Fundraising

Startups are in constant competition for 2 resources — capital and talent. One of the most common ways to secure capital for a startup is by raising venture capital. However, raising capital for a startup, especially an early-stage startup, is no easy feat. In order to best improve your odds of raising capital, you need to have a game plan and system in place to kick off your raise. At Visible, we often compare a fundraise to a traditional B2B sales process. You are adding investors (leads) to the top of your funnel, nurturing them with Updates and meetings in the middle, and ideally closing them as a new investors at the bottom of the funnel. Related Resource: All Encompassing Startup Fundraising Guide Just as a sales and marketing team has a process for acquiring customers, so should a founder when setting out to raise capital. Learn more below: 1) Display Growth and Traction First things first, you need to make sure that your company is in a position to raise venture capital. Investors are generally taking a major risk by funding startups so it is important to demonstrate that you have the ability to generate outsized returns. One of the main things investors will look to is your company’s growth and traction. In order to do so, it is important to have a system in place to track and monitor your key metrics. A few of our favorite resources to get started: 6 Metrics Every Startup Founder Should Track Our Ultimate Guide to SaaS Metrics Key Metrics to Track and Measure In the eCommerce World Why This Item Is Important As we previously mentioned, investors are taking on risk so they want to see that your startup has the ability to grow into a large company. The easiest way to do this is by showing consistent and rapid growth from one period to the next. 2) Define Your Startups Milestones and Fundraising Goals If you’ve determined that your business is in a good place to raise venture capital, it is time to put together milestones and goals for your fundraise. A couple of questions you’ll want to ask yourself and think through before raising: How much capital do I want to raise? When do we need new capital by? What valuation should we raise at? What will we do with capital once it is in the bank? Related Resource: The Investor Due Diligence Checklist: How to Treat New VCs Like Business Partners Why This Item Is Important Before setting out to launch a new acquisition campaign, you likely have goals and milestones in place. The same can be said for a fundraise. By having a list of milestones and goals in place, you will be able to field any questions from investors as you’ve done the legwork upfront and will come off as prepared and calculated with your raise. 3) Make Sure You Have a Compelling Pitch Deck At the end of the day, fundraising is storytelling. You will want to hook your investors and help them build conviction for why they should invest. One of the most popular tools for telling your story is a pitch deck. Check out a few of our favorite resources to help you build your next pitch deck below: Tips for Creating an Investor Pitch Deck 18 Pitch Deck Examples for Any Startup Our Teaser Pitch Deck Template How To Build a Pitch Deck, Step by Step Why This Item Is Important Investors generally have little to no context about your business and your market. In order to help them build conviction around your business you need to arm them with the right information and assets to move as quickly as possible to invest in your company. A pitch deck is a great tool to distribute to potential investors and use as a guiding tool in your raise. 4) Prove Your Product/Service Is Scalable As we previously mentioned, investors want to fund companies that have the ability to turn into large businesses and exits. One of the aspects they will focus on most is your ability to build your customer base and revenue at scale. During the course of your raise investors may ask to see a few of the following things: Metric growth as it relates to your acquisition efforts How your current acquisition strategy works Stories from customers that show you have happy customers Why This Item Is Important Without a clear path to scale your revenue, investors will likely have no interest in funding your business. You need to demonstrate that you have had success in the past or have a gameplan to scale revenue in the future. If you have an acquisition strategy that is already working well, investors will feel more inclined to invest as you should be able to demonstrate how their capital will directly grow the business using your existing channels. 5) Build a List of Investors Just how a sales process starts by identifying your ICP and potential customers, the same is a true for a venture fundraise. VC funds invest in all sorts of companies – ranging from early stage to late, new markets to old, small teams and big, etc. We suggest starting by building a list of 50-100 investors that you believe are a strong fit for your company and staying focused on them during your fundraise. A couple of traits that are important to pay attention to (from our post, Building Your Ideal Investor Persona): Location – Where are you located? Do you need local investors? Or maybe you are looking for connections and networks in strategic geographies. Industry Focus – What type of company are you? Where should your future investors/partners be focused? e.g. If you’re a B2B SaaS company don’t waste your time with marketplace focused investors. Mark Suster suggest that it is best to prioritize investors with companies in your space. Stage Focus – What size check/round are you raising? e.g. If you’re raising a $1M seed round avoid a firm with $2B AUM. If you’re raising a $30M round avoid a firm with $75M AUM. Current Portfolio – What type of companies should be a signal to you that they’re a good fit? Is there a high likelihood they’ve invested in one of your competitors? If so, best to avoid as they likely won’t double down their bet with a competitor to a portfolio co. Motivators – What do want to get out of your investors and what do they want to get out of you? Do they need to match your values and culture? Deal Velocity – Are you in need of capital as soon as possible? Or are you taking your time and looking for strategic investors? Varying investor’s have different philosophies for the velocity they’re making deals. Point Nine Capital and Kima ventures are both regarded as top firms in Europe. However, Point Nine makes ~10 investments a year whereas Kima makes 1-2 investments a week. Why This Item Is Important Randomly reaching out to any investor is a poor strategy when it comes to pitching investors. You want to make sure you are spending your time on the most relevant investors for your business. By starting with a list, you’ll be able to customize your outreach and make sure you are spending time on the right investors for your business. Check out our free investor database, Visible Connect, to filter and find the right investors for your business. 6) Tell a Story About Your Company As we mentioned earlier, storytelling is a component of a successful fundraise. While metrics, data, traction, etc. will certainly grab the attention of investors, that will likely not be the sole reason they write a check. As a founder it is your duty to build a compelling narrative around your business that will help investors build an emotional understanding of your business. This could be things like your background, founding story, customer stories, etc. Why This Item Is Important While the duty of a VC is to generate returns for their limited partners, there is still a human element to investing. Investors, especially at the early stage, are generally investing in the founder. In order to help them build conviction in you and your business, you need to present stories that will help them gain a new understanding of your business. 7) Introduce Your Team and Stakeholders Of course, founders are not the only people behind a business. You might have co-founders or early teammates that have helped get your business to where it is today. Be sure to prep your current teammates and inform them on the status of the raise. Investors will want to hear about your teammates and earliest hires to understand why your business is positioned to execute on the problem you are solving. Why This Item Is Important At the early stages, investors are generally placing a bet on the team and the vision of the company. They will look to your early hires and executives to help them decide if your team is right for building the business. They will likely want to see relevant experience, roles, and traits that make your team stand out from your competitors. 8) Include a Cap Table One of the benefits of investing in private companies is the ownership and equity that comes with it. Because of this, investors will want to see the ownership breakdown of your company. This is generally best served via a cap table. There are countless tools (we suggest Pulley) that can help you quickly share your most up-to-date cap table. Why This Item Is Important Cap tables are another tool that help VCs understand the structure of your business. It will help them understand their potential ownership position and the investors they will be working alongside. While you might not need to share a cap table from the start with investors you should make sure it is up-to-date and ready for later stages of your fundraising process. 9) Signup For a Fundraising Relationship Platform Just how a sales and marketing team have dedicated tools, so should your fundraise. By finding a tool to track and manage your fundraise you’ll be able to spend more time on what actual matters, building your business. Find investors, manage your raise, share your pitch deck, and update your investors all from one place. Try Visible for free for 14 days here. Why This Item Is Important Having a dedicated place to keep tabs on your fundraise and investor relations will not only help you speed up your fundraise but will allow you to focus on building your business. Visible Is Here to Help You WIth Your Fundraising Fundraising is difficult. Our mission at Visible is to help more startups succeed. We’ve built a set of tools that will help you with every step of your fundraising journey. Find investors, manage your raise, share your pitch deck, and update your investors all from one place. Try Visible for free for 14 days here. Related resources: Navigating the Valley of Death: Essential Survival Strategies for Startups Top 18 Revolutionary EdTech Startups Redefining Education

