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FUNDRAISING 101:

HOW TO RAISE A SEED ROUND
D AV I D C H A N G
@ C H A N G D S
Fundraising
Basics
How to Raise
a Round
Tips
BACKGROUND
STARTUP EXPERIENCES
Direct Via Syndicate/Fund
ANGEL INVESTMENTS
PORTFOLIO LIFE
Building Investing Connecting
Fundraising
Basics
How to Raise
a Round
Tips
WHAT OBSTACLES STAND IN YOUR
WAY?
BUSINESS TRAJECTORY
• Lifestyle or social good
• Linear growth or revenue fueled
• High growth, scalable venture
Source: Jean Hammond & MassChallenge
Size
Cost
Equipment Financing
Traditional VC
Micro VC
Angel Groups
AngelList
Angels
Corporate / Strategic
Venture
Customers
Jobs Bill Portal
Crowdfunding
Vendors
Founder
Friends & Family
Crowdfunding
Grants- Gov & Foundation
Venture Debt
Bank
Loans
Personal
Loans
Private Equity
Competitions
Accelerators &
Contests
Impact Angels & VCs
CAPITAL SOURCES
VENTURE CAPITAL STAGES
Growth Equity
Early Stage
Angel
Friends & Family
VENTURE CAPITAL DYNAMICS
Skewed return distribution
VCs must swing for the fences
RAISING A ROUND
HOW MUCH TO RAISE
• Basic financial model of
cost drivers and revenue
• Forecast monthly for 2
years
• Fundraise rule of thumb:
12-18 months’ cash
USE OF PROCEEDS
• Build out the product
• Grow the team
• Marketing
• Customer acquisition
• Working capital
MILESTONES
See www.techcrunch.com/2015/06/24/running-out-of-money-isnt-a-milestone
Team
Product Development
Market Demand
Product / Market Fit
Business Model
Execution
Fundraising
Basics
How to Raise
a Round
Tips
Prep Target Socialize Raise Close
FUNDRAISING CAMPAIGN
BASIC PREP
✓ Legal representation
✓ Founders agreements
✓ Financials and budget
✓ Teaser (1 page)
✓ Pitch deck (10 pages)
Stage Location
Industry
Vertical
Business
Model
Investment
Thesis
Social /
Trust Filter
TARGET CRITERIA
BUILD PIPELINE
SOCIALIZE
• Prioritize sequence
• Find strongest connections to 30+ targets
• Tactics: lead gen, cold calling, warm intros
• Network over 2-3 months
DON’T ASK FOR MONEY!
“I’m not ready to raise”
“Who would be helpful?”
“Who else should I talk to?”
REFINE PITCH
• Incorporate feedback
• Double down on consistent themes
• Avoid whiplash changes
GO FOR THE ASK
• Approach your top candidates at the same time
• Run conversations in parallel
• Decide whether / when to tell investors about each
other
CREATE URGENCY
• Anchor investor acts as the first domino
• “Triggering events” to get a (or better) term sheet
STRUCTURE
Equity
Debt
STRUCTURE
• Preferences over common
• Board seat or 2
• Option pool
• Liquidation preference
• Control over sale, new options
• Debt that becomes preferred equity
when you raise it
• No valuation, but the “cap” is a
ceiling
• Interest accrues, rate <10%
• Conversion discount
Equity
Preferred Stock
Debt
Convertible Notes, SAFEs
CLOSING THE DEAL
Seed A B
$15
$6
$1
$30
$12
$5
VALUATION & DILUTION
?
Dilution: what’s your end stake?Valuation ($M)
?
VALUATION & DILUTION
37%
See www.ownyourventure.com
Raise $1M on $5M pre
33%Raise $1M on $3M pre
34%Raise $1.5M on $5M pre
Dilution: what’s your end stake?Valuation ($M)
Seed A B
$15
$6
$1
$30
$12
$5
FINAL DEAL POINTS
• Rolling close vs. set close
• Not done until money is in
the bank
Key terms
❑ Board composition
❑ Option pool
❑ Voting rights
❑ Founder vesting
❑ Change of control
❑ Redemption rights
❑ Information rights
❑ Anti-dilution
HOW LONG DOES IT TAKE?
• Longer than you expect
• 3-6 months
• Speed limited by access to investors
• Your ability to find them
• Calendar availability (surprisingly hard)
FIND THE RIGHT INVESTORS
FUNDRAISING 101:

HOW TO RAISE A SEED ROUND
D AV I D C H A N G
@ C H A N G D S
Fundraising
Basics
How to Raise
a Round
Tips
MassChallenge: How to Raise a Seed Round - Sept 2019
KNOW YOUR AUDIENCE
ADJUST FOR STYLE
SHARE YOUR SUMMIT & BASECAMP
DON’T SHARE EVERYTHING AT ONCE
• 1 Sentence
• 1 Paragraph
• 1 Page
• 1 Light Deck
• 1 Follow-up Deck
Articulate in 90 seconds
Why you’re the right team
Know numbers and
business model cold
KEVIN O’LEARY
pexels.com
thenounproject.com
TYPICAL PARTS
Overview Problem Solution Market
Traction
Marketing
Strategy
Team
Competition Conclusion
Financial
Projections

(high level)
Money Being
Raised and

Use of Funds
Revenue Model
& Business
Model
www.nextviewventures.com/blog/free-startup-pitch-decks-template
www.bestpitchdecks.com
RESOURCES
• Legal
• Goodwin Procter www.foundersworkbench.com
• Foley & Lardner www.foley.com
• Pierce Atwood
• Techstars www.techstars.com/docs
• www.seriesseed.com
• General
• www.jddavids.com
• www.robkornblum.com
bit.ly/startresources

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MassChallenge: How to Raise a Seed Round - Sept 2019