When it comes to raising money for your startup, there are certain questions investors ask startups during their pitch in order to evaluate your business idea as well as to see how prepared you are to take on all the challenges and responsibilities you set for yourself. Find out the most Frequently Asked Questions you need to know to successfully prepare your pitch. **** Presentation is created by Volodymyr Nesterenko, Managing Partner @ Digital Future. Digital Future is the most active Ukrainian VC firm Closed 11 deals in 2016, $4M+ invested in 2016 www.digital-future.org

1. Startup funding
F.A.Q.
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Volodymyr Nesterenko, Digital Future

2. Whatever I do, I end up in Investments
Managing Partner @ Digital Future
Digital Future is the most active Ukrainian VC firm
Closed 11 deals in 2016, $4M+ invested
About me

3. When to raise money
How much to raise
What valuation to expect
Which investors to approach
Debt or Equity
Can I get paid my past cost
Do I need a legal entity
What is Term Sheet and do I need it
Questions

4. When to raise
money?
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5. When to raise
money?
When there is no other choice
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6. When to raise
money?
When there is no other choice
You know how to use it and prove you can do it
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7. When to raise
money?
When there is no other choice
You know how to use it and prove you can do it
You have at least 6 months of runway
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8. Image source
Runway

9. Runway: how many months a company can operate
without new financing at the current level of cash burn
Cash burn: monthly net cash outflow

10. Mailchimp:
The most known bootstrapped company
Founded in 2007, never raised venture capital
$300M+ annual revenue, 550+ employees

11. Bootstraps
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12. How much
to raise?
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13. How much
to raise?
The round should cover 12-18m runway
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14. How much
to raise?
The round should cover 12-18m runway
If less: out of cash => depressed valuation (at best)
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15. How much
to raise?
The round should cover 12-18m runway
If less: out of cash => depressed valuation (at best)
If more: selling your stake too cheap
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16. How much
to raise?
The round should cover 12-18m runway
If less: out of cash => depressed valuation (at best)
If more: selling your stake too cheap
Mind investors’ ticket
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18. What valuation
to expect?
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19. The one promising an investor min 10x return over 5-7y
What valuation
to expect?
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20. The one promising an investor min 10x return over 5-7y
Using revenue multiples is the most common method
What valuation
to expect?
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21. The one promising an investor min 10x return over 5-7y
Using revenue multiples is the most common method
Investors also check valuations vs potential exit value
What valuation
to expect?
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22. The one promising an investor min 10x return over 5-7y
Using revenue multiples is the most common method
Investors also check valuations vs potential exit value
If it’s $50M, they’re unlikely to accept valuation >$5M
What valuation
to expect?
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23. Revenue multiple: a benchmark ratio that is used to
measure a company's value based on its annual sales;
expressed in ‘times revenue’: 3x, 5x, 10x ... Multiples
depend on industry averages, growth and margins

25. Which investors
to approach?
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26. Which investors
to approach?
Most appropriate for your stage
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27. Which investors
to approach?
Most appropriate for your stage
Seed and earlier stages: raise where the money is
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28. Which investors
to approach?
Most appropriate for your stage
Seed and earlier stages: raise where the money is
Late seed, venture stages: raise where the revenue is
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29. Which investors
to approach?
Most appropriate for your stage
Seed and earlier stages: raise where the money is
Late seed, venture stages: raise where the revenue is
Seek VCs which can bring clients and other investors
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31. Debt or Equity?
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32. Debt or Equity?
They both suck
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33. Debt or Equity?
They both suck
Selling equity is better for a founder
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34. Debt or Equity?
They both suck
Selling equity is better for a founder
But it steals much time and costs money
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35. Debt or Equity?
They both suck
Selling equity is better for a founder
But it steals much time and costs money
That’s why we use convertibles and SAFEs at early stages
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36. Convertible note SAFE* Preferred stock Common stock
Class debt derivative equity equity
Ownership no no yes yes
Voting rights no no no yes
Asset claim priority 1 1 2 3
Maturity yes no no no
Interest yes/no no no no
Valuation yes** yes**/no yes yes
* Simple Agreement for Future Equity; it is neither equity, nor debt, as it doesn’t have any maturity or interest;
** So-called ‘valuation cap’ -- maximum valuation, at which the underlying amount will be converted into equity;
actual equity round valuation can be lower (or higher)

37. Can I get paid
my past cost?
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38. Can I get paid
my past cost?
Never ask this ^^^ question
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39. Can I get paid
my past cost?
Never ask this ^^^ question
Yes, you can. If it’s not your personal debt
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40. Can I get paid
my past cost?
Never ask this ^^^ question
Yes, you can. If it’s not your personal debt
To repay personal debt, sell your own shares
(be prepared for low valuation)
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41. Do I need
a legal entity?
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42. Do I need
a legal entity?
YES - at any stage later than Friends & Family
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43. Do I need
a legal entity?
YES - at any stage later than Friends & Family
Register where your clients are
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44. Do I need
a legal entity?
YES - at any stage later than Friends & Family
Register where your clients are
LLC is just fine until you need to issue shares
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45. Do I need
a legal entity?
YES - at any stage later than Friends & Family
Register where your clients are
LLC is just fine until you need to issue shares
Corp - for raising equity and for SAFEs
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46. What is Term Sheet
and do I need it?
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47. What is Term Sheet
and do I need it?
The summary of key terms of a future binding agreement
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48. What is Term Sheet
and do I need it?
The summary of key terms of a future binding agreement
Needed to save time & money for everybody
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49. What is Term Sheet
and do I need it?
The summary of key terms of a future binding agreement
Needed to save time & money for everybody
Normally used by professional VCs
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50. What is Term Sheet
and do I need it?
The summary of key terms of a future binding agreement
Needed to save time & money for everybody
Normally used by professional VCs
This is an investor’s document
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51. Get connected
/nesterenko.v
/digitalfuture
digital-future.org