Kingsley Advani is a British investor who started investing in 2013 and turned $34k in savings into ~$100m in private investments. Since then he’s co-founded an angel group with 1,000+ investors and founded a private markets platform, Allocations. Kingsley is joining Visible.vc to discuss the benefits of creating a hybrid SPV + fund strategy. Kingsley Advani, Founder and CEO of Allocations joined us to discuss trends in SPV investing and the benefits of raising SPV’s for VC fund managers. In this webinar recording, you can expect to learn: SPV Overview (what are they, how did they become popular) Kingsley’s perspective on the ‘Why Now’ for SPV’s 5 Benefits of Creating a Hybrid SPV + Fund Strategy Demo of Creating an SPV in Allocations Using Visible for SPV + Fund Reporting

Equity financing comes in different shapes and sizes for startups. The most common form is a traditional venture capital firm. However, there are other instruments and organizations that will fund startups in exchange for equity. Related Resource: All Encompassing Startup Fundraising Guide One of the more common alternatives to venture capital is a syndicate. Learn more about startup syndicates and how your company can raise funding from a syndicate below: What Is Syndicate in Startup Terms? An investment syndicate is an investment vehicle that allows a group of individual investors to pool their money and make an investment in a single company led by a lead investor. Syndicate investing is used in multiple asset classes including startups, private equity, real estate, and others. Syndicates have risen in popularity due to the ease created by tools like AngelList. As the team at AngelList puts it, “A syndicate allows investors to participate in a lead investor’s deals. In exchange, investors pay the lead carry.” Related Resource: The Understandable Guide to Startup Funding Stages What is a Syndicate Lead? A syndicate lead is generally a well-established investor that has a pulse on the market. They are the individual dedicated to deploying the capital and investing in individual startups. This allows the lead, who may not have enough capital to keep up with their deal flow, to pool money from other individuals and ideally generate returns for the group. How Does Syndicate Funding Work? Syndicates function differently than a traditional venture capital firm. It is important that you understand how they work as a founder to improve your pitch and odds of closing a syndicate plus to make sure they are a fit for your business. Check out a quick overview of how syndicates work below: 1) The Lead Investor Chooses a Startup As we mentioned earlier, a lead investor is generally someone with strong dealflow or a presence in a particular industry. They might be a venture capitalist themselves or closely associated with the market. To kick things off, a lead will find a startup they would like to invest in via their syndicate. 2) An Investment Vehicle is Created Next the lead investor pools money from a series of backers to help fund the company via their syndicate. This can be created in tools like AngelList or StartupXplore. Backers, or individual investors, can serach through and find the syndicates that they are most interested in and invest within the syndicates parameters. The lead investor they will need to help distribute materials and data that show why LPs or backers should join their syndicate and make an investment. This is typically done within one of the tools mentioned above. Once the syndicate is fulfilled they can move on to make the actual investment into a company. 3) Monitor Investments Naturally, everyone invested in a syndicate will want to understand how their investment is performing. Generally, it is on the startup founder to inform the lead investor who will distribute the necessary information with the investors within the syndicate. 4) Liquidation or Exit Of course, syndicate investors are partaking in a round because they believe there is an opportunity for upside from the investment. Eventually the investment will be faced with a successful exit or a liquidation event. For an example from StartupXplore, “If the investment does not go well, the vehicle will disolve. If there are benefits (dividends, buyback or partial or total acquisition of the startup), all the investors will receive the amount they invested and 89% of the capital gains generated. Of the remaining part, the leader will receive 10% and Startupxlore 1%.” Related Resource: Down Round: Understanding Down Round Funding and How to Avoid It On the flipside, AngelList lays out a successful exit that looks something like this: “Here’s an example: Sara, a notable angel investor, decides to lead a syndicate. The syndicate investors agree to invest $200K total in each of her future deals and pay her 15% carry. When Sara makes her next investment, she offers to invest $250K in the company. She personally invests $50K and offers the remaining $200K to her syndicate. If the investment is successful, the syndicate investors first receive their $200K, after which every dollar of the syndicate’s profit is split 80% to the syndicate investors, 15% to Sara and 5% to AngelList Advisors. AngelList Advisors is a venture capital exempt reporting advisor with the Securities and Exchange Commission, and a subsidiary of AngelList.” How Can an Investor Become a Part of Syndicate Investing? Syndicates are open to any individuals that are considered accredited investors. As put by the team at Investopedia, “An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access by satisfying at least one requirement regarding their income, net worth, asset size, governance status, or professional experience. In the U.S., the term accredited investor is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include high-net-worth individuals (HNWIs), banks, insurance companies, brokers, and trusts.” Related resource: Accredited Investor vs Qualified Purchaser The 3 Types of Syndicate Investors Syndicates offer an opportunity for an array of different individuals to make their way into startup investing. Learn about the most common types of syndicate investors below: Funds Some funds may use syndicates as a way to diversify their portfolio and make their way on to additional cap tables. Full-Time Investors Another common syndicate investor is a full-time investor or angel investor. This is someone that might not be attached to an individual fund but has a portfolio of startup investors. Related Resource: How to Effectively Find + Secure Angel Investors for Your Startup Regular Individual Investors Lastly, there could be any individual who partakes is accredited and is interested in diversifying their investments by investing in startups. Related Resource: How to Fairly Split Startup Equity with Founders Benefits of Syndicate Investing for Startup Founders On top of being an additional funding option for startups, syndicates offer a few benefits that might make them intriguing to a founder. A few benefits below: Large LP base with a single investor. Founders can tap into the individual investors in the syndicate but is only treated as a single investor on their cap table. Speed. Founders can move quickly when raising from syndicates as most of the diligence and effort is done upfront on behalf of the syndicate lead. Benefits of Syndicate Investing for Investors On the flip side, there are plenty of benefits to individuals that back a syndicate as well. A few of the benefits below: Access for smaller investors. Syndicates give individuals that write smaller checks the ability to back larger deals and rounds. Diversification. Syndicates give individuals the ability to make investments in more companies that might not be available to them as an individual investor. For More Fundraising Help Contact Visible Today Raising a syndicate is one of the many funding options available to a startup. As you kick off your raise and pitch different investors along the way, let us help. With Visible you can find investors with Visible Connect, add them directly to your Fundraising Pipeline, share your pitch deck, and track your round’s progress. Give Visible a free try for 14 days here.

