rounds
VCs vs. Angels vs. Super Angels
Other Investor Sources:
Angel Groups (TCA, Pasadena, Maverick)
3rd Party Sites: LinkedIn, AngelList, CapLinked
6. #4: Make Your Pitch
Get an Intro (don’t cold email)
Share Information w/ Them (slides, deal room)
Set up a Meeting or Call (only if interested)
Meeting Checklist:
Elevator Pitch
Problem You’re Solving
Market Size
Business Model
Traction
Listen!!!
7. #5: Follow Up
Sorry, You’re Not That Hot… (So Persistence Will Be
Required!!!)
Track Your Leads
Send Updates
Due Diligence
Make Sure Questions are Clear
Getting an Answer
Angels Don’t Like to Say No
8. #6: Close the Deal
From Slow to Fast
Let Prospects Know as Round Fills Up
Typical Closing Process:
Collect Signed Documents
Confirm Wires
Counter-Sign Documents
Announce to Media
Start Working on Next Round