1.
Seed Funding Strategies
Jeff Clavier, Managing Partner
SoftTech VC
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

2.
Brief Bio
 Jeff Clavier (@jeff)
 French born
 C/C++ & Distributed Computing
 CTO at Financial Services startup
in 1989
 Acquired by Reuters in 1993
 “Traditional” VC in the Valley since
2000
 Angel/Seed Investing since 2004
 Launched one of the first micro-
VC funds in 2007
 Board Member of the NVCA
 SoftTech VC (@softtechvc)
 12 years old
 188 investments
 $300M AUM
 45+ exits, 1 IPO
 $2.5B in follow-ons
 $10B in exits
 HQ: San Francisco
 3 Partners
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

3.
Foreword
 The numbers I am mentioning are averages I have
seen in our my day to day work
 Every startup is different, as such you may, and
probably will, end up with lower or higher numbers
– and that will be OK
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

4.
Agenda
 Understanding The VC Side
 Funding Ecosystem
 Raising
 How much? At which valuation?
 From whom?
 What do you need to raise?
 Top 10 list of “Don’t do this”
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

5.
Understanding the VC Side
 VCs have to raise capital
from Limited Partners (LPs)
 They have a portfolio
construction strategy
 They are expected to
return 4X their fund size
 “Homerun” deals return
50% to 100% of a fund (or
more)
 The VC Deal Funnel
 Get thousands to tens of
thousands of pitches
 Meet hundreds to thousands
 Investigate less than 5%
 Invest in less than 1%
 Only 15/20% of the
companies impact returns
 VC Scale
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

6.
Funding Ecosystem
@NewCo #MasterClass - Jan 2017 -2/13/2017
Pre-
Seed
< $1M
• Bootstrapping/Friends and family
• Pre-Seed Funds and pre-order/crowdfunded campaigns
• Incubators and Accelerators (YC, Techstars, AngelPad, 500 Startups, SeedCamp)
Seed
$1.5 to
$3 M
• 350+ Micro-VC Firms having raised $4B+
• Syndicates of micro-VC firms, angels and (potentially) traditional VCs
• AngelList and Crowdfunding services as alternative or “fill up” opportunity
Seed
Prime
$2M to
$3M
•Companies that can not raise a Series A will raise a bridge from existing investors
•Some funds like have positioned themselves as goto leads for Seed Prime rounds
Series A
$5M tp
$15M
• One traditional VC, with micro VCs investing pro-rata and adding strategic angels
• Syndicates of micro-VCs leading smaller series A rounds
• Family Offices, Strategics, Micro-VCs + Crowdfunding pools as alternative
Series B
$10M to
$30M+
• Another traditional VC (or two), with insiders coming in for pro-rata. Corporate VCs start showing up.
• Same mix as Series A for alternatives plus the YC Continuity Fund and Strategics
• Family offices and growth investors coming into Series B rounds of top performing companies
Growth
$20M to
$100M+
• Mix of traditional/growth VCs, PE firms, hedge funds. In parallel, secondary transactions.
• Alternative: direct co-investments from LPs, hedge/mutual funds, cash rich corporates
• SPVs (Special Purpose Vehicles) coming in all over the place

7.
Raising: How much? At which valuation?
 It depends:
 Team: experience, track record, unique insights,
founding story
 Product: how unique, stage of development, intellectual
property
 Market: revenue potential, TAM
 The higher the risk, the lower the valuation, the
smaller the raise
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

8.
Raising: How much? At which valuation?
 The valuation is a measure of all the risks that have
not been eliminated (team, tech, production, goto
market, etc.)
 It increases with traction and the number of
investors who are willing to commit to fund the
opportunity
 Market will decide on the valuation
 The only thing you need to worry about is a
reasonable dilution2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

9.
Raising: How much? At which valuation?
Pre-Seed: < $1M
 To build the product
 Sources: Angels, AngelList,
pre-seed firms,
accelerators
 Runway: 9/12 months
 Team: handful
 Valuation: $3 to $6M pre
 Dilution: 5% to 15%
Seed: $1M to $3M
 To launch the product
 Sources: Seed funds,
angels, AngelList, other
funds
 Runway: 18/24 months
 Team: < dozen
 Valuation: $6M to $10M
 Dilution: 20/25%
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

10.
Raising: From whom?
 You need to end up in someone’s “1% of deals”
 First you need to develop your list of target
investors filtered by your stage, industry, geography
 Search CrunchBase, AngelList or CB Insights for firms,
partners interested in your sector
 Make sure they have not invested in competitors
 Focus on identifying leads first – who will set terms
and write larger checks
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

11.
Raising: From whom?
 You need to identify a strong connection (the
“trusted referral”) who will introduce you to these
investors.
 Cold emailing will dramatically reduce your
chances.
 Create a shared spreadsheet listing firm, partner,
relevant investments and share it with advisors,
early investors, other entrepreneurs for input
 Figure out priorities (P1, P2, P3), reach out to 6/82/13/2017 @NewCo #MasterClass - Jan 2017 - SF

12.
Raising: From whom?
 What if you have zero connections to investors?
 Bootstrapping on your dime is always an option
 An incubator or accelerator program will be your “right of
passage”. Understand not all accelerators are created
equal, and only the best ones are worth it
 Early revenues, and upfront cash, are a great way
to fund your company (Qualtrics, Atlassian,…)
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

13.
Raising: What do you need to raise?
 Pitch deck: opportunity, founders background and
unique insights , product, enablers, milestones met,
market size, competition, goto market, funding
 Demo of product or prototypes
 Basic financial model showing the use of funds
 References: founders, customers/users, experts
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

14.
Raising: Misc
 Steps to a financing:
 initial meeting, follow-up meetings, due diligence calls
and meetings, full partners presentation, termsheet
negotiation, legal due diligence, closing
 Types of instruments:
 Equity financing
 SAFE
 Convertible notes
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

15.
Top 10 things that will lower your chances
1. Send a “To whom it may concern” mass email
2. Saying I am either selling to Google or raising a
round
3. Not having a good grasp of your ecosystem or
competition
4. Investors feeling founders “don’t know what they
don’t know”
5. Using too many buzzwords
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

16.
Top 10 things that will lower your chances
6. Having a massive advisory board that is not
engaged
7. Trying to hide things
8. Raising too little, or too much at a valuation that is
disconnected from your stage
9. Acting weird, not following up promptly, not
showing interest
10.Not having your tech ready, or backup solutions
when pitching2/13/2017 @NewCo #MasterClass - Jan 2017 - SF

17.
Questions?
2/13/2017 @NewCo #MasterClass - Jan 2017 - SF