If you read newspaper headlines you might think every successful startup jumps from funding round to funding round and celebrates its extreme growth along the way. However, building a startup is incredibly difficult and every founder is faced with ups and downs along the way. If you hear the term “down round” at a VC event, heads will turn. But if your startup is around long enough, chances are the thought of a down round will cross your mind. Learn more about what a down round is and how you can try to avoid one below: What is a Down Round? As put by the team at Investopedia, “A down round refers to a private company offering additional shares for sale at a lower price than had been sold for in the previous financing round. Simply put, more capital is needed and the company discovers that its valuation is lower than it was prior to the previous round of financing. This “discovery” forces them to sell their capital stock at a lower price per share.” While not celebrated by newspaper headlines, down rounds are a natural occurrence during a startup lifecycles. Learn more about down rounds below: Reasons Why a Down Round Occurs There are a number of reasons why a down round occurs. Startups are impacted by everything from internal decisions to macro events. Learn more about a few of the common reasons why a down round mights happen below: The Company Fails to Reach Necessary Earnings Milestones First and foremost, and most simply, a startup might fail to reach milestones they laid out during previous funding. In the early stages, startups generally have little to no traction and are setting milestones and projections based on a small dataset and history. If a startup is raising capital to last them 12-18 months at a seed round and are setting milestones for the next 12-18 months, investors will want to see that progress. If the startup is not at those milestones or showing strong progress, raising at a higher valuation will be difficult. With that said, it is important to be intentional and realistic when setting expectations and milestones during a fundraise. You will want to see your expectations high enough to entice investors but realistic enough to achieve. Of course, there are plenty of instances where you might miss your milestones but are showing strong traction and product development that might warrant a higher valuation. New Competitors are Grabbing Market Share There are also changes to markets that will impact a startup’s funding path. Markets, especially emerging tech markets, will see new competitors pop up often. In the lifecycle of an early-stage startup, navigating competition and standing out among your peers is crucial. Related Resource: How to Model Total Addressable Market (Template Included) Investors want to see that your company is grabbing market share and becoming an authority in the space. If there are hot new startups or large corporations entering your market (e.g. Amazon building a tool in your space), investors will feel less motivated to fund your company at a higher valuation. General Financing Requirements are Becoming More Stringent Another common reason for down-round funding is the macroeconomic environment. Venture capitalists are institutional investors and have a duty to return capital to their investors/LPs (limited partners). When times get tough, VC investment decision-making will likely get more stringent. While it can make a founder feel totally helpless, there are steps you can take during downtimes to see your startup through. One company that excelled through multiple downturns was ExactTarget. We interviewed former ExactTarget CEO, Scott Dorsey, to understand how they navigated both the Dot-Com Bubble and The Great Recession. Learn more below: Related Resource: 4 Takeaways From Our Webinar with Scott Dorsey Three Ways to Potentially Avoid a Down Round Now that we know the reasons why down rounds tend to happen, we can start digging into ways to help you avoid a down round. Of course, there are times when they are inevitable but there are steps that can be taken to help your odds of success: 1) Cut Costs to Make Money Last Longer As we mentioned earlier, we interviewed Scott Dorsey, former CEO of ExactTarget, to understand how to succeed through a downtown. “While cash has always been king, Scott mentions that it is even more important during a downturn. As a founder, you need to have a deep understanding of your cash flow and burn rate. It may be difficult to fundraise during a downturn but you need to be able to show your investors that you can (1) make it through a downturn and (2) thrive on the other side. If you can successfully display that you’re in a good cash position and ready to thrive after, you’ll improve your odds of raising capital.” If you can successfully cut costs and maintain your burn rate, you have the opportunity to stand out among other startups and generate interest from potential investors. Scott also recommends communicating often with your team and building an even closer relationship with your customers. Of course, cutting costs doesn’t only make sense during a downturn. If your company is struggling to hit milestones or find product-market fit, it might make sense to extend your runway so you can continue to develop your product and refine your go-to-market approach. Related Resource: 6 Metrics Every Startup Founder Should Track 2) Raise Bridge Financing As put by the team at Investopedia, “Bridge financing “bridges” the gap between the time when a company’s money is set to run out and when it can expect to receive an infusion of funds later on. This type of financing is most normally used to fulfill a company’s short-term working capital needs. There are multiple ways that bridge financing can be arranged. Which option a firm or entity uses will depend on the options available to them. A company in a relatively solid position that needs a bit of short-term help may have more options than a company facing greater distress. Bridge financing options include debt, equity, and IPO bridge financing.” Related Resource: How to Secure Financing With a Bulletproof Startup Fundraising Strategy 3) Consider Renogiatiating with Investors Of course, you can turn to your current investors and re-negotiate to work your way through a downturn. If you’ve been regularly communicating and updating your investors, chances are they will know the position of your company. If they’re aware of your status and believe in your ability to execute a plan, there is a chance they will be inclined to re-negotiate or help you work through a downturn. Related Reading: Startup Syndicate Funding: Here’s How it Works Steer Clear of a Down Round With Visible’s Help While there is no silver bullet to avoid a down round, there are steps a founder can take to avoid the potential of a down round. By taking your fundraise seriously and approaching it with a sales strategy, you’ll be able to better build momentum and focus on what truly matters, building your business. Learn more about how you can use Visible to help find investors, share your pitch deck, and track the status of your raise. Try Visible for free for 14 days here.

Securing venture capital for a startup is difficult. On top of having a business or product that is fundable, you need to have an approach to how you reach out and engage with investors during the process. At Visible, we oftentimes compare a venture fundraise to a traditional B2B sales process. You are adding investors to the top of your funnel, nurturing them with meetings, emails, and pitches in the middle, and hopefully closing them at the bottom of the funnel. Related Resource: How to Secure Financing With a Bulletproof Startup Fundraising Strategy Learn how you can craft a strategy to reach out and engage with potential investors below: Step-by-Step Guide to Investor Outreach As we mentioned earlier, fundraising can mirror a traditional B2B sales process. Just as you have a step-by-step process for reaching out to potential clients, you should have the same for investors. Check out a few of our recommended steps below: 1) Understand the Market First things first, you need to understand the market to help understand why an investor would want to fund your business. Ultimately, you need to understand the person you are “selling” to. This will be incredibly important when it comes to crafting your investor list as well. To learn more about the venture capital industry check out our post, “A Guide to How Venture Capital Works for Startups and New Investors Guide.” 2) Research Your Target Investors Just as you would build a list of potential customers that fit your ideal customer profile, you can do the same for a fundraise. Fundraising becomes a full-time job for many founders so it is important to make sure you are spending your time on the right investors. A couple of filters/fields we recommend starting with: Location Market focus Stage focus Check size Fund size Portfolio makeup Learn more in our post, “Building Your Ideal Investor Persona.” Use Visible Connect, our free investor database, to filter and find the right investors for your business. 3) Build a List of Potential Investors After you have a thorough understanding of your ideal investor, you’ll want to start building out a list of potential investors. Generally speaking, founders should talk to 60+ investors during the course of a fundraise (of course this number differs from company to company). You can use Visible to upload your list of investors (or add them directly from VIsible Connect) and track conversations. Give it a try for 14 days here. 4) Draft Your Outreach Email or Use a Template Once you’ve got your list of investors together it is time to craft messages to reach out to everyone. Cold email investors comes down to a fine balance between personalization and focus. Check out some tips and a template to get you started in our post, 3 Tips for Cold Emailing Potential Investors + Outreach Email Template. 