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Raising Capital: The Ultimate Guide to Building the Right Deck, Nailing Your Pitch and Finding Investors
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Raising Capital: The Ultimate Guide to Building the Right Deck, Nailing Your Pitch and Finding Investors

Raising Capital: The Ultimate Guide to Building the Right Deck, Nailing Your Pitch and Finding Investors

Entrepreneurship
August 5, 2021
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11 Jogs
Why it matters?

Raising capital for your business is never easy. It takes a lot of work, research and preparation to find the right investors and close that round.

Every good entrepreneur needs to start with the elevator pitch - a one minute speech about what your company does, how your product works and why your company can't fail. What makes for the perfect pitch? Something short and concise, which delivers only the key points that invite an investor to want to know more about your business. Check out some of the pitch deck examples in the below content for examples to learn from.

Running a good process is also key to success. Many experts recommend running your fundraising process like your sales process and this is true. Build a pipeline, maintain strong momentum throughout, and you'll give yourself the best chance to close that round.

There is a lot of content available to you with some great advice. We have gathered the most impactful, popular, tried and tested advice available so you can save time. Of course, as with everything on Joggo, check out the summaries first so you know where to spend time efficiently.

The Content

Each link contains a summary produced by one of Joggo's geniuses so you can decide where to spend your time learning more

June 20, 2007
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Marc Andreessen
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Marc Andreessen

When the VCs say "no"

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The Summary

When VC rejects your business plan, you could:

  1. Lay the groundwork to go back in later. Take the rejection gracefully and ask for feedback
  2. Consider the macro business environment's implication. VC's decision process are different in normal vs euphoric vs funereal times
  3. Retool your plan: understand the risks VC sees in your business, keep peeling the risks off until VC say yes

Common risks and mitigates for a high-tech startup

  1. Founder risk: does the startup have the right founding team?
    1. Mitigate through swap or add key personnel
  2. Market risk: is there a market for this product?
    1. Mitigate: need to get customers to validate your market hypothesis
  3. Competition risk: is this startup differentiated?
    1. Never say you have no competitors
    2. Never say you will be successful if you get only 2% of market
  4. Timing risk: is it too early, too late?
    1. Mitigate: make more progress, get customers in bag
  5. Financing risk: how much additional rounds of financing will need for this company to become profitable?
    1. Mitigate: think how much money needed to raise after this round
  6. Marketing risk: can this startup acquire profitable customer 
    1. Make sure differentiation is sharp
    2. Model out customer acquisition economics in detail, show how to get more revenue from a customer than cost of acquisition
  7. Distribution risk: need certain distribution partner to succeed?
  8. Technology/Product risk: can product be built by this team?
    1. Mitigate: build the product, at least to beta
  9. Hiring risk: can they hire the right talent?
    1. Mitigate: add key personnel to founding team
  10. Location risk: can this startup succeed in this location?
    1. Mitigate: move
June 15, 2020
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Ariella Young
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Ariella Young

All You Need To Know About Convertible Debt

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The Summary

Types of convertible debt

  1. Convertible equity debt
    1. An investor loans money to a startup (usually pre-revenue early-stage companies) in return for equity in the company at a later time
    2. Usually include additional, equity-like, perks for investors
    3. If a company fails to receive a follow-on round, investors can’t ask for the redemption of the debt
  2. Traditional convertible debt
    1. The price of the stock is not determined at the time when the investment is made

Get into convertible debt if you

  1. Want to value your startup later
  2. Need cash fast and don’t want to be valued before gaining traction
  3. Board control is important
  4. Don’t want to dilute shares for investors
  5. Have a sophisticated investor with experience

To negotiate convertible debt consider

  1. Discount rate 
    1. Investor can convert the loan into shares at a discount compared to the purchase price paid by the investors during the follow-on round
    2. About 20%, +/- 5% to 30%
  2. Interest rate
  3. Maturity date 
    1. Usually, investors won’t ask to be paid back on the maturity date and extend it if there is no subsequent equity round
  4. Pro-rata rights
    1. Let investors keep their equity stake by investing in further financing rounds
  5. Conversion cap
    1. Sets the maximum company valuation at which point the note will convert into equity.
    2. Investors will
      1. Pick a cap; or
      2. A discount rate if the next round is below the cap
  6. Warrant
    1. Used by a warrant holder to acquire shares from the borrower at a pre-determined price 
    2. For late-stage startups with a raised round of equity
    3. When issuing warrants think of
      1. What percentage of your startup the warrant will represent; and
      2. Which class of stocks you will be issuing
July 22, 2020
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Nikhil Basu Trivedi
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Next Big Thing

Founder-Investor Fit

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The Summary

The decision for a founder to take an investment from a venture capitalist (VC) firm and the decision for a VC firm to invest in a founder depends on the founder-investor fit.

