FUNDRAISING

RESOURCES

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 TYPES OF INVESTORS

How to find the right When it comes to financing your startup, before you
start pitching to different investors, you need to have
investor(s)?
clarity on how much money you need, what type of
business you have, in what stage your business is in,
what are the implications of different types of financing
etc.

As the amount of money that you are trying to raise

increases, so do the expectations of what you should
deliver in return.

These are the main startup financing options:

Funding stages One of the main considerations when you think about
financing is to understand how it fits the stage your
startup is in.

There are 6 stages of growth in a typical startup:

1. Pre-Seed stage: Concept & early product
development.
2. Seed stage: Validating the business model.
Product launch & early traction.
3. Early stage, Series A.: Product-Market fit
testing with Minimum Viable Product
development. Build & test business model:
customer acquisition, etc.
4. Growth: Strong market demand is met, business

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 starts to scale. The highest failure rate.
5. Expansion: A proven business model ready to
expand to new markets. Acquisitions, IPO
preparation.
6. IPO (Initial Public Offering): A company goes
public and anyone can invest in the company
and buy stock. Scaling new markets,
acquisitions, global expansion

Each of these phases requires different types of

financing summarized in the table below.

VALUATION AND DILUTION

The process of Depending on the stage you are in, the value of your
company will change. The higher the stage, the higher
valuation the valuation. This is extremely important to
understand when you are looking for financing. At the
same time, each time you raise money in exchange for
the stakes in your company, you are giving up a part
of your company - this is called dilution.

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 This is why you need to understand the implications of
the valuation rounds:

1. Why are you raising money? You need to

determine the minimum amount you need to really
get to the next milestone. To prove that the product
is valuable.
2. How much money do you need? You need to
determine the costs you will incur.
3. How much to value your company at? You need
to find a balance between what you think your
company is worth and what investors will pay for it.

Maximize your chances

● NOT How much capital can you raise BUT => How
can I ensure sufficient capital to grow my business
effectively?
● NOT How little dilution can you take on BUT =>
How do I not take too much dilution?
● How do I also attract investors that will help me
bring the business to the next phase?

You have to be really thoughtful with growing into

valuation at the right time according to how the
market is evaluating the company.

Dilution The amount of the company that you are giving up at

any fundraising event.
Eg:
● Company Valuation 8$ Million (before raising
money)
● Raising $2 Million
● Company Valuation $10 Million (after those
additional $2 M were invested)

↓
Investor has 20% stake ($2 M/$10 M=20%)
=> 20% dilution of your company

To bring $2 Million you took on 20% dilution in that

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 round.

As you raise more and more money it’s typically for a

smaller and smaller stake of the business.

Watch outs
● Your goal is to fuel the company to get to the
next stage => Don’t give too much stake to early
stage advisors who won’t add a lot of value
● More money => faster growth, more dilution
● Controlling the equity => compromising growth
● Investors will expect from you to use that money
and demonstrate growth

UNDERSTANDING A VC

What is a VC? Venture capital (VC) is a form of private equity and a

type of financing that investors provide to startup
companies and small businesses that are believed to

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 have long-term growth potential.

Premise: Invest in early stage (unproven) companies

=> get rewards and gains for predicting right, i.e.
choosing the right early stage startups

Out of the startups VC’s invest in:

● ⅓ will die and VC will lose all the money
● ⅓ will make the money back
● ⅓ will make the profit for the VC and make up for
all the losses above. Normally the top 3-4% will
return more gains than all the rest together.

Because of the high investment and risk, venture

capital generally comes from well-off investors,
investment banks, and any other financial institutions.

How does it work? VC is a permanent entity, but within a VC you will raise
individual funds from a group of investors called
limited partners:
a. Family offices
b. Foundations
c. Pension funds
d. Private equity funds
e. Wealthy individuals, etc.

Limited partners invest in a single VC fund.

Individual VC Fund:
A period of time (normally 10-12 years) in which limited
partners invest those funds into early stage
companies.