5) Perform Your Outreach Of course, putting everything in place is only half the battle. You need to start actively reaching out and moving investors further through your funnel. One of the strategies we recommend here is from the team at First Round review. As they wrote in their post, “Group investors in batches to better evaluate and select them, like a surfer scanning sets of waves that move toward the shore… Say you have a dozen partners at firms who might make a good fit. Don’t group all your top choices in the first set of five. Pick two or three of your highly-ranked VCs and round out the set with lower priority firms. Even if you’ve rehearsed your pitch, you’ll continue to refine it, so diversify your schedule to account for that learning curve. It’s going to take some time in market to perfect the actual pitch. That said, don’t leave all your top picks until the end as they’ll be very out of sync with your process if in a later set. It’s a balancing act.” In order to better monitor your raise, you should have a tool or system in place to keep tabs on the status of your round. Check out our Fundraising CRM and give it a free try for 14 days here. 6) Prepare Your Marketing Materials and Create a Pitch Deck Inevitably, investors will ask for different assets, metrics, materials, etc. throughout a raise. We encourage founders to have them prepared in advance so they can respond to an investor quickly and efficiently. If you survey a set of investors, they will likely all offer different feedback on when, how, and where to share a pitch deck. Some investors (like Brett Brohl, check out his interview with us above) recommend sending a “teaser deck” in advance of a meeting. This should give investors the context they need to have a productive conversation and avoid spending time going over the basics of your business. Check out our Teaser Pitch Deck Template here and our other tips for creating a pitch deck here. Related resource: 23 Pitch Deck Examples 7) Follow-up With Potential Investors Any good outreach strategy has a set plan for following up with targets. It typically depends on the conversation and if expectations were set but we recommend following up a week or so after if an investor has not responded. However, if you have had contact with a potential investor you should set expectations with them on how and when you will follow up. For example, if you speak with an investor and your company is too early for them, you can send them your monthly investor updates to show your continued growth and traction. 8) Track and Measure Email and Click-Through Rates Gauging investor interest throughout a raise will be an important skill to hone. You will want to spend your time on the investors that are truly interested. Use email engagement data to uncover who the investors are who are most interested and engaged with your company. Related Resource: How to Build a Strong Investor Relations Strategy 9) Have Productive Conversations and Close Deals If you’ve done your homework and research beforehand having productive conversations should feel natural. If you have researched and targeted the correct investors and sent them the information they need in advance, you should be able to sit down and have a strong conversation. Every investor won’t say “yes”, in fact, most will say “no” so it is important to stay focused and continue to have strong conversations. Related Resource: Unlocking the Power of Thoughtful Relationships with the Founders of Clay What are the Best Platforms For Investor Outreach? Just as you have tools and mediums for reaching out to potential customers, the same can be said for investor outreach. Check out a few popular mediums and they can best be leveraged for investor outreach below: Email Reaching out via email is generally the best method for getting in front of potential investors. It is common practice that founders will reach out via email so investors are awaiting cold emails from founders. To learn more about reaching out to investors, check out our cold email template and best practices here. LinkedIn & Twitter Different investors will tell you different things about reaching out via social media. Some might like it, some might not. There are countless stories of founders who have had success using Twitter for outreach. For founders that are “building in public” and sharing their story over social media, either channel can be a powerful tool for finding new investors. Phone Calls Cold calling is likely not the strongest channel for getting in front of a potential investor but it can certainly find its purchase throughout the process. Phone calls are generally most effective after you’ve had some prior conversation and need to catch up quickly to understand the next steps. Visible Connect As we mentioned earlier, Visible Connect is our free investor database that can be used to help you identify potential investors and build a list to start your outreach. Check it out for free here. Visible Visible helps founders communicate and strengthen relationships with their investors. You can use Visible to find the right investors, track conversations, and share Updates throughout the process. Check out an Update template you can share with potential investors and start a free 14-day trial here. Visible is Here to Help You With Your Investor Outreach Raising venture capital is difficult enough. Having a system in place to help you build momentum will allow you to focus on what truly matters, building your business. Build a cohesive fundraising strategy and create momentum with Visible. Try Visible for free for 14 days here.

The underrepresented founder’s ecosystem has grown over the past several years but there are still systemic barriers in the industry. One of the most common arguments heard is that diversity hampers quality but the stats don’t support that, as Jeff Karoub explains “For example, women-founded startups, on average, have twice the return of male-founded startups. So, without systemic barriers, more money should be invested in women-founded startups.”. Another barrier for underrepresented founders has been accessing resources including, personal wealth, education, and network. The more money someone’s family has the more likely they are to go to a prestigious university, be introduced to a network of people that can help further their career goals, and have financial support from their families as they bootstrap their business to start. If we help support underrepresented founders today we will begin to see a multi-generational wealth impact. This starts with having more diversity within VC’s (black investors make up only 4% of partner-level roles and women are at 5%) as well as creating more networks for underrepresented founders in which they can connect with one another and have access to mentorship and knowledge to help them grow in their journey and gain access to capital. Related resource: The Femtech Frontier: Opportunities in Women's Health Technology + the VCs Investing Underrepresented Founders Stats: “Global VC funding nearly doubled year-over-year to more than $640 billion in 2021, Crunchbase data shows. Black founders received only around 1.3 percent of total venture funding last year—up from 2020, but still a tiny fraction. On a percentage basis, funding to Latino founders has largely stalled, and for sole female founders, it actually fell last year.” source “According to The US Census, the country will be majority/minority by 2045. As demographics change, so does economic influence. Yet fewer than 3% of venture capital partners are Black and in the record-breaking first half of 2021, Black founders received a mere 1.2% of the $147 billion invested in startups.” source According to PitchBook, “only 18% of about $240 billion raised by all venture capital-backed companies fund female founders.” Source “The current system capitalizes women and minority founders at 80% less than businesses overall. But miraculously, about 80% of investors believe that minority and women business owners get the capital they deserve — spotlighting the disconnect.” source “One report found that minority tech startups in the U.S. saw almost no progress in venture capital funding from 2013 to 2020. In a January piece for Crunchbase, Kinsey Wolf, a fractional CMO at Chisos Capital, suggests several potential solutions, including cultivating an ecosystem that supports minority founders and holding traditional funding avenues accountable to diversity, equity and inclusion benchmarks.” source “While funding to black entrepreneurs quadrupled over the first half of this year, it still only represented 1.2% of total US venture dollars – and only 0.34% (!!) to black women. Investment in women-owned startups fell over the last year, to just 2.3% of funding. On the investor side, only 4% of investors are black (compared to 14% of the population), only 5% of investors are women, and Latinx venture representation dropped from 5% to 4% over that period.” source Other Funding Opportunities Revenue-based financing with Founders First Capital Partners TechCrunch Article: First Capital Partners, a San Diego startup investment firm that uses a non-traditional approach to funding called revenue-based investment to invest in historically underrepresented founders AWS launches new $30M accelerator program aimed at minority founders Partner organizations include those that work with Black, Latino, LGBTQIA+ and women founders, including Black Women Talk Tech, Digitalundivided, StartOut, Backstage Capital and Lightship Capital. The Thiel Fellowship gives $100,000 to young people who want to build new things instead of sitting in a classroom. Venture for America: A national nonprofit