August 11, 2017 | 4-minute read (803 words)
Whether you are a seasoned seeker of capital looking to get continued investment, or you are a first-time entrepreneur putting together notes on what may be needed, there is much to glean from this webinar from Early Growth Financial Services at Startup Fundraising 201.
David Ehrenberg of Early Growth Financial Services (EGFS) and Scott Bryan of Imagine H20 delve into what early stage companies need to know when it comes to fundraising and discuss the intricacies of bringing capital in. Imagine H20 is an accelerator for entrepreneurs working on water innovation and solving the challenges of resource privatization and availability.
Imagine H20 has the illustrious honor of having their participants represent 10% of early stage investment in the water industry. Similarly, Early Growth Financial Services covers a huge swath, providing nearly 20% of all startups nationwide with outsourced CFO solutions. The two companies have a long history, and Ehrenberg and Bryan share insights into what you need to know, how to find out more, and the questions and type of people you should consider when deepening your search for fundraising.
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00:00 Startup Fundraising 201: The next round
06:45 Founder Statement/ Who we work with
10:15 Starting Questions to Consider
11:15 Reason to Raise Funds
14:00 Funding Options
19:00 Venture Debt
21:55 Convertible Debt vs Equity
27:20 Choosing your Target VC
30:20 Presenting to Investors
32:20 Key Slides in your Pitch Deck
34:00 Top-Down Financial Projection
36:55 Bottom-Up Financial Projection
37:30 Funding Requirements
40:20 Accounting: Post Funding
48:55 The Cap Table
49:30 When a Firm Like EGFS is needed
50:09 Follow up Contact Info
1. Why do you want to raise? What are your funding options?
We're going to talk about the process, about how you actually go about networking and raising those funds, and what the business development process is like for raising funds. Then we'll talk about what investors want to see and some of the challenges once you have funding. It's always important to think about alternative methods if you're not going to be able to raise venture funding. There are a lot of other methodologies that you can use to raise funds. The first consideration is: Do you have a business that venture capitalists are going to be interested in?
2. Do you really need venture capital funding, or is this an idea or a business that you can bootstrap to get to initial revenue?
Funding Options - Angel Investors
There are three types of angels:
In addition to equity investors there are also different ways to leverage the amount of money that you raise and extend your runway, or the length of time that your company has before it runs out of cash. (see also: When Was The Last Time You Thought About Cash Burn?)
One of the best ways to extend your runway and to fight against dilution or giving up too much equity is leveraging your fundraise with venture debt. (see also: Debt Funding Options).
Venture debt is true debt that needs to be repaid, but it's typically associated with raising an equity round of capital. It's non-dilutive, but there is an interest rate associated with it. There's typically a little bit of warrant coverage, which is like a call option on your equity, but the equity impact is fairly minor. It's a nice way to extend your runway by a few million dollars
All these quotes and more can be found within the webinar as part of the ever-growing library of resources available from Early Growth Financial Services. If you or your company would like to be involved in co-hosting or presenting on a topic of interest to our growing base of subscribers contact us to find out more at firstname.lastname@example.org with re: webinar in the heading.
- Individual angels: These are investors that are in the network. These angels operate solo and can be difficult to meet.
- Super angels: This is a breed of investors that have appeared over the last five years. Super angels tend to be folks like Dave McClure, Ron Conway, or Page Craig. They are very, very high net worth individuals and make a lot of investments in the early stage market. Their investments typically range anywhere from $25,000 to a $100,000, but they approach investments much more like a venture capital firm as opposed to a typical angel.
- Angel groups: In every city in this country there are angel networks where individual angels come together to share deal flow and collaborate on due diligence to co-invest together. (see also: How Your Startup Can Attract Angel Funding)