How to raise your first round - Having trouble finding prospective investors? Not getting the meetings you need? Wondering why raising your round is taking so long? Dreamit Managing Director Andrew Ackerman gives the inside scoop on how their startups prospect for investors, get meetings, and drive the round to close.

1. Andrew Ackerman, Managing Director
andrew@dreamit.com
+1.917.478.5838 @andrewackerman
@dreamit
How to Close Your First Round

2. Step 1: Prospecting

3. 3
Key Insight:
You generally want to have a list of
50-100 relevant investors before
kicking off your round.

4. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
4
What Do Fishing and Fundraising Have in Common?

5. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
5
Absolutely Nothing
❏ If you think you can just put your company out there and
wait for investors to nibble, you will catch nothing
❏ If you think waiting patiently will bring results, you will be
waiting a long time
❏ If you think it's a one person job, you are nuts

6. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
6
A Better Analogy: Hunting

7. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
7
You need to track your prey…

8. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
8
… with as much help as possible…

9. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
9
… and be aggressive

10. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
10
How to Prospect for Investors like a Big Game Hunter

11. ❏ Find a comparable company
❏ Make note of all their investors
❏ Check out each of those investors
❏ Make note of all their other
❏ Investments
❏ Iterate, iterate, iterate
Build Your Prospect List

12. Meet Your New Best Friend
Tip: is nice too

16. Master the
customer meeting
❏ When to meet
❏ Who to meet
❏ Where to
meet
❏ What to
show & ask
❏ How to run the
discussion
16
You probably want to avoid talking to investors who
are investing in your direct competitors

17. Do Not Stop Until You Have 50-100+ Prospects

18. ❏ A = Most active investors in relevant startups. Your hottest
prospects.
❏ B = Moderately active. Still pretty good prospects.
❏ C = 1 or 2 investments in your space. Not so hot.
Pitch the B list first

19. Meet Your Next Best Friend

20. ❏ Type each investor's name into
LinkedIn to find mutual connections
who you can ask for warm
introductions.
❏ Only count people who know you
well enough to make a credible
introduction.
Use LinkedIn to Build Your Connector List

21. Unlimited
Introductions
There are Three Kinds of Connectors
Use Sparingly Do Not Use

22. Add Them to Your Prospect Spreadsheet
Use the "Unlimiteds" first. Then turn to "As Needed" …
… and try to spread the burden evenly

23. Reaching Out To Connectors
❏ Sprint, not a marathon
❏ Get a quick Yes or No
❏ Follow up within 4-7
days
❏ No response? Reach
out to another
connector

24. ❏ Have a clear, killer subject line
❏ Make it short, forwardable, & scannable
❏ Give them an easy out (viz., get a quick
no)
❏ Use tools like Boomerang to keep track
of outstanding requests
Be an Email Ninja

25. Step 2: Pitching
(The much-abbreviated,
how-not-to-trip version)

26. 26
Key Insight:
Most pitches fail because the
founders don’t have a believable and
exciting story.

27. Tell a story

28. Share Your Vision
❏ What’s your BHAG?
❏ What makes your company
compelling?

29. Why Should I
Believe You?

30. Every doctor
will want one!

31. 2 - 3 Key
Assumptions

32. 32
The risks are not always
obvious
@dreamit #FundRaising

33. Step 3: Crossing the Finish Line

34. 34
Key Insight:
Getting to “yes” is not enough. If you
do not understand, own, and drive
the process forward, you will fail to
close your round.

35. They like you! Now what?

36. ❏ Will name a specific amount they are willing to invest
❏ Will lead the round
OR
❏ Sets specific criteria for secure their investment
❏ Lets you use his name with potential lead investors
❏ Will actively help you network for other investors
Soft-Circle That Investor If...

