Startup Fund raising and raising capital

Raising Capital!

A guide for First-Time Founders

Fo
from ve r internet startu
nture ca ps  
pitalists
and ang
els"

Bryan Starbuck Linkedin.com/in/bryanstarbuck
Founder/CEO of Empower.me about.me/bryanstarbuck
Former Founder/CEO of TalentSpring (Acquired in 2010)

Pitch-Deck!
" The Alliance of Angels pitch deck may be the best
template"

"
BLOG: bryanstarbuck.typepad.com!

CRITICAL:!
!
Understand the pitch
from the investor’s
perspective!

They can start off hesitant!
A warm trusted introduction is important whenever possible"

95% of companies
I see aren’t good
enough. Let’s see
about these guys"

"

Focus on WOWing with these 4:!
1 2
This is a REAL & They have a real
huge problem for solution. No solution
in the market!
the customer!

3 4
People will pay   This is a HUGE
(that amount)! market!

"

They switch to being impressed!
After they see those 4 critical areas"

They are in the top 5%
of companies I see."
"
Now I focus on
blockers"

"

Make sure these won’t kill the company!
" Great team"
" Customer acquisition plan"
" Sales model"
" Content or partnerships"
" Able to get funding"
" Exits are available"
" This is a market I like"

I think their plans in all of these areas will succeed.
Why don’t I invest?"

ANSWER: Rapport, trust, terms, team and ﬁnalizing details determine
ﬁnal answer."

"

Finding Angels!
" AngelList"
" BEST: Great advisors and your network"
" Top big law firms can make some intros"
" It is hard to scale, but doable. (Lots of work)"
" Requires tons of networking"
" Often with CEOs who have raised capital before"
" Move to the bay area for 5 months"
" Linked-In"
" Tons of scouting for people who fit the profile"

"

Finding VCs!
" Research to find WHICH ones you want to target first"
" Very important: Pitching VCs who don’t match will
block raising capital"
" Find ones that work at your stage, industry, etc."
" Easy to find the list of VCs. TheFunded, AngelList, etc."
" Top startup law firms can make intro, as a backup"
" Intro from CEO they funded is the best"
" Target the right partner. "
" Start with Partner and above. Not associates"

"

Closing Angels!

1 Pitch & Demo!

2 They review Financials!

3 Due Diligence (If angel group)!

4 Get all of their questions answered!

5 Rapport & trust!

6 Sign legal docs & close, close, close!

"

VCs!
" Pitch & demo"
" Meeting #2 to #4. "
" Sometimes with others at the ﬁrm"
" Present to Monday partner meeting"
" Get term sheet"
" Negotiate & sign term sheet"
" Sheppard details until big stack of legal docs signed"

"

Important (1 of 2)!
" Herd mentality:"
" If they see other investors moving and they might
lose out, the investor will move"
" True for both Angels and VCs"
" You need to force enough demand from investors to
get the deal closed"
" Have polished pitch deck, pitch and ﬁnancials"
" Angel groups are good outside of the bay area"
" Quote from the bay area, “Pitching to a bay area
angel group is a sign of a bad company”"
"

Important (2 of 2)!
" Get a rent-a-CFO for Projected financials:"
" $150 to $270 per hour"
" 3 to 7 hours to create very detailed projected
financials"
" Asked for a fixed price project"
" Get a very high quality one. They don’t cost very
much more"

"

The VC process!
" Progress in batches of ~6 VC ﬁrms"

" Hold ﬁrst meeting"

" See which progress"

" Start another batch as a smaller number progress to later stages"

" In 2 months, work to have several batches progress so more than
one arrive to a term-sheet"

" More than one greatly improves chances of any funding and
improving terms"

" After 4 months, VCs will have heard about you and likely think you
are a “stale deal”. Then meeting with them will likely be ineffective"

"

Pre-Money Valuation!
If raising under $2 million…"

If raising over $2 million from VCs:"
" Often valuation above PLUS capital raised"
" Investors get ~33% to 48% of round"

"

Lessons about funding!
$1m to $2 round is often better than a $500k round"
" Startups are cheap to run early, but…"
" So it costs $50k to $70k per month"

Funding goes hot and cold"

Year 1" Idea
! "Validate" "Alpha "Beta "Launch" "Traction Building"
!

