The Art of Startup Fundraising. Pitching Investors, Negotiating the Deal, and Everything Else Entrepreneurs Need to Know

  • ID: 3610033
  • Book
  • 224 Pages
  • John Wiley and Sons Ltd
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THE INDISPENSABLE GUIDE TO THE WORLD OF STARTUP FUNDRAISING

"The Art of Startup Fundraising is an easy read with a lot of good advice on how to raise capital. One of the biggest hurdles of early stage companies is fundraising. Entrepreneurs are not experts in this arena which makes this book a worthwhile read."

—TONY HSIEH, author of Delivering Happiness and CEO of Zappos

"The Art of Startup Fundraising is a must read for anyone who even considers starting a business. Fundraising is hard. This book gives you the roadmap to get where you are going. Alejandro Cremades speaks with wisdom and from experience."

—TIM DRAPER, Founder of Draper Associates, DFJ, and Draper University

"The Art of Startup Fundraising should be a mandatory reading for entrepreneurs that are looking to raise capital. This book will enable Alejandro to help many more early stage companies answer the tough questions when fundraising."

—MARCO LANDI, Former Chief Operating Officer at Apple and Chairman at Atlantis Ventures

"Raising capital is often the most daunting and least understood aspects of starting a new business and there are few people more experienced than Alejandro Cremades to act as a guide. The Art of Startup Fundraising unlocks key secrets of fundraising for newly minted entrepreneurs."

—JEFF STIBEL, Chairman of BrainGate, Inc. and Vice Chairman of Dun & Bradstreet, Inc.; New York Times bestselling author of Breakpoint and Wired for Thought

"This book provides a clear, concise tour of the fundraising game. With his crowdfunding and entrepreneurial expertise in full display, Cremades does a terrific job making a complicated process simple and accessible."

—JEFF BUSSGANG, General Partner at Flybridge Capital Partners and Senior Lecturer at Harvard Business School

"Raising money is perhaps the most daunting challenge faced by any startup. For the uninitiated, it is also a mystical process filled with an increasingly complex array of investment options and practical considerations. As one of the finest entrepreneurs I know, Alejandro has put together an authoritative guide that should be required reading for all nascent entrepreneurs, as well as veterans looking to brush up on the latest the field has to offer."

—TYLER WRY, Professor at The Wharton School

"For many entrepreneurs, finding the right investor for their venture can be a daunting task. Alejandro′s experience with equity crowdfunding gives a unique perspective on the fundraising game. The Art of Startup Fundraising is very insightful for entrepreneurs looking to close a round of financing and change the world."

—ANYNDYA GHOSE, Professor at NYU Stern School of Business

"Entrepreneurs need to be amazing at recruiting, selling and fundraising. The Art of Startup Fundraising provides the essential toolkit for mastering a core skill for any entrepreneur."

—GIL PENCHINA, serial entrepreneur and prolific angel investor

"The Art of Startup Fundraising is a practical and comprehensive resource for entrepreneurs to use again and again. It captures what startups need to do to be successful in the rapidly evolving financing world, while also providing tips on the fundamentals of building businesses that don′t change over time."

—MARIANNE HUDSON, Executive Director at Angel Capital Association

"It doesn′t matter how great of a business you can build. If you can′t raise money, you′re toast. Master this book."

—ILYA POZIN, Forbes Contributor and CoFounder of Pluto TV and CoFounder of Coplex

"There is no perfect approach to raising investment for a startup, but there is a certain tribal knowledge out there, that most of us had to learn through several failed attempts. The Art of Startup Fundraising captures every bit of advice (and then some!) that I would give to any entrepreneur looking for funding."

