How to Raise Venture Capital. It's not as easy as coming up with a good elevator pitch, putting together a compelling PowerPoint presentation, and then saying, "Show me the money. " Venture capitalists most often require something in exchange for handing over much-needed cash. They want a percentage of your company. They often want at least one board seat. And they want an eventual exit strategy – an initial public offering (IPO), an acquisition, or some other event that promises a return on their investment.
Even if you're willing to give up all that control, venture capitalists are still quite picky about what companies they'll invest in. The sections below will review what type of business is ripe for venture capital investment and how a business can get in the door and raise money from venture capitalists. Dig Deeper: An Insider's Guide to Venture Capital Financing How to Raise Venture Capital: Businesses that VCs Will Back Dig Deeper: How States Can Attract Venture Capital What is your business plan? I met with an investor, what happens next? This is part of my ongoing series, “Pitching a VC.”
Getting a meeting with a prominent angel or VC is difficult enough. Some advice on how to do that was covered in this link – Getting Access to a VC. This post covers the day after. I spoke about the topic on Fox Business News yesterday in a great session with TechCrunch50 winner RedBeacon and will post it along with my other VC Videos when Fox puts it on their website. The Day After (the waiting game begins) So you just had an investor meeting. OK, if I’m going to be honest with you then you need to promise not to shoot the messenger. Remember that most fund raising takes time. Why don’t VC’s follow up? Not to mention what happens in years where they also need to raise a new fund. Let’s be honest. As a result, the ball is actually in your court. I am really surprised how many entrepreneurs pitch me and then I never hear from them again. So how to proceed? 1. 2. 3. 4. 5. 6. So how do you create urgency? 7. Guidelines for following up 1. 5 Accelerator Lessons: How to Raise Funds and Build a Business.
Last summer, Pipedrive was fortunate to be part of Angelpad, an accelerator run by a few very smart ex-Googlers.
The 3 intensive months thoroughly changed our understanding of how to build a successful product, and a successful company. And more importantly, it boosted our growth to the next level. Here are the five most important lessons I learned from this crazy time. 1. Be open to being challenged, be prepared to be wrong Running a startup is like being punched in the face repeatedly.Paul Graham The Angelpad team and mentors challenged us in many ways.
Another important piece of feedback early on was to add more languages to the product. 2. Finnish companies tend to be very traditional, not taking many risks. We began building Pipedrive in Europe, in the tiny country of Estonia. Lastly, it’s only in Silicon Valley where you have startup celebrities randomly walk into your office. Your location will also impact your valuation. Hackathon House in Estonia 3. 4. 5. Pipedrive Hackathon. The 5 most common mistakes startups make with VCs. (Editor’s note: Scott Edward Walker is the founder and CEO of Walker Corporate Law Group, PLLC, a law firm specializing in the representation of entrepreneurs. He submitted this column to VentureBeat.) A reader asks: My co-founder and I are about to approach VCs for funding for the first time.
We’re both first-time entrepreneurs and don’t want to make any rookie mistakes. What are some of the common missteps you’ve seen guys like us make dealing with financiers? Answer: You’re always at a disadvantage when dealing with the venture capital community, since their experience almost certainly outweighs yours. Cold Calls. The ideal middleman is a successful entrepreneur whom the VC has backed; other investors can be good middlemen – and lawyers or accountants may also be helpful. Homework. NDAs. VC’s are inundated with business plans and executive summaries and are constantly talking to entrepreneurs whose ideas may be similar to yours. Valuation. Negotiations. The anatomy of a fundable startup. This post is sponsored by The Founder Institute.
As a co-founder of several companies, an angel investor in several more, and co-maintainer of two great resources for entrepreneurs — AngelList and Venture Hacks — Naval Ravikant has a unique view of the startup and investing landscape. That’s why he was asked to speak at the Founder Showcase event last week in San Francisco to almost 500 founders and investors, and he did not disappoint. In a great speech appropriately titled “The Anatomy of the Fundable Startup,” Naval broke down the 5 main qualities of an “exceptional startup”: 1. Traction - “Traction trumps everything” - “You want to have about 20% a month growth to look like a hot company” 2. 3. 4. 5. And while all these qualities are important, Naval explained, the most important thing is to understand that “investors are trying to find the exceptional outcomes, so they are looking for something exceptional about the company.
