The Coffee Bean & Tea Leaf(CBTL), Business strategy case study
Startup Fundraising 101
1. Startup Fundraising 101
Startups on Onevest have raised $80 million+ with our help
September 25
2. Meet Today’s Host
Shahab Kaviani
Co-Founder | CMO, Onevest
• 10+ years as a startup
founder
• Previously co-founded
CoFoundersLab and
HyperOffice (exited)
• Raised over $800k –
including a portion via equity
crowdfunding
3. Agenda
1. Fundraising Sources
2. Key Terminology
1. Pros/Cons of taking outside investment
2. How do you decide how much $ to raise?
3. What do investors look for?
6. The JOBS Act & Equity Crowdfunding
4. Fundraising
Sources
Friends
and
Family
Accelerators
VC
(Venture Capital)
Bootstrapping
Crowdfunding
Angels Customers
5. Where do entrepreneurs get money?
Largest sources of capital for young companies in order:
Founder Savings
Credit Cards
Kauffman Sketchbook – “Money Game” by Paul Kedrosky, Senior Fellow Kauffman Foundation:
https://www.youtube.com/watch?v=U470xXKfDyE
Family & Friends
Banks
VC, Angels, Etc.
6. Key Terminology
Sources: Investopedia.com, http://www.investopedia.com/terms
FT.com, http://lexicon.ft.com/
Term Sheet
Cap Table Valuation
Convertible Note Dilution
Crowdfunding
Equity vs. Donation
Common vs.
Preferred Stock
7. Have you ever tried raising $ for a startup?
YES or NO
8. How Long Does it Take to Raise $?
It depends, but it’s usually a long process.
Source: http://danielodio.com/daniels-rule-of-10-angel-intros-1mm-raise-infographic
9. Should I Take Outside Investment?
Nothing beats cash flow; if you don’t need $, don’t take it
PROS CONS
Hire faster
Launch faster
Experiment with more
things (marketing,
partnerships, etc.)
Investors support as
advisor(s)
Give up equity/ownership
Dilute yourself and your
shareholders
More people to answer to:
direction of company no
longer only up to you
10. How do I decide how much $ to raise?
*Source: http://www.techrepublic.com/article/the-dark-side-of-venture-capital-five-things-startups-need-to-know/
How much $ do you
need to hit certain
benchmarks
Two good methods
If no benchmark, good rule
of thumb: take amount it
takes to sustain operations
for next 18 months + 25-
50% for added flexibility
11. What do investors look for?
TEAM
IDEA
TRACTION
LARGE MARKET
OPPORTUNITY
COMPETITION
12. Pitch Deck – What to Include
Team
Overview
High-level
overview of your
company
Problem
How your
startup solves
the problem
Market Size Competition Traction
Financial
Projections
The ASK
How much are
you raising?
How will you
use the $
FINANCIA STATS INTRO
L
13. You raised money...Now what?
Communicate with and
update your investors
Focus on milestones
Celebrate!
(and then get back to work!)
15. JOBS Act = New Opportunities
NOW FORTHCOMING
JOBS Act Title II
Tell everyone you’re fundraising
TIME
JOBS Act Title III
Fundraise from everyone
(not just accredited investors)
16. Pros of Equity Crowdfunding
Promote your company to a larger pool of investors
outside your personal network, saving time and effort
Smaller investment minimums allow more investors
to participate
More investors = More strategic advisors with
knowledge of/experience in your space
1
2
3
Hinweis der Redaktion
Is it necessary to keep that subtitle? Since most of the presentation is talking about how difficult it is, it may not be a good idea to lead them on by showing them a big number (potentially raising false hope). Just a thought.
Bootstrapping
Friends and Family
Customers
Accelerators
Angels
Crowdfunding
VC
Bootstrapping
Savings
Debt
Credits cards – still the most popular method
Home equity or personal loans
Term Sheet – Non-binding agreement setting forth the basic terms and conditions under which an investment will be made
Cap Table – Spreadsheet or table that shows ownership stakes of all major shareholders of your company
Valuation - Process of determining the current worth of a company
Pre-Money Valuation – Value of a company before it receives outside funding
Post-Money Valuation – Value of a company after funds have been added to the balance sheet
Convertible Note – Short-term loan that “converts” to equity upon a new fundraising round
Common vs. Preferred Stock –Securities that represents ownership of a company; common stock is at the bottom of ownership structure; in event of liquidity event (sale, etc.) common shareholders only get paid after everyone else paid in full, including preferred shareholders.
Dilution – Reduction in the ownership % of a share of stock caused by the issuance of new stock (i.e. new fundraising)
Crowdfunding – Rewards/Donation based is Kickstarter model; you give a small amount of money to support a product/project you support and in exchange might get some sort of reward (tshirt, etc.); Equity based crowdfunding is what we’re doing at Onevest. This is when investors (currently only accredited investors) invest money in a startup for a piece of equity in the company. Similar to other startup investing, except open to a larger pool of investors.
Answer: it could take a long time (maybe b/t 6-9 months) but every situation is different
This chart isn’t mean to scare you, but it represents one startup’s tracking of all of their outreach when raising a seed round and how long each deal took to come to a close (yes or no on investing). The large circles represent successful investments. You can see there were a lot of players, some took longer than others, and the process itself was very time consuming.
HELP WITH THIS. Need to add this phrase:
“Pros/Cons of raising on lower end & higher end of your target”
How much $ do you need to hit certain benchmarks
If just building software, easy calculation = Calculate cost of engineer, how long to build MVP, and how long to do marketing
If more than just building out software – think of other milestones you need to reach (build prototype materials cost, new hires cost, etc.)
Raising on lower end of your target
Pros
Suffer less dilution
Get back to work sooner
Forced to be more resourceful
Cons
Shorter runway
Often need more $ than you think; nobody can see into the future
Grow team slower or not at all
Raising on higher end of your target
Pros
Hire more people to achieve your goals/vision
Longer runway
More opportunities to pivot
Cons
Suffer more dilution
Too crowded?
Communicate with & update your investors
Focus on milestones
Celebrate…and then get back to work
Now - JOBS Act Title II
Tell everyone you’re fundraising
Forthcoming – JOBS Act Title III
Fundraise from everyone, not just accredited investors