—PAUL MURPHY, Partner at Betaworks and CoFounder of Playdots

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Foreword by Barbara Corcoran xiii

Acknowledgments xvii

1 Everything Started with Onevest 1

2 Raising Capital for Your Startup 5

Speeding Up the Machine 5

It’s Not as Easy as Reading an Article on Tech Crunch 6

The 18– to 24–Month Plan 7

Milestones 8

Breaking Even 9

Expectations of Investors 9

Outperform the Competition 11

Marketing 12

Storytelling 13

Leveraging Help 15

Divide and Conquer 16

The Rollercoaster of Emotions 17

Learn to Love Rejection 18

Connect the Dots 19

The Pros and Cons of Raising Capital 21

Don’t Underestimate the Need for Capital 22

3 Setting Yourself Up for Success 25

Investors Don’t Want to Invest 25

The Core of Your Business 26

Experienced and Talented Management 27

Organize Your Corporate Structure with a Legal Team 28

Helpful Advisors 29

Building Momentum 31

Team Alignment 31

Show Your Competitive Advantage 32

Know Your Terms 33

Vision 34

Attracting Investors Requires Patience 35

4 Crafting the Pitch 37

The Business Plan Problem 37

Get the Message Straight and Your Team behind It 38

The Elevator Pitch 40

The Pitch Deck 41

Awesome, Effective Pitch Deck Design 43

The One Pager 45

5 The Due Diligence Package 47

The Interview and the Visit 61

Find Balance 62

6 Sources of Capital 65

Bootstrapping 65

Credit Cards 67

Business Loans 68

Friends and Family 69

Crowd funding 71

Angel Investors and Super Angels 74

Angel Groups 76

Family Offices 77

Venture Capital 78

Venture Debt 80

7 Understanding the VC Game 81

Defining Roles in a VC Firm 81

The Process of Getting Funded by a VC 83

How VCs Monetize 84

VC Involvement in Your Company 85

Understanding the Value a VC Brings 85

Cutting through the VC Noise 86

Differences between Venture Capital and Private Equity 86

8 Investment Rounds Explained 89

Friends and Family 89

Micro Seed Round 92

Seed Round 95

Series A Round 97

Series B, C, D Investment Rounds 99

Initial Public Offering (IPO) 100

Research Is Critical 102

9 Deciding Investment Amounts and Prospects 103

Needed, Realistic, and Ideal Investment Levels 103

Your Valuation versus Market Valuation: The Asking Price 105

Persuading Investors with a Financial Forecast 106

Identifying Prospective Investors 108

Six Ways to Contact Investors 109

Creating a Buzz around Your Startup 111

10 PR: Creating a Storm and Building Momentum 113

The Rainmaker Code 113

Journalist Outreach 114

Self–Distributed Press Releases 116

More Buzz–Building Tactics for Smart Startups 119

11 What to Look For in an Investor 123

Why Selecting the Right Investors Is So Critical 123

Three Factors You Should Be Looking For in Investors 124

Three Factors to Avoid in Investors 126

Six Key Questions to Ask Potential Investors 128

Speed Is a Two–Way Street 128

Arming Yourself with Answers 129

12 Term Sheets and Terms 131

Term Sheets 101 131

Terms within Term Sheets That You Need to Know 140

Term Sheet Tactics 143

Smart Term Sheet Strategies 144

If Things Don’t Go Forward 145

13 Closing the Deal 147

The Importance of Urgency 147

Creating a Completion Schedule 148

Managing Expectations 149

Updating Your Investors 151

Closing the Deal Is Not the End of the Deal 152

14 Avoiding Common Fundraising Mistakes 153

Failing to Connect 153

Clarity and Doing What You Say 155

Self–Sabotage in the Deal–Making Process 158

15 Understanding the JOBS Act 161

The Game Changer 161

The JOBS Act 162

Implications for Startups and Raising Money Online 173

Implications for Individual Investors 174

16 Recommended Tools for Fundraising 177

Using the Right Tools 177

Organization 178

Research 181

Social Media 182

Outsourcing 183

Sales and Administration 184

Finding Your Investors 185

17 Red Flags 187

Key Red Flags for Startups 187

Glossary 193

About the Author 197

Index 199

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Alejandro Cremades
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