MD at Unstructured Ventures, startup finance and funding Ex- VC, strategy consultant, startup CFO, private equity. Still a photographer. MBA Finance, Tepper School of Business at Carnegie Mellon BA Economics, University of Virginia
@tdavidson
What you’ve already learned about: Business Models Creating assumptions and Testing Ideas
@tdavidson
Hopefully you’ve convinced yourself of your thesis, and perhaps even your solution to the problem. Now let’s convince others.
@tdavidson
Pitching
@tdavidson
Content & Process & Audience
@tdavidson
Content i.e. what to pitch
@tdavidson
You control your story.
@tdavidson
Pitch decks have a flow that investors expect to hear.
@tdavidson
VCs expect problem and solution right at beginning.
The order isn’t the key; the most important thing is to get someone hooked.
@tdavidson
Figure out how you can hook them, and lead with that.
@tdavidson
Why you (and your team) is uniquely predisposed to execute better than any founder in the space.
@tdavidson
Why the market has a problem and needs a solution.
@tdavidson
Why your product or technology is better truly breakthrough or innovative, or simply much better.
@tdavidson
Why an investor needs to be a part of what you’re building.
@tdavidson
Flow tells the story…
@tdavidson
… why you’re uniquely predisposed to solve …
@tdavidson
… this problem you discovered …
@tdavidson
… and how you created a solution …
@tdavidson
… which is a major innovation …
@tdavidson
… in a huge, growing, accessible market …
@tdavidson
… and you’ve already started getting traction…
@tdavidson
… given your unique position v. competitors…
@tdavidson
… and here’s how you’re moving forward.
@tdavidson
The flow for crowdfunding and foundations is very different.
@tdavidson
The “proof” around the how varies drastically.
@tdavidson
Early-stage venture = prove there is big market + a potential business model
@tdavidson
Late-stage venture = prove the business works and needs capital to execute and escape
@tdavidson
Crowdfunding = prove it’s something that people would buy
@tdavidson
Foundations = prove it fits our criteria.
@tdavidson
All experiences are different and unique.
@tdavidson
Common Gaps
@tdavidson
The why: why do you care about this?
@tdavidson
Clear, crisp description of the problem and solution. Product demo, screenshots, hands-on, anything to get people connected to what you’re doing. Let them be a part of it.
@tdavidson
Define your market and addressable market with clear logic. Logic is better than sheer size.
@tdavidson
There are always competitors Just because nobody does exactly what you do, doesn’t mean there isn’t competition.
@tdavidson
Crystal clear ask. Money, support, advice, mentoring, business development, etc.
@tdavidson
Create materials that are professional but approachable. Easy for readers to skim (don’t assume people read details). Big headers, big quotes, big numbers, charts, graphics. Talk about your ideas: don’t hold back
@tdavidson
Tactical fundraising
@tdavidson
What do I send someone?
@tdavidson
Elevator Pitch Paragraph Summary Intro Email
@tdavidson
PPT Deck Teaser v. Presentation v. Exec Summary v. Word Doc Business Plan
@tdavidson
Financial Model -> Summarize!
@tdavidson
How?
@tdavidson
Warm intros. Find a connection.
@tdavidson
Connect at a human level.
@tdavidson
Seed VCs don’t expect you to have all the answers. Expect honest, transparent, grounded and well-thought out rationales.
@tdavidson
It’s a relationship business.
@tdavidson
Ask for advice before you have to ask for money.
@tdavidson
Build relationships with investors far before you need them.
@tdavidson
Determine what you need.
@tdavidson
Funding Network Domain expertise Past success Brand name (note: popular =! fit)
@tdavidson
Don’t optimize for valuation. Optimize for resources for success.
@tdavidson
How much? Make it grounded.
@tdavidson
Target: example raising $750K Rationale Runway: 18 months of runway 3-6 months to raise, 12-15 to execute enough to justify a next round Key milestones Key milestones to be accomplished in time period and runway, enough to justify success and traction for next raise
@tdavidson
Round size is more art than science.
@tdavidson
Round size impacts valuation and dilution Sell 10-25% in each round
@tdavidson
Create forces to get a yes. Competition, growth, fear.
@tdavidson
Commitments are extremely valuable social proof.
@tdavidson
Audience
@tdavidson
• Investment thesis • Too early • Too late • Founder • Team gaps • Immature product • Immature market • Product / market fit • Competition / “Winners” already identified • Conflict with portfolio investment • Valuation or terms
@tdavidson
No doesn’t necessarily mean you’re wrong; you could be pitching the wrong audience.
Look for partners, not just funds. Crunchbase, Angelist, LinkedIn… and people.
@tdavidson
Absence of a yes is a no.
@tdavidson
No means no, but not for the reasons you may think.
@tdavidson
Learn as much as you can until you have to say yes.
@tdavidson
More info, more time, more traction, less risk.
@tdavidson
VC is a lagging indicator.
@tdavidson
Crowdfunding is a leading indicator.
@tdavidson
Buying a product when it’s only an idea.
@tdavidson
Foundations have different goals, so the pitch is different.
@tdavidson
Defined application process.
@tdavidson
Publicly declared criteria.
@tdavidson
Balancing conflicting goals.
@tdavidson
Commit to pitching & fundraising mode.
@tdavidson
More resources: About the fundraising process psychology and incentives: http://www.paulgraham.com/fr.html For statistics and process around fundraising seed rounds: http://www.slideshare.net/schlaf/raising-a-seed-round For a good explanation of VC and fundraising: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/0470929820 For resources on pitch decks, process, and financial models: http://foresight.is