fundraising 101 : are you ready for an investment round?

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Startup Fundraising 101: Are You Ready for an Investment

Round?

Shayne VeramallayVenture Pipeline ManagerDLA Piper

Sirk RohCOOEarly Growth Financial Services

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• Why raise funds? Funding options

• Fundraising process

• Network• What investors

want to see

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Reasons to Raise Funds

Accelerate growth

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Network expansion

Timing

NOT for product / market validation!

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Funding Options and the Business Life Cycle

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Bootstrap/Self

Family and Friends

Venture Debt

Strategic Investors

Angels

VC (seed venture and early stage equity)

Operating: Customer and Vendor Terms

Banks

Crowdfunding

Ideation Launch & Traction Growth & Scale Breakout Established$0 $0-$1M $1M -$5M $5M + $MMs

**Please Note: These are tendencies and not a hard fast rules. Many financings happen outside of these terms.

Friends and Family

• Convertible debt better than equity

• Transparency• Only take money

that people can afford to lose

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Angels and Super-Angels

• HNW individuals• Not sophisticated investors• Smaller funds ($25-250K

range)• 3-6 month process• Have a point person

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• More institutionalized• Functions like VC: process

analysts• Due diligence & term sheets• Convertible debt or SAFE• You’ll need to worry about

valuation – what’s appropriate valuation?

Micro-VCs and Traditional Venture Capitalists

Traditional VCs•Greater capital investment •Greater network•Thorough due diligence•Greater dilution•Greater investor involvement•Increased funding = increased expectations

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Micro-VCs•New breed•AUM ~ $10-50M •Typically do seed and Series A•May or may not be with you for entire life cycle of raise•Need to understand sectors/focus: B2B, B2C, regions, important criteria•Operator sympathetic

Venture Debt

• On top of venture investments• Way to extend runway and reduce dilution• Based on VCs more so than your company• Financing alternatives for recurring revenue

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Convertible Debt vs Equity

• From valuation and dilution perspective, CD is cheaper & quicker• Current marketplace: less CD• Typical terms

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Entrepreneurial advantage: CD Investors often push for equity

Fundraising Game Plan

• Milestone financing• How much money do you need to raise?• 10-25% “fudge factor”• What’s that money going to be used for?• At what cost and with what terms and conditions?• What type of capital is the best fit for your company, and why?• Where do you find the type of financing you need?

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How Much Should You Raise?

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The Fundraising Process

• Business development process

• Timing – 6 months out• Determine your funding

round• Build your value proposition• Rely on your ecosystem for

investor intros • Evaluate and select key

service providers accordingly – ancillary value

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Choosing Your Target VC

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Network• Target key players• Networking game – build targeting list of all VCs in your

region, stage, industry. How are you connected to them?• Introductions are strongest access point• Network with other entrepreneurs• Start early• Co-los and incubators = good!

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What You Need to Present to Investors

• Elevator pitch• Executive summary• Pitch deck • Financial model

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*Reference: Guy Kawasaki, Art of the Start & Marc Phillips, Inside Silicon Valley

Key Slides in Your Pitch Deck

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**Courtesy of Marc Phillips’ Inside Silicon Valley: How the Deals Get Done

Financial Slides: What to Include

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Top-Down Financial Projection

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Bottom-Up Financial Projection

Pitch Deck and Pitching Tips

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• Let the best pitcher pitch• Pitch the company, the team,

and the product; not the problem

• Charts and graphs: replace words with a simple graphics and charts

• Know your numbers really well (but no excel spreadsheets – save that for diligence!)

• Short sentences, non technical speak

• Investors watch body language • Control emotion, be prepared

for conflict

Thank You and Q&A

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Sirk Roh

415-234-3437

contact@earlygrowthfinancialservices.com

www.earlygrowthfinancialservices.com

Follow us @EarlyGrowthFS

Shayne Veramallay

973-520-2542

Shayne.veramallay@dlapiper.com

www.dlapiper.com

Follow us @DLA_Piper