and two-year Fellowship program that gives recent college graduates firsthand startup experiences that help them become leaders who make meaningful impacts with their careers. According to Forbes, “generalist funds like PayPal announced a $500 million fund, part of which was specifically black-led startups. Prudential committed $200 million to DEI in private equity. Funds were also raised with diversity as a core mandate. Female Founders Fund raised $57 million to invest in female founders. Harlem Capital raised $134 million, Collab Capital raised $50 million, Screendoor formed a $50 million fund, Sixty8 Capital closed $20 million. All in all, 134 venture organizations to-date have made commitments to back underrepresented founders (Harlem capital provides a comprehensive breakdown).” Resources The AllRaise Airtable of investors. All Raise is on a mission to accelerate the success of female founders and funders to build a more prosperous, equitable future. Data from the team at Diversity VC The Fundery’s Essential VC Database for Women Entrepreneurs This public airtable aggregating investors who invest in underrepresented founders Investors and Accelerators in the Space: Precursor Ventures Location: San Francisco, California, United States About: An early stage venture firm focused on classic seed investing. Thesis: We invest in people over product at the earliest stage of the entrepreneurial journey. Investment Stages: Seed Recent Investments: Noula Health AnyRoad Dispatch Goods To learn more about Precursor Ventures check out their Visible Connect Profile. MaC Venture Capital Location: Culver City, California, United States About: MaC Venture Capital is an early-stage venture capital firm focused on finding ideas, technology, and products that can become infectious. Thesis: We invest in technology companies that create infectious products that benefit from shifts in cultural trends and behaviors in an increasingly diverse global marketplace. Investment Stages: Seed Recent Investments: Petra Spora Health Edge Delta To learn more about MaC Venture Capital check out their Visible Connect Profile. Backstage Capital Location: Los Angeles, California, United States About: We invest in companies led by underestimated founders. Thesis: We invests in new companies led by underrepresented founders. Investment Stages: Pre-Seed, Seed, Series A Recent Investments: A Kids Company About Hello Alice BookClub To learn more about Backstage Capital check out their Visible Connect Profile Lightship Foundation Location: Ohio, United States About: Hillman Accelerator focuses on companies led by underrepresented individuals in tech by developing venture backable companies. Thesis: We serve underrepresented tech-driven startups through mentorship, specialized curriculum, partnerships, and capital investments– providing them the resources and guidance they need to scale. Investment Stages: Accelerator, Pre-Seed, Seed, Series A To learn more about Lightship Foundation check out their Visible Connect Profile. SoGal Ventures Location: New York, United States About: As the first female-led millennial venture capital firm, SoGal Ventures represents how far our generation has come, and how deep our impact on the world can be. We believe in the power of diversity, borderless business, and human-centric design. We invest in seed stage diverse founding teams in the U.S. and Asia, and aim to be the first institutional investor for our portfolio companies. Our investments paint the future picture of how we live, work, and stay healthy. Thesis: We invest in the future of how we live, work, and stay healthy. Investment Stages: Pre-Seed, Seed, Series A Recent Investments: Lovevery Everyly Health Function of Beauty To learn more about SoGal Ventures check out their Visible Connect Profile. Women’s VC Fund Location: Oregon, United States About: Women’s Venture Capital Fund invests in early stage companies which have raised angel capital, developed their core technology and are demonstrating bona fide market traction. The Fund capitalizes on the expanding pipeline of women entrepreneurs leading gender diverse teams and creating capital efficient, high growth companies. Thesis: WomensVCFund II makes investments in early stage (A/B), revenue-generating, high-growth companies led by management teams inclusive of women. Investment Stages: Series A, Series B Recent Investments: Newsela HopSkipDrive Nvoicepay To learn more about Women’s VC Fund Fund check out their Visible Connect Profile. True Wealth Ventures Location: Texas, United States About: Investing in Gender Matters. We see value in the impact of women. True Wealth Ventures invests in smart female entrepreneurs, from consumer health innovators to sustainable product pioneers. Women-led companies have proven they deliver higher returns. It’s time to invest in new perspectives. Thesis: We like to be the first institutional investors at an early stage (usually Series Seed) with first checks up to $1M, and we often take a board seat. We generally reserve over half of our investment capital for follow-on investments. We look for companies where the founders see an acquisition exit opportunity within 3-5 years at a valuation of $100 million or more. Investment Stages: Seed, Series A, Series B Recent Investments: UnaliWear BrainCheck Dermala To learn more about True Wealth Ventures check out their Visible Connect Profile. LGBT Capital Location: Harrow, England, United Kingdom About: LGBT Capital is a specialist corporate advisory and asset management business serving the LGBT consumer sector. Thesis: Is principally focussed on the LGBT Consumer segment as a credible investment sector and to demonstrate the business case for advancements in LGBT equality and inclusion globally. To learn more about LGBT Capital check out their Visible Connect Profile. BLCK VC Location: San Francisco, California, United States About: Connecting, engaging, empowering, and advancing Black venture investors by providing a focused community built for and by Black venture investors. To learn more about BLCK VC check out their Visible Connect Profile. Transparent Collective Location: San Francisco, California, United States About: Transparent Collective is a non-profit organization helping underrepresented founders access the growth resources and connections. To learn more about Transparent Collective check out their Visible Connect Profile. Forum Ventures Location: New York City, San Francisco, and Toronto, United States About: B2B SaaS; Future of Work, E-commerce enablement, Supply Chain & Logistics, Marketplace, Fintech, Healthcare To learn more about Forum Ventures check out their Visible Connect Profile. Start Your Next Round with Visible We believe great outcomes happen when founders forge relationships with investors and potential investors. We created our Connect Investor Database to help you in the first step of this journey. Instead of wasting time trying to figure out investor fit and profile for their given stage and industry, we created filters allowing you to find VC’s and accelerators who are looking to invest in companies like you. Check out all our investors here and filter as needed. After learning more about them with the profile information and resources given you can reach out to them with a tailored email. To help craft that first email check out 5 Strategies for Cold Emailing Potential Investors. After finding the right Investor you can create a personalized investor database with Visible. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Start your free trial here. Related Resources: The Rise of Women-Led VC Firms (+ a List to Keep an Eye on) 10 Angel Investors to Know in Los Angeles

Being a founder is difficult. Managing the day-to-day as a founder while trying to secure capital for your business can almost feel impossible. Thankfully, there are different tools and techniques that founders can use to systemize their fundraise to focus on what truly matters, building their business. One of those tools is a startup funding proposal. In this guide, we’ll break down what a startup funding proposal is and how you can leverage it to build momentum in your fundraise. What Is a Startup Funding Proposal? A startup funding proposal is a document that helps startup founders share an overview of their business and make the case for why they should receive funding. A startup funding proposal can be boiled down to help founders layout 3 things: What — what does your startup do How — how does your startup or product help customers accomplish what they are seeking Why — why does your startup need funding and why should an investor fund your business Related Resource: How to Write a Business Plan For Your Startup Types of Startup Funding Proposals Like any business document, there are many ways to approach a startup funding proposal. Ultimately it will come down to pulling the pieces and tactics that work best for your business. Investors are seeing hundreds, if not thousands, of deals a month so it is important to have your assets buttoned up to move quickly and build conviction during a raise. Check out a couple of popular types of funding proposals below: Traditional Startup Funding Proposal The most traditional or “standard” standard funding proposal is generally a written and visual document that is created using word processing software and/or design tools. A traditional proposal is great because it allows you to share context with every aspect of your business. For example, if you include a chart of growth you’ll be able to explicitly write out why that was and what your plan is for future growth. This document is generally designed to fit your brand and will hit on the key components of your business is structured and predictable way. We hit on what to include in your proposal below. Startup Funding Proposal