How to get funding from Venture capital and angel investors - Startup Next - Alexander Jarvis
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Transcript of How to get funding from Venture capital and angel investors - Startup Next - Alexander Jarvis
How to get funded
Hi! I’m Alexander Jarvis
• twitter.com/ADJBlog
• my.linkedin.com/in/alexanderdjarvis
• angel.co/alexander-jarvis
• www.facebook.com/50folds
Connect with Alexander
Confused how to raise?
Fundraising is, well…
But there is a basic process
You need to be smart, prepared and work hard
WORK HARD
RAISE WELL
What stage are you at?
• Idea, or have little traction you are Angel
• Take more risk, but smaller checks
• Need to get lots of them, generally through personal relationships
• May not need lead
• $100-300k check
Super early = Angel
• Team, some traction with functioning product = seed investors
• These are seed ‘VCs’ in Asia, can also add angels to ‘top up’
• Need a lead
• $500-1m check
We rolling = Seed investors
Requirements (What VC’s care about)
• So many founders simply ignore the fundamentals, but they are all that matter at the start
• If you don’t have an investible startup, keep working till you do and then go pitching
• Super-talented founders can attract $ with less traction and product, everyone else needs to prove they can execute and have semblance of product-market fit
• Remember, you are NOT entitled to $ so be humble
You can’t sell what no-one will buy (invest in)
“70% of my investment decision
of an early-stage company is the team”
Make it great!
Read about investible team
http://alexanderjarvis.com/blog/2015/05/05/investible-founding-startup-teams/
Read here!
Problem - make it painful
Broken thumb
Learn about problems
http://alexanderjarvis.com/blog/2013/10/27/your-solution-is-not-my-problem/
Read the blog here!
Solution: Aspirin not vitamin
10x better than alternative (This can
be inertia)
Big market => power distribution law (How
VC returns works)
Functioning, attractive product
Landing page pretty at least
• Ideas are a multiple of executionTraction
Clear go to market strategy
“Don’t give me 20 slides on your idea… give me 10 on
how you are going to do it!”
• Different kinds of investors, with • Different sector focus, and • Different check books
How much do you need?
How are you going to spend it to hit milestones
for next round?
What you need to prepare before raising
Pitch deck
yes, it’s in Word…
Template pitch deck
http://alexanderjarvis.com/2015/01/06/template-seed-stage-investor-pitch-deck-for-raising-venture-capital/
Get the FREE template here!
Pitch deck examples
http://alexanderjarvis.com/blog/2015/05/19/pitch-deck-collection-from-vc-funded-startups/
See 42 funded startup decks!
• Don’t let investors work hard • Investors will ask for more info • The more you spoon feed, the easier it will be • Create an appendix for common questions
• Numbers matter • If you have numbers, you need to give them • The later stage the company, the more they matter • They help remove risk in investors heads
Detailed deck
Financial model (The actual plan)
Financial model blog
http://alexanderjarvis.com/blog/2015/01/12/why-you-are-making-a-financial-model-for-your-fundraise-is-wrong/
Discover how to make a model that works for you!
Cap table (If complicated)
Cap table template
http://alexanderjarvis.com/blog/2015/01/08/ultimate-startup-cap-table-and-return-analysis-template/
Get the FREE template here!
• Give to contacts that make ‘warm intros’ • Take control of the ‘sales’ process
• Dear [x] • Pitch: Uber is challenging traditional taxis • Problem: It’s hard to find taxis, we solve this • Traction: Currently in 3 countries (SEA focus), signed
up 120 taxis, $15k MRR • Team: 5, Ex-Yahoo and SingTel • Raising: $500k Seed, $200 closed so far • Why 50Folds: Love experience in X and your
investment in Y • Hugs and kisses, • Travis, CEO, Uber
Template email for intros
List of investors and specific reasons why you want them
Practice!
