Based on sessions that took place at Google Campus (Tel Aviv) on Dec 14 & 15, 2014
Startup Fundraising:
A Love Story
By Gil Ben-Artzy, UpWest Labs
These are summary slides of a 2.5-hour presentation aimed
at discussing major aspects of fundraising for high growth,
capital intensive tech startups. It is a supplement for those
that attended the presentation, and is not meant to serve as
a comprehensive guide for fundraising.

2
Life
Work
EDU
46 Alumni Startups
>$50M in total funding
>70% raised follow-on funding
>20% of teams have a female founder
Acquisitions by Google, Priceline, Gartner, etc
Dozens of Fortune 500 customers and partners
Largest community of entrepreneurs innovating between Israel and Silicon Valley

3
VC Funds
Do VCs Meet Investor Expectations?
VC Returns
Top 20 VC Funds
Other VC Funds
<1x
1-2x
2-3x
>3x
50%
33%
10%
7%
VC ReturnsVC Funds
98% 95%
2%
5%
Investor Mindset
Source: The Kauffman Foundation

4
Fund*
VC Economics (illustrative)
Returns Exits
$200M
$600M
$3B
3X
20%
Equity
*Few Investments per Partner
Investor Mindset

5
How Do The Best VCs Reach 3x?
Option A Option B
Exit 1
Exit 2
Exit 3
Exit 4
Exit 5
Exit 1
Exit 2
Exit 3
Imagine you made 30 investments….
Returns = $600M Returns = $600M
Investor Mindset

6
Implications
* VC could agree to smaller exits if you are not going to
be big as they had hoped, IRR & fundraising
considerations, founding team really insist, etc
Startup
“I need to show
potential for $50M
in Revenues in Year 5
(or >100M users)”
VC Partner
“Should I bet part of
my career on this
startup?”
Investor Mindset

7
VC Economics Impacts All Investors
Large Funds Micro-Funds Angel Investors
“I need
large exits”
“I’m ok with small
exits, but as they
are unlikely, I
need the micro-
funds to invest in
my startups”
“I’m ok with
medium-size exits,
but as they are
unlikely, I need the
large funds to invest
in my startups”
Investor Mindset

8
Market
1. Size of Addressable Market
2. Level of Competition
3. Distribution Channels
4. Timing (e.g., Mobile Advertising)
• Recent investments in this market:
when, how much, by whom
• How many have tried this before
You can tell
a lot by…
Startup Evaluation

Momentum = f
* “Perceived Momentum” has some value as well :-)
Users / customers (number, engagement)
Partners
IP
Advisors (industry, domain)
New Hires
Investment Commitment
Thought Leadership (conferences, blogs)
Press (credibility, not traction)
etc
Momentum
Startup Evaluation

Team
1. Domain knowledge
2. Previous success
3. Team dynamics
4. Personal definition of success
5. Smart / Coachable / High Integrity / etc
“Do I want to work with them for
the next 5-7 years?”
Startup Evaluation

11
When Am I Attractive Enough?
Attractive
to Investors = Market Momentum
Team
“Market always wins”
Cold/Lukewarm Market
Super-hot Market
When in doubt
Show momentum
(or find a new idea…)
Strong team is the key
(can raise with little proof)
Examples?
Startup Evaluation

12
Key Principles
No right way, many strategies
The process is about building trust…
…But aim to do it quickly, don’t waste time
Investors want to invest!
• See many, invest in a few
• Dislike saying “No”
• Option value
Psychology is a big component (losers vs. FOMO)
Courtship

13
Finding The Right Investor for You
Form Strategy Prepare Showtime
1-2 months 1-2 months 3-6 months
1. Decide to
fundraise
2. Identify your
time window
3. Begin “Beta
investors”
engagement
4. Complete
materials to share
5. Practice the pitch
6. Create investor
list & referrals
7. Test the waters
8. Approach
investors
9. Manage the
process
10.Complete due
diligence on
investors
Courtship

14
Other People’s Money
Time Commitment
Opportunity Cost (PT vs FT)
Personal Sacrifice
Lifestyle Business?
Need to Move Fast?
Aligned Incentives?
Understand The Risks… … Align Expectations
1. Do Not Fundraise Before…
Courtship

