A guide for First-Time Founders

Raising Capital for Startups"

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Hi. I am… Bryan Starbuck Former CEO & Founder of TalentSpring (Acquired in 2010) Currently: CEO & Founder at SPARKON.com BryanStarbuck@hotmail.com

My talk 1st The Key to Pitching

2nd Managing the process

Your pitch will cover the common bases

but… There is something

critical to cover

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Investors start off pessimistic

Inte

rest

Start Make this happen

Low

High

Image: @Theodore Scott

This is what investors expect

A company targeting a

$40m to $80m year business model

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95 of 100 companies go after too small of a market

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This is what they want

Able to reach > $100m rev for Angels. VCs want > $400m or > $800m

They don’t care about the rest of your business

Until they TRULY BELIEVE the market size is big enough

Focus on WOWing these 4:"There is a REAL & significant problem for the customer"1"

2"

3"

4"

This company has a real solution. "No other solution exists in the market"

People will pay "(this company’s prices)"

This is a HUGE market"

After that, demonstrate that the rest is rock solid

2nd Part: Managing the fund raising process

Process with Angels"Pitch & Demo"

They review Financials"Due Diligence (If angel group)"3

Get all of their questions answered"4Rapport & trust"5

Sign legal docs & close, close, close"6

21

!

VCs: A single VC firm"! Pitch & demo!! Meeting #2 to #4. !! Sometimes with others at the firm!

! Present to Monday partner meeting!! Get term sheet!

! Negotiate & sign term sheet!! Sheppard details until big stack of legal docs signed!

!

Important (1 of 2)"! Herd mentality:!

! If they see other investors moving and they might lose out, the investor will move!

! True for both Angels and VCs!

! You need to force enough demand from investors to get the deal closed!

! Have polished pitch deck, pitch and financials!

! Angel groups are good outside of the bay area!

! Quote from the bay area, “Pitching to a bay area angel group is a sign of a bad company”!

!

Important (2 of 2)"! Get a rent-a-CFO for Projected financials:!! $150 to $270 per hour!! 3 to 7 hours to create very detailed projected

financials!! Asked for a fixed price project!

! Get a very high quality one. They don’t cost very much more!

!

The “process” – aka many VC "! Progress in batches of ~6 VC firms!

! Hold first meeting!

! See which progress!

! Start another batch as a smaller number progress to later stages!

! In 2 months, work to have several batches progress so more than one arrive to a term-sheet!

! More than one greatly improves chances of any funding and improving terms!

! After 4 months, VCs will have heard about you and likely think you are a “stale deal”. Then meeting with them will likely be ineffective!

!

Pre-Money Valuation"If raising under $2 million…!

If raising over $2 million from VCs:!! Often valuation above PLUS capital raised!! Investors get ~33% to 48% of round!

!

Lessons about funding"$1m to $2 round is often better than a $500k round!

Funding goes hot and cold!

! Startups are cheap to run early, but…!! So it costs $50k to $70k per month!

"Year 1! "

" Fund raising is hard! Near impossible! "

"Idea !Validate! !Alpha !Beta !Launch! !Traction Building! "Year 2! "Small traction !Medium Traction ! !Huge traction / Profitable!Raising your series A after your Seen round closes!

THE END""

Backup slides"

Finding Investors"

Finding Angels"! AngelList!

! BEST: Great advisors and your network!

! Top big law firms can make some intros!

! It is hard to scale, but doable. (Lots of work)!

! Requires tons of networking!

! Often with CEOs who have raised capital before!

! Move to the bay area for 5 months!

! Linked-In!

! Tons of scouting for people who fit the profile!

Finding VCs"! Research to find WHICH ones you want to target first!

! Very important: Pitching VCs who don’t match will block raising capital!

! Find ones that work at your stage, industry, etc.!

! Easy to find the list of VCs. TheFunded, AngelList, etc.!

! Top startup law firms can make intro, as a backup!

! Intro from CEO they funded is the best!

! Target the right partner. !

! Start with Partner and above. Not associates!

!

Pitch-Deck"! The Alliance of Angels pitch deck may be the best

template!

THE END""

Q & A"