READ THIS FIRST

● Hey everybody! I’m Juan Felipe Campos, Partner/VP of Tech at Manos Accelerator
via Google Launchpad. Over the last 3 years of living in Silicon Valley, I’ve taken lots of
notes about raising institutional money for tech startups. I hope this serves as a valuable
resource in your journey to become venture-backed.

Why is this a Live eBook?

As I continue to grow and learn about fundraising, I’ll update this document. It’s my goal to make
it the most valuable resource of its kind in the world. By creating it as a live document, we can
all benefit from new lessons and perspectives. Feel free to share your own lessons as a
comment.

Questions?
You have commenting access.
Leave a comment any time you have a question. I’ll do my best to answer them here directly
and hopefully others will join, too.

Here’s to your success!

Enjoy,
Juan

LinkedIn | Twitter | Instagram | Facebook

1. For international founders

Half of the founders in Silicon Valley are foreign-bornforeign born.

Preparation is important before you come here. If you’ve received investment from a credible
investor in your country, that helps you here. Get customer traction in your home country. If you
come here with just an idea, you’re not taking advantage of what’s available in your home
country.

“Liability of foreignness (meaning the danger in doing something new/foreign)”. If they don’t
know you within this tribe of Silicon Valley, then it’s difficult for them to justify you to their
investment community. They’re looking for signals: that you went to a specific school or worked
at Google. Sometimes you don’t have it. Some investors look at those signals and let it guide
them. I think the best ones do their due diligence. If I were you, I wouldn’t stay with convincing
the VC’s. I’d start with convincing the local market (companies). They only want the best, so if
you get into every unicorn in the valley, they’ll take your meeting. This is the strongest signal
there is: core your corporate clients.
That’s how you translate your success into Silicon Valley terms. If you have clients, VC’s will
take notice and disregard any other “shortcoming”.

Do you have to incorporate as a Delaware C corp?

At Oak Ventures we have a global mandate to find the best companies— period. If it doesn’t
make sense to incorporate in the US, then I’m ok with it. We’ve invested in pretty much any
offshore jurisdiction where it has made sense.

If you’re in China, no. If you’re in Delaware, Cayman, etc it’s ok. All European are ok.

2. On the challenge of raising funds

There’s a lot of literature about product feedback and customer acquisition but fundraising is
one of the least optimized processes you’ll have to speed up.

Assess the RISK for the investor/s

● What are you selling: Service, Consultancy or Product?
○ Generally it is far easier to approach investors with product related companies
that for instance consultancy related. I.e. a Consultancy will rely on a person/s to
do the work. You need their skill and is critical to the company as supposed a
product related company you/other current role players are not that critical
therefore the risk is highly reduced for whoever comes onboard.

On finding the right investor:

Start by looking at who invested in your competitors or synergetic startups. Ping synergetic
startups asking for intros to their investors. The more you learn about who invested in your
competitors, the easier it will be to find the right VC for you. Learn those investors’ thesis
intimately and find other VC’s with the same thesis.

Do due diligence on the VC. Ask portfolio CEO’s how the VC is. Not just the firm, but the
individual.

On talking to investors:
Value time, your own and theirs. Research what they invest in.

On the process of getting funded:

● Do your homework:
● Full-time job for 3-6 months. Dong-Su
● They’re looking at 10-50 deals per week. Make an impression in your deck.
● Then due diligence. Financials business plan, etc.
● Negotiate the term sheet.
● Form a syndicate of investors.
 ● Close.

It’s a myth that VC’s write a check on a napkin.

You’re also trying to figure out who YOU want to work with. If they’re that quick to write a check,
chances are that they’ll never talk to you again. Good or bad. Especially when you need help.

Connect with 50, you’re lucky with 20 meetings and even luckier with one guy to lead.

3. On when to fundraise
Decide your exit point first
Is this a legacy project or do you plan to build and sell. Investors are always interested in the
term you intend to get them involved.

You should always be fundraising.

Always identify the right people that you’re interested in building a relationship with and then do
that. That can connect you with other people. If your VC’s are in your general area of what
you’re doing, it’s their job to know what you’re doing. You make their job easier by putting
yourself in front of them. They’ll give you feedback and it’s up to you to determine if the
feedback is valuable or not.