Multiple funds:
BUT the VC firm will raise multiple funds and nurture
the companies in which they invest, in order to increase
their likelihood of reaching an IPO stage.

Initial investment => they start investing in companies

as soon as the fund is raised. By year 3-4 they will use
up more than half of that capital and will start raising
fund 2.

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Fund 2 Follow up investment => They will start raising
additional funds while the first fund is still not
exhausted, because they need to reserve a big chunk
of that first fund in order to be able to invest in next
rounds. But as the valuation of the company grows, in
order to keep your initial stake in the company you
have to invest much more money, that’s why you need
the follow up investment as a reserve.

That’s why VC firms will have multiple funds at all

times.

Eg.: Let’s say a VC invested in UBER

1st round: $1 million

2nd round: much bigger round => $50 million
● you need to invest much more to keep your
ownership stake

Fund 3 Follow up investment => At the same time you

also want to invest in new startups. That’s why a VC
firm will have multiple funds at the same time.

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Biggest The main and first challenge is raising capital. After
raising capital:
challenges for
VC’s 1. Sourcing the right companies: You need to have a
strong proprietary network of companies.
2. Picking: Nº1 skill. Right entrepreneur, in the right
market at the right time
3. Portfolio Management: Need to decide how much
money at what valuation, and if you re-invest in later
rounds.

There many different types of VC’s, they can be classified

Types of VC’s based on the stage they are in, i.e. what stage of the
company they choose to start investing in and also based
on verticals, i.e. the industry they are investing in.

WHAT DO INVESTORS WANT? 5T MODEL

What do investors When looking for investment it’s very important to

understand what the potential investors are looking for.
want? Depending on the stage the startup is in, the level of
importance might vary, but there are 5 big things they
are looking at:

1. Team: a critical component, especially in the early

stages of the startup, when there is barely anything
else. They will look into the following:

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 ○ Subject matter expertise
○ Deep industry knowledge
○ Confidence to build the business and grow with
the founder to manage a multibillion dollar
company
○ Diverse team to handle different problems that
come up
○ Ability to attract talent (at later stages
2. TAM: The size or opportunity you are going to offer.
It’s critical to communicate the market correctly to
VCs, focus on the specific part of the industry your
startup is in with both bottom up and top down
analysis.
E.g. UBER
Bad example - Uber is going after transportation
which is a $10 trillion industry
Better example - Taxis are $2 billion industry, that
hasn’t changed much
3. Traction: How fast your key metrics are growing
(users, revenue, etc.) to achieve product market fit
and go beyond. The traction will be different at
different stages, i.e. at an early stage it might be
just the fact that a lot of people are talking about
it. Traction is what the investors are most interested
in.
4. Technology/Intellectual Property: How
interesting is the product, how new and unique is
the product or the science behind.
5. MoaT: How difficult is it for other companies to
replicate your services.

ACCELERATORS, INCUBATORS AND VENTURE

BUILDERS

Definitions There are different options entrepreneurs can rely on

in order to build their business and get some help.

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 Incubator: Program that helps you grow from the idea
to the initial product stage.

Accelerator: Program to accelerate your company,

from the initial product and try to find some early signs
of product-market fit, providing guidance and funding
as well.

Venture Builder/Studio model: A group, a company

comes up with interesting ideas, target markets, and
launches them itself and brings on entrepreneurs and
seasoned executives to watch the company grow.

PITCH DECK AND ELEVATOR PITCH

Pitch Deck Pitch deck is a visual representation of what you’re

trying to build and what is your vision of the company
- a mechanism to help you raise money.

Download here the full Pitch Deck template. (Go to

file/make a copy to be able to edit the document)

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Elevator Pitch A brief description of what your startup is, delivered in
a way to have the other party respond to it and
understand intuitively what you’re talking about, the
problem you’re solving and what the solution is.

Download here the full Elevator Pitch template (Go to

file/make a copy to be able to edit the document)

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