Professional Documents
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101
Basics on the startup process, raising capital,
and thinking about valuation.
Bernard Moon
bernardmoon.blogspot.com
June 2009
1
Overview
✓ Trust is essential
3
Get Things in Order
4
Packaging Your Startup
• Create a solid team
• Target a big market
• Build an advisory board
• Sign strategic partners or
blue chip customers
5
How Much Do You Need?
• Project how much money you need for
one year
6
Who is Your Ideal Investor?
• Capital needs dictate investor type
✓ Micro-seed capital. < $100,000 (i.e. Y-Combinator,
TechStars, friends & family, savings, Visa/Mastercard)
7
Who is Your Ideal Investor?
• Ideal Seed Capital Deal
✓ Convertible Debt. Promissory note that converts to
equity upon the next round of qualified financing, which
should be a Series A. Better than equity financing since
there is less dilution.
8
Who is Your Ideal Investor?
• Research and target your
investors
✓ Learn about their preferences for
startups
9
How to Think About Valuation
• Startup valuation is an art. Forget DCF
(discounted cash flow) and other valuation methods.
10
How to Think About Valuation
• Pre-money & post-money valuation.
This is the basic framework of startup funding.
11
How to Think About Valuation
• Stock option pool. 10%-20% will be set aside for
current and future hires during your Series A. Most VCs
will ask for 20%.
Pre-money Post-money
Valuation of Startup $4 million $6 million
# of Common Stock 4,000,000 ($1/share) 4,000,000 ($1/share)
# of Preferred Stock 0 2,000,000 ($1/Share)
12
Pitching Your Startup
• Tell Your Story. It’s about telling a story of
momentum, vision and your team. You have to gain
the trust of investors in your product, team and the
market potential.
15