From my experience, it is best to fundraise right after an inflection point (critical milestone). For
example, fund raise right after you got patent approval or right after you have a POC. This will
allow you to negotiate better terms. Raise enough to get to the next major inflection point.
Then raise again.

4. On how to talk to investors

Every slide in your pitch deck must have a number associated with it, i.e. a measurable metric.

> We have built the fastest xxx processing software - No impact to investors
✅ We have built the software which processes xxx under 5 seconds, whereas the industry
average for others is 40 secs. This can save our (target) customers every year upwards of USD
###K - Full impact to investors as now there is a clear definition of impact magnitude.

Talk numbers, get investor attention, and not rhetoric or adjectives!

To VC’s: what can you do for a startup like mine? Ok, there’s probably competition if they want
to know.
On communication with your investor:
What we provide for startups depends on the stage and kind of VC. Some are very corporate
and want monthly reports and they have to do compliance and reporting on their side. It’s all
about the personal relationship between the person that led the round and the CEO. Angel
doesn’t want you spending time on anything that doesn’t help you. It’s a lot more scalable if you
write an email etc once a week or month and send it to all your mentors advisors and VC’s. I
don’t need documentation to make sure that you’re on track, but when a new VC comes in, they
need documentation to do due diligence. How would a new VC know how you pivoted or
learned. That helps them know you’re running an organization and not just yourself and your
friends.

You should feel like there’s someone on the board that you can have brunch with. If you don’t
have that kind of relationship, you should fix it. You should be in line with the investor and they
should want to have that level of access to you too. I like CEO’s that leverage their VC’s. I
understand some don’t— but I like it when they do.

What gets a second conversation?

It’s hard. Work on it and try different things. It’s more chemistry than anything else. Easier if
you’re introduced by someone reputable that investors trust. That gets you started at the fifty
yard line. A mentor etc who is reputable in Silicon Valley.

I’ll have a list of questions ahead of time. I’ll ask people to send me everything ahead of time.
Just be aware that time is super limited so make sure the right information is presented
concisely.

5. On how investors choose who to invest in

Can I help this company? I don’t care about financials. If there’s nothing I can do, then I’m a
passive investor. If you do that then just put the money in the stock market so you can pull it out.
What stage are they in? If they’re a little bit too early, Iearly I want them to connect with my other
companies so they already start adding value and my companies can do due diligence in them.
If they’re too late, there’s nothing I can do. I can connect my portfolio to them.
Finances ties to the sector. Every space has metrics that are meaningful. You need to figure out
what the story is and why those metrics make sense. These metrics represent you creating
value and you capturing that value. It’s your job to understand where they are with that.

Corporate VC’s can add value in different ways. Remember that.

If a VC rejects your startup idea, that does not mean that your idea is not a viable startup. Uber
got rejected from a multitude of VC’s saying that no one would pay to go into a stranger's car.
Now Uber is a $60120 billion company.

For us, the decision is financial and strategic. If we can show that a company that we invest in
creates synergies with our other companies, then we’re successful.
Our LP’s only want the financial success me for me, it’s questionable to get a great return but
bad relationship. The VC’s care about the long run.

The vast majority you pass on just have nothing to do with what you do. It’s about the alignment
of the vision between the founder and VC for the harder ones. If it works, then the question is if
this opportunity will return your entire fund. We play in a field where most are not unicorns
anyways.

If I can’t trust the CEO, that’s a big flag. Looking for character here. What does your cap table
look like? Keep it simple. 7 investors investing in equity or something like that. Try to clean it up
before trying to raise money.

6. On how to learn more about fundraising

You have to be a leader and a well-roundedwell rounded leader and able to surround yourself
with complementarycomplimentary people. I think it’s overlooked to invest in yourself, your
culture (what rules and vibe), it also involves your family. Team building and leadership books.
They’re often overlooked areas. They’re not more important, just overlooked. Personal side of
being a leader.

Learn from other people. Entrepreneurs, investors, mentors. Reach out. This is much faster.
They’ll more freely give you advice.

Get mentors and study up financial models. The better you understand the financial world the
easier your communication with investors become. Investors think profit/loss.

