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Funding Strategies to Go the Distance
1. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Funding Strategies to Go the Distance
startupsecrets.com
2. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Workshops
Full descriptions of each at
startupsecrets.com
1. What’s Your Roadmap to Success?
2. Building a Compelling Value Proposition
3. Turning Products into Companies
4. Culture, Mission and Vision
5. Hiring A+ Talent
6. Game-Changing Business Models
7. Go to Market Strategies
8. Getting Behind the Perfect Investor Pitch
9. Funding Strategies to go the Distance
10. Have You Got What It Takes?
11. Mastering Mutual Mentorship
3. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Agenda
Many ways to fund your startup
Develop a funding strategy
Remove the mystique of VC
4. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 4
Sex,
Relationships
& Money
This could get complicated, but it doesn’t
have to!
5. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 5
Raising Money Is Like Sex.
Everyone wants to know about it.
Few people talk about it openly.
6. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 6
Everyone wants to know about it.
Few people talk about it openly.
People are afraid to ask …
Raising Money Is Like Sex.
7. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 7
Everyone wants to know about it.
Few people talk about it openly.
People are afraid to ask …
It’s fun once you get it!
Raising Money Is Like Sex.
8. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 8
Should you even raise money?
• If you don’t know, the answer is no!
• Do the work first
Example reasons for a NO:
• No need!
• Personal: risk aversion, lifestyle, control
• Business: small potential
• Other: not for profit, or research
Funding Strategy
9. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 9
Overview
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
10. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Overview
10
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Increasing VALUE
DecreasingRISK
11. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Overview
11
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
Increasing VALUE
DecreasingRISK
12. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 12
Overview
Increasing VALUE
DecreasingRISK
Product
Market Fit
Prototype
Problem Fit
Value Prop
Idea Fit
MVP & MVS
Customer Fit
Company
Execution Fit
Company
Public Market Fit
Company
Business
Model Fit
Ideation Confirmation Creation Validation Repeatability Scalability Profitability Predictability
13. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 13
Ideation Confirmation Creation Validation Repeatability Scalability Profitability
Predictability
The two best times to raise
capital:
With all the potential
or
Plenty of proof
Startup Secret!
The Best Times to Raise Capital
Increasing VALUE
DecreasingRISK
14. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Funding Vectors:
Matching Expectations & Outcomes
14
15. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 15
Equity
• Angel
• Accelerators
• Seed, Venture Capital (including Strategic / Corporate investors)
• Growth, Private Equity
• Public Markets
Other
• Bootstrap
• Friends and Family
• Debt
• Grants, subsidies, off balance sheet
Alternatives
• Business Crowdfunding (e.g., AngelList), Products / Services (e.g., Kickstarter)
Typical Sources
16. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 16
What’s Right For You?
LargeSmall
Capital
Potential
Intense
Efficient
17. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 17
Sex, Relationships & Money
This could get complicated, but it doesn’t have to!
simplified.
18. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 18
What’s Right For You?
LargeSmall
Capital
Potential
Intense
Efficient
VC
19. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 19
Venture Capital
Seed: ~ $100K to $1-3m
• See later
A to IPO
• $Millions, multiple rounds
Stage development participation, involvement
• Active (board seat)
• Passive (follow “lead” investors)
22. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 22
Research
Fit: Geography, Sector, Stage
Portfolio: Complementary, competitive?
Partner(s)
Track Record
Capital, free capital, reserves
23. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 23
Target, Be Selective, and Focus
Fit: Geography, Sector, Stage
Portfolio: Complementary, competitive?
Partner(s)
Track Record
Capital, free capital, reserves
24. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 24
Build a Relationship
You could be partners for several years …
25. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 25
Triangulate Ways to Connect
Find someone who knows the VC
Get a warm introduction
Interact online
Use your initiative!
27. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 27
Process: Framework
You
• Research
• Connect
• Meet
• Motivate
• Diligence
• Fit check
• Pitch
• Legal
• Celebrate (briefly!)
The VC
• Thesis
• Qualify
• Meet
• Prioritize
• Engage
• Socialize
• Partner meeting
• Final diligence
• Fund
28. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 28
First Connection: Who, What, Why?
Make a connection
Establish
• Who are you (relevant experience)
• What do you do (uniquely well for who)
• Why does it matter (market opportunity)
Investors often have ADD
• Not value add – A.D.D. !
• Limit the agenda, control the discussion, get the first meeting!
29. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 29
First Meeting
Tell your story …
See “Getting Behind the Perfect Pitch”
30. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 30
Process: Build Momentum
You
• Research
• Connect
• Meet
• Motivate
• Diligence
• Fit check
• Pitch
• Legal
• Celebrate (briefly!)
The VC
• Thesis
• Qualify
• Meet
• Prioritize
• Engage
• Socialize
• Partner meeting
• Final diligence
• Fund
31. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Incomplete Stand Outs Are Better Than
Complete Stand Ups!