How to approach investors
First find them. Make a list
•LinkedIN •AngelList •Google •Your network •CrunchBase •Read tech blogs for who invested in whom
•Ask friends
Start with crappy ones who don’t know millions from billions (Learn)
• See who knows them (LinkedIn) • Give them template email with specific reasons • Give them deck
Get warm intros to investors you want
Blitzkrieg. Keep the pace up, don’t lose momentum
Need to ensure investors are running on the same
timeline
One goal: Get the first meeting
Take small steps in each interaction
Then: make investors like YOU and get excited
Believe. If you don’t no-one else will. Share your belief
How to manage the process
The photo made me laugh…
One goal: Find a lead investor
Investor tracking sheet
Track name, date, interest, ticket size, status etc
Learn from feedback and reiterate pitch
Keep fixing your deck and pitch after you receive feedback.
Adjust size of round etc
Provide regular updates
Will take time, so keep everyone updated on progress
The round will rapidly come together once you have a lead
• Hey Alexander, • I created this for the investors who I'm in talks with currently. I thought I should reach out to you.
Since you guys gave me a genuine reason for a "No" in the past and not some random bullshit.
• Below is a quick update on our current status. • Quick Update mail: • 140 char pitch: Convert photos/images in content publisher websites into ad units. • Year founded: 2013. Revenue model - CPM. • Traction - 3-5 mn Impressions/day - $250-$320. • Current MRR: ~$10K-$12K. Current ARR: ~$100K- $140K. • ARR Aimed at before end of 2013 - $500K. • Amount raised: $~15K (Accelerator). Previous Investor - INVESTOR (www.INVESTOR.com). • Looking to raise- $500K. • Founders - 2. Team size - 6. Location- CITY. • Target Market:Global - Currently SE Asia, Australia, US. • Competitors:6 players (Globally - 1 acquired by XXX in MONTH 2014). • Market Share: 90% still left (According to datanyze). • Competitive advantage: Strategy - Programmatic first advertising. • Future plans: Expand - Videos,Mobile,Social.(5 Trillion images online). • Top publishers Include: COMPANY, COMPANY, COMPANY. • Top Advertisers Include: COMPANY, COMPANY, COMPANY.
• Let me know if there is any interest. Thanks. • P.S:Attached is a quick reference of our product.(10 slides only)* • Regards
Example update email
How to close
Get a lawyer
Not your uncle who does property law
Get a term sheet from the lead
This summarises the key terms (Any potential ‘deal
breakers’) Principally the terms are
about economics and control
Shop the term sheet for the best deal
Term sheets are gold for negotiation
Nothing makes VCs move faster than you getting one
of these
Get the followers in to close the round
Lead will help here a lot Followers are like sheep, you need to herd them
Keep growing business, you still are expected to hit targets!
Seriously, as talks progress they want to see updated numbers
up and to the right
Due diligence
Early companies don’t have much- so your incorporation
docs, HR agreements etc Later stage companies will
be in hell ;)
Negotiate definitive documentation
Read so you aren’t a dumb
ass
Keep working in case shit happens
Term sheets do get pulled, but not often VC looks bad if they do
Stay friends with VCs who participate in next round
If you have a competitive round, be nice and say you would love
to chat about the next round Remember! VCs know every
other VC
Close and get started (really, I mean started)
Closing a round isn’t a reason to celebrate. You
need to deliver now…
No Nos
Don’t do stupid things
VC’s are busy, don’t make things hard
Very frustrated man
If they ask for something, give it, unless it is silly
Be on time to meets Check your ego at the door
Quit your job after the raise
You have to be full time before you raise
Think VC’s invest in ideas
Setting up is cheap these days. VCs don’t want to pay for you to learn the basics…
• Pick who you trust • Assume your deck will find competitors though
Ask for an NDA
Don’t pitch a VC invested in your competitor. Check their
portfolio..
Insist on meeting before giving a deck
I have had founders ask for a meet and say they will share the idea when
we meet…
Blog: Why I want a deck before a pitch
http://alexanderjarvis.com/blog/2014/07/17/why-i-want-a-pitch-deck-before-a-pitch/
Read the blog here!
• One founder is 100% on raise, other runs business
Treat raising as a distraction
Use Word, or make deck too long
Don’t Do
Write long emails to people (Please!!!)
Omit key info they need - VCs don’t waste time
Keep your idea a secret