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Lecture72021.pptxMGT 187
Lecture #7
© L. Jean Dunn, Jr. 2021
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The way that seed funding is all about
your idea and team, Series A is all
about the numbers.
Series A
Inflection Points
These goals and objectives need to be set out after the
seed round
b) Inflection points include: customer acceptance, product
completion, revenue goals, etc.
VC’s are focused on these metrics that de-risk the transaction
By meeting the goals the company distinguishes itself
Don’t want to be explaining why you didn’t make the goals
Normally takes 18 to 24 months to hit goals
Series A
“If you weren’t embarrassed by the
first version of your product you launched
too late.”
Reid Hoffman - LinkedIn
Series A
Don’t Hire or Engage an Intermediary – Don’t mass email
VCs want to speak directly to the founders
Decision to go forward is based on the founders
Question why you need an intermediary
Existing Angels, lawyers and accountants are acceptable
VCs can tell which emails are mass mailings and usually
ignore these
Each VC should be approached individually
No one wants to look at a shopped deal – VCs talk and know
If one or more turn it down then everyone walks
Control information – Don’t want to hurt chances
Series A
Timing
Normally takes 3 to 6 months to complete the financing
You should take at least a month preparing
Amount
Target lower dollar amount – No more than 10% to 25%
VCs want you to manage the business prudently and use less
money
Lower dollar amount means more VCs that could have an
interest
Easy to increase offering, if you go down the question is
“Why is it okay now when you want less where before
you absolutely needed more?”
Series A
Fund Raising Objective – Fear of Missing Out
Traction - Customer acceptance and growth
Team Impression – Impression of the CEO
Social Proof – What others think
Product
Normally the VC makes a decision within the first 10 minutes
of the presentation
Series A Presentation
General - No type less than 24 – They need to read it
Minimize words on slides – graphics better
Avoid industry terms
Title Page – Name of company and contact info
Do not have a date
Problem - This should be on one page
Problem should be customer’s #1 concern
Not #4 or #10
Series A Presentation
Competition
Ideal presentation is a graphic
Feature table tends to be too detailed
Why are you better?
What drives the customer to you versus competition?
Don’t want to compete on price?
Series A Presentation
Market Size – Trends
Want to see a market of $1 billion dollars
What is the total addressable market?
Who is the target customer?
What are their unique needs or requirements?
Evolution of the market
Why are we at an inflection point right now?
Customer story – Why did they purchase?
Ideally rich customers that will pay a premium
Series A Presentation
Distribution
How do we approach and sell the customer?
What sales channels do we utilize?
How do we measure the cost of acquiring
a customer? CAC = customer acquisition cost
Business Model
How do we generate revenues?
Do we have multiple revenue sources?
How do we price? How does this affect our market?
LTV – PV of future revenues from each customer
For LTV calculation LTV is net of COGS or is gross margin
Series A Presentation
Common metric is LTV / CAC – Measures the revenues
generated by a customer
versus the cost of acquiring
that customer
Traction / Milestones
Show milestones and that you have hit them
Where is the company going in terms of revenues?
Where is the company with regards to product?
Series A Presentation
General
Want to sell: Big Problem, Big market, Right Solution
Want to be 10x better not 2x – 3x
Wait until after Series A to form a Board
If you have an Advisory Board they should receive no
more than 1% of the stock
Advisory Board members should be investors
Series A Presentation
Funding Request
Capitalization Table
Funding request
Amount owned by insiders
Angels
Stock options for employees
Be prepared to discuss valuation
Series A
Common Questions
What is the impetus for starting the company?
What is the problem you are solving and why?
Why are you uniquely suited to solve this problem?
Why now? Any recent trends?
How did the founders meet and decide to partner?
Series A
If VC says “no” this means no – don’t ask them to reconsider
Don’t ask the VC to refer you to their competitors
Don’t give up – Make sure that you raise sufficient Angel money
to carry you through if you have to re-market in a year
Be frugal
