2 - (Basics) Raising capital for your startup

Question 1

What are some misconceptions of founders about raising capital?

Answer 1

Investors want to give me money if I just show them my idea

My idea will make me and them money easily

Question 2

What is speeding up the machine?

Answer 2

While you might not be able to build it fully or get it out the door; but you CAN try to show that you’ve made some progress

Question 3

What percentage of opportunities to VC’s invest in?

Answer 3

2% of opportunities they review

Question 4

Approx how many business entities are filed each year?

Answer 4

600k new entities each year

Question 5

What is the breakdown of VC spending (generally)

Answer 5

3% of VC funds go to brand new startups; 97% go to existing ones

Question 6

How much is a good timeframe to cushion for raising the capital needed?

Answer 6

18 to 24 months (plan)

Question 7

what are the 13 milestones in this startup and fundraising plan?

Answer 7

1. Idea conceptualization
2. Mkt research
3. Business plan creation
4. Testing the waters
5. Finding cofounders
6. Making key hires
7. building a board
8. Prototypes and beta testing
9. MVP launch
10. Expanding early adopters and users
11. Gaining revenues
12. Proof of demand and potential for scale
13. reach breakeven point

Question 8

what are the 4 categories of the 18-24 mo plan (aka Business and Fundraising plan - BFP)?

Answer 8

Plan, People, Product, Proof

Question 9

What are the components of the first category of BFP?

Answer 9

Plan - Idea conceptualization, Business Plan, Market Research, Testing the waters (talk to ppl about your idea/plan)

Question 10

What are the components of the second category of BFP?

Answer 10

People - Cofounders, key hires (developers, creatives, external support - cpa, legal, vendors, etc.), board members

Question 11

What are the components of the third category of BFP?

Answer 11

Product - Prototypes/beta, Minimally viable product (MVP), early adopters/users (and their feedback)

Question 12

What are the components of the fourth category of BFP?

Answer 12

Proof - Revenues, proof of demand/scalability, break even point

Question 13

How do you calculate BE point?

Answer 13

[SP(unit) - VC(unit) - FC] x (1-taxes) - fees = BE

Question 14

What do investors NOT want?

Answer 14

to lose money , to look foolish

Question 15

What do investors expect (19 items)

Answer 15

1. business idea and plan
2. organization
3. integrity and character
4. answers to obvious questions
5. you know what you don’t know and don’t have but you have a plan to get it
6. mkt potential
7. plans for repayment (if seeking loan)
8. plans for add’l rounds of funding and/or exits
9. that you put your heart into the project
10. that you have and will keep skin in the game (you have something to lose)
11. feedback from others
12. proof of demand
13. that they can get along w you
14. that you are coachable
15. consideration of the safety of their capital and time
16. good match (with other things they are investing, etc.)
17. passion for your product/service
18. passion for connecting and working w them
19. opportunity that will take them closer to their goals

Question 16

What are categories of what investors expect?

Answer 16

4 things: Preparedness, technical feasability, personal fit/behavior, financial viability

Question 17

What are the components of the first category of Investor expectations?

Answer 17

Preparedness - Answers to obvious questions, known unknowns (you know what you don’t know or have but have a plan on how to get it (or figure out the unknown) ; business plan, organizatoinal structure ; mkt research

Question 18

What are the components of the second category of Investor expectations?

Answer 18

Technical feasability - development plan ; capability of key hires ; proof of demand / MVP ; external user feedback (early adopters/users)

Question 19

What are the components of the third category of Investor expectations?

Answer 19

Personal fit/behavior - “Pick Sir” PICSr ; Passion, Integrity, Coachability, (Own) Stake/Risk in project

Question 20

What are the components of the fourth category of Investor expectations?

Answer 20

Financial viability - Market potential, repayment plan, plans for funding rounds (or exits) ; risk mgmt for VC firm (that you are aware of their concerns and will protect their investment) ; portfolio fit (with other investments and VC firm goals)

Question 21

Other nuances with investor expectations

Answer 21

You’re not selling your product, you’re selling an investment in your company (pitch has to address both but not focus solely on the project itself)
Just like mkt research on customers/competitors, do research on investor’s needs
VC members have performance metrics/goals to meet: ROI, sales, cash flow projections (exceeding all of these) ; bonuses based on them
Other VC informal goals: outdoing competition, bragging rights, strategy, egos etc. (think shark tank investors against each other etc)

Question 22

What is one of the best ways to attract capital?

Answer 22

Outperform your competition: this will help w your pitches, presentations, and discussions. Not to mention boosting your results and thus negotiating strength. Also will help you get noticed (bring investors TO you)

Question 23

what are different measures of performance (to outperform?)

Answer 23

$: Profit margin, sales
Users: growth in users (daily active users)
Publicity: social media, startup battles/hackathons
Lesson here: find your edge and define a metric to outperform on

Question 24

what are advantages of outperforming competition

Answer 24

people will believe in future potential

indicates there is a perceived discount available (so they can get in early)