Basics on the startup process, raising capital, and thinking about valuation, especially for first-time entrepreneurs. Read my article at VentureBeat for details on this slide deck: http://venturebeat.com/2016/09/05/startup-fundraising-101-revisited/

2. • Getting Started
• Positioning Your Company
• How Much Capital You Need?
• Who Is Your Target Investor?
• How to Think About Valuation
• Pitching Your Startup
• Final Pointers
CONTENT

3. Establish Your Team
You have an awesome idea. Now what?
• Remember Two Founders is Better Than One
• Define core skills needed for the next 12 months
• Know your weaknesses as founders
• Lean and focused
• Trust is essential and check your egos
GETTING STARTED

4. Discuss and Dividing Equity
• Do not nitpick on each founder’s value
• Among peers an equal split of shares in best
• Create a C corporation, not S Corp or LLC
READ: “How to Split Equity Among Co-Founders” by
Michael Seibel at the Macro (Partner at Y Combinator and
previously Co-Founder of Justin.tv, Twitch and Socialcam)
“Equity should be split equally because all the work is
ahead of you.”
GETTING STARTED

5. You are not building a lifestyle business, but a
billion dollar world changer
• Create an outstanding, hard-to-ignore team
• Target a big market or create a new one
• Make your product or service a “must have”
POSITIONING YOUR COMPANY
READ: “The Four Main Things that Investors Look for in a
Startup” by Mark Suster at Both Sides of the Table (Managing
Partner at Upfront Ventures)
“Just four key factors. And they’re easy to remember
because they all begin with an M: management, market,
money and above all else momentum.”

6. Do Not Fund To Fail
• Project how much you need for at least one year
• Add a 30% buffer
• Assume fundraising will take 6-12 months
HOW MUCH CAPITAL DO YOU NEED?
READ: “How Much Money Should I Raise For My
Startup?” by Bryan Stolle at Forbes Blog (General Partner, Mohr
Davidow Ventures; Founding Partner, Wildcat Venture Partners)
“Coming up short is even worse than raising too much, as
it will almost always cost you even more than the original
capital.”

7. Capital Needs Dictate Investor Type
• Accelerator, Friends & Family, Credit Cards
• Seed Capital
• Series A
• Smart money is best
WHO IS YOUR TARGET INVESTOR?
READ: “Why Raising Too Much Money Can Harm Your
Startup” by Mark Suster at Both Sides of the Table (Managing
Partner at Upfront Ventures)
“The larger the round, the higher the price, the harder the
next hurdle is to hit.”

8. Research and target your investors
• Learn about their preferences for startups
• Avoid people or firms with competing investments
• Get to know a specific partner / investor on your
deal
WHO IS YOUR TARGET INVESTOR?
READ: “Everything You Ever Wanted To Know About
Convertible Note Seed Financings (But Were Afraid To
Ask)” by Scott Edward Walker at TechCrunch (CEO of Walker
Corporate Law Group)

9. Seed Rounds: Convertible Debt or Equity?
• Convertible Debt
Promissory note that converts to equity upon the next round of
qualified financing, which should be a Series A. Better than equity
financing since there is less dilution.
• Deal hurdles
Qualified financing is a standard minimum (i.e. $1 million), and no
backstop provision, which sets a time limit (i.e. one year) for closing
your next round. Set a reasonable cap. No cap doesn’t fly any longer.
• Deal Terms
Interest of 6%-8% and warrant coverage 20% but can go up to 40%.
This is the gravy for angel investors taking the risk early on.
WHO IS YOUR TARGET INVESTOR?

10. To Party Round at Seed or to Not Party
• Do not go with just one investor
• Do not go with 10 or more unless you have a couple
big checks (e.g. $500,000 to $1M for seed)
• Get good investors (“active help”) in your round
• Party round follow-on rate was 53% vs 39% of non-
party round startups (*CB Insights)
WHO IS YOUR TARGET INVESTOR?
READ: “Party Rounds” by Sam Altman at personal blog
(President at Y Combinator)
“In a typical party round, no single investor cares enough
to think about the company multiple times a day.”

11. Research and target your investors
• Startup valuation is an art.
Forget DCF (discounted cash flow) and other valuation methods.
• VCs have their valuations
VCs have standard ranges for each stage to optimize their returns
• Increasing your valuation
The way to increase your valuation is to create a horse race
HOW TO THINK ABOUT VALUATION
READ: “Entrepreneurs, here’s how to think about your
valuation” by Bernard Moon at VentureBeat (Co-founder &
Partner at SparkLabs Global Ventures)
“Money burns quicker than most entrepreneurs think. It’s
not paper, it’s paper soaked in gasoline.”

12. Pre-money & post-money valuation
• Pre-money valuation
Share price * premoney shares
• Post-money valuation
Premoney valuation + investment
• % of Ownership
Shares issues / Post-money shares
• Not just about percentage but about share price
HOW TO THINK ABOUT VALUATION

13. Stock option pool
• Standard practice.
10%-20% set aside for for current and future hires during your
Series A. Most VCs will ask for 20%
• Push back on 20% if not needed
Know who you need to hire during the next stage of growth
• This is additional dilution
Most VCs will dilute you before their money goes in. Unless you are
Elon Musk or Ev Williams.
HOW TO THINK ABOUT VALUATION
READ: “The Option Pool Shuffle” by Babak Nivi at Venture
Hacks (Co-founder at Angel List)

14. Practice Makes Perfect
• Tell Your Story
It’s about telling a story of momentum, vision, and your team. You
have to gain the trust of investors in your product, team and the
market potential
• Don’t oversell
Don’t oversell yourself or your company. There is a difference
between presenting with passion and making up crap.
• Listen to all feedback and continually improve.
Whether an investor expresses interests or rejects you, listen
carefully to all feedback and concerns. Even mediocre investors have
good advice to him.
PITCHING YOUR STARTUP

15. Never Easy Being An Entrepreneur
• Too high of a valuation is dangerous
It’s about telling a story of momentum, vision, and your team. You
have to gain the trust of investors in your product, team and the
market potential
• Don’t’ spend too much time negotiating terms.
At the early-stages, terms are pretty generic so stay in range and
you’ll be fine. Just be watchful of onerous terms.
• Each time you close your round it is a race to
optimize your value.
Yes, it’s about growing your business. Rmeember, there is good
dilution and bad dilution.
FINAL POINTERS

16. Never Easy Being An Entrepreneur
• Raise as much money as possible
Remember do not fund to fail
• Value every penny.
Know all your expenses, burnrate and runway. Do not charter a
helicopter for meetings, launch a China office on a whim or hire 200
people in 2 months. A few million isn’t as much as you think.
• Focus your product and service.
Do not try to be everything to everyone.
FINAL POINTERS

17. COMPLIMENTARY ARTICLE
Read this article at VentureBeat:
http://venturebeat.com/2016/09/05/
startup-fundraising-101-revisited/

18. SparkLabs Global Ventures is a new seed-stage fund founded by
entrepreneurs. We are a global fund that believes exceptional
entrepreneurs can be found anywhere.
All six partners have created new businesses across the globe, and
ABOUT
are currently based in London,
Tel Aviv, Seoul, Singapore and
Silicon Valley.
Since December 2013, we have
invested in 58 companies
across 5 continents.