Investors are looking for outstanding:
• People
• Technology or other disruption
• Market opportunity
One outstanding of the above stands out versus all good, but none great
Investors don’t expect complete:
• Team
• Product
• Value prop
• GTM plan
• Business Model
Entrepreneurs don’t need all the answers!
• They just need to be self aware, listening, leaders!
31
32. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 32
Dating and Validating
Why diligence is so important to YOU too!
33. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 33
Dating: Evaluating Investors
Everyone’s money is the same color
Get to know the partnership and their portfolio
This is NOT an arranged marriage! Pick your partner.
• Level of insight and experience
• Track record is great but it’s history
• Talk to others who have worked with them
Will they be a balance for you?
Good self-aware mentor?
• Find someone who is genuinely motivated to set you up for success.
• If you don’t have comfort and personal chemistry … KEEP LOOKING!
34. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 34
Expectations of Your VC?
Operating experience?
Investment experience?
Hands on/off?
Thoughts:
• Team and board building
• Remove roadblocks
• Reveal opportunities to accelerate
• Strategic insight
• Access to resources, network
35. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 35
Validating the VC’s Work
Get to know the team
• Time, References, etc.
Understand the business
• Value proposition, business model
Check under the hood
• e.g., Expert opinion on tech
Validate assumptions
• GTM Strategy, speak to customers, partners
36. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 36
Process: Term Sheet Timing
You
• Research
• Connect
• Meet
• Motivate
• Diligence
• Fit check
• Pitch
• Legal
• Celebrate (briefly!)
The VC
• Thesis
• Qualify
• Meet
• Prioritize
• Engage
• Socialize
• Partner meeting
• Final diligence
• Fund
Term sheet?
Term sheet?
37. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 37
Funding Strategy Questions
First Question
• How much do you need?
38. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 38
How Much Do You Need?
Run the numbers
Build the assumptions
Assess the dependencies
Define the milestones
Enough to build real value
• 18 months of runway typically
39. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 39
More Important Than the Spreadsheet:
Assumptions
Things to test
Minimally: cash flow projection
Optimally: Financial forecast
40. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 40
Financials
P&L Cash Flow
• 6 quarters for cash flow, requirement
For sizing the business, overall capital requirement (informs investor for their reserves)
• Annual P&L, CF up to 5 years thereafter;
Highlighting if applicable
Cash flow positive
Breakeven
Suggested information / detail as needed for the above
• Headcount
• Bookings
• Revenue
May need to break out things like Services depending on your business
• Gross Margin
• Expenses
Major categories like R&D, Sales, Marketing, G&A shown as needed
• Profit / Loss
• Cash
42. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 42
First Question
• How much do you need?
Second Question
• How much do you want?
Funding Strategy Questions
43. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 43
How Much Do You Want?
Enough to build real value
Define the milestones
• Key hires
• Product beta, ship
• First customers
• Channel Partners
• Etc.
18 months of runway typically
44. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 44
First Question
• How much do you need?
Second Question
• How much do you want?
Final Question
• What should you raise?
Funding Strategy Questions
45. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance 45
What Should You Raise?
One strategy (dilution sensitive, risk tolerant)
• Raise just what you need
• Just before you need it?
Another strategy (dilution insensitive, risk intolerant)
• Raise more than you need
• Well before you need it
Either way
• Timing is everything so plan
• Assume the unexpected
46. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Predictability of your business
• Your execution
• Market adoption
• Cash flows (business model)
• Potential outcome (risk / return)
Competitors’ balance sheets
Valuation…
46
Factors
47. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
The sixty four million
dollar question…
Valuation
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49. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Always be one round ahead in your thinking.
Proof (Metrics, Milestones per earlier)
Customers, Partners, GTM Strategy, Business Model,
Product
Allow for
Unknowns
Time to fundraise
Capital to capitalize!
49
Startup Secret!
Don’t Just Value…Evaluate!
50. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Ultimate Exit Potential (if you must)
Potential acquirers
• Their motivations
• Recent transactions in the space
- $ paid and valuations basis
Independent beyond IPO
• Comparable valuations
– Data for these like revenues, growth rates, market cap
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51. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Build relationships between financing rounds
Always ready to close
ABC: Always Be Closing
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52. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Human capital
Invest in it with your option pool!
52
Startup Secret!
The Most Important Capital You’ll Raise
53. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Investor fit
Amount of capital raised
Human Capital (option pool)
Timing
(To clear the bar: Clean Terms)
What Really Matters
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54. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Raising Money Is Like Sex
It doesn’t need to be complicated
It’s fun when you get it!
So pick your passion not your poison
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56. Proprietary and ConfidentialProprietary and Confidentialstartupsecrets.comFunding Strategies to Go the Distance
Funding Strategies to Go the Distance
startupsecrets.com
Notas do Editor
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
Customer problem or need
Customer problem or need
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together
By defining a thesis and having a network come together