Year 2" Small traction "Medium Traction
! ! " "Huge traction / Proﬁtable"

Raising your series A after your Seen round closes!
! Fund raising is hard" ! Near impossible"
"

Seattle Notes!
" Using a convertible note is the best. The valley does
that for seed rounds"
" Almost all Seattle investors demand a priced round. By
policy"
" Watch valuation very closely in Seattle"
" Many people are moving to the valley currently, purely
because of funding challenges in Seattle in the last 2
years"
" I HIGHLY RECOMMEND moving to the bay area for 5
months to raise capital there. Then return."

"

Next Steps for Learning (1 of 3)!
People often ask how to learn more. Here is the best way:"
ABSOLUTE Must Read! Strategic Thinking or Execution!
Venture Deals On Amazon" Innovator’s Dilemma On Amazon"
By: Brad Feld" By: Clayton Christensen"
" "
" Crossing the Chasm On Amazon"
Art of the Start On Amazon" By: Geoffrey Moore"
By: Guy Kawasaki" "
" Blue Ocean Strategy On Amazon"
" By: W. Kim"
" "
The Lean Startup On Amazon" "
By: Eric Ries" Good to Great On Amazon"
" By: Jim Collins"
"
Maverick On Amazon"
Other! By: Ricardo Semier"
"
"
The Ten-Day MBA On Amazon" The Four Steps to the Epiphany On Amazon"
By: Steven Silbiger" By: Steven Blank"
" "
Founders at Work On Amazon" Inspiring Excellence On Amazon"
By: Jessica Livingston" By: Michael Schutzler"
"
"
"
ABSOLUTE Must Read"
"

Next Steps for Learning (2 of 3)!
People often ask how to learn more. Here is the best way:"
Marketing! Other!
The 22 Immutable Laws of Branding On Amazon" Founders at Work On Amazon"
By: Al Ries" By: Jessica Livingston"
" "
" "
Full Frontal PR On Amazon"
Startup Weekend On Amazon"
By: Richard Laermer"
By: Marc Nager"
"
" "
Positioning: The Battle for your Mind On Amazon" Don’t Make Me Think On Amazon"
By: Jack Trout" By: Steve Krug"
" "
The Strategy and Tactics of Pricing On Amazon" "
By: John Hogan"
"
"
Purple Cow On Amazon"
By: Seth Godin"
"
"

ABSOLUTE Must Read"
"

More Learning (3 of 3)!
" (My) Bryan Starbuck’s Blog on Company Building:"
" http://bit.ly/StarbuckBlog"
" Dave McClure – Marketing Model for Startups: "
" http://500hats.typepad.com/500blogs/2007/06/internet-market.html"
" http://vimeo.com/26277733"
" http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version"
" http://www.slideshare.net/dmc500hats/startup-metrics-101-367863"
" More from Dave McClure:"
" http://www.slideshare.net/dmc500hats/why-not-to-do-a-startup"
" http://www.slideshare.net/dmc500hats/do-marketing-its-not-evil"
" Presenting to Investors:"
" http://www.slideshare.net/dmc500hats/how-to-pitch-a-vc-aka-startup-viagra-how-to-give-a-vc-a-hardon"
" Strategic economics of SaaS https://salesforce.adobeconnect.com/_a13852757/buildingasuccessfulsaasco/"
" Startup Marketing: http://howtolaunchastartup.com/2011/06/20/21-must-read-resources-for-start-up-marketing/"
" 57 Things I’ve Learned Founding 3 Tech Startups:
http://betashop.com/post/1417413108/57-things-ive-learned-founding-3-tech-companies"

ABSOLUTE Must Read"
"

The END!

Next Steps:! !
" Create your company and have a BLAST"
" !
Join the “MicrosoftßàStartup Learning” mailing list"
" Join here: http://groups.google.com/group/Knowledge-Startup-to-Microsoft"
" Bryan Starbuck’s Blog: bryanstarbuck.typepad.com"

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