the startup guide - raising venture capital
TRANSCRIPT
-
7/30/2019 The Startup Guide - Raising Venture Capital
1/43
CEO of Connect.com
Startup Guide RYAN ALLIS
Building a Better World Through Entrepreneurship
With Ellen Daly
The
2013 Edition
More slides at www.s
-
7/30/2019 The Startup Guide - Raising Venture Capital
2/43
STARTUPGUIDE.COM
RAISing VENTURCAPITAL
ENTREPRENEURSHIP
-
7/30/2019 The Startup Guide - Raising Venture Capital
3/43
STARTUPGUIDE.COM
THIS presentation IS PART OF A LARGER slide DECK on
building a better world through entrepreneursh
Startupguide.com
ABOUT THIS PRESENTATION
For more slides & CONTENT visit:
-
7/30/2019 The Startup Guide - Raising Venture Capital
4/43
STARTUPGUIDE.COM
YOU HAVE TO DO WHATEVERIT TAKES TO
KEEP COSTS LOW
UNTIL YOU HAVE REVENUE
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
5/43
STARTUPGUIDE.COM
THE #1 mistake I seeFirst time entrepreneur
Make is raising too much
MONEY TOO SOON
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
6/43
STARTUPGUIDE.COM
Dont raise outside CAPITAL
UNTIL AFTER
YOU KNOW YOU HAVE SOMETHTHAT CUSTOMERS
ARE WILLING TO PAY FOR
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
7/43
STARTUPGUIDE.COM
TO TEST DEMAND
BEFORE YOU RAISE MONEYBUILD AN INEXPENSIVE
PROTOTYPE and improve itUNTIL YOU KNOW
CUSTOMERS LOVE IT
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
8/43
STARTUPGUIDE.COM
Unless youre building a productLike a new drug that requires massiv
upfront investments dont raise
Outside capital until after
You have proven customer demand
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
9/43
STARTUPGUIDE.COM
IF YOU RAISE MONEY TOO
SOON AND DonT YET HAVE
SOMETHING CUSTOMERS WANTINVESTORS WILL EAT YOU FOR
BREAKFAST
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
10/43
STARTUPGUIDE.COM
YOUR GOAL IS FOR EVERYONE
TO DO WELL--CUSTOMERS, EMPLOYEINVESTORS & YOU
SO DonT PLAY WITH INVESTOR MONUNTIL YOU KNOW YOU HAVE SOMETH
THAT THE MARKET REALLY WANTS
Raise funding or bootstrapentrepreneurship
Raise funding or bootstrapentrepreneurship
-
7/30/2019 The Startup Guide - Raising Venture Capital
11/43
STARTUPGUIDE.COM
PRO TIP:GET AS FAR AS YOU CAN
WITHOUT RAISING
OUTSIDE CAPITAL
Raise funding or bootstrapentrepreneurship
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
12/43
STARTUPGUIDE.COM
AT ICONTACTWE BOOTSTRAPPED
FOR THE FIRST 3 years
(2003-2006)
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
13/43
STARTUPGUIDE.COM
WE GOT to
$1.5 million in annual sales
BEFORE WE RAISED ANY FUNDSBEYOND A $5,000 loan
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
14/43
STARTUPGUIDE.COM
HOW?
