Summary: 8 min
Book reading time: 1h50
Book published in: 2020
- Make a compelling pitch deck.
- Make a list of people who would be interested to invest in your startup
- Contact them for a first meeting.
- The first meeting’s purpose is to get a second meeting.
- Design your terms sheet according to investors’ interests so far.
- Close the deal on the second meeting, or get a third meeting.
- Negotiate your terms sheet with your biggest/most important investor
- Get everyone else to invest on those terms
- Use equity crowdfunding to double (or more) the amount you have raised
What Accelerate Talks About
Ok, that one’s a weird one.
I ended up randomly on the website of an accelerator called Newchip.
They offered a free 100-page book about fundraising and startup building, so I thought…why not?
I downloaded it and summarized it in this article.
It gives an interesting view of what building a startup is like for people that have no idea what it’s like.
Table of Content
Click to expand/collapse
- Financing Options
- Finding Investors
- Cold Outreach
- Meeting Investors
- Funding Checklist
- Fundraising Is Sales
- Closing Investors
Summary of Accelerate Written by Newchip Accelerator
Part One: Startup Fundraising
Startups need lots of outside capital to grow fast and become profitable. So, they raise.
You need to start fundraising when you’re ready to tell your story.
When investors hear a story that resonates with them and believe the team of founders can grow the company to capture a large market opportunity, they will invest.
You also need to demonstrate traction. And it needs to be “the right time” for the investor to invest.
You need to impress investors. You do so by showing quick growth. And you grow quickly by building a product people want.
Funding rounds: rounds of financing usually provided by VCs. While it used to be equity, most investors today want convertible debt or simple agreement for future equity (SAFE).
Convertible debt: convertible debt converts to equity when the company raises equity financing. If it doesn’t convert, it works like a loan, with an interest to pay and a maturity date.
SAFE note: like convertible date, without maturity date or interest.
Equity: raising equity is complex. You need to decide on a price per share, an overall valuation, and issue this equity to investors. It rarely happens in seed rounds, and you need a lawyer to help you out with it.
Angels VS Venture Capitalists: angels invest their own money, rely more on their emotions, and invest quickly. VCs invest the money they raise from other people, rely on “documents”, and take many meetings before investing. The best way to meet these people is to have someone else introduce you to them.
Crowdfunding: raising on online platforms from a lot of different people.
Accelerators: usually the fastest way to get funding. They focus on teams, vision, and traction before accepting startups.
It’s a numbers game. Go after as many people as you can.
The success rate is 3 or 4%.
Here are some strategies:
- Make your own list with LinkedIn, AngelList, Foundersuite, and Crunchbase
- Filter your leads. Some will not invest in your geographical area/industry.
- Use LinkedIn to build your network. Befriend founders of companies they have funded.
- If you’re friends on LinkedIn with someone that is friends with your target, ask for an intro.
- If it doesn’t work, send a cold email.
Most entrepreneurs don’t get their cold emails read because they can’t catch the attention of the investor.
One of the best ways to get someone to open your email is to ask them for advice in the subject of the email.
Your purpose when you meet someone for the first time is to get another meeting. They rarely invest after one meeting, so make sure your first meeting is interesting enough to get another one.
- Simplify your pitch
- Let them talk more than you do
- Tell your story
- Be confident and humble
The more interest you got from big investors, the higher your company will go in value.
Most people base their valuation on the market.
You want a valuation that enables you:
- To raise enough money
- Without too much dilution
Companies raising a seed round are usually valued at $2M-$10M.
The advantage of raising with SAFE or convertible is that there is little negotiation, and it can be closed fairly quickly.
Don’t negotiate in real time.
Ask investors for a written offer, then think about it and answer back later. Don’t hesitate to ask them to motivate their offers (why they chose this and not that).
Once you get to a yes, don’t wait. Get a signature and cash ASAP. It should not take more than a day.
Don’t spend too much time creating documents for seed rounds. If someone wants too many documents, drop them, as they are unlikely to invest even if you provide everything they’re looking for.
Have a one-page executive summary with:
- Your vision
- Your product
- Your team
- Market size
- Minimum financials
Get graphs and pics in your slide deck, not words.
What to include in the pitch deck:
- Market Landscape
- Current Traction
- Business Model
Fundraising Rules to Follow:
- Raise as fast as possible
- Don’t stop raising too soon.
