ATTRACTING YOUR 1ST INVESTMENT A SIMPLE PRIMER

PRESENTED BY JUSTIN HALL YOUR FRIENDLY

NEIGHBOURHOOD VC

FUNDRAISING 101

Before you begin fundraising …

Plan for real time and effort. Think of your ideal company, its billion-dollar markets, its goals to take over the world. Now condense that all into a few slides, or an hour-long meeting. It’s hard. Don’t expect to finish quickly. Fundraising can and will take months, depending on your industry, your traction, and where you are speaking to investors.

Don’t sell an idea. At the very least, you need to be in the product stage: you have discovered a customer segment with a meaningful problem or underserved desire, and you have developed (or are developing) a solution. Investment should be used to bring your product to market, not flesh out an idea that is likely to fail.

Organization is key. You will be blasting out emails to countless investors, and following up with the warm leads. You need to keep track of where they are in your pipeline. Make up a CRM solution (or buy one).

INVESTMENT PRIMER SOME PRACTICAL TIPS

Make an investment deck.

Now.!

A business plan is the equivalent of a book. A deck is the equivalent of Sparknotes.

Investors will not read your business plan.

Investment Tip #1

When creating you deck, learn from the best.

(And by learn, I mean shamelessly copy.)!

There are numerous decks found online, of companies that were funded, and companies that weren’t.

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Aesthetics and presentation are just as important as substance.

Investment Tip #2

Angels are a special breed.They have the highest propensity for risk.

So they have finely attuned bullshit detectors.!

Early-stage investors care primarily in the strength of the founding team, the problem they are solving,

and the market size. In many cases, these are the only things they look for.

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So don’t try to sell them on bullshit. !

Investment Tip #3

Understand your “ask.”

Only raise if you need to. If you do, know exactly for what, how long the money will last,

and why.!

I come across as many entrepreneurs that don’t need money as I do entrepreneurs with wildly unrealistic expectations.

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So be realistic in both your needs and your expectations.

Investment Tip #4

Know what the market can support.

Do not refer to Silicon Valley. Don’t mention it in your deck. Pretend it doesn’t even exist.

Follow local tech blogs and news. That will give you a better approximation of what is possible.

Investment Tip #5

Do your research. Have a “term sheet” in mind. Learn to negotiate (smartly).

Early-stage fundraising can seem daunting. It doesn’t need to be.

Understand the numerous investment vehicles and terms. Appreciate the difference between equity and notes, priced

and unpriced rounds, discounts and interests rates.

Get a lawyer and accountant when the time comes. Don’t skimp.

Investment Tip #6

The valuation is not everything.An unrealistically high valuation can tank you.

Pushing for a high valuation too early in your company lifetime might seem like a wonderful idea. It’s not.

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You’ll need at least two other rounds to grow into a company. If your valuations are too high now, it’ll be harder to justify an even higher valuation twelve to eighteen months

down the line.

Investment Tip #7

Learn to differentiate between Angels and VCs.

Angels are generally quicker but have smaller pocket books. VCs are typically slower, with

greater resources but more constraints.!

Each has distinct workflows. Don’t be afraid to ask about them. !

Push for speed. There’s no shame in following up. No investor wants to be seen as dallying.

Investment Tip #8

Not all investors are created equal.Investors must be ethical, reputable,

and value-adding.You want to bring on investors not only for their investment,

but because they will introduce you to the right people, give you the right advice, and won’t hurt your business.

Taking the money from a bad investor can cause

more harm for you than bootstrapping it.

Investment Tip #9

Validate, validate, validate.When you secure a commitment, especially from a lead investor, do your due diligence.

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Do you research: speak to other investors, speak to their portfolio companies, and even consult a lawyer on the

terms. !

Some red flags: an exorbitantly high equity stake, a high liquidation preference, and arrogant assholes.

Investment Tip #10

Some final thoughts …

Be ready to fundraise. Know how much you need to raise, have an investor deck ready, know what investors are looking for, and understand the (admittedly complex) terminology.

Quantity matters. The more investors you are speaking to, the better your chances at raising. That means you need to be organised. Think of it as CRM for investment.

Get a decent sales funnel. Create a reasonable, local investor hit list, through AngelList and email hacks.

Getting a lead investor can snowball into a round close. Take that momentum and carry it through.

AngelList Email Hack

Go to http://www.thilsted.com/hack/

You must have a Linkedin account for this to work.

This web application scrapes contact data from AngelList and creates a simple spreadsheet that can be used as a sales funnel.

But wait!DO NOT EMAIL BLAST. DO NOT COLD EMAIL. DO NOT ASSUME ALL INVESTORS ARE THE SAME.

Do your research. What stage is the investor, what is their investment thesis, what other startups have they invested in? Most importantly, how are you connected to them?

If you haven’t culled your list down by at least 80%, then you are doing something wrong.

Once your list is ready, start hustling. In order of preference: check if you have any connection in common on Linkedin; check if you are connected to any shared companies; ask a super connector; stalk them (literally!); and finally, cold email them.

And don’t be afraid to add

Investor Email TemplatesGo to http://bit.ly/1jnKY18

These are five template emails you can use, but feel free to modify or make your own.

The templates are as follows: “Initial Connection”, “AngelList Intro Response”, “Deal Terms and Details”, “Closing the Deal”, and “Wire Transfer Details”.

Don’t disregard the importance of templates. When combined with an efficient CRM solution, like the AngelList Email Hack, it’s much easier to keep track of your investors and, consequently, close a round.

AngelList + Zapier

Go to https://zapier.com/zapbook/angellist/

Zapier allows for the integration between AngelList and hundreds of other web applications

For those of you already using Google Docs, Salesforce, Trello, Evernote, or other applications, you can create your own “zaps” with no software skills required

“Zaps” are predefined by the user, and can do things such as create automatic email templates, task reminders, and calendar updates

PEACE OUT! !

QUESTIONS, COMMENTS, OR SUGGESTIONS?EMAIL JUSTIN@GOLDENGATE.VC

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