Fundraising and Investor Relations 101 with Andrew Parker
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Andrew Parker, Spark Capital General Partner, gives an overview of fundraising and investor relations from the VC perspective.
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Fundraising and Investor Relations 101 with Andrew Parker
- 1. @andrewparker Andrew Parker⨠General Partner, Spark Capital
- 2. FUNDRAISING
- 3. Andrew Parker " @andrewparker ⢠10 Investments! ⢠Initial Investment: 7 Seed, 3 Early! ⢠Currently: 4 Seed, 2 Early, 3 Mid, 1 Late! ⢠Transaction support on 100+ ďŹnancing rounds across two ďŹrms! ⢠Associate at Union Square Ventures! ⢠Product Management & Product Design at Homestead
- 4. To Start: Big Caveat " What is Normal? What is âNormalâ Today. There are always outliers. ! Covers 85% of cases (+/- 1.5 Sigmas)
- 5. Stage DeďŹnitions Seed Early Mid Growth / Late Security Series Seed / Note Series A Series B / C > Series C Round Size < $2MM $2 - $8MM $8 - $20MM > $20MM Company Progress ⢠Idea <â> Initial Product ⢠Compelling Founders ⢠Initial Proof of Hypothesis ⢠Known Customer Demand ⢠Great Product ⢠Strong Core Team ⢠Clear Traction ⢠Escape Velocity Traction ⢠Full Team in Place and Excelling ⢠Thought Leadership How to pitch? (in order of priority) ⢠Founders ⢠Vision ⢠Prototype ⢠Founders ⢠Vision ⢠Product ⢠Traction ⢠Market ⢠Product ⢠Traction ⢠Team ⢠Market ⢠Marquee Events (Partnership) ⢠Traction ⢠Product ⢠Thought Leadership ⢠Team ⢠Market Valuations < $8MM $4 - $20MM $10 - $80MM > $80MM
- 6. Who Should Own Fundraising Responsibility ⢠95% of the time: The CEO! ⢠Fundraising is about telling a story; selling a vision. This has to be the CEO.! ⢠The CEO can/should bring anyone (cofounders, CTO, etcâŚ) needed to help tell the story⌠talking time typically allocated roughly 80/20%.! ⢠In growth stage contexts, sometimes a strong CFO can take the lead on ďŹnancing
- 7. How Much and When ⨠Should I Raise? ⢠18-24 months of capital, assuming continued hiring! ⢠This provides the right balance of (typically) providing enough runway to hit milestones without being unnecessarily dilutive! ⢠When? Opportunistic A Formal Process Canât control timing Runway is looming Requires semi-regular VC networking Multiple simultaneous conversations Result of inbound VC leads from Partner Practice with a friendly room first Thought leadership / presence is key Intros help with VC responsiveness Typically shorter, and better valuation Constantly qualify/gauge interest
- 8. Target Investor List ⢠Firms that have *CLEARLY DEMONSTRATED, REPEATEDLY* that they write the type of check you want. ! ⢠Firms that focus primarily on your stage, as a *lead* investor.! ⢠Firms that have invested in Spark portfolio companies in the past.! ⢠Firms that have invested in your industry (but not a *direct* competitor).! ⢠Ideally, institutional investors with the capacity to continue to support the company over its life.! ⢠Maintain a list of contacts and last touch points (CRM for bonus points)
- 9. Institutional VCs Investing " After Spark ⢠Series B! ⢠Greylock, Shasta, Khosla, Foundation, A16Z, Sequoia, OpenView, Tiger Global, CRV, General Catalyst, Bessemer, Norwest! ⢠Series C! ⢠Benchmark, IVP, Valiant, Sequoia, Bessemer, Rho! ⢠Series D+! ⢠DST, KPCB, Insight, Greylock
- 10. Historical Spark ⨠Institutional Co-investors Firm Early Mid Late USV W P W Bessemer W P W P P Greylock W W P P Index W W P W P Sequoia W W W P Benchmark W W P Insight W P Battery W W P KP W W P A16Z W P W W P Khosla W P P Shasta W W P Highland W P W General Catalyst W P W P W P CRV W W P Matrix W P W P Redpoint W W P
- 11. Historical Spark ⨠Institutional Co-investors Firm Early Mid Late NEA W W W TRUE W P Accel (London) W P W Accel (US) W W W Balderton W P W QED W P Maveron W P Oak W Foundry Group W P W Founders Fund W W Tiger Global W P W P Thrive W P W W Canaan W P W P FirstMark W P Social + Capital W P W DFJ W W W P Menlo W W
- 12. Historical Spark ⨠Institutional Co-investors Firm Early Mid Late OpenView W P Norwest W W P Rho W W P W RRE W W P DST W P SoftBank W P W P Valiant W P Bain Capital Ventures W W W ** NOTE: Deliberately omitted seed funds from this exercise because the purpose is to help target follow-on capital sources. **
- 13. How Much and When ⨠Should I Raise? ⢠DeďŹnition: Strategic VCs are corporations investing via their balance sheet.! ⢠EX: Google, Comcast, Intel, Bezos Expeditions (sorta), TimeWarner! ⢠When to consider accepting Strategic VC funding:! ⢠Multiple in same round can be great! ⢠No board seat, if possible! ⢠Otherwise, Last Resort Pros Cons Less Valuation Sensitive Can Disappear in Down Markets Can (sometimes) Unlock BD Opptys Slow to Close â Waste Your Time Larger Capacity (sometimes) Adverse Issues in M&A Situations Think Different from VCs Hard to Get Institutional VC Afterwards Can Be A âKingmakingâ Round Board Participation Can Be Painful
- 14. Concluding Context ⢠Total Small Business Funding Sources (BY POPULARITY):! ⢠Foundersâ Personal Savings! ⢠Credit Cards! ⢠Friends and Family! ⢠Regional / National Banks! ⢠Government / Foundation Grants! ⢠Venture Capital (less than 2%!!)