Harvard Law Entrepreneurship Project (HLEP) - Fundraising 101
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Basic fundraising overview and tactics on raising a seed round
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Harvard Law Entrepreneurship Project (HLEP) - Fundraising 101
- 1. Harvard Law Entrepreneurship Project Lunch Talk: Fundraising 101 Nov 11, 2016 David Chang @changds
- 9. $80 $4 $42 $7 $17 $110 $210 $270 $1 $135 Funding Exit My Startups – Venture Returns
- 10. Direct Via Syndicate/Fund My Angel Investments
- 13. What Obstacles Stand in Your Way?
- 14. Capital Sources You hear a lot about… • Venture Capital • Angel Groups • Crowdfunding • Friends and Family • Customers • Accelerators • Competitions Not much about… • SBA Loans and Personal Debt • Grants • Corporate Venture • Vendors or Equipment Finance • Bootstrapping (creatively)
- 15. Growth trajectory of your business? Lifestyle business Personal raise – loan, add folks to cap table Growth oriented business Crowdfunding and personal raise High growth scalable business Venture capital
- 16. Venture Capital Stages Friends and Family Angel Early Stage Growth Equity
- 18. Venture Capital Dynamics •Skewed return distribution •VCs must swing for the fences Source: @DawnUmlah
- 19. Amount to Raise How much funding do you need? •Basic financial model of cost drivers and revenue streams •Forecast monthly for 18 months •Fundraise rule of thumb: 12-18 months’ cash How Much For What To Prove
- 20. Use of Proceeds What will you use the money for? •Build out the product •Grow the team •Marketing •Customer acquisition •Working capital How Much For What To Prove
- 21. Milestones What will be proven that de-risks the business? •Product development •Market demand •Product / market fit •Business model •Execution How Much For What To Prove
- 22. How to Raise a Round
- 23. Fundraising Campaign Prep Target Socialize Raise Close
- 24. Basic Prep ü Legal representation ü Founders agreements ü Financials and budget ü Teaser (1 page) ü Pitch deck (10 pages)
- 25. Target List of Investors Stage Location Industry Vertical Business Model Investment Thesis Social / Trust Filter
- 26. Socialize •Get warm intros • Find strongest mutual connections to 30+ potential investors • Network over 2-3 months •Ask for referrals, not money •Refine pitch • Incorporate feedback, but avoid whiplash changes “I’m not ready to raise” “Who would be helpful?” “Who else should I talk to?”
- 27. Raise: Go for the Ask •Talk to your top candidates at the same time • Run conversations in parallel • Decide whether / when to tell investors about each other •Create urgency • Anchor investor acts as the first domino • “Triggering events” to get a (or better) term sheet
- 28. Closing the Deal •Rolling close vs. set close •Reference check investors •Not done until money is in the bank Key terms q Board composition q Option pool q Voting rights q Founder vesting q Change of control q Redemption rights q Information rights q Anti-dilution
- 29. Structure Preferred Stock • Preferences over common • Board seat or 2 • Option pool • Liquidation preference- they get their $ first • Control over sale, new options Convertible Debt • Debt that becomes preferred equity when you raise it • No valuation, but the “cap” is a valuation ceiling • Interest accrues, rate <10% • Conversion discount
- 31. Valuation & Dilution ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise ?
- 32. Valuation & Dilution ? $12 $30$6 $15 Seed A B Valuation ($M) Dilution: what’s your end stake? $1M raise $6M raise $15M raise 37% See www.ownyourventure.com Raise $1M on $5M pre 33%Raise $1M on $3M pre 34%Raise $1.5M on $5M pre
- 33. How Long Does it Take? •Longer than you expect • 3-6 months •Speed limited by access to investors • Your ability to find them • Their calendar availability (surprisingly hard) • Bigger raises = more diligence (up to 30 days)
- 34. Resources • Pitch • www.pitchenvy.com • www.bestpitchdecks.com • Guy Kawasaki: 10 slides / 20 minutes / 30 point font • NextView www.nextviewventures.com/blog/free-startup-pitch-decks-template/ • www.mjskok.com/resource/getting-behind-perfect-pitch • www.soulmix.com/remix/619 • Legal • Foley & Lardner https://www.foley.com • Goodwin Proctor www.foundersworkbench.com • Techstars www.techstars.com/docs • www.seriesseed.com • General • www.jddavids.com • www.robkornblum.com
- 35. Q&A
- 36. Pitch Tips
- 38. Share Your Summit & Basecamp
- 39. Leverage Your Natural Presentation Style
- 40. Adjust for Your Audience
- 41. No Blind Spots Pricing Customer Collaborators Funding Promotion Product / Service Context Place Company Concept Competition
- 42. Pitch Materials for Each Level •1 Sentence •1 Paragraph •1 Page •1 Light Deck •1 Follow-up Deck
- 45. Start or Join a Company
- 46. People Bonds > Company Bonds
- 47. Find the Right Co-founders
- 50. Doing Business in Boston
- 53. Local Pillar Tech Companies http://bostontechguide.com
- 54. Big Tech Companies with Local Presence http://bostontechguide.com
- 55. Industry Clusters of Expertise Marketing Tech e-commerce Cybersecurity Cloud Travel Mobile Ed Tech Robotics Life Sciences Health IT Energy http://www.slideshare.net/bussgang/boston-startup-scene-fall-2015
- 56. Accelerators / Incubators Co-working Corporate University Independent
- 63. Community Groups & Trade Organizations http://bostontechguide.com