7. On company valuations
Value is what a customer is willing to pay.
It could be that that’s all they have to pay. It’s complex and varies.
Lawyers have the mindset and training of “how to divide the pie”. Business people think “how do
I grow the pie”. Don’t have your legal team just close it. It’s about finding how to maximize this
opportunity together. Be careful. Sometimes they just want to know your numbers. Pricing is
really important. Don’t underprice just so you can sell. You’re leaving a lot on the table if you do
that. Price so you can grow.

You want to show that one plus one equals three. You need to show that the acquisition fits you
within the company and how that will exponentially increase the company’s momentum.
Valuations: get informed. There’s generally a range and a variation of that range. As long as
you’re within that range, there can be a conversation. VC’s want something that is fair.
Ultimately the investors know that if they’re putting lots of cash at a low valuation, they’re
diluting the founder so much that they’re killing the incentive. If they set it too high then it makes
it harder for founders on the next raise. Don’t think in terms of that valuation but think in terms of
the story that it will tell later and how the dots will connect in retrospect.

Don’t overthink the valuation. It’s not as important as you may sometimes think. Go for the
most value, not for the most cash. Not just the highest bidder.

8. Step by Step
The moment you start fundraising, you begin running two product lines.

1. Your flagship product that you sell directly to customers (what most people know you for).

AND

2. Your company.

Investors are not clients of your product, they are looking at your whole company as a separate
product that they may want to purchase part of.

This means they look for nice "features" in the business like: founding team, traction, business
model, revenue, etc.

Here are 10 more things you should know about fundraising:

Build a sales funnel of investors just like you would for your product. Expect to talk to at
least 150 QUALIFIED investors.

100 pitches to get 3-5 commitments is not unusual. This means you'll get rejected ~95% of
the time– even with a highly qualified and pre-vetted investor list. Prepare for this.

Find investors on Crunchbase, PRHub, InsideVenture, VenturePulse, Quora, Techcrunch,

Medium, Pitchbook (paid), CB Insights (paid), Foundersuite, or LinkedIn.

Asking someone for "investor intros" is too broad of an ask. If you don't know what you want,
they won't either. Do your homework in advance and ask for intros to specific people who you
think would be a good fit to increase the likelihood of an intro.
 Avoid investors who have: invested in competitor startups, are low on funds, have done no
recent deals, invest in a different sector/stage/location than you're in, have bad reputation.
Diligently cut down your list at the research stage for a better investor conversion rate.

Create a tracking system or CRM to keep track of relationships as they move from "new
lead" to "💸 committed" or "⛔ declined". Remember, you're selling a part of your company.
This is a sales process.

Do intros in parallel– you want to talk to as many qualified investors as possible at once.
Build momentum!

Send regular progress updates to all investors who haven't explicitly told you "no". This
creates FOMO in your favor. Investors have a tendency to want to be the last ones to join. They
won't know they're last if you don't tell them others are jumping on board.

Use a tool like Foundersuite or Docsend to see who's viewing your deck (and plug emails
into re-targeting so you can infiltrate their attention).

🔟 When you see momentum building, go for the close! Ask for interest level and next steps. It
can take 3-6 meetings before you get a term sheet, so expect to follow up frequently and move
the relationship along. This is your responsibility. Don't let up until they say "no" or you have
money in the bank 😊

More Thoughts
Make sure you’re reaching out to the right investors. If it doesn’t fit the right investor, you’ll be a
pass and a No.

Talk to your peers and get relevant intros.

Make sure you have traction in your home country. They don’t know how to assess your home
traction, so attract clients here and break into the ecosystem that way.

--------

Capital Raising for Entrepreneurs

https://www.udemy.com/capital-raising-for-entrepreneurs/
John Colley

What types of investors are out there?

Early Stage / Pre Revenue
● Angel - Individuals. The money is coming from their own pockets. They typically have
relevant experience because they are successful individuals in their own right.
● Seed - Individuals or funds. $10k’s to $100k.
● Crowd funding - pledgers become your first customers. Good for validating.
● Grants - Government money.

Early Stage / Post Revenue

● Venture Capital - $1M USD and more. Hard to get VC money if you’re raising less than
$1M. Keep in mind venture rounds (Series A, B, C) and the criteria for what it means to
raise at each round.