- Be greedy and selfish: raise as much as you can from the people most likely to give you money.
- Constantly be looking for leads
- Be honest and ethical. A bad reputation will destroy your chances.
- Never be arrogant
- Too talkative
- Slow to follow up
- Don’t break an agreement
- Claim that you know something you don’t
- Ask for an NDA
- Take “no” personally
Fundraising Is Sales
And like sales, fundraising follows a funnel.
- Get investor leads
- Nurture those leads with intros and emails
- Schedule meetings
- Respond to data requests
- Get a yes
- Always Be Closing. If you don’t get money, get at least a next meeting.
- Follow up frequently
Successful fundraising is made out of five parts:
- The pitch deck: making a pitch deck is one of the best ways to refine your idea for your startup. Careful though: investors don’t invest because of your deck. Your deck should get you a meeting. Use a lot of “why” in your narrative. Why this product, why now, why this investor, how, etc. Talk about traction and a lot about your story.
- Terms sheet: the founder designs it, then tries to raise, the investor sets his own terms, the founder changes the terms sheet, everyone else invests with the new terms.
- Your investor list: find out who are the best investors in your field, and get them to invest. Google “top your industry investors” and add them. Look at startups in your space and who they have raised from.
- Pitching: investors don’t fund ideas. They fund detailed plans, progress, traction.
- Get friends, family, or yourself to invest first in the company.
- Get an advisor with experience that adds value and helps with intros.
- Come up with a specific timeframe for outreach (2 weeks), terms, (4 weeks), and closing (4 weeks). Tell your investors about it and stick to it.
- Send a short pitch deck before the meeting
- Know what you want to ask the investors + the terms.
- Expect lots of “no’s”. Use these to get better.
Once you have raised a lot of money from the offline world, you can always go online and see if you can use equity crowdfunding. This will help you out get many more investors and can double (or more) the money you have already received.
Part Two: Growth Hacking Traction & Sales
- Have clearly defined goals: how many customers per week do you need? What’s the best way to achieve this?
- Leverage your pre-launch list: the pre-launch list is a list of emails of people that signed up to receive your product once it goes live. Use it to:
- Launch invite
- Get them to invite more people
- Send swags to bloggers talking about you
- Do things that don’t scale: that means do everything you can to get the first 100 customers, even if these things don’t scale.
- Build a great product: not-so-good products waste marketing money.
- Track: you need to know what converts the best in terms of marketing channels, landing pages,
- Build an email list:
- Write case studies explaining how your customers are getting X and Y out of your product.
- Embrace Freemium
Hacking sales: the best way to do so is to try new stuff. Take a look below for more tricks.
- Use videos to tell your brand story
- Engage on social media channels
- Use content marketing to engage on social media
- Send out cold emails
- Use influencers
- Use affiliate marketing
Part Three: Customer Acquisition
The author summarized the book Traction.
Part Four: Hack It Right Now
Here are some strategies you can use today:
- Keep the sign-up experience simple.
- Get a good-looking website
- Test your site for UX issues
- Improve site speed
- Get testimonials
- Integrate with other products
- Guest posts on blogs
- Share content on relevant communities and platforms
- Contact influencers for influencer marketing
- Add a referral program
- Submit your product to startup directories
- Organize real-life meetups and give out swags and benefits
- Promote new content on social media
- Do PR (with HARO, etc)
- Promote your products on relevant sites
- Use lead magnet
- Call new users that sign up
- Offer free trials to those that aren’t yet paying customers
- Give up email confirmation
- Send users exclusive content
Part Five: Founder & Co-founder Best Practices Guide
Finding a Co-Founder
Choosing a co-founder is like choosing a partner to get married.
Make sure you choose someone with the same vision, someone that gets along with you, and someone that has complementary skills to yours. Make sure that person is trustworthy. If not, walk away immediately.
Get a founder vesting document. It’s a document that outlines who owns what in the company.
Make sure to:
- Divide responsibility
- Show empathy
- Have a plan to handle disagreements: if you can’t communicate well with your cofounder, it will be really hard.
Overall, finding a co-founder takes time. Make sure that this person is someone who is bringing to the team things you don’t have.
For more summaries, head to auresnotes.com.
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