HUM120-L8

Persuading Investors II

Bootstrapping

• CFIMITYM

  • Gross Burn
  • Net Burn
  • Runaway (no revenue) //how much time/money you left

  cannnot be expected, be reality

• Development

  • Onshore
  • Infrastructure, cloud
  • tools, free SaaS

• Sales

  • Co-founder
  • Commission based

• Marketing

  • Growth hacking

• Legal and Financial

  • Persuade advisor to help

Why/When should you fundraise

when you need it and your product is available in good use

Fundraising: Rounds and Investors

• Best Funders? Paying Customers

What are Investors looking for?

• Have a good company

  • real problem, compelling solution, big market, good team, user validation, customer traction

• view fundraising as evil, get it done as quickly as possible

  • funding is not revenues
  • ignore TechCrunch and VentureBeat headlines

Persuading initial investors

• rule1: conviction breeds conviction

  • advisor help //keep the momentum
  • the "50 done" principle
  • which fundraising round would you participate in
    • raising 1M with 150k committed so far
    • raising 400k with 200k committed so far

    people always over estimated

• rule2:

• rule3: have more than one fundraising option

  • choose 2:
    • crowdsourcing
    • investors/accelerator
    • bootstrapping
    • friends and family
    • angels/seed funds
    • VC
  • difficult ask + different growth plans
  • ethical persuasion: each growth plan MUST be feasible

• rule4: never give up the bootstrapping mindset even after funding

you cannot say, I cannot do this because I dont have enough money, I can only do 50% now. But you need to have a plan B, how you can do so far with limited money

Persuading investors: pitch, presentation, and plan

1. The pitch

   • over email or in person

   Q: why would people care about it?
   R: that's why you need advisor to recommend you

   • text or pics/PDF or Video
   • about 100-200 words

2. business presentation (investor deck)

   • tell a story

3. business memo

   • less than 60-page business plan (word docs)
   • The high-stakes venture capital game

for best VC firms:

• 200 pitches a month

• 1-2 investments a month

• 50% write off

• 1 in 20 is a home run

• the benchmark-rbay story

  • 1997: 1 taker
  • 1999: IPO
  • $6M -> 2.5B

  Do you have 20 shots?
  No, you only got 3-4 shots

Before meeting:

at meeting:

• tell the story
• show (don't state) how BIG your venture can be
• show (servers-on-fire) traction
  • true metrics (not vanity)
  • users, paying customers, usage, revenues
  • market market fit
• show you do need money to survive
  • not bagging, you need each other
  • scale operation
• listen and connnect

after meeting:

• followup, even a 1-2 sentence email
• know where you stand
  • yes, no, or wait and see
• if they are still interested
  • you will get called back to email
  • you should get a forcing function

  VC loves to be second investor

VC: The bigger picture

• the power game
  • at all other times, the ready entrepreneur holds the power
    • invesor love: ready and confident
    • not like: oragant, dishonest
• bigger is not always better

investor psychology in 60 seconds:

• chasing the hot deal
• rushing to be the 2nd one in
• obsessed with the hot trend du jour
• FOMO