1

Fundraising Guide for Early Stage Startups

Scott SageEIR

Seedcamp

2

This is for

• Founders raising a seed or Series A round from VC’s• Not for –

• founders who will be running a rolling close with their seed round via a convertible or

• later stage company founders where the diligence process can take longer (ie Series B+)

3

Typical lifecycle of closing a round

Intro to a VC 1st Pitch

If excited – VC leans into a deal If not, passes or goes cold

Likely 2-4 more meetings with other members of the team Full partner pitch Final DD / Termsheet Transaction execution $ wired and huge relief

4

3 phases

1. Be ReadyAll about Prep

2. StartExecute

Termsheet

3. Close

Company readinessStory/deckRehearsalCompany Strat/planNumbersTraction

Fundraising PlanTargeting (fit)Intro’sDrive the process

*Ultimate Goal

$(1-6 months) (3-4 months) (1 month)

Actual fundraising (ie 1st meeting to completing legals) should take c12 weeks

5

It’s about time

• From first meeting to $ in the bank my personal goal as a VC is to have the deal done in under 3 months• First mtg to partner meeting to final diligence and

termsheet should take somewhere between 3-8 weeks and legals/deal execution should take 2-3 weeks.

• Any longer and you get lazy and time slips• Keeping pressure on both sides to get to completion

means the founder can get back to running the co

6

VC is looking at

TractionPlanTeamMarketProduct

Whether users love the product and are highly engaged?

If product has technical defensive barriers?

Is there at least one highly technical person on the team?

Do they have domain expertise?

Will they be able to recruit and retain the best talent?

Will this be a multi-billion dollar market in 5-10 year’s time?

What are you competing with currently?

What are the clear objectives over the next 1, 3 and 6 months?

How will they use this money?

What does the company need to achieve to raise their next round at an increased valuation?

Do they know their most important metrics?

Does retention look good?

Are they growing organically or acquiring customers with a positive margin?

Is growth sustainable?

7

Ideal timeline

Most time wasted here

8

9

Be upfront about your process

“I’m glad you understand and like what we are doing and we would love to continue the process with [insert fund]. Just to let you know our timeframe, I’m holding first meetings this week with the usual suspects and we are optimistic that we’ll have a termsheet by x week of September. Does this fit with your own timeframe? Could you please walk me through your process?”

10

Checklist

Well designed fundraising deck with the relevant content Rehearsed story Plan for the next 18 months with a budget Other diligence materials ready to be shared in Dropbox Confirmed intro’s lined up from friends to investors Fundraising plan / timeline

11

Appendix

12

Sample due diligence list for a SaaS-Co1. Customer reference calls x 5 (ideally from different verticals)2. Financial model

a. Historical + Forecast of next 2 yearsb. Use of proceeds of the $7m including hiring plan, sales and marketing costs, int’l expansion thoughts

3. Seed Termsheet4. Current Cap Table5. Sales Model / Metrics

a. Existing pipeline coverage for existing quarter and next quarterb. Number of sales people on quota historically (probably not many at this stage!)c. Ramp up time for sales people (probably still a guestimate!)d. Funnel metrics + sales cyclee. CLTV (another total guestimate!)f. CAC Ratio (somewhat erroneous at this stage as your spend / revenue is all over the place)g. Revenue and customer Churn / reasons (very important to understand this)

6. Marketing metricsa. Inbound leads, MQL’s per source, cost assumptions for net 18 months

7. Product / Competitiona. In-depth analysis of product compared to competitorsb. Technical reviewc. How have they won customers away from the comp?d. Roadmap

8. GTM Strategy / Partnerships strategy9. Time with rest of the team

a. Informal interviews with all senior execs onsite to also check out your offices