Pitch or Presentation The most common approach we see to a fundraise or proposal is the pitch deck. Pitch decks take the same components as any proposal and fit them into a visual pitch deck that can be easily navigated and understood by a potential investor. Pitch decks are not required by investors by are generally expected and are a great tool that can help you efficiently close your round. To learn more about building your pitch deck, check out a few of our key resources below: Tips for Creating an Investor Pitch Deck 18 Pitch Deck Examples for Any Startup Our Teaser Pitch Deck Template 1-on-1 Proposals (Elevator Pitch) A 1 on 1 proposal or an elevator pitch is the quickest version of any proposal. Every founder should have an elevator pitch in their back pocket and is a complementary tool to any of the other funding proposals mentioned here. As the team at VestBee puts it, “Elevator pitch” or “elevator speech” is a laconic but compelling introduction that can be communicated in the amount of time it takes someone to ride an elevator, usually around 30 seconds. It can serve you for fundraising purposes, personal introduction, or landing a prospective client.” Email Proposal Another common way to share a startup funding proposal via email. While the content might be similar to what is seen in a “traditional” funding proposal this allows you to hit investors where they spend their time – their inbox. The format will follow a traditional proposal with less emphasis on visual aspects and more emphasis on the written content. Check out an example from our Update Template Library below: Related Resource: How to Write the Perfect Investment Memo Investor Relationship Hub Lastly, there is an investor relationship hub or data room that can be used to share your proposal with potential investors. A hub is a great place to curate multiple documents or assets that will be needed during your fundraise. For example, you could share your funding proposal and your financials if they are requested by a potential investor. Related Resource: What Should be in an Investor Data Room? What to Include in Your Startup Funding Proposal How you share your funding proposal might differ but ultimately the components are generally closely related from one proposal to the next. However, be sure that you are building this for your business. There is no prescriptive template that will work for every business. Project Summary First things first, you’ll want to start with a summary of your project or your business. This can be a high-level overview of what your proposal encompasses and will give an investor the context they need for the rest of the proposal. A couple of ideas that are worth hitting on: What your company does and how it’s different from existing solutions to pressing problems. Existing market gaps and how your product covers them. The importance of your product in your industry and how it improves the industry. Existing resources and manpower, investment requirements, and potential limitations. Current Performance and Financial Report Of course, investors want to see how your business has been performing. The data and metrics around your business are generally how an investor builds conviction and further interest in your business. We suggest using your best judgment when it comes to the level of metrics or financials that you’d like to share. A couple examples of what you might share: Current assets and liabilities MVP presentation for companies still in the ideation stage Appendix with financial reports Related Resource: ​​Building A Startup Financial Model That Works Existing Investors and Partners Inevitably investors will want to know who else you have raised capital from and partnered with in the past. Include a brief description of the different investors you have on your cap table and be ready to field additional questions if they have any. Pro tip: The first place an investor will go to when performing due diligence is your current investors. Make sure you have a strong relationship and good communication with your current investors. Market Study and Sales Goals Investors will also care about your customer acquisition efforts and want to make sure you can repeatably find and close new customers. A couple of things that might be important to include in this section: Product pricing and information Revenue targets and goals Customer acquisition model and efforts Sales and marketing related KPIs Stories or testimonials from happy customers Current Valuation, Investment Requirements, and Expected Returns This is an opportunity to lay out your cap table and explain your current valuation, investment requirements, and what future valuations could look like. As always, we suggest using your best judgment when it comes to what level of detail you’d like to share about your cap table. Potential Pitfalls and Solutions There is an inherent risk when investing in any startup. It is important to make sure potential investors are aware of this. Layout the common pitfalls your startup might face and stop you from achieving your goals. Next, lay out the solutions to these problems and how you plan to tackle them if/when they arise. 8 Startup Funding Proposal Samples and Templates Below are 8 proposal templates to help you kick off your next fundraise. Note that some of these are technically investor updates and not designed for first-time fundraising. Keep in mind that a startup funding proposal could also be utilized for additional funding after the first round of funding. 1. An Investment Summary Template by Underscore VC Underscore VC is a seed-stage venture fund based out of Boston. As the team at Underscore writes: “As part of this, we strongly recommend you write out a pitch narrative before you start to build a pitch deck. “Writing the prose forces you to fill in the gaps that can remain if you just put bullets on a slide,” says Lily Lyman, Underscore VC Partner. “It becomes less about how you present, and more about what you present.” This exercise can help you synthesize your thoughts, smooth transitions, and craft a logical, compelling story. It also helps you include all necessary information and think through your answers to tough questions. Check out the template here. 2. The Visible “Standard” Investor Update Template Our Standard investor update template is great for communicating with existing investors. If you are regularly sending Updates to their investors they should know when you are beginning to raise capital again and can almost be treated as an investment proposal. Check out the template for our standard investor update template here. 3. Sharing a Fundraising Pitch via Video Videos are a great way to give the right context to the right investors in a concise and quick way. Video is a great supporting tool for any other information or documents you might be sending over. For example, you can include a few charts or metrics and some company information and use the video to further explain the data and growth plans. Check out the template here. 4. Financial Funding Proposal The team at Revv put together a plug-and-play financial funding proposal. As they wrote, “A funding proposal must provide details of your company’s financials to obtain the right amount of funding. Check out our funding proposal template personalized for your business.” Check out the template here. 5. Investor Proposal Template for SaaS Companies The team at Revv put together a template to help founders grab the attention of investors. As they wrote, “With so many Investing Agencies, this Investor proposal will surely leave an impact on your company in the long run.” Check out the template here. 6. Startup Funding Proposal Sample Template.net has created a downloadable funding proposal template that can be edited using any tool. As they wrote, “Get your business idea off the ground by winning investors for your business through this Startup Investment Proposal. Fascinate investors with how you are going to get your business into the spotlight and explain in vivid detail your goals or target for the business.” Check out the template here. 7. Simple Proposal Template Best Templates has created a generic proposal template that can be molded to fit most use cases. As they wrote, “Use this Simple Proposal Template for any of your proposal needs. This 14-page proposal template is easily editable and fully customizable using any chosen application or program that supports MS Word or Pages file formats.” Check out the template here. 8. Sample Investment Proposal for Morgan Stanley Another example is from the team at Morgan Stanley. The template is commonly used by their team and can be applied to most proposal use cases. Check out the template here. Connect With More Investors and Tell Your Story With Visible Being able to tie everything together and build a strategy for your fundraise will be an integral part of your fundraising success. Check out how Visible can help you every step of the way below: Visible Connect — Finding the right investors for your business can be tricky. Using Visible Connect, filter investors by different categories (like stage, check size, geography, focus, and more) to find the right investors for your business. Give it a try here. Pitch Deck Sharing — Once you’ve built out your target list of investors, you can start sharing your pitch deck with them directly from Visible. You can customize your sharing settings (like email gated, password gated, etc.) and even add your own domain. Give it a try here. Fundraising CRM — Our Fundraising CRM brings all of your data together. Set up tailored stages, custom fields, take notes, and track activity for different investors to help you build momentum in your raise. We’ll show how each individual investor is engaging with your Updates, Decks, and Dashboards. Give it a try here.