The Four Main Things that Investors Look for in a Startup. I obviously don’t speak for all investors.
But in my experience as an entrepreneur and now spending my time amongst investors I can generalize that almost all VC investments in early stage technology & Internet investments come down to just four key factors. And they’re easy to remember because they all begin with an M: management, market, money and above all else momentum. This post was prompted by an email exchange I had with a young entrepreneur. It’s a conversation that creeps up from time-to-time. This person had been introduced to me several times by angels and I was told that I’d be the perfect seed investor.
So I wrote to the entrepreneur and said, “Congrats. I do understand. I understand. Not everybody agrees that entrepreneurs should take investor meetings outside of “funding season” when they’re raising capital. But if you identify investors with whom you’d like to work here’s my advice: 1. 2. If you haven’t read my post on the bio slide before here it is. 3. 4. BUT WAIT? Understanding a VC’s Seed Funding Policy is Critical. There has been much discussion about VCs doing seed funding in the past year.
I’ve written about it myself (Is VC Seed Funding Dead?) And (Is There Really a Signaling Problem with VC Seed Funding?). Short summary of my posts: 1. There is a structural reason that VCs are investing at early stages, 2. Many (Union Square Ventures, Foundry Group, True Ventures, GRP Partners, Mike Hirshland at Polaris Ventures) do it the right way – we treat it as a normal investment and we don’t have a “options” strategy with our investment. I think the issue was mostly framed initially by Chris Dixon in his article The Problem with Taking Seed Money from Big VCs. From the debate on VentureHacks, our offline chats and from our blog posts, I think that Chris Dixon and I are pretty much 98% aligned on the topic. Knowing What the Seed Funding Policy of your VC is We carved out a total of $7.5 million of our $200 million fund for seed funding. A Deals: Deals that immediately and obviously successful. 5 Reasons An Angel Investor Will Walk From Your Deal. 5 Reasons An Angel Investor Will Walk From Your Deal The following is a guest post by Ty Danco.
Ty is an angel investor and startup mentor. Read more of his thoughts at tydanco.com. You’ve got a killer idea, a good prototype, a terrific market opportunity, and maybe even some funding already. But you still may lose potential investors that have nothing to do with your deal, and everything to do with you. 1. Worst is a coverup: An entrepreneur presenting to an angel group was discussing his record as a "successful repeat entrepreneur", but didn’t give particulars other than "the last company he founded went IPO.
" 2. 3. 4. 5. This is not to say that the investor is going to be right or that you are wrong. For a good entrepreneur, it shouldn’t be hard to avoid these potholes: you do your homework, you don’t lie, you follow through, you’re not short-sightedly greedy, and you’re open to hear what others think about your strategy and prospects. What do you think? Madmagz: Good stuff I Notes on rais... Amis startuppeurs, n'acceptez pas de l'argent de n'importe qui ! L'affaire Asterop. Comment (et combien) valoriser une startup ? How Much Money To Raise. Image via Wikipedia I spent some time yesterday talking to an entrepreneur about this topic and I thought I'd share what I told him with everyone.
When your company is growing really fast, doubling employees year over year, adding users and customers at a very rapid rate, you don't want to raise too much money. If you raise three or four years of cash, there is a very good chance that by your second year, you will be sitting on cash that you raised when your company was worth considerably less. That's not a good thing. It's too dilutive to you and your co-founders and angels. I've got two basic rules of thumb. Second, raise 12-18 months of cash each time you raise money. These rules are most applicable in the early stages. But for the seed, Series A, and Series B rounds, I think 10-20% dilution and 12-18 months of cash are ideal. PEG: Comment valoriser sa boîte... Où lever des fonds en amorçage ? - We Change the World. Quand faut-il lever des fonds ? Ce que les VCs recherchent dans une startup – #mipcc. Lever des fonds. J'ai besoin d'argent pour mon entreprise.
Les levées de fonds et cessions du web français depuis début 2010. Les levées de fonds de l'e-business au premier semestre 2010. The Future of Startup Funding. August 2010 Two years ago I wrote about what I called " The opportunity is a lot less unexploited now.