Growth Stage / Post Revenue (sometimes also comes Post Profit)

● Private Equity
○ Growth - They want to add capital into the business rather than into
shareholders’ hands to help grow the company faster.
○ Buyout - They’re looking to take equity positions in companies which are already
well established and buyout the investors who are already in there.
● Venture Debt

Later Stage
● Convertible Debt - Company issues a convertible note and investors take them up on it.
● Pre-IPO Funding - Some funds focus specifically on this part of the market.
● Secondary - Sometimes 10 year funds are nearing the end of their investment period
and want to exit all their investments. In these cases, they can exit to another fund that
buys Jout some of the portfolio companies.
● Post IPO Debt/Equity - Self explanatory. More institutional money after IPO.

What is the difference between venture capital and private equity?

Venture Capital - Tend to invest at an earlier stage than private equity. The companies are less
developed and are higher risk. In return for that risk; the VC’s are looking for a much higher
return. The cash is used to grow the business, not to buy out other shareholders. Previous
investors are kept in the cap table; if anything they’re expected to invest alongside the VC. All
the money the VC puts into the business, she expects to see it working in the business. The VC
does not want a majority equity position. He wants the founder to still have the majority to stay
incentivized (skin in the game). Companies at this stage are typically pre-profit (seldom
pre-revenue). They don’t invest in PRE-REVENUE opportunities very often. They make their
money (returns) when the company is sold (exits or goes IPO). They typically don’t invest in
very niche markets— they want (NEED) very large markets because they want (NEED) a 10x
exit.
 Remember:
● Earlier Stage
● Higher Risk
● Cash Used in the Business
● Minority Investments
● Tech entrepreneurs are generally looking for venture capital investors

Private Equity - Private equity investors invest in later stage companies that are still high
growth but are almost always cashflow positive and almost certainly profitable by this point.
They’re much more stable / lower risk than companies seeking venture capital. These are
established businesses. The Private Equity firm is trying to take over majority control to have a
high proportion of the equity. You will rarely see a founder/management have a majority stake at
this stage of the business. If anything, you’ll find that it’s the founders that are selling their
shares for the next generation of management to come through.
Because of this: private equity is conducting a financial arbitrage = buy low and sell high. They
are using their cash to buyout existing shareholders, not to grow the business directly (though
some of the cash may be used for this purpose).
Remember:
● Later Stage
● Cash Positive / Profitable Businesses
● Majority Positions / Control Positions
● Tech entrepreneurs are generally not looking for private equity investors

What stage is your business at?

Stages:
1. Idea - Friends and Family (You have an idea that you think you have an unfair
advantage to pull off)
2. Confirmation - Angel (Maybe a few sales)
3. Creation - Seed (Minimum viable product)
4. Validation - A (Your MVP is generating sales)
5. Repeatability - B (Prove there is a large market for your product/service)
6. Scalability - C (Prove the business logistics can scale to serve this large market)
7. Profitability - N/A
8. Predictability - IPO (Prove it works every time so everyone will want to invest)
What stage is your business at?
Depends on what you talk about
● Do you talk about your idea & writing a business plan? You probably won’t get
funding for your startup at this stage.
● Do you talk about building a prototype? - You’re pre-funding but can maybe get
seed/angel funding.
● Do you have the funding necessary to launch? Great! Do it :P Most investors will
pass when you’re right about to launch.
● Do you have the funding necessary for traction? If you already have some traction
but need more, then you should be able to get Angel/Seed funding.
● Do you have the funding necessary to scale? If you have traction and are already
scaling but need funding for operations and growth, then you should be able to raise a
Series A.

How much money should you raise?

No more than you need.
As much as you can get.

Think in terms of milestones:

● Profitability
● Cash flow positive
● Next funding round
● Revenue targets
● Customer numbers

Let’s talk about milestones:

They give you nonnegotiables to try to reverse engineer in your financial projections or pro
forma. These documents become extremely valuable when you try to raise funds as they will be
able to tell you how much money needs to go into the business in order to fund the growth and
sales that you project for the business. Without solid financial projections that are anchored to
nonnegotiables (profitability, customer numbers, revenue targets, etc), your funding amount will
make no sense once institutional investors/VC’s start poking around.

Financial Projections and Pro Formas are your best friend in the fundraising process. They
prove that you’ve given careful consideration to the following:

● What will you need to do to justify the next funding round?

