HBS Field Y - Fundraising 101 - How to raise a round - April 2021
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This document provides guidance on fundraising for startups. It discusses preparing for a fundraising campaign by developing a pitch deck, legal documents, financial projections, and building an investor pipeline. The fundraising process takes 3-6 months on average and involves socializing the opportunity with potential investors without asking for money initially. Once interest is generated, the formal fundraising campaign begins with approaching top investors simultaneously to close a round. Key deal terms to negotiate include valuation, equity stakes, liquidation preferences, and board seats. Choosing investors carefully based on their characteristics and ability to help the startup succeed is also advised.
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HBS Field Y - Fundraising 101 - How to raise a round - April 2021
- 1. HBS Field Y Fundraising 101: How to pitch and land your first investors D AV I D C H A N G @ C H A N G D S
- 2. Fundraising Basics How to Raise a Round Pitch Tips
- 3. Background
- 6. What obstacles stand in your way?
- 7. What’s the business trajectory? Lifestyle or social good Linear growth or revenue fueled High growth, scalable venture
- 8. Where to get that first dollar? Revenue
- 10. • Active VC List, DocSend • Investors meeting during COVID-19 • Plan for longer runway • Valuations hit 20-30%
- 11. Venture capital stages Growth Equity Early Stage Angel Friends & Family
- 12. How the VC game works Skewed return distribution VCs must swing for the fences
- 13. Raising a Round
- 14. How Much to Raise • Basic financial model of cost drivers and revenue • Forecast monthly for 2 years • Fundraise rule of thumb: 12-18 months’ cash
- 15. Use of Proceeds • Build product • Grow team • Marketing • Customer acquisition • Working capital
- 16. Milestones See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone Team Product Development Market Demand Product / Market Fit Business Model Execution
- 17. Fundraising Basics How to Raise a Round Pitch Tips
- 18. Prep Target Socialize Raise Close Run a 5-step fundraising campaign
- 19. Basic Prep ✓ Legal representation ✓ Founders agreements ✓ Financials and budget ✓ Blurb (1 paragraph) / teaser (1 page) ✓ Pitch deck (10 slides)
- 20. Hone in on target criteria Stage Location Industry Vertical Investment Thesis Business Model Social / Trust Filter
- 21. Tools to build the pipeline
- 22. University Focused Corporate VC bit.ly/boston-area-investors-firms Local Investors Angel Groups Seed Stage Growth Stage Early Stage VC Tech VC Healthcare, Biotech, Energy
- 23. Socialize • Prioritize sequence • Find strongest connections to 30+ targets • Tactics: lead gen, cold calling, warm intros • Network over 2-3 months
- 24. Don’t ask for money! Improves hit rate Creates data points Doesn’t start the clock “Who else should I talk to?” “I’m not ready to raise” “Who would be helpful?”
- 25. Refine pitch • Incorporate feedback • Double down on consistent themes • Avoid whiplash changes
- 26. Go for it! Create FOMO • Approach your top candidates at the same time • Decide whether to tell investors about each other • Land anchor investor as the first domino • Use triggering events to get or improve term sheets “I’m closing a round”
- 27. Structure Equity
- 28. • Board seat or 2 • Option pool • Liquidation preference • Control over sale, new options • Debt that becomes preferred equity when you raise it • No valuation, but the “cap” is a ceiling • Interest accrues, rate <10% • Conversion discount Equity
- 29. • Not done until money is in the bank Key terms ❑ Board composition ❑ Option pool ❑ Voting rights ❑ Founder vesting ❑ Change of control ❑ Redemption rights ❑ Information rights ❑ Anti-dilution
- 30. Seed A B $15 $6 $1 $30 $12 $5 Valuation & Dilution ? Dilution: what’s your end stake? Valuation ($M) ?
- 31. Valuation & Dilution 37% See ownyourventure.com See dlopuch.github.io/venture-dealr Raise $1M on $5M pre 34% Raise $1.5M on $5M pre 33% Raise $1M on $3M pre Dilution: what’s your end stake? Valuation ($M) Seed A B $15 $6 $1 $30 $12 $5
- 32. How long does it take? • Longer than you expect • 3-6 months • Speed limited by access to investors • Your ability to find them • Calendar availability (surprisingly hard) How soon to start, how long it takes, general timeline you can expect, how to reduce time between the initial outreach and closing a deal?
- 33. Choose your investors carefully What characteristics to look for in a venture partner?
- 39. • 1 Paragraph • 1 Page • 1 Light Deck • 1 Follow-up Deck
- 40. Articulate in 90 seconds Why you’re the right team Know numbers and business model cold Kevin O’Leary
- 41. www.garage.com/resources/perfecting-your-pitch 10 slides 20 minutes 30 point font Guy Kawasaki’s tips
- 42. pexels.com
- 44. Typical Parts Overview Problem Solution Market Opportunity Go-to-Market Traction Revenue & Business Model Team Competitive Landscape Financial Projections Ask & Use of Proceeds Conclusion
- 47. Resources • Legal • Goodwin Procter www.foundersworkbench.com • Foley & Lardner www.foley.com • Pierce Atwood • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com bit.ly/startresources
- 48. Q&A D AV I D C H A N G @ C H A N G D S