BY KEEPING COSTS LOWUNTIL WE GOT REVENUES
NOT TAKING SALARIES FOR 3 yearsAND DOING SERVICE WORK ON THE S
FOR FUNDS TO LIVE OFF OF
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
15/43
STARTUPGUIDE.COM
We LIVED IN THE OFFICE
ATE RAMEN NOoDLES
AND Jumped IN DUMPSTERS TRECOVER PROOF OF PURCHASE
TAGS FOR REBATES
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
16/43
STARTUPGUIDE.COM
IN THE BEGINNINGDO WHATEVER IT TAKES
TO KEEP COSTS LOW
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
17/43
STARTUPGUIDE.COM
RYANs 3 RULEs OF BUSINESS:
1. CREATE PRODUCTS CUSTOMERS LOVE2. RECRUIT TRULY EXCELLENT PEOPLE3. Dont raise venture capital until youhave revenue & PROVEN CUSTOMER
DEMAND
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
18/43
STARTUPGUIDE.COM
TOO MANY STARTUPS FAIL
BECAUSE THEY RAISE VENTURE CAPITA
BEFORE THEY HAVE REVENUEAND BEFORE THE ENTREPRENEUR HAS
BUILT SOMETHING CUSTOMERS LOVE
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
19/43
STARTUPGUIDE.COM
THE ABSOLUTE BEST SOURCEOF FUNDING IS FROM
entrepreneurship Raise funding or bootstrap
PAYING CUSTOMER
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
20/43
STARTUPGUIDE.COM
Venture capital is LIKE THE
GOLDEN MUSHROOM IN MARIO KARTIT MAKES YOU GO FASTER
BUT If you accelerate TOO QUICKLIN THE WRONG DIRECTIon
entrepreneurship Raise funding or bootstrap
YOU FALL OFF A CLIF
entrepreneurship Raise funding
-
7/30/2019 The Startup Guide - Raising Venture Capital
21/43
STARTUPGUIDE.COM
JUST BECAUSE MONEY ISAVAILABLE DOESnt MEAN
its good for you ORthat your company is ready
entrepreneurship Raise funding
entrepreneurship Raise funding OR BOOTSTRAP
-
7/30/2019 The Startup Guide - Raising Venture Capital
22/43
STARTUPGUIDE.COM
OUTSIDE CAPITAL SHOULD BEUSED AS FUEL TO ACCELERATE
WHEN YOURE ALREADY MOVINGIN THE RIGHT DIRECTION
entrepreneurship Raise funding OR BOOTSTRAP
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
23/43
STARTUPGUIDE.COM
WHERE TO LOOKDEPENDS ON HOW MUCH
YOU NEED AND HOW FAR
ALONG YOU ARE
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
24/43
STARTUPGUIDE.COM
MONEY NEEDED
-
7/30/2019 The Startup Guide - Raising Venture Capital
25/43
STARTUPGUIDE.COM
A great source to find earlyStage angels is
AngelList.com
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
26/43
STARTUPGUIDE.COM
ALSO CHECK OUT THE NEW
Peer-to-peer investing sitesThat have launched FOLLOWING
the PASSING OF THE U.S. JOBS ACT of 201THE BEST ONE IVE SEEN Is
FUNDABLE.com
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
27/43
STARTUPGUIDE.COM
OTHER BUSINESSES
LIKE DALTON CALDWELLs APP.NET
HAVE BUILT KICKSTARTER-LIKE
PLATFORMS OF THEIR OWN
TO FUND THEIR EARLY EXPENSES
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
28/43
STARTUPGUIDE.COM
DO YOUR BEST TOAVOID RAISING MORE
THAN 1x your currentANNUALIZED REVENUE
entrepreneurship Raise funding or bootstrap
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
29/43
STARTUPGUIDE.COM
AS AN EXAMPLE, HERE iS Icontacts
CAPITAL RAISED OVER 4 financing rounds
u s s u g o oo s
DateCapital raisedto balancesheet
ANNUALIZEDREVENUE
CAPITALSource Capital type
Approx. Pre-MoneyVALUTION
Approx Post-moneyvaluation
Approx COMPAN
June 2003 $5k $5k FRIEND LOAN 0%
May 2006 $500k $1.5M IDEA FUND SEED STAGE $16m $16.5M 3%June 2007 $5.3M $5.5M Updata SERIES A $27M $32.3M 16%
