Investment Workshop - Big Booster Boston Bootcamp
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Investment Workshop
David Chang@changds
Harvard Business School, Entrepreneur-in-ResidencePersonalVC, Co-founder
Feb 14, 2017
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)
Growth trajectory of your business?
Lifestyle businessPersonal raise – loan, add folks to cap table
Growth oriented business
Crowdfunding and personal raise
High growth scalable business
Venture capital
Amount to RaiseHow 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
Use of ProceedsWhat will you use the money for?
•Build out the product
•Grow the team
•Marketing
•Customer acquisition
•Working capital
How Much
For What
To Prove
MilestonesWhat will be proven that de-risks the business?
•Product development
•Market demand
•Product / market fit
•Business model
•Execution
How Much
For What
To Prove
See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
Basic Prep
Legal representation
Founders agreements
Financials and budget
Teaser (1 page)
Pitch deck (10 pages)
Target List of Investors
Stage Location
Industry Vertical
Business Model
Investment Thesis
Social / Trust Filter
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?”
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
Closing the Deal
•Rolling close vs. set close
•Reference check investors
•Not done until money is in the bank
Key terms Board composition
Option pool
Voting rights
Founder vesting
Change of control
Redemption rights
Information rights
Anti-dilution
Structure
Preferred Stock
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference- they get their $ first
• Control over sale, new
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
Valuation & Dilution
?$12
$30 $6
$15
Seed A B
Valuation ($M) Dilution: what’s your end stake?
$1M raise $6M raise $15M raise
?
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
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)
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 www.foley.com
• Goodwin Proctor www.foundersworkbench.com
• Techstars www.techstars.com/docs
• www.seriesseed.com
• General• www.jddavids.com
• www.robkornblum.com
No Blind Spots
PricingCustomer
Collaborators
Funding
Promotion
Product / Service
Context
Place
Company
Concept
Competition
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