philip stehlik at techtalks.ph - fundraising in silicon valley
TRANSCRIPT
FUNDRAISING IN SILICON VALLEY 2012-07-10 for TechTalks.ph Philip Stehlik
About
• Entrepreneur living in San Francisco • Startups – joined one @19 started first @22 • Money from friends and ‘angels’ • Failed with a couple of ideas and projects • One company got acquired • Helping out a couple of startups • CTO Co-Founder Taulia in 2009 (Ser.A & B) • Serving Fortune 2000 companies with
financial SaaS + SAP add-on
Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company.
source wikipedia
Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company.
source wikipedia
Good
Raising money?!
• Grow and accelerate a business • Having a novel idea or approach • Software, Hardware, Medicine,
Space travel, ... • Giving away parts of your company • Investors need to make money • Eventual sale or IPO of the company
Raising money is not for
• Lifestyle business • Low-growth • Low-potential (VCs want high return)
After raising - You will not just get
• High salary • More customers • More traction • Less work • Less pressure
• Money ≠ The solution to everything
After raising you might get
• New hires to compliment your team's skillset • Marketing exposure and marketing $$ • A chance to iterate a few times on your
product (before making or running out of money)
• VCs who take calls of your customers • Intros • Resources (advice, hiring, marketing, ...)
Some hints
• Can you do it without raising? • Bootstrap as long as possible • Traction is key • Choose your investors to assure a good fit • Try to stay in control - it is still your company • Usually your investors are on your side. They
WANT you to succeed.
How much money to raise
• Roughly (Series A): • 12-18 months run-rate • Trying to give away 10%-20% of company max
• Fundraising is full-time job - you don't want to do it every couple of months
• Don't give away too much of your company or you won't have anything left at the end
• Raising 'a bit more than you need' will allow you to survive smaller issues along the way
Different 'funding providers'
• Angels – wealthy individuals • Angel groups – multiple Angels • Super Angels – very wealthy individuals • Incubators/Accelerators – Institutions
providing funding, space, connections,... • Venture Capital firms – Full-time professional
investors, usually after ‘seed’
Fundraising flow part 1
• Decision to raise money • Build story • Build pitch • Build deck • Research investors • Intros • Pitch • Iterate
Pitching • Elevator pitch
o 60 seconds to fame (verbally & e-mail) o Get somebody who doesn’t know you excited enough
to hear more of your story
• Intros o The most important piece to get good meetings
• Pitch deck o Usually 10 slides, telling your story
• Segment before pitching – try your pitch out o Harder to turn around a ‘no’ than pitching fresh
• Product demo
Tools you have
• Marketing • AngelList (your fundraising profile and
distribution) • Dealflow/traction • Social Proof • Intros • Being in a 'hot market' • The 'right team’ • Not needing the money
Fundraising flow part 2
• Have interested investor(s) • Determine which investor(s) would be best • Agree on baseline terms • Sign term-sheet • Figure out details and sign lots of paper • Get money • Pay lawyers • Get back to building your business
Stock options
• Way to compensate your employees o Retain employees o Vesting over four years o One year cliff
• These are not shares – but options to buy (common) stock
• Option pool usually set at founding and rounds of funding
• Different tax implications (at least in US) for different kinds of options – ask tax expert!
Different types of stock
• Common stock o The most basic stock there is
• Preferred stock o Stock with special conditions attached to it o E.g. Preferred participation in liquidity event o Details about conditions are in funding contracts o Usually 1 time participating preferred
Having multiple investors
• Angel Group • Multiple Angels • Multiple VCs
• Lead investor • More investors = more people to
communicate with and to ‘manage’
Watch out for
• Location o For fundraising you need to go to where the money is
• Over-valuation o If you can’t deliver and raise a down-round it will hurt!
• I say once more: o Traction o Team o Social proof o Do your due-diligence
Img: Scrooge MC Duck Graph