Investment Workshop - Big Booster Boston Bootcamp

Investment Workshop

David Chang@changds

Harvard Business School, Entrepreneur-in-ResidencePersonalVC, Co-founder

Feb 14, 2017

Background

Startup Experiences

Direct Via Syndicate/Fund

Angel Investments

Fundraising

Basics

How to Raise

a RoundTips

What Obstacles Stand in Your Way?

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

Venture Capital Stages

Friends and Family

Angel

Early Stage

Growth Equity

Venture Capital Dynamics

Skewed return distribution

VCs must swing for the fencesSource: @DawnUmlah

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

How to Raise

a Round

Fundraising Campaign

Prep Target Socialize Raise Close

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

Negotiating Valuation

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)

Choose Investors Carefully

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

Tips

Share Your Summit & Basecamp

Leverage Your Natural Presentation Style

Adjust for Your Audience

No Blind Spots

PricingCustomer

Collaborators

Funding

Promotion

Product / Service

Context

Place

Company

Concept

Competition

Pitch Materials for Each Level

• 1 Sentence

• 1 Paragraph

• 1 Page

• 1 Light Deck

• 1 Follow-up Deck

Function

Size

Know Yourself

Location

Industry

Start or Join a Company

People Bonds > Company Bonds

Amplify Your Network

Investment Workshop

David Chang@changds

Harvard Business School, Entrepreneur-in-ResidencePersonalVC, Co-founder

Feb 14, 2017