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Fundraising

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This is a list of resources and blog posts around early stage startup fundraising. Please take every piece of fundraising advice with a grain of salt, as every startup, industry, founder, industry is different, and the market changes rapidly.

Early stage fundraising pitch deck resources

General fundraising advice and understanding the VC market

Popular topics investors ask about

Team
  • How do you and your cofounder know eachother (if you have a cofounder). How strong is that relationship and can you power through the inevitable challenges you will face?
  • Why are you and your team uniquely suited to tackle this market?
  • Are you a founder who can scale to CEO? If not, what is the plan?
  • Do you have the expertise on the team to address some of the biggest risks
    • Product or technical risk?
    • Sales or marketing?
    • Risk or compliance (like credit)?
Market
  • Is the market size large enough to support a venture exit?
  • How do you compare to your competition?
  • What would your customer do if you didn’t exist?
  • How much will a customer pay? How do you know?
Product
  • Can you articulate your product value in 5 words or at most one sentence?
  • What is your moat?
  • Is your product unique or differentiated from others in the market in a protectable way?
  • How do you measure product-market fit?
  • What made your product viable now?
    • New technology (like AI, cloud, mobile)?
    • Market shift (like pandemic)?
    • Regulation?
Customer
  • Who is your ideal customer profile? This will evolve as your product evolves, but be as specific as you can in the early days. “sales teams” is more generic than “Account executives on 50+ person sales teams in publicly traded companies”
  • Make sure this aligns to your TAM
What are the top 5 questions you don’t want investors to ask?
  • We generally find great investors will narrow in on the top 5 questions you don’t want them to ask. It’s better to have answers prepared in advance, ideally with slides and supporting information.
  • It’s acceptable to not have solved every issue, as every companies has issues. It’s less acceptable to not be aware of your risks and issues, and feel unprepared or ignorant to your business.

How do I find investors for my company?

Pre-Seed

Pre-seed: I have an idea but need capital to create an MVP:

  • Family and Friends. (articles here, here, here)
  • Pre-seed Venture funds
  • Incubators/Accelerators
    • Y Combinator, On Deck Founders, Village Global, 500 Startups, Techstars, Hustle Fund
  • Pitch Competitions
    • Some pitch competitions are open for just ideas, and you can win anywhere between $5,000 to a few hundred thousand dollars.
  • Metal is an investor intelligence and CRM platform that helps founders be more targeted and efficient with their fundraising efforts. The platform provides advanced analytics on venture investors, identifies optimal intro pathways to each investment firm based on your Gmail and LinkedIn data, and provides the most intelligent CRM platform for fundraising. Get 10% off if you mention Puzzle in your onboarding call.

Seed

In the seed stage, your initial preparations end, and you have a proven product that is required in the market. Now, you must continue product development, grow your team, and build your brand.

  • Angel Investors & Venture Capitalists
  • Incubators/Accelerators
  • Metal is an investor intelligence and CRM platform that helps founders be more targeted and efficient with their fundraising efforts. The platform provides advanced analytics on venture investors, identifies optimal intro pathways to each investment firm based on your Gmail and LinkedIn data, and provides the most intelligent CRM platform for fundraising. Get 10% off if you mention Puzzle in your onboarding call.
Crowdfunding
  • Debt
    • Funding Circle, Lending Club, CircleUp, GrowthStreet, Localstake, NextSeed
  • Equity
    • Crowdfunder, EquityNet, AngelList, Start Engine, Fundable, WeFunder
  • Reward
    • Kickstarter, Indigogo, Rockethub

Series A

Series A - In this round, it’s important to have a plan for developing a business model that will generate long-term profit
  • Funding typically comes from venture capital firms
  • Series B - This round is all about taking businesses to the next level, past the developmental stage and towards expanding market reach by building out BD, sales, marketing departments
    • Funding typically comes from later stage venture capital firms
  • Series C - This round is all about getting additional funding in order to help the business develop new products, expand into new markets, or even to acquire other companies
    • Funding typically comes from groups such as hedge funds, investment banks, private equity firms, and large secondary market groups

How to prepare for due diligence

Staying data room and diligence ready will be crucial to keep the fundraising process moving forward. You should create an internal data room in Google Drive and perform regular audits to ensure you have all the necessary documentation on hand.

Common Due-Diligence Requests

Due diligence checklist by accounting and CFO firm Burkland here.

Due diligence is an inevitable fact of life for growth-oriented startups. Whether your startup is pursuing an investment round, government grant, or M&A opportunity, there will come a time when you need to open up your company files for outside scrutiny.

Use the following checklist to build a file organization structure and be disciplined about saving your files to stay prepared for due diligence.

Company

  • Information Articles of incorporation
  • By-laws
  • Minutes, board resolutions, board decks

Securities Issuance

  • Legal docs for all issuances
  • Cap table
  • Options, warrants

Contracts

  • Customer
  • Vendor
  • Employment
  • Licenses and insurance

Indebtedness

  • List of all banks and non-bank lenders
  • List of any liens or outstanding borrowing

Marketing

  • List of competitors
  • Marketing brochures
  • Sales commission structure
  • Marketing studies

Property

  • List of any real property owned or leased by company

Employees/Contractors

  • List of name, title, and compensation
  • Details on employee benefit plans

Licenses and Permits

  • Copies of permits/licenses
  • Certificates from all states where company operates

Litigation and Claims

  • Description of past, current, and threatened claims, lawsuits, disputes, proceedings, etc.

Financial Information

  • Financial statements since formation
  • Budgets and projections

Taxes

  • Federal, state and local tax returns
  • Correspondence with any taxing authority

Intellectual Property

  • Registrations for patents, trademarks, copyrights, and service marks
  • Copies of any NDAs and Development Agreements

Early stage fundraising best practices only matter if you know them. I made the mistakes so you don’t have to…

Below is a subjective 4-part blog series on fundraising best practices for seed stage founders, with a focus on first-time founders raising venture capital. It's based on my personal experience (Sasha Orloff, founder of LendUp, Mission Lane, Puzzle) and hosting or attending multiple discussions on the topic with early stage founders and investors. Note: Later stage investing is almost an entirely different process.

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Take everything with a grain of salt. I am sharing my experience as an investor, a venture-backed founder, a board member and a limited partner. I have raised hundreds of millions of dollars in equity and debt, and I have made many, many mistakes. This is just a perspective of one. Raising venture capital is hard, frustrating, and not for every business model. But if you want to go for it, best of luck and I hope you succeed!
1️⃣Part 1: Understanding the VC industry as a founder2️⃣Part 2: Can my business be funded by venture capital?3️⃣Part 3: Nail your opening slide4️⃣Part 4 Some 🤦‍♂️ fundraising mistakes