37. ❏ Not before the term sheet is signed
❏ Prospective Lead Investors may team up to drive less friendly terms
❏ You want multiple, competing term sheets to choose from
When To Name Drop?
❏ Definitely after the term sheet is signed
❏ Adds credibility and encourages
other investors to join syndicate

38. You Got a Term Sheet!

39. Your round isn’t their top priority

40. Don’t Be This Guy!

42. 42
It may be your first time at the rodeo...
...but it certainly isn’t theirs

43. ❏ Don’t agree to anything before reviewing with your lawyer
and advisors
❏ Give your lawyer advance notice when you are expecting a
term sheet
❏ Provide timeframe for response to investors when asking
lawyers to review
Managing Term Sheet Negotiations

44. Your Lawyer Advises...
❏ Explains term sheets
❏ Explains financial ramifications of terms
❏ Protects you from legal issues
❏ Reviews all documents
… but you drive the process

45. Economics
❏ Price
❏ Liquidation Preference
❏ Option Pools
❏ Founder Vesting
Control
❏ Board of Directors
❏ Protective Provisions
❏ Participation Rights
❏ Drag-Along
❏ Conversion
❏ Exclusivity
Understand Your Term Sheet

46. ❏ Establish a virtual data room (Google Drive, DropBox, Docusign)
❏ Digitize all critical documents the day they are created and again
on the day they are signed.
❏ Save with long, descriptive file names
❏ Have a secure, organized system for filing critical paper copies
❏ Ask investors for their standard due diligence checklist and
required documents
❏ Do YOUR diligence on the investors by reference checking VC’s
with companies that have both been successful and that have
failed
Be Prepared for Due Diligence

47. Typical Due Diligence Checklist
Team
❏ Reference checks & CVs
❏ Compensation structures
❏ Working environment
❏ Involuntary terminations
❏ Attrition (why?)
❏ Pending lawsuits
❏ Employment contracts
❏ Key employees
❏ Stock option plan
Operations
❏ Financial statements &
projections
❏ Business partners
❏ IP, patents, applications
❏ Board of directors
❏ Insurance (liability, BOD, other)
Customers
❏ Customer reference checks
❏ Client list and pipeline report
❏ Distribution model

48. Due Diligence Best Practices
❏ Ensure your team knows the vision presented in your investor
pitch and their roles in achieving success
❏ Have your team accurately reflect their roles with your startup on
social-media profiles and resumes
❏ Assign a point person for communications
❏ Answer investor questions thoroughly
❏ Prepare your lawyer to answer questions from investors and their
lawyers
❏ Validate satisfaction of reference customers in advance

49. Why VCs Pull Term Sheets
Financial Negotiations
❏ Aggressive non-standard
terms
❏ Stock option plan less than
customary 15%
❏ Non-standard vesting
❏ High founder salaries
❏ Repayments of founder
“debts” from proceeds
❏ Investor syndicate unlikely to
invest in future rounds
Due Diligence Findings
❏ Story does not hold up
❏ Customer issues
❏ Management issues
❏ No clear leader/CEO
❏ Unexplained discrepancies in
materials
❏ Not hitting financial plan

50. Do not lie. You will get caught.

51. Long Form Documents
❏ After term sheet is signed, typically investor will supply you with
long form documents:
❏ Share purchase agreement (SPA) and more if an equity round
❏ Promissory note and more (for convertible note)
❏ Representations (Reps) & Warranties
❏ … and a whole lot more
❏ Your attorney on point but make sure you understand and are
driving to close
❏ Typically you pay for both parties’ legal work

52. Remember: The round is done when the money is in the bank!

53. VC vs. Angel Money: http://www.entrepreneur.com/article/199604
Term Sheets: http://blog.thesecretofraisingmoney.com/termsheet/
Term Sheet Payout Calculator: http://gizmo.startupfreak.com/termsheet1.1/
Convertible Debt: https://www.startups.co/articles/convertible-debt-what-you-need-to-know
SAFEs (Convertible Securities): https://www.ycombinator.com/documents/
http://shockwaveinnovations.com/2013/12/21/reviewing-the-new-safe-investment-instrument/
For more information on:

54. Due Diligence Process: http://www.marsdd.com/mars-library/the-due-diligence-process-in-venture-
capital/
Due Diligence Checklist: https://www.asme.org/getmedia/86b994d9-2faf-43b5-9b57-
4cb6e727a3a2/Due_diligence_checklist.aspx
https://www.cooleygo.com/documents/sample-vc-due-diligence-request-list/
For more information on:

55. Andrew Ackerman, Managing Director
andrew@dreamit.com
+1.917.478.5838 @andrewackerman
@dreamit
How to Close Your First Round