Investors have poured into this territory from both directions. VCs are much more likely to make angel-sized investments than they were a year ago. And meanwhile the past year has seen a dramatic increase in a new type of investor: the super-angel, who operates like an angel, but using other people's money, like a VC. Though a lot of investors are entering this territory, there is still room for more. In fact, it may be good for angels that there are more people doing angel-sized deals, because if angel rounds become more legitimate, then startups may start to opt for angel rounds even when they could, if they wanted, raise series A rounds from VCs.
Of course, prestige isn't the main reason to prefer a series A round. But while series A rounds aren't going away, I think VCs should be more worried about super-angels than vice versa. They would seem to have history on their side. VCs Angels. 'Super Angels' Fly In to Aid Start-Ups. Come See the Incredible, Shrinking VC Industry! The VC industry is starting to shrink with some rapidity, according to data released today by National Venture Capital Association (NVCA) and Thomson Reuters.
The trend, which first started in 2008, has only accelerated. During the second quarter of 2010, new money committed to venture funds plunged 49 percent from the previous quarter and 57 percent from the same period a year ago. NVCA believes the soft economic environment is to blame for much of the recent decline in new funds. The latest quarter saw 38 funds raise $1.91 billion — the lowest level since the third quarter of 2003. There were 26 follow-on funds and 12 new funds raised in the second quarter of 2010, NVCA noted. If you look at the accompanying graphic, you can see that the total amounts being raised by venture capital firms are decreasing, and 2010 isn’t looking particularly attractive.
However, if there is any good news for the VC sector, it is on the exit side of the equation. Destin: European VC Needs Revolution, Not Evolution. How to raise money with no lead. Paul Graham says “The future [of funding] is no fixed amount, no fixed closing date, and no lead.”
In other words, the future of financing is continuous, not discrete. This post explains how to raise a seed round with no lead, no fixed amount, and a fluid closing date. The process is called mass syndication, or a party round. Paul proposes eliminating rounds altogether, but we’re not there yet. Mass syndication is a single continuous seed round and I think it’s the state of the art in continuous fundraising. We originally offered this interview exclusively to AngelList applicants — now it’s available to everyone. Another future The future of funding is also finding the right investors for your startup, quickly. How? Despite the name, you can use AngelList to request intros to any subset of investors on the list — you don’t need to send it to the whole list.
Leads aren’t going away 1. 2. Here’s an outline and transcript: 3. Music: Squarepusher Nivi: Hi there, this is Nivi from Venture Hacks. The Future of Startup Funding. This is a great article, Paul. I have one question, if you do not mind setting off on a tangent. You said that start-up investing is a seller's market now. Why is that? In general "a sellers market" would indicate that there a lot of investor money in comparison with startup opportunities. Is it because there profitable exists which are bringing more money in? Also VCs keep telling me that they have trouble getting funds as their traditional institutional investors have soured on the VC investment class.
Or do you think that because there is so much activity with start-ups, investors have already decided that some companies that have not yet reached an exit (e.g., Twitter, Foursquare) are defacto winners, so that there is an assumption of high profitability even without the exits. Or do you think it is a sellers market because more money is going to silicon valley now that many of the wall street profit making schemes have stopped working. Crowdfunding & Finance. Ces forces qui bouleversent le Capital Investissement. Stock Market Drops. Then It Rallies. What Happens Next for Funding? This article was originally published on TechCrunch.
Venture Capitalists typically have partners’ meetings on Mondays. Why is that? Who knows. But probably because as a group we travel a lot. So the industry formed around a day of the week when all partners could avoid having company board meetings or traveling. Yesterday was a Monday. Rewind. It was a great learning time for me.
By 2008 I had gotten more serious about championing companies through our investment process. I have always believed that TV was ripe for disruption. I introduced my partners, we spent weeks with the team and felt good rapport. The following is a 2-week graph of the end-of-week price of the Dow Jones Industrial Average (DJIA) in Autumn 2008. And while the market was off 24% in two weeks, it’s worth remember 2 other things The market was actually off 40% from its Oct ’07 peakThe market wouldn’t bottom until Mar ’09. We thought the following: No new deals close until we figure out WTF is going on with the market.