August 2010 $25M $38M JMI EQUITY SERIES B $100M $125M 20%
NOTE THAT OUR ANNUAL REVENUE WAS ALWAYS HIGHER THAN
THE AMOUNT OF MONEY WE RAISED
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
30/43
STARTUPGUIDE.COM
LEVEL OF NEED FOR THE MONEYYOUR EXPERIENCEYOUR TEAM
PRODUCT & TECHnOLOGYCOMPETITIONOTHER TERM SHEETS
QUALITY OF YOUR ADVISORS
YOUR NEGOTIATING POWER is BASED ON
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
31/43
STARTUPGUIDE.COM
VALUATIONOPTION POOL SIZELIQUIDATION PREFERENCES
FOUNDER REVESTINGPREFERRED VETO RIGHTSTYPE OF PREFERRED STOCK
BOARD SEATS
! THE HIGHEST VALUATION IsnT ALWAYS BEST
THE MOST IMPORTANT INVESTMENT TERMS
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
32/43
STARTUPGUIDE.COM
CHEMISTRY WITH THE PARTNEROPERATIONAL EXPERIENCECURRENT PORTFOLIO ALIGNMENT
PARTNER/FIRM EXIT RESULTSEXECUTIVE RECRUITING ABILITYTERMS OF INVESTMENT
FACTORS IN SELECTING YOUR INVESTORS
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
33/43
STARTUPGUIDE.COM
VALUATION RANGES FROM $1M To $25M depending on Factors like
CEO Past exits TEAM EXPERIENCE NUMBER OF USERS NUMBER OF ENGINEERS LOCATION OF COMPANY
TECH STARTUP PRE-REVENUE VALUATION GUIDELIN
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
34/43
STARTUPGUIDE.COM
INCORPORATED b2c tech COMPANY RUN BY FIRST TIME
ENTREPRENEUR with 1 engineer
PRE-REVENUE VALUATION EXAMPLE
Pre-Money Valuation: $1m-$3m
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
35/43
STARTUPGUIDE.COM
INCORPORATED b2c tech COMPANY RUN BY FIRST TIME
ENTREPRENEURS who have been through y combinator w
good idea AND 2 engineers
PRE-REVENUE VALUATION EXAMPLE
Pre-Money Valuation: $4m-8m
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
36/43
STARTUPGUIDE.COM
tech COMPANY run By experienced CEO with 10 years c-l
experience, $100m prior Exit, & 5 engineers
PRE-REVENUE VALUATION EXAMPLE
Pre-Money Valuation: $10m-20m
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
37/43
STARTUPGUIDE.COM
1x to 12x revenue based on factors like
TECH POST-REVENUE VALUATION GUIDELINES
AMOUNT OF REVENUE REVENUE GROWTH RATE NUMBER OF USERs/customers TYPE OF REVENUE CEO/TEAM EXPERIENCE COMPANY MARKET LOCATION OF COMPANY
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
38/43
STARTUPGUIDE.COM
AS YOU GO ABOUT FUNDRAISINGYOU USUALLY WANT TO CREATE
A COMPETITIVE PROCESS
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
39/43
STARTUPGUIDE.COM
BUILD YOUR FUNDING
PROCESS TO ENSURE
YOU RECEIVE
MULTIPLE TERM SHEETS
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
40/43
STARTUPGUIDE.COM
HAVE ACCESSIBLE
IN YOUR HEADVALUATION COMPARABLES
RECENT SIMILAR Venture DealsRecent SIMILAR M&A dealsPublic comparables
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
41/43
STARTUPGUIDE.COM
RAISE MONEY
ONLY FROM SMARTPEOPLE YOU REALLY LIKE
YouLL BE MARRIED toThem FOR THE NEXT
3-10 years
entrepreneurship Raise funding or bootstrap
-
7/30/2019 The Startup Guide - Raising Venture Capital
42/43
STARTUPGUIDE.COM
WAIT TO RAISE
Your series AUNTIL You HAVE
PROVEN MATHEMATICALLYTHAT X DOLLARS SPENTBRINGS Y DOLLARS BACK
And make sure y is >4 times x
The
-
7/30/2019 The Startup Guide - Raising Venture Capital
43/43
CEO of Connect.com
Startup Guide RYAN ALLIS
Building a Better World Through Entrepreneurship
With Ellen Daly
2013 Edition
More slides at www.s