“The future of work” is a broad and evolving topic, for this article we will cover it in the context of how founders are creating and solving for our rapidly changing working world as well as where and how VCs are investing in it. At its core, the future of work revolves around how technological advancements, socio-economic shifts, cultural changes, and evolving business models are transforming the nature, location, and experience of work. For founders, this signifies a wide array of potential opportunities to innovate within, and for VCs, there lies huge investment opportunities. Predictions for the Future of Work: Where VCs see the biggest opportunities The “Future of Work” is expected to be more flexible, decentralized, sustainable, and human-centric, all underpinned by advanced technology. For founders, aligning with these predicted trends could prove beneficial in securing VC interest and investment. AI and automation will transform many jobs. AI is already widely being used to automate tasks and will grow as new use cases and technology evolve, this could lead to some job displacement. However, AI is also creating new jobs, such as AI developers and engineers. VCs are investing in companies that are developing AI-powered tools to automate tasks, improve productivity, and make work more efficient. Expert Opinion: McKinsey & Company, among others, has highlighted the accelerating adoption of automation and AI across industries, from manufacturing to services. Opportunities: Startups developing intuitive AI interfaces, low-code/no-code automation platforms, and solutions for job displacement caused by automation (like re-skilling platforms). Democratization of Entrepreneurship. This refers to the leveling of the playing field, enabling more people from diverse backgrounds to start and scale businesses thanks to recent developments in technology, such as AI. The “Future of Work” isn’t just about how we work, but also about how we create, innovate, and bring ideas to market. What once required a substantial capital investment or technical expertise is now accessible to anyone with an idea and internet access. No longer do entrepreneurs need to understand coding to build a digital presence. Expert Opinion: Lower barriers to entry in business, thanks to digital tools, will lead to a rise in micro-entrepreneurs and niche businesses. This viewpoint is supported by platforms like Shopify and their growth trajectory. VC Opportunity: Tools supporting small-scale e-commerce, localized marketing platforms, and solutions catering to niche digital businesses. Skills development and education will be essential for success. As the world of work changes rapidly, it is increasingly important for people to have the skills they need to succeed. VCs are investing in companies that provide skills development and education programs to help people learn new skills and stay ahead of the curve. Expert Opinion: With the pace of technological advancement, lifelong learning is becoming essential. Leaders like Thomas Friedman have emphasized the importance of adaptable and continuous learning. Opportunities: Micro-credentialing platforms, industry-specific upskilling courses, and experiential learning tools leveraging AR and VR. The gig economy will continue to grow. The gig economy is growing rapidly, and VCs are investing in companies that are making it easier for people to find and book freelance work. This includes companies that provide freelance marketplaces, job boards, and payment platforms. Expert Opinion: The gig economy is expected to grow but evolve to offer more security and benefits to freelancers. Experts like Diane Mulcahy have discussed the shift from the traditional 9-to-5 to more flexible work structures. Opportunities: Platforms providing benefits and insurance for freelancers, gig work management tools, and specialized marketplaces for niche skills. Investment Landscape: Capital Flowing into the Future of Work As of Q3 2023, the future of work 100 has collectively raised $30 billion in capital from VCs, with a total valuation of over $211 billion, according to Future of Work 100 Report. Top Investors Y Combinator Index Ventures General Catalyst Kleiner Perkins Accel Top Categories (starting with the largest) Recruiting HR Learning Collaboration Wellness Notable Deals Rippling $500 million Series E in Q1 2023 Total Funding Amount: $1.2 Billion Rippling is a human resource management company that offers an overall platform to help manage HR and IT operations. Guild Education $264.7 million Series G Q2 2022 Total Funding Amount: $643.2 Million Guild is a learning platform that offers classes, programs, and degrees for working adults. These fundraises suggest that VCs are still very bullish on the future of work sector, even in the face of a challenging economic environment. Future of Work Categories The “future of work” is dynamic, and the areas of focus will evolve as new technologies emerge and societal needs change. VC investments will continuously shift to adapt to these changes, seeking out innovative solutions that address the most pressing challenges and opportunities in the world of work. As of now, these are the categories we found to be of most interest to VCs and Founders alike, as they solve for and support the way we work today and in the future. Remote and Distributed Work With the proliferation of digital tools and the effects of the pandemic, remote and hybrid work models have become more prevalent. Virtual collaboration tools (e.g., video conferencing, project management software). Virtual office environments and platforms. Remote team-building and culture-enhancing solutions. Digital security tools tailored for remote work setups. Human Resources and Talent Management AI-driven recruitment platforms that ensure a better fit between candidates and companies. Employee engagement and performance tracking tools. Solutions for remote onboarding, training, and continuous learning. Automation and AI The rise of automation and AI has the potential to transform many job roles and industries. Robotic Process Automation (RPA) for automating repetitive tasks. AI-driven solutions for data analysis, customer service, and other business functions. Job re-skilling and up-skilling platforms, recognizing the need for workers to adapt. Gig Economy and Flexible Employment As more people pursue freelance, contract, and part-time work, there’s a growing demand for platforms that facilitate this kind of employment. This includes: Freelancer marketplaces. Tools for gig workers, such as invoicing, insurance, and benefits platforms. Platforms for micro-tasks or crowd-sourced work. Employee Well-being and Productivity The emphasis on work-life balance and employee well-being is growing. Mental health and well-being platforms tailored for professionals. Productivity-enhancing tools, including time management and focus-enhancing software. Physical wellness platforms, including virtual fitness and ergonomics solutions. Lifelong Learning and Continuous Education The rapid pace of change means workers need to continually update their skills. Online learning platforms, both general and industry-specific. Corporate training and development tools. Credentialing and certification platforms. Decentralized Work Platforms With the rise of blockchain and decentralized technologies, there are new models for work and value creation, such as: Decentralized autonomous organizations (DAOs) where members collaborate without a traditional hierarchical structure. Platforms that allow for tokenized incentives or compensation. Diverse and Inclusive Work Environments Recognizing the value of diverse workforces, there’s a push for tools and platforms that promote diversity and inclusion, such as: Recruitment software that mitigates biases. Platforms that connect businesses with diverse talent pools. Tools that foster inclusive communication and understanding within teams. Culture and Engagement in Distributed Teams Platforms for virtual team-building activities. Tools that help maintain and communicate company culture in a remote setting. VCs Investing in the Future of Work Khosla Ventures Location: Menlo Park, California, United States About: At KV, we fundamentally like large problems that are amenable to technology solutions. We seek out unfair advantages: proprietary and protected technological advances, business model innovations, unique approaches to markets, different partnerships, and teams who are passionate about a vision. Investment Stages: Seed, Series A Recent Investments: Volta Labs WorkWhile Emi To learn more about Khosla Ventures, check out their Visible Connect Profile. Menlo Ventures Location: Menlo Park, California, United States About: We are investors and company builders—we know what it takes to turn a budding idea into a scalable business. We work with early-stage founders to find product-market fit, develop go-to-market strategies, scale their organizations, and support them as they grow. Investment Stages: Pre-Seed, Seed, Series A, Series B, Growth Recent Investments: TruEra OpenSpace Siteline To learn more about Menlo Ventures, check out their Visible Connect Profile. Social Capital Location: Palo Alto, California, United States About: Social Capital’s mission is to build the future. We do this by identifying emerging technology