LAFI 2015 Fundraising Villard

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FundraisingJanuary 4, 2016

Los Angeles

Dimitri Villard

The Founder Institute



Action Plan

• Be prepared

• Be relentless

• Pitch everyone

• Network

• Use mentors

•Follow up



Many types of investors

• Family, fools and friends

• Crowdfunding

• Incubators

• Angels

• VC’s

•Strategic investors

• Venture debt

• Co-founders





How much to raise

• More than you think you need

• Next major milestone

• 18 months



Bootstrapping vs. Raising Funds

• If you can build the MVP with little money

• Test it online – Reddit

• Keep control

• Small market

• Don’t need large investment to launch

•

Can grow with internally generated profits



Type of capital

• Equity

– Common stock

– Preferred stock

• Convertible Note

– Converts at a pre-determined discount (e.g. 20%) to the

next round

•

Pre-money valuation• Corporations vs LLCs



Stages of Capital Raising

• Pre-Seed (< $100K) – Savings, grants, FF&F

• Seed – ( $100K - $1.5M) - Angels, FF&F, VCs, Business

Managers

• Series A & B ($500K - $5M) - VCs, Strategic (corporate)

investors, Angels

• Series C (VCs, Private Equity)

•IPO or M&A Exit

• Expectation of each stage investors: a higher valuation and an

eventual exit



Investors’ Rights

• Pre-emptive Rights

• Anti-Dilution

• Board Representation

• Veto Rights on Key Decisions

• Liquidation Preference

•

Rachet• Monthly or Quarterly Reporting



Presentation

• Pitch deck (short and long)

• Executive summary

• Demo• Business plan



Art of the pitch

• Start with “The Problem”

–Describe a real-life scenario

–Describe how big The Problem is

–You want to create a mental image of

The Problem the investor can relate to



The Customer

• Who is the target customer?

– This defines the market segment, size, growth potential

and competition

• How much will they pay?



The Solution

• “Our solution does [fill in the blank]”

• Only explain why it works better

–

Do NOT explain HOW it works – Do NOT explain the value proposition

– Do NOT flowchart the process

• Demo the solution if you can



The Competition

• Investors think competition is good because it means

there actually is a market

–

Describe competition and why they don’t solve TheProblem

• Explain why your solution is better, faster, cheaper



Business model

• Who will pay?

– What is the value chain?

•

Is it a Vitamin or a Painkiller? – Vitamin is “nice to have”

– Painkiller is “must have right now”



The team

• What is the Team’s experience?

– Any previous startups?

– Domain experience?

• What credible advisors do you have?

– Advisors validate the concept and you

• What is the sales & marketing component of the

Team?

– Investors really want to know who will deliver the revenue



The Close

• Big Problem

• Growing market

• Business model that works• Team that can execute

• We want investors that will join us

•

We are raising $---- to do ------- – Do NOT mention terms



Timing

• Practice, practice, practice

• Practice some more with high energy

• Video yourself and practice again until you candeliver the pitch without any hesitation and reeking

with self-confidence

•

Do NOT read your pitch – it must be memorized



Tech Coast Angels Criteria

• Management with strong domain expertise

• Technology that solves pressing needs

• Niche dominance

• High growth potential• Sustainable competitive advantages

• Some level of market validation

• Exceptional return on investment

• Use of funds sufficient to complete major milestone

• Ability of attract future funding

• Credible exit potential



Due diligence

Problems for investors:

– Management team issues

– Existing shareholder issues

–

Inadequate IP protection – Litigation

– Liabilities

– Valuation issues

– Excessive stock options

–

Serious competition – Unlikely to attract institutional next round

– Lack of traction



Materials

• Competitive analysis

• Financial statements

• Financial projections – 36 months

– Revenue assumptions

– Monthly expense budgets and staffing plan

– Balance sheet and cash flow projections

– Use of proceeds

• Management team

– Org chart

– Bios

– Table of compensation and stock options

• Cap table

• References contact information



Resources

• Tech Coast Angels

• Angel List

• Keiretsu

• Harvard Business School Angels

• SoCalTech.com

• EZnumbers.com

•Crowdfunding: Kickstarter, Indiegogo, Peerbackers, Crowdcrux

– 1,000 sites and growing

• Incubators: Amplify, Science, Idealab, Mucker, Disney +

Documents

LAFI 2015 Fundraising Villard