How Founders Choose Their Investors

What founders care about: 1. The best deal terms 2. The speed of the investment decision 3. Brand of the individual partner leading the investment 4. Specific expertise from a former founder Founders have much more desires, making it crucial for VC firms to find founder-investor fit as they think through their strategy.

VC Firms Strategy

To find founder-investor fit, VC firms focus on: 1. Diversity across gender, race, age, and socioeconomic background. 1. E.g. The BLM movement has shone a light on the lack of Black VCs. 2. Generational transition 1. Why VCs care about this: 1. Investors active during the dot-com era are beginning to retire. 2. A new crop of younger, more diverse investors in partnerships is rising. 3. Brand at the firm level and individual partner level 1. There can be tension between a firm's brand and an individual partner's brand.

The Decade Ahead

Focusing on founder-investor fit can lead to a competitive advantage for a VC firm.

August 1, 2008
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Paul Graham
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Paul Graham

A Fundraising Survival Guide

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The Summary

Raising money is the second hardest part of building startup after finding product market fit. Investors are not sympathetics. Investors are skittish because they make large decisions with limited domain expertise.

Bootstrapping (= Consulting)

Some “bootstrapped” companies started out as consulting companies and used earnings to turn into product companies. Consulting route can take years for efforts to fruition.

How to Approach Fundraising

  • Have low expectations and understand that deals fall through.
  • Prioritize working on startup and then investors, especially with smaller founding team.
  • Be conservative and lock in eager investors quickly because of their skittish nature.
  • Be flexible with financing.
  • Demonstrate qualities that show founders can survive independent of investors.
  • Don’t take rejection personally because statistical odds are against every founder.
  • Be able to switch to consulting if necessary.
  • If possible, avoid novice investors.
  • Understand if investors are indecisive because waiting time could potentially destroy companies. Ultimately, startup founders need to be aware of dangers during fundraising, and venture capital investors need to also be aware of how their indecisiveness could destroy a company.
July 7, 2015
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Bill Gurley
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Above The Crowd

In Defense of the Deck

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The Summary

Over the past few years less entrepreneurs are pitching with a slide deck. However, investors are evaluating how founders convey a story and a deck illustrates that skill. Founders can have success without a deck, but this isn’t always optimal. 6 reasons why good presentation decks are impactful:

Importance of narrative

A slide deck transports the listener to the conclusion to invest

Controlling the cadence

  • Slide decks help organize arguments and keep them succinct
  • Helps use time wisely 

Numeracy

  • Conveying statistics is much easier in a presentation 
  • Best entrepreneurs are focused on numbers

Storytelling never ends

  • There is always a need to attract investors and customers and practicing storytelling is key
  • Better storytellers are often better entrepreneurs

The process itself is useful

  • Creating a presentation is a forum to make sure everyone is one the same page
  • A structured presentation helps organize key parts of the business 

Be like Steve

  • The top entrepreneurs like Elon Musk and Jeff Bezos all had some sort of presentation It makes sense to go without a presentation in a get-to-know you situation with an investor Great storytellers have a competitive advantage
August 1, 2013
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Paul Graham
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Paul Graham

How to Convince Investors

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The Summary

In order to raise money, founders need to demonstrate certain qualities in order to convince investors. Three things founders need: (1) be formidable; (2) have a promising market; and (3) have some evidence of success so far.

Formidable

Investors seek founders that are genuinely confident and appear prepared, when facing adversity.

Truth

Formidable founders are sincere, do not attempt to mislead investors, are domain experts, and have a provisional roadmap on how to succeed.

Market

Startups are considered a good bet if they are targeting a large market and demonstrate the necessary expertise and traction to capture the market.

Rejection

Investors seek to know about the other investors involved in a company. When asked about other investors, founders should not lie but be genuine and ultimately state how they have changed since past rejection and that they are in talks with others.

Different

Founders need to convince investors that their startups are not speculative. To impress investors, founders need to 1. Make something worth investing in. 2. Understand why it's worth investing in. 3. Clearly explain that to investors.

