Raising Achievement and Closing Gaps: Thoughts for the School Board
Raising Capital: Closing The Deal
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Transcript of Raising Capital: Closing The Deal
Raising Capital:Closing the Deal
Joe BeninatoAugust 27, 2009
joe |at| beninato |dot| comTwitter: @beninato
© Joe Beninato 2009
Topics• Preparation
• Should I Raise Money?
• Angels vs. VCs
• Convertible Note vs. Priced Round
• Finding the Right Investor
• The Approach
• The Meeting
• The Follow-Up
• Closing the Deal
© Joe Beninato 2009
Who Is This Guy?• Joe Beninato
• MIT aerospace engineer
• 20 years in Silicon Valley
• 6 startups full-time2 IPOs, 2 acquisitions, 2 TBD
• 15+ startups advisor/board
• $200+ million capital raised
• >$1 billion in exits
© Joe Beninato 2009
“Be prepared.”
© Joe Beninato 2009
Preparation• Raising money is not formulaic
• Present company in best light
• 9/1 is the beginning, not the end
• “Show a little leg”
• Get to first base
• Identify targets in advance and find them 9/1 -- scrum
• Long process -- get mentally prepared
• You will hear “no” WAY morethan you will hear “yes”
• Some of you will not get funded
© Joe Beninato 2009
Q: Should I Raise Money?
A: Only if you have to• Professional investors change your life &
company
• What’s your goal?
• Can you wait?
• Breakeven now or soon?
• Credibility
• Rainy day fund
• Competition
© Joe Beninato 2009
Angels vs. VCs
Angel Groups
Band of AngelsSand Hill AngelsAngels Forum
Golden Gate AngelsKeiretsu Forum
PAPA
Angels
Ron ConwayReid Hoffman
Russ SiegelmanAydin SenkutXG VenturesAriel Poler
Brett BullingtonMitch KaporChris SaccaBill Harris
Joi ItoEsther Dyson
Michael DearingNaval Ravikant
Seed Incubators
fbFund REVY Combinator
TechStarsSeedcamp
Launchbox Digital
Seed Funds
fbFundFirst Round Capital
TrueSoftTechBaselineMaples
MHS (Sugarman)Amidzad
Alsop-LouieCRV Quickstart
TugboatNuevaAgile
AmicusO’Reilly AlphaTechFounders Collective
VCs
SequoiaBenchmark
AccelSutter Hill
Union SquareFoundryShastaAugust
GreylockFounders Fund
DFJCRV
TrinityMatrix
VenrockAndreessen-
Horowitz...
*My apologies to anyone omitted on this slide...no offense intended
© Joe Beninato 2009
Convertible Note vs. Priced Round
• Convertible Note
• Loan that gets added to next round with perks (discount, warrant coverage, cap)
• OPM = “Other People’s Money”
• Delays valuation determination
• Significantly lower legal fees ($5k?)
• Priced Round
• Investors generally prefer
• You know where you stand
• Higher legal fees ($30-50k for both sides)
© Joe Beninato 2009
Finding the Right Investor is Hard“I’m on
too many boards”
“it’s a small market”
“I don’t like sports”
“not enough traction”
“weak team”
“no revenue model”
“too expensive”
“my partners don’t like it”
© Joe Beninato 2009
Finding the Right Investor is Hard
© Joe Beninato 2009
Maximizing Your Chances• Be honest
• Credibility
• fbFund REV winners
• Team accomplishments
• Advisors
• Lawyer
• Other investors
• Cool demos
• Users
• Page views
• Partnerships
• Revenue!
• Profit!!!!!
© Joe Beninato 2009
The Approach• Identify relevant targets and make a spreadsheet
• You need a warm intro
• Don’t approach competitors
• Don’t waste time on associatesif you can avoid it
• Send intro paragraph & 1 pageexec summary and/or link to site
• Be clear on your “ask”
• NEVER COMMUNICATEA VALUATION!
• Be persistent, but once declined,back down
• Lather, rinse, repeat
• NOTE: Be really friendly to assistants
© Joe Beninato 2009
The Meeting• Do your homework
• Confirm the night before via email
• Don’t be late
• Don’t meet for lunch
• Find out how much time you have
• Have a great deck - concise, clear
• Be confident, smile, show passion
• Know your business• Know your pitch inside and out• Teach them something
• Don’t argue
• If you don’t know an answer, say“I don’t know, let me follow up”
• Be clear on your “ask” - NEVER COMMUNICATE A VALUATION!
• If you don’t suck, and you feel there’s interest, ask about next steps
© Joe Beninato 2009
The Follow-Up• A game of patience and persistence
• A few hours after meeting, send follow-up email
• Thank them for their time
• Make sure they know you heard their issues
• Follow-up on any open issues
• Confirm next steps (if any)
• A day after they miss the next step (and they will), email again
• 5 days after they miss the next step (and they will), call them
• Pay close attention to the feedback
• Don’t be insulted with a “no”
• Keep reviewing your spreadsheet and following up
© Joe Beninato 2009
How VCs Say “No”
• “No” “Nein” “Non” “Nyet”
• They don’t return your calls or emails
• “We love what you’re doing but would like to see more progress”
• “We’d like to see what your beta looks like”
• “Have you thought about hiring a _______ ”
• “Have you thought about approaching _______ ”
• “We’re interested, but we don’t want to lead”
© Joe Beninato 2009
Closing the Deal:Angels
• Angels don’t need to own 20% like VCs
• They invest in people/concepts they like
• Get an angel to commit and leverage that
• You need a lead investor to provide term sheet
• Sometimes you can provide term sheet
• Make sure your angels aren’t wannabe CEOs
• No board seats for angels
• Rely upon your lawyer and advisors for advice
© Joe Beninato 2009
Closing the Deal:VCs
• VCs typically want 20% minimum
• Get angel(s) to commit and leverage that
• Ideal: get multiple VCs to compete
• Never rush an investor
• Don’t lie about a fictitious term sheet
• Rely upon your lawyer and advisors for advice
• Due diligence takes time
• Check references on your investors
• Board composition REALLY matters
© Joe Beninato 2009
Best of luck!