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TheFunded Web 2.0 Talk

TheFunded Web 2.0 Talk

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Published by: TheFunded on Sep 22, 2008
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05/09/2014

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get funded for your dream

a crash course raising smart money
By Adeo Ressi, Founding Member of TheFunded.com

Global Venture Capital Statistics
• $60 Billion USD Annually Invested • 3,000 Companies Funded Annually • 3,800 VC Firms • 17,500 Professional Venture Capitalists

Best Time in History to Start a Business
• Disaggregation of traditional businesses • Lower costs of labor • Lower costs of real estate • Increasing amounts of free infrastructure • Steady supply of growth capital

do not compromise

The Right Investor Selection

Average
• Attend Meetings • Responsive • Provide Research • Assist with Fundraising

Good
• Lead Future Rounds • Identify Deals • Build the Team • Decision Support

• One bad investor will ruin your company.

0. Set-up your Company (right)
• Delaware C Corporation • Interview fundraising lawyer
– – – – What is the right corporate structure? How many VC deals have they done? How many VC firm intros will they do? How will they protect your equity?

• Founder vesting for departures • Governance protections

1. Demonstrate Traction (traction?)
• Prove out vision of company • The definition of traction:
– – – – – – Committed Team of Experts Patented Approach or Technology Functioning Prototype Launched Offering Customer Adoption Revenue Demonstration

2. Secure Media Exposure
• Company Blog • Industry Blogs • Trade Journals • Research Organizations • Print • Television

ignore the incoming calls

3. Prepare your Materials
• Prepare your materials
– Meeting PowerPoint (15 slides) – – – – – – Introductory “One Sheet” Capitalization Table Working Financial Model Competitive Landscape Analysis Published Industry Research (Audited Financials, Patents, Etc.)

4. Pick your Targets
• Know all local investors
– Socialize at events – Do background research – Pick the right ones for you

• Identify connections
– – – – Entrepreneurs Venture capitalists Bankers, lawayers, vendors Unsolicited

5. Make Initial Introductions
• The “Magic” Five Sentences
– – – – – What do you do? What is your market size? What makes you unique vs competition? Where are you in your development? How much capital do you require?

• Less is more – no big emails!

6. Set-up the Meetings

Good Signs
• Thoughtful Questions • Market Understanding • Set Follow-up Items • “Interesting” • Meeting Partners

Bad Signs
• No Questions • Market Size Ignorance • No Further Steps • “Maybe” or “but” • Handled by Associates

• Are they doing competitive research?

get to the next encounter

7. Negotiate & Complete Diligence
• Get the first term sheet
– Do not accept it – Time is on your side – Expiration is a tactic

• Find the second term sheet • The details really do matter

Key Secondary Terms
Good Liq Preference Participation Inv Board Seats Founder Vesting Option Pool Dividend 1x None 1 None 20% Optional Bad >3x Full >1 75% <10% Mandatory

What to Expect when Fundraising?
Low Management Effort Time to Close VCs Pitched Offers Received Equity Dilution Amount Raised 25% 4 mn’s 10 1 15% $0.5 MM High 50% 12 mn’s 60 5 45% > $10 MM

Tips from the Inside
• Do not outsource your fundraising • Know the legal terms • There is no “Industry Standard” • There is no confidentiality

The “Magic” Five Sentences

- What do you do? - What is your market size? - What makes you unique? - Where are you in development? - How much capital do you require?

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