Venture Capital 101 – I’m a VC, Who Are You? #Fundraising

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More and more aspiring Internet technology entrepreneurs are coming from various non technical backgrounds, i.e. kids not grown up on Hacker News. Google search phrase “Raising money for your startup“, and the overwhelming ambiguous results will leave you confused whether or not to raise funding at all. At best one finds herself in deep waters with topics like Series A crunch, Valuation bubbles, or whether Angellist Syndicates are good or bad for the industry. Huh?

Hell, even the kids on the Hacker News find themselves lost in the fundraising jungle, why I’ve put together “Venture Capital 101 – I’m a VC, Who Are You?“. It explains to an audience new to fundraising the essentials of venture capital, early stage funding alternatives, and the difference between good and bad VC. Very important.

I first gave this talk to Interactive Communications students at Berghs School of Communications in Stockholm, March 11th 2013.

Venture Capital, huh? (s. 3-4)

Venture capital is a business itself. Understand the business model, its value proposition, and the different stages in venture capital.

How Funding Rounds Differ by Elad Gil
Venture Capitalists Are Not Your Friends by Vinod Khosla
Venture Math 101 by Mark MacLeod, StartupCFO
Venture Hacks “THE Venture Capital Wiki”
Venture Deals “THE Book”
Understanding Dilution: Helps you get the basic understanding of how equity stakes change over time depending on the team size, funding size raised and valuation. Additional great advice on pre- and post-money valuation with dilution calculator by Seedcamp.

Early Stage Funding Alternatives (s. 5-8)

Besides from bootstrapping or borrowing from FFF (friends, family and fools), there are private Angel investors, Seed stage investors, i.e. venture capitalists, a sea of Accelerator programs (over 100 in Europe alone!), and Equity crowdfunding as the new kid in town, all willing to trade your company’s equity for funding.

How To Fund a Startup by Paul Graham
AngelList: Where it happens. Your number one professional network as an entrepreneur, as well as an investor. Offers equity crowdfunding from accredited investors.
Global Accelerator Network: To check-upon accelerators, their transparency and success rating.
Equity Crowdfunding: Besides from traditional reward based crowdfunding platforms Kickstarter and Indiegogo, well suited for creative industries and hardware products, there are equity crowdfunding platforms such as Seedrs, Seedmatch, and FundedByMe, which operate on the European markets. As the industry matures, so will the platforms, but make sure you understand the terms and choose one that fits your business: “How Crowdfunding Nearly Bankrupted My Company”.

Fundraising aka The Dating Game aka How To Get Married (s. 9-21)

“I usually know within 5 min if I want to fund you, within 15 if I want to fund your business” Fred Destin, Accel Partners

How fast industry moves: Fred has since gone down to 3 respective 10 min regarding whether he wants to fund you 😉

“Ask For $$$, You Get Advice – Ask For Advice, You Get $$$” Jason Nazar, Co-founder Docstoc

Your biggest hurdle is to overcome indifference. You will also hear over and over again: “We invest in teams”, “It’s all about the people”. Therefore:

Pitch yourself, not your product.
Have a compelling story.
Create relationships, get introductions.
Show up. You really should be found on Angellist.
Keep good investors updated on your company progress, and please,
Don’t fall for vanity metrics! You’re being tracked by investors, and the ones you do want to fund your business don’t buy into your short lived hockey sticks. We all want to see real traction, real engagement.
#Mustread Fundraising Hacks #Mustlisten How Good VC works #Mustwatch Video by Fred Destin, Accel Partners

The Good vs Bad VC – The Due Diligence (s. 22-29)

Maybe most important: Learn how to spot the douchebag VCs , the ones who will only waste your time. Trust me, there are plenty out there.

Who Not To Take Money From by StartupCFO
VC Asshat Move #1 by David Cohen
Due Diligence Should Go Both Ways: VC Check-list For Entrepreneurs by Ciaran O’Leary, BlueYard

Yes, the early stage funding should preferably come with a value add, but when an investor suggests ways to become more viral. I’m like… Remember, you know your company best!

Extra Material: Fundraising Toolkit #Mustwatch

Scott Sage, Expert in Residence at Seedcamp, summarizes all the above and more in 20 min talk Fundraising Toolkit. Few golden takeaways:

Raising on AngelList: Only signal on Angellist that you’re fundraising AFTER you have your first one or two signed commitments ON Angellist (Investors LOVE social proof, appeals to their herd mentality.)
A/B test your pitch live: If you’re struggling with your pitch at investor meetings, take notes on which parts of the pitch are confusing and adjust accordingly.
Best time raising seed funding and the best known secret in business: The best time is just prior to a launch when your product is almost ready and you basically have nothing but a compelling story. Having been in beta for 3-6 months, struggling to get traction, is way closer to death valley than raising funding.

#Goodreads

There are many and great sources of information when it comes to read on entrepreneurship, startups and venture capital, but these are the venture capitalists I recommend to have on your reading list.

#Mustread would you decide to pursue an entrepreneurial path: “Stealth Mode” and Other F’ing Brilliant Strategies by Jason Cohen

Paula is Digital Product Advisor and Top 100 Women in Tech in Europe, focusing on Product, Go-to-market, and Internationalization strategies. Rated as one of the very best startup mentors in Europe, she has to date mentored over 150 digital technology companies on product, marketing and growth. Pick My Brain! is her fixed price service tailored to early stage startups, gender wage gap adjusted for female founders. Contact Paula for digital strategy work or book her as keynote speaker about #Startups #WomenInTech #GenderEquality #Entrepreneurship. Read more about her work and connect @Twitter, @LinkedIn. “You never learn anything when you speak, only when you listen” – Roelof Botha / Douglas Leone, Sequoia Capital

Paula Marttila

{ being part of the change, not disrupted by it }