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 ‡ 16,500 Professional Venture Capitalists

Great Timing for You
‡ Low Costs
± New Technologies ± Open Source ± New Distribution ± Inexpensive Global Labor Pool

‡ New Opportunities
± Web 2.0 ± Social Networking

‡ Strong Financing Climate

What Type of Company gets Financed? 
Big Vision  Growing Market  New Approach  New Technology

‡ Facebook ‡ Google ‡ Microsoft / Yahoo ‡ Electronic Arts ‡ Apple Computer ‡ FedEx / Kinkos ‡ Cisco ‡ and more«

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‡ Fu d R tur s - $$$ ‡ Ch ap Equity ‡ Part r Est m

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

Step 1: Choose a Good Lawyer
‡ Identify 3-4 ³Fundraising Firms´ ‡ Interview Firms Thoroughly
± ± ± ± What is the right corporate structure? How many VC deals have they done? How many VC firms can they introduce you to? How will they protect your equity?

‡ Conflict of Interest & Declining Honesty

Step 2: The ³Throwaway´ Pitch
‡ Prepare your First Presentation
± ± ± ± ± 20 minutes long Push the Big Vision Push the differentiation Avoid detailed financial discussions Avoid confidential information

‡ Take a First ³Throwaway´ Pitch Meeting
± Write everything down ± Watch for when your pitch ³disengages´ ± Ask what they liked and did not like

Step 3: Prepare your Approach
1. Introductory ³One Sheet´ 2. Meeting PowerPoint 3. Capitalization Table 4. Working Financial Model 5. Competitive Landscape Analysis 6. Published Industry Research 7. (Audited Financials, Patents, Etc.)

Step 4: Shotgun Attack
‡ Goal: Pitch 30 Firms in 2 Weeks
± Expect 1/10 success ratio ± Expect investors to talk

‡ Leverage Law Firm, Friends, Associates
± Get ³introduced´ ± find a connection ± Set-up meetings ± over the phone or face-to-face ± Ensure a Partner is present ± the more the better

‡ Send out the One Sheet in Advance

Good Signs
‡ Thoughtful Questions ‡ Market Understanding ‡ Set Follow-up Items ‡ ³Interesting´ ‡ Meeting Partners

Bad Signs
‡ No Questions ‡ Market Size Ignorance ‡ No Further Steps ‡ ³Maybe´ or ³but´ ‡ Handled by Associates

‡ Are they doing competitive research? ‡ Are they overly concerned about traction? ‡ Do you sense a run-around?

Step 5: Negotiate
‡ The First Term Sheet
± DO NOT ACCEPT IT !!! DO NOT NEGTIATE !!! ± Time is on your side ± Exclusivity and expirations are tactics

‡ Goal: The 2nd / 3rd Term Sheet
± Inform the interested parties ± Avoid the syndicated round

‡ Your Lawyers work for THEM
± Trust, but VERIFY

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

Step 6: Close the Financing
‡ Diligence
± Prepare your references ± Say ³no´ when excessive

‡ Legal
± The deal is more important that you ± The DETAILS MATTER

‡ Have a Back-up Plan

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Tips from the Inside
‡ Do not outsource your fundraising ‡ Do your homework ‡ There is no ³Industry Standard´ ‡ There is no confidentiality ‡ Understand exit scenarios ‡ Inform targets of progress during the negotiation