● What operational resources (people, equipment, services, etc) are needed to deliver the
milestones?
● What financial resources will you need?
 ● How much capital is needed to fund those resources for that period of time?
● How long will it take?
● How much time, given those resources, is needed to deliver the milestones?

Basically, without financial projections that have given thought to these questions, your
fundraising journey will stop shortly after the first few VC meetings. Want to fundraise
successfully? Surround yourself with advisors that can look at your projections and give a green
light on three fronts:

1. Growth
2. Product
3. Business

You want veterans to look at your financial projections through their lens of expertise and tell
you whether or not you’re crazy on those three topics. A growth expert will tell you if your sales
goals are possible given your chosen go to market strategy; as well as how much to budget for
testing other traction channels. Same goes for your product and business advisors.

Find advisors on LinkedIn, Angel.co or (my favorite) Clarity.fm . Sign them up as an advisor with
this agreement: the Founder / Advisor Standart Template (FAST).

Raising Venture Capital

By Brad Feld Partner Foundry Group, Founder CEO Techstars
https://www.linkedin.com/learning/brad-feld-on-raising-capital/angel-investors

Friends and Family

People who believe in you and believe in you. It’s important to treat them just like you would
treat a professional investor. Make it legit and report often. Jeff Bezos’s parents invested $10k’s
and got back $10,000,000,000’s . Explain where they can help. The WORST thing you can do is
go silent when things go wrong.

Angel Investors
Many times invest at the same time as friends and family. Sometimes after friends and family.
They’re typically successful entrepreneurs themselves or high net-worth individuals (in some
cases inherited wealth). It’s typically coming from their own money. They can invest through a
syndicate like Angel List. They typically fall on a spectrum between just being passive capital, all
the way to being very involved in the success of your business. The best ones can actually help
your business, not just provide capital. Be very careful that your angel is not a devil: they can’t
control the company, or direct the company, or try to scope crawl on their rights. Do your
research and due diligence on angel investors. How much have they invested in the past? If
you’re their first or only investment or you represent a big chunk of their investment fund, they’re
going to have very (unfairly) high expectations of your performance and they may default into
wanting to control more than is fair of your business. Also, do they JUST want to invest in this
round or will they potentially invest in future rounds down the road? This will also affect their
expectations.

Crowdfunding
Interested customers are able to pre buyprebuy your product in advance of it being ready.
This is especially popular with physical products. Get money upfront from interested parties, pay
a percentage to the platform (typically 5-10%) and then use the money raised to build your
product and fulfill on your promise to your pledgers.

As an added benefit, you’re building a community of early adopters to your product.

There are many crowdfunding campaigns that never clear the goal of money raised, but this is
ALSO valuable feedback: it means you haven’t yet been able to dial in the right type of product.
You should question the product if you’re not able to successfully raise funds to build it.

Equity Crowdfunding

Result of 2012’s Jobs Act (Jumpstart Our Business Startups Act) which allowed a bigger pool of
investors (unacredited) to, in some cases, invest in early stage companies eventhough they
wouldn’t typically qualify to do this as a traditional angel investor.

Venture Capitalists or Firms

Typically come in after you’ve raised some money and have your business generating revenue
and growing. Once you’re ready to raise a sizable amount of money (typically starting at $1M
USD), you may want to think about approaching VC’s— not just for the immediate financing
need, but also for all financing needs for the lifespan of the company. This includes very late
stage rounds of financing for the company.
One of the main mistakes that founders make with Venture Capital is that they see VC’s as a
singular archetype. You’ll hear founders talk about “VC’s” as a collective. This is the wrong way
to think about it. Not only do the firms have unique experiences and styles, but also each
individual at each firm has his/her own background, network, and personality— all within the
context of venture capital.

What’s important is to understand each person you’re talking to and get to know they work with
companies. Make sure your values align. This will have a big impact in how you handle things in
good times and bad times.

It’s really important for you to know that in most cases VC’s have a combination of institutional
capital and their own capital pooled together in order to invest large sums of money in your
startup. Their intention is typically not to control your startup, but they DO, in the end, exert a lot
of control over your business and the direction you go. They do, afterall, end up owning 10-40%
of your company and their capital and returns to their LP (Limited Partners) is tied to the
success of your company. By bringing on a VC, you’re recruiting a collective group of business
partners into your company. It’s very important that your visions for the direction of the company
align.