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The All-in-One Startup Funding Guide

There is a proven process to successfully raising startup funding. I’ve learned about the process over the years by getting to know a few of the worlds most successful serial entrepreneurs, by raising millions myself from angels & VCs, by investing as an angel, and as CEO of multiple startups as well as an investor in the equity investment platform Silicon Prairie Portal and Exchange.

Across all this investment and fundraising activity, I’ve seen that the most successful fundraises have a several key elements in common. Below are five parts to successful fundraising for your startup — with specific examples, templates, and resources.

The Pitch Deck

Every great startup begins with an idea. And even with the best startups, over time that idea is deeply refined.

Creating your Pitch Deck is one of the best processes for getting your idea and business out of your head, on paper, and to enable continual questioning and refinement of your thinking and approach. And for now here are the high level takeaways on pitch decks:

  • Follow the formula investors look for, which I show you in my post

  • Investors don’t write checks for decks — the goal is to get a meeting/call

  • Go deep on your “meta” narrative — why this, why now, why you, how

  • Give basic product/traction points but less information, more story

To help you with your deck, I created a template for you along with examples and resources of successfully funded startups and their pitch decks — it’s all in the pitch deck post. This includes recommendations from VCs like Dave McClure of 500 Startups, along with the actual deck that Reid Hoffman used to pitch and close Greylock when they invested in LinkedIn’s Series B.

Term Sheets (What To Offer Investors)

Crowdfunder posted a detailed post on Term Sheets. It includes samples and templates from leading legal firms, VC firms, along with data and resources on how to think about the valuation of your company when you’re fundraising.

If you haven’t raised angel or venture capital funding before, there’s likely a lot you don’t know about it from a legal, structural, and process standpoint.

  • The high level fundraising process with investors goes like this:

  • The founder shapes terms of a financing (e.g. $500,000 in priced equity at a $5M pre-money valuation)The founder discusses these with investors, and investors consider and respond

  • A first investor decides they will invest at specific terms (not always at the terms shaped by founder)

  • If founder accepts, this can be formally or informally a “lead investor” (someone credible who priced the round)

  • All the detailed legal documents get created or updated, and the investment is finalized

  • The founder goes out to raise the remainder of the round at same terms from other investors

Term sheets are used in this process to help founders and investors come to an initial agreement. Again, I’ve shared some great examples and templates for you in my post on Term Sheets.

After terms are agreed to and the term sheet signed, long form documents are drafted by legal counsel, signed, then money is wired.

Build Your Target Investor “Hit List”

Every great fundraiser aims high by first finding out who the best companies and investors are in their space, and then learning about them and setting goals to to meet with them and capture their interest and investment.

To this end, you want to build a deep and ambitious investor “hit list” for yourself. This is a list on an excel spreadsheet of at least 40–50 active investors - notable angels, VCs, and high net worth people who have created, sold, invested in companies in your space.

Great fundraisers do great research to find these investors and are creative and resourceful in the ways they find to contact them directly. Your first step is to search Google for the leading investors in your space/industry. Google “top ____ angels” and “top ____ investors.”

As a FinTech company I might search for “top fintech investors” and I would find this list in the results which I would add to my hit list.

This will help you build up your hit list of 40–50 investors or more across both individual angel investors and VC firms. In your excel spreadsheet write down the names of the investors or firms, and partners in those VC firms, and what city they’re in. Then use the online lists of investors to deepen and flesh out your list info at places like Crunchbase, LinkedIn, Prime Crowdfunding.

Also, leverage the success of companies that have come before you and raised money in your space. Search for the names of companies you know have been very successful in related markets to yours, and use these online investment sources and platforms to identify who the investors are who invested in those deals. These are also your target investors.

With your hit list in hand, you’re ready for the next step in meeting and pitching investors…

Preparing, Meeting, Pitching Investors

Getting in front of investors takes several steps in preparation before you can expect to find and reach the right investors, meet with these investors, and close any funding.

Successful fundraisers put the following process into place before they go out to investors, to make sure their time is well spent: (Note — I’m not including equity crowdfunding in this section on meeting investors, but I cover that below.)

If you don’t have a live product, get as close to a working demo as possible (wireframes, designs, etc.) I’ve seen this be a simply a mock-up of an entire app, or screen shots, CAD designs, etc.. Just don’t expect slides on a deck alone to do the trick and trigger interest.

Ideas are not what investors fund but detailed product plans, progress, teams, and rollout strategy can be.

  • Get friends & family (or yourself) to put first money into the company/round.

  • Bring on an advisor or two with experience in a related space, expect them to add value & make intros

  • Structure & timing are critical, and are your friends. Set a specific time frame for your fundraise to include an outreach period, terms period, closing periods. Tell investors exactly what the time frame and process is.

  1. Often times I see great fundraising set the timing up as roughly two weeks for outreach & scheduling, four weeks of meetings where they meet with investors and discuss and negotiate terms, and then four weeks of closing to follow where they get everyone in (or not) in a timely manner and with a final close deadline.

  2. The more you stick to your timing and your guns here, the more that both you and your investors will respect your time, and the more often investors respond more positively.

  • Send a short pitch deck ahead of the meeting, set expectations that you are asking for funding (qualify)

  • Have an “ask” and suggested terms for the investment when you meet (see Term Sheet section below)

  • Plan to hear “No” from all of your early meetings. Knowing this, go to the lower pressure and less significant investors first. Use these meetings to get feedback and become more comfortable on your pitch. Pay attention to what they question, where they get hung up, what they are excited by, how you did well and where you were weaker.

  • Expect a lot of No’s and failure. Everyone fails most of the time at fundraising, until they don’t.

  • Celebrate the process of getting good investors to say No. I know this sounds odd, but hear me out. Every successful founder knows how hard fundraising is, myself included.

To feel better about myself in the fundraising process, I developed a strange and unusual “ritual” that I took up in order to not feel as deflated at difficult points in the fundraising process.

My ritual? I make a point of it to celebrate how many “No’s” I received. I actually look over the long list of all the investors who have passed in one long spreadsheet. Looking at this, I positively acknowledge myself for the hard work, time, and toughness it has taken to get this many meetings and hear this many “No’s.”

I also remind myself that this is part of what success looks like — getting in front of lots of great investors while knowing that I will likely hear 15–30 No’s for every one “Yes” early on.

Use Equity Crowdfunding To Reach Investors

Early stage funding across angel and venture capital is moving online. As little as two to three years ago it was against the law to raise funding for your startup online. But today there are new opportunities and new laws that allow you to raise money online from angels, VCs, and even everyday smaller investors.

My recommendation to any startup founder is this — first start by raising funding more traditionally offline and aim as high as you can to build great direct investor relationships. Get a strong investor or two in if you can first — as they bring strong follow on interest once you’re on an equity crowdfunding platform.

Then… look to leverage what you’re already doing with an equity crowdfunding platform that works with high net worth investors first (accrediteds). Reason being, you won’t have to spend much in the way of added cost, time, or legal resources to put your company out to accredited investors (meanwhile, with non-accredited investor platforms it is a longer and more complex and expensive process).

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