Funding 101: How to Navigate thru the World of VCs (Venture Capital)
Today I want to share a few thoughts around navigating through the world of venture.
I've have the opportunity to meet with thousands of startups the last few years ranging from 2 guys/girls and an idea to much later stage companies (Series A, B, C, D). This post is geared towards earlier/younger companies and first time entrepreneurs who are fundraising.
We often hear stories of founders raising with nothing but an idea but if you do some digging, you'll realize that the founder was likely an experienced founder with several past successful exits or they have extensive experience or IP in a niche sector. This isn't always the case but most VCs will have some sort of thesis behind how they invest. Here are a few things to keep in mind when fundraising.
1. Understand where your company fits in the world.
Is your company a hardware company, software/SaaS, consumer, enterprise, etc. While there's always emerging categories, having an idea or two of where your company fit can help you and others in your network find the right VCs. The best way to get a meeting with a VC is to get an introduction from someone they trust.
2. Do your Research on the Fund
Each fund and VC is different. Some focus only on consumer deals, others will focus on enterprise. Some will invest early (pre seed, seed, Series A) others will invest later (Series B, Series C, Series D), a few will invest across the board. Some are regionally focused.
By doing some upfront research, this will save you a lot of time. Some firms have a strict percentage they want to own, others are more flexible. It will be useful to understand this before going into the meeting. This information is often listed on websites or you can ask around.
When choosing your angel and seed investors, find ones that are well connected and understand your space. They can introduce you to additional advisors and investors that understand your space in and out.
3. Choose your accelerator/incubator wisely.
For first time inexperienced entrepreneurs, a decent accelerator program can get you far but keep in mind, if you end up in one that doesn't have a great reputation, this can hurt your company and fundraising process more than help you. Take a look at the companies that have raised capital in the program but also speak to founders who did not raise, this will give you a broader perspective on how well the program is doing.
4. Have your fundraising and due diligence materials ready.
This includes:
Executive Summary - a short summary of what your company is doing
Startup Deck/Presentation - detailed presentation going over your team, market, product, strategy
Business Plan - What will you be doing in the next 12 - 18 month with the money you have raised
Financials - Burn rate, projections, revenue, expenses (later stage companies will have more complicated models)
Team Bios - short bio on executive team
Demos, have a 1-2 backup demos as needed
Make sure these documents are easy to make edits on as different firms may ask for different things.
5. Have a grand vision AND clear next steps.
It's important to shoot for the moon but investors will want to understand what you'll be doing with the money you're raising. Having clear next steps on how you will hit your milestones for your next raise will help streamline the process.
This is very important especially once you hit the later stages.
Have additional questions? Shoot me an email.
Happy Fundraising!
I've have the opportunity to meet with thousands of startups the last few years ranging from 2 guys/girls and an idea to much later stage companies (Series A, B, C, D). This post is geared towards earlier/younger companies and first time entrepreneurs who are fundraising.
We often hear stories of founders raising with nothing but an idea but if you do some digging, you'll realize that the founder was likely an experienced founder with several past successful exits or they have extensive experience or IP in a niche sector. This isn't always the case but most VCs will have some sort of thesis behind how they invest. Here are a few things to keep in mind when fundraising.
1. Understand where your company fits in the world.
Is your company a hardware company, software/SaaS, consumer, enterprise, etc. While there's always emerging categories, having an idea or two of where your company fit can help you and others in your network find the right VCs. The best way to get a meeting with a VC is to get an introduction from someone they trust.
2. Do your Research on the Fund
Each fund and VC is different. Some focus only on consumer deals, others will focus on enterprise. Some will invest early (pre seed, seed, Series A) others will invest later (Series B, Series C, Series D), a few will invest across the board. Some are regionally focused.
By doing some upfront research, this will save you a lot of time. Some firms have a strict percentage they want to own, others are more flexible. It will be useful to understand this before going into the meeting. This information is often listed on websites or you can ask around.
When choosing your angel and seed investors, find ones that are well connected and understand your space. They can introduce you to additional advisors and investors that understand your space in and out.
3. Choose your accelerator/incubator wisely.
For first time inexperienced entrepreneurs, a decent accelerator program can get you far but keep in mind, if you end up in one that doesn't have a great reputation, this can hurt your company and fundraising process more than help you. Take a look at the companies that have raised capital in the program but also speak to founders who did not raise, this will give you a broader perspective on how well the program is doing.
4. Have your fundraising and due diligence materials ready.
This includes:
Executive Summary - a short summary of what your company is doing
Startup Deck/Presentation - detailed presentation going over your team, market, product, strategy
Business Plan - What will you be doing in the next 12 - 18 month with the money you have raised
Financials - Burn rate, projections, revenue, expenses (later stage companies will have more complicated models)
Team Bios - short bio on executive team
Demos, have a 1-2 backup demos as needed
Make sure these documents are easy to make edits on as different firms may ask for different things.
5. Have a grand vision AND clear next steps.
It's important to shoot for the moon but investors will want to understand what you'll be doing with the money you're raising. Having clear next steps on how you will hit your milestones for your next raise will help streamline the process.
This is very important especially once you hit the later stages.
Have additional questions? Shoot me an email.
Happy Fundraising!