15
Feb June Sep Nov
2. Fundraising Window
Your “shelf life” = 3-4 months*
* Everybody talks….
Courtship

16
3. Engage with “Beta investors”
3-5 relevant, friendly investors to engage
Get feedback, know when you are ready
Could pre-empt your round…
Courtship

17
4. Required Materials
• How much to raise
• Deal terms
Financials
Materials
Online
• Paragraph
• Deck
• Exec Summary
• Website
• Social Media
Courtship
Know Your Story
Your fundraising story needs
to make sense, capturing
your unique style:
• Team: Why you, why this
team
• Market: Why this venture,
why now
• Momentum: Can you
prove you may be right?
What will you prove with
this money?
– Users, revenue, small-scale
economics, vision
Source: https://www.cbinsights.com/blog/seed-series-a-data-startup/

18
The Deck (And What Investors Are Looking For)
Problem: What are they trying to solve?1
Vision: Does this matter? Is this interesting/big enough?2
Product/Demo: What are they doing? How does it work?3
Tech: Is there anything unique here?4
Momentum: Do they any proof that this is working?5
Source: https://medium.com/@michaelrwolfe/what-should-be-in-my-fundraising-slides-eca162d14d2a
Market: Is this a big enough opportunity?6
Competitors: Do they know them? Are they different?7
Biz Model: How will they make money?8
Distribution: Is this credible? Do they have proof?9
Team: Why them?10
Milestones/Ask: Will they be in a good place in 1 year?11
Courtship

19
(personal
estimation)
Israel
($M, % equity)
Silicon Valley
($M, % equity)
Pre-seed 0 - 0.3 15 - 25% 0 - 0.5 10 - 15%
Seed 0.5 - 1.5 30 - 40% 1 - 3 20 - 25%
Series A 2 - 7 25 - 40% 5 - 15 20 - 30%
Cap Table Management:
Remain in Range, Don’t Over-Optimize
$ Needed
% Equity
Valuation =
% Equity = { negotiations, # of offers,…}f
Courtship

20
What Would a Series A Investor Think?
Other & Future
employees
CEO
CTO
VP R&D
Pre-seed &
Seed investors50%
12.5%
12.5%
12.5%
12.5%
Courtship

21
Verbal pitch: 7 + 30 + 120
Practice with existing investors and entrepreneurs
Who speaks? CEO 70%, others 30%
Focus on weak points
5. Practice the Pitch
Courtship

22
Identify & prioritize relevant investors:
• Domain expertise
• Partners vs. Non-Partners
• Lifecycle of fund
• Completion of a recent deal
Track all investor engagement:
6. Create Investor List & Referrals
Fund Name Relevant
Investments
Contacts First
intro
Notes Next
Steps?
Priority
Money
VC
Mary
Smith
Ring, Flippr,
ReStore
Mike M
John R
1/1/14…. Reach
out Q2
High
…
Courtship

23
Before spending 3 months on fundraising, try
the following:
1. Identify and reach out to 4 relevant investors
2. If all 4 meet you once and say “No” 
reconsider the round
3. If 2 meet you multiple times and only then
say “No”  Kickoff the round
7. Test the Waters
Courtship

24
Never ever cold-call + no NDA
Parallel-process
“Second tier” investors, escalate with traction
Target people investors know and trust: current /
previous investments, colleagues, business friends
Use paragraph; Exec summary / deck as requested
8. Approach Investors
How have you done it?
Courtship

25
Focus on lead investor; Keep list of “follow-on”
Iterate on your pitch and materials
Reach potential customers
Remember: everyone talks to everyone
How do you know if the meeting is going well?
9. Manage The Process
Courtship

26
Will they care about their investment? (e.g., size of fund)
Do they know the market, customers, partners?
What is their follow-on record? Did top investors
participate in their rounds? Ties to US?
How have they treated founders of previous
investments? (both failed and successful ones)
Given their engagement style, do you want to work
with them?
10. Interviewing The Investors
Courtship