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Nicolas Carteron
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Medium

Pitch Deck Teardown: DocSend. A brilliant deck that raised $1.7M

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The Summary

DocSend has established itself as a serious contender in the corporate application market, boasting more than $18B raised using their platform to share financial documentation. These are some important details they had in their seed round deck that helped them raise $1.7M in 2013.

Title Slide

  • Should include logo and brand name, tagline and some icons that explain the value proposition of the company and purpose of the deck

Team Slide

  • Shows the different members of the team, their position and a short bio

Comparisons

  • Compare yourself to existing services to introduce your offering and to anchor it to a certain image of quality. However, this could be seen as lacking character. 

The Problem

The Solution

  • Refine them until they not only convey your offering clearly but also do it with style.
    • Action verbs should be strong, sentences catchy.

Revenue Model

Market Size and the larger opportunity

Customer acquisition

  • Outline your exact plan precisely.
  • Investors love when your story is coherent and your strategy in line with your economics.

Competition

Product Walkthrough

  • Outline exactly what your product is and how it works. 

Customers

  • Outline people, company names and logos, highlighting how many employees they have, how many sales reps etc. A pitch deck should demonstrate a clearly defined strategic plan, a growing target market, and reasonable unit economics.
September 27, 2017
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Tiffany Spencer
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Techcrunch

How to announce a funding round

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The Summary

Attracting investment is a milestone for any startup – it’s a vote of confidence from a respected outside expert in your space and a signal that your company is positioned for the future. How to get it right:

Drafting the Announcement

Mention investors, give a background on the company and quote from the founder or CEO

Securing coverage

  • The goal of your announcement is to generate news coverage.
  • Your media list should include reporters with whom you have a relationship. 

Lead Time

  • Give reporters ample time to write the story.
  • This can be easily achieved by sharing news in advance under “embargo.”

Amplifying the news

  • You can also amplify your news through social media and other “owned” channels.
  • Sharing links via Twitter, Facebook and LinkedIn drive awareness of the news. 

PR agency

  • Having PR professionals at your service is helpful.
  • For many early stage companies, committing to an agency on retainer is too much too soon.
  • You might consider working with a consultant or agency on a “project basis.”
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David Frankel
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Founder Collective

Going Up and Down the VC Roller Coaster

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The Summary

A lot of volatility goes into investment decisions.

Highs

  • Entrepreneur with impressive background
  • Product with traction
  • Team of all-stars

Lows

  • References uncover flaws
  • Industry diligence -> small opportunity, congested, or capital intensive
  • Distracted by "new shiny object" deal

Strategy for founders

  • Line up news to break through the process (e.g. new customers, sales bump)
  • Time the process to create FOMO
  • Be responsive
July 8, 2019
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Eric Paley
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Founder Collective

Why Small Interactions Make a Big Difference

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The Summary

A founder and VC will often spend less than a full day together before they decide on their partnership. In cases like this, every small interaction takes on huge importance. 

Here are strategies to ensure that your brief interactions with investors make a good impression.

  • Get organized before you reach out.
  • Respond quickly.
    • Keep investors in the loop to avoid making them hesitant.
  • Address all questions and issues with urgency.
    • Don’t let doubt linger.
  • Overdeliver.
    • Prepare to exceed expectations at every step.
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James Currier
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NfX

16 Non-Obvious Fundraising Lessons On Pitching

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The Summary

16 Non-Obvious Fundraising Lessons On Pitching:

  1. Use sentences with data/numbers: people who build businesses speak in precise numbers, not generalities.
  2. Pitching is a full-body experience: body language is a big part of communication.
  3. Diagrams communicate 10x more.
  4. Jump to the screen and point: Venture capitals (VCs) can focus on the thing you’re focused on.
  5. Send your company brief ahead of time.
  6. Get there 15 minutes early.
  7. Sit in the front of the room.
  8. Don’t talk about your passion – show it: show that you aim to drive the business forward through the strength of will.
  9. Look the part: look professional.
  10. Bring a pen and take notes: ask questions and take notes.
  11. Only bring your best presenters: choose people based on their personality and their skill in pitching.
  12. Make a specific deck: prepare them with the language that will persuade the other partners in the firm.
  13. Spend 1/3 presenting, 2/3 asking questions.
  14. The goal is learning, not closing: ask for feedback during the meeting.
  15. Know when you’re improving or not.
  16. Understand VC Psychology: consider the constraints and the context they’re operating in. Be aware that: (1) VCs are constantly switching contexts; (2) VCs are being trained to be negative and have to say no all the time; and (3) You should treat VCs as equals and have the confidence to have a real conversation.