A novice’s guide to raising venture capital

p 1 raising venture capital for the first time not sure where to start read this post

Editor’s Notice: Every week Maynard Webb, former CEO of LiveOps and the previous COO of eBay, will provide candid, sensible, and generally stunning recommendation to entrepreneurs and founders. To submit a query, write to Webb at [email protected]

Q. We’re beginning to fundraise and want to know the way to do it. What recommendation do you have got? 

Pricey Founder, 

Congrats on getting to this level. We fund quite a bit early-stage corporations and first-time founders on the Webb Funding Community, so we’ve beforehand given this query a whole lot of thought. We broke our roadmap to fundraising down to steps that I hope any first-time founder will discover helpful. I’d like to give a hat tip to Jonathan Pines, common companion, who helped me with this reply.

Construct a mannequin of how a lot capital you want and wish. The first step is to assess how a lot cash you will want. We propose at the very least sufficient to cowl operations (headcount, sources, and so on.) for 12 to 18 months—nobody desires to be raising cash each six-to-nine months. Then, construct in an excellent buffer, for instance, six months to cowl any uncertainty. 

Assess the place you might be. Decide general firm technique and key milestones for the subsequent 12 to 18 months. How robust a worth proposition do you have got (each within the concept and within the crew)? How a lot traction you have already got? Is it nonetheless the concept stage? Is there a prototype? Is the product launched? This evaluation will decide whether or not you have got a compelling alternative, which determines if you should have a alternative of traders or if you will want to scramble to elevate funds. Offers fall into one in every of two classes: offers which can be very popular or offers that it’s essential to work very exhausting to get performed.  (It’s form of like credit score—straightforward to get once you don’t really want it, and exhausting to get once you want it probably the most.) The simplest manner to get funding is by constructing a related services or products that everybody desires.

Construct your supplies and story. This may sometimes be in a ten to 15-page slide deck, although generally it may be a shorter doc at earlier levels. It’s key to share a story and clarify why you might be doing this firm. Preserve issues easy. Follow earlier than you current! Solicit suggestions from pleasant events and hear fastidiously to their suggestions however keep in mind that opinions will differ, in order all the time, depend on your judgment.

Keep an inventory of goal traders. Relying on the spherical dimension and targets these will be entrepreneurs who began an identical firm, angels, small funds, or larger VCs. Use public knowledge sources (e.g. Crunchbase, AngelList, LinkedIn) to see who seems to be lively in your sector and stage however shouldn’t be concerned with direct rivals. As with all the pieces, heat leads are finest. At WIN, introductions that come from our associates who make investments alongside us, portfolio corporations, or individuals with whom we regularly make investments, are thought of very severely. Attain out to associates and contacts who could know traders and will have concepts for you.

Prioritize your investor listing and plan your outreach. Cull the first “sortie” to 10-15 traders. Then construct an inventory of your outreach channels. Do you have got nicely related contacts who can look by way of your listing and supply ideas and doable introductions? Are you able to establish how your goal traders like to be reached? Additionally provide you with a powerful chilly outreach plan as a backup.

After you attain out, assessment! It’s crucial to assess and iterate. What labored nicely and what didn’t? What are you able to do to strive to enhance the method? Are you prepared for extra outreach or do you want to regroup and revisit your technique?

Assume forward: Construct a future fundraising mannequin. What’s your anticipated plan for future fundraises? What’s going to dilution appear like in numerous funding situations? What would you like to optimize for?

Select correctly. Choosing the best individuals is a crucial choice. Every founder has to resolve what issues most. The phrases? The investor? The investor’s fame? The investor’s community?  Choose funding companions which can be dedicated to serving to and have a observe report of doing so. I like to recommend having just a few wholesome angel stakes within the deal, as opposed to very small stakes from a lot of angels—particularly should you anticipate the angels are to present time and a spotlight to assist the corporate. I’m opposed to the “peanut-butter” strategy, the place there are a whole lot of angels with such a small stakes that they aren’t prepared to dedicate the required time it takes to be meaningfully concerned. Lastly, there ought to be a private rapport and an affinity in direction of each other. Traders can be with the corporate for a very long time, so select individuals you will have with you thru each good instances and the dangerous.