trends, partnering with entrepreneurs that are trying to solve some of the world’s hardest problems and help them build substantial commercial and economic outcomes. Our returns have placed us among the top technology investors in the world and act as a signal that we have generally been on the right track. Investment Stages: Seed, Series A, Series B, Growth Recent Investments: Palmetto WorkStep Asaak To learn more about Social Capital, check out their Visible Connect Profile. Hexa Location: Paris, France About: Hexa is home to startup studios eFounders (SaaS), Logic Founders (fintech) and 3founders (web3). It all started in 2011 with startup studio eFounders, which pioneered a new way of entrepreneurship, became a reference in the B2B SaaS world, and launched over 30 companies including 3 unicorns (Front, Aircall, Spendesk). Now, eFounders is part of Hexa, alongside its sister startup studios Logic Founders (fintech) and 3founders (web3). Investment Stages: Pre-seed, Seed, Series A, Series B, Series C Recent Investments: Kairn Crew Collective To learn more about Hexa, check out their Visible Connect Profile. s28 Capital Location: San Francisco, California, United States About: S28 Capital is an early-stage venture fund with $170M under management. We’re a team of founders and early startup employees. Investment Stages: Seed, Series A Recent Investments: OpsLevel Rudderstack CaptivateIQ To learn more about s28 Capital, check out their Visible Connect Profile. WorkLife Location: San Francisco, United States About: The first fund designed for builders, creators & individual contributors We’re operators with a deep network of creators, developer evangelists, product designers and engineers. We’re backed by the founders of Cameo, Spotify, Twitch, Zoom and platforms built for builders, creators, and individual contributors. Our advisors include Arianna Huffington, Michael Ovitz, Sophia Amoruso, Eric Yuan and other disruptors across all industries. Investment Stages: Pre-seed, Seed, Growth Recent Investments: Accord Tandem ChartHop To learn more about WorkLife, check out their Visible Connect Profile. Bonfire Ventures Location: Los Angeles, California, United States About: We bring experience and empathy to our founder’s journeys. Investment Stages: Seed, Series A, Series B Recent Investments: SKAEL Spekit Atrium To learn more about Bonfire Ventures, check out their Visible Connect Profile. Related Resource: 10 Angel Investors to Know in Los Angeles iNovia Capital Location: Montreal, Quebec, Canada About: Inovia Capital is a full-stack venture firm that invests in tech founders. Investment Stages: Seed, Series A, Series B, Series C, Growth Recent Investments: Talent.com Calico RouteThis To learn more about iNovia Capital, check out their Visible Connect Profile. Related Resource: 10 Venture Capital Firms in Canada Leading the Future of Innovation Bloomberg Beta Location: San Fransisco & New York City, California, United States About: Invests in powerful ideas that bring transparency to markets, achieve global scale, with strong, open cultures that embrace technology. Thesis: We believe work must be more productive, fulfilling, inclusive, and available to as many people as possible. Our waking hours must engage the best in us and provide for our needs and wants — and the world we live in too often fails to offer that. We believe technology startups play an essential role in delivering a better future. We can speed the arrival of that future by investing in the best startups that share these intentions. Investment Stages: Pre-seed, Seed, Series A, Series B, Series C Recent Investments: CloudApp StrongDM Tonic.ai To learn more about Bloomberg Beta, check out their Visible Connect Profile. SOSV Location: Princeton, New Jersey, United States About: SOSV is a venture capital firm providing multi-stage investment to develop and scale their founders’ big ideas for positive change. Investment Stages: Accelerator, Pre-Seed, Seed, Series A, Series B Recent Investments: MarketForce Novoloop TabTrader To learn more about SOSV, check out their Visible Connect Profile. Lerer Hippeau Location: New York, New York, United States About: Lerer Hippeau is a seed and early-stage venture capital fund based in New York City. Investment Stages: Seed, Series A, Series B, Series C Recent Investments: Palmetto Sardine Blockdaemon To learn more about Lerer Hippeau, check out their Visible Connect Profile. White Star Capital Location: New York, New York, United States About: White Star Capital is an international venture and early growth-stage investment platform in technology. Investment Stages: Series A, Series B Recent Investments: Swing Wrk RareCircles To learn more about White Star Capital, check out their Visible Connect Profile. General Catalyst Location: Cambridge, Massachusetts, United States About: General Catalyst is a venture capital firm that makes early-stage and growth equity investments. Investment Stages: Seed, Series A, Series B, Growth Recent Investments: Ponto Socotra Homeward To learn more about General Catalyst, check out their Visible Connect Profile. Tuesday Capital Location: Burlingame, California, United States About: Tuesday Capital (formerly known as CrunchFund) is a seed stage focused venture firm Investment Stages: Seed, Series A, Growth Recent Investments: Kueski NeuraLight Crabi To learn more about Tuesday Capital, check out their Visible Connect Profile. Forum Ventures Location: New York City, San Francisco, and Toronto, United States Thesis: B2B SaaS; Future of Work, E-commerce enablement, Supply Chain & Logistics, Marketplace, Fintech, Healthcare Investment Stages: Pre-Seed, Seed Recent Investments: Sandbox Banking Tusk Logistics Vergo Check out Forum Ventures profile on our Connect Investor Database Start Your Next Round with Visible We believe great outcomes happen when founders forge relationships with investors and potential investors. We created our Connect Investor Database to help you in the first step of this journey. Instead of wasting time trying to figure out investor fit and profile for their given stage and industry, we created filters allowing you to find VC’s and accelerators who are looking to invest in companies like you. Check out all our investors here. After learning more about them with the profile information and resources given you can reach out to them with a tailored email. To help craft that first email check out 5 Strategies for Cold Emailing Potential Investors. After finding the right Investor you can create a personalized investor database with Visible. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Start your free trial here.

Many new ventures and new startups are formed by multiple individuals, collectively known as the founders. Sometimes long-time friends, sometimes former colleagues, other times like-minded individuals who came together specifically for the problem the startup solves. All of these different combinations of individuals, regardless of background, are startup founders and with that new title comes a new set of rules and responsibilities. New startup founders that are forming a business, often enter into a Founders Agreement. We’ve gone in-depth into the typical nature of a Founders Agreement, what it is, and what it can mean for your startup. Related resource: The Startup’s Guide to Investor Agreements: Building Blocks of VC Funding What is a Founders Agreement? A Founder’s Agreement is a contract. But not just any contract, a Founder’s Agreement is a specific contract that lays out the business relationships that the founders enter into and agree upon. The Founder’s Agreement contract specifically lays out the responsibilities, rights, obligations, and any liabilities of each founder. The Founder’s Agreement is in place to regulate matters that aren’t governed by any type of operating agreement or financial agreement with investors, but rather specifically ensures that each founder is clear on their specific role with and for the company. Related Resource: How To Find Private Investors For Startups What Are the Must-Have Items to Include in the Founders Agreement? Now that it’s been established that a founder’s agreement is essentially a contract dictating the founding team’s rights, responsibilities, and role within the company, let’s get a little bit more specific. Thinking through all the possible items that could be in your founder’s agreement, we recommend starting with at least the following 10 to ensure the key details of the business are specifically covered. Related resource: Investor Agreement Template for Startup Founders 1. Add Notable Names Including the Founders of the Company While it may seem straightforward, be as detailed as possible and list out every single founder of the company by name, title, and even a breakdown of ownership if applicable. Capture as much detail as possible about the founding team that the Founder’s Agreement pertains to. It is also helpful to outline any other notable names that are involved at the early formation of your company. For example, if you have any early friends and family investors, advisors in the space, founding customers, founding partners, or subject-matter experts involved in any type of POC or validation study, list them out by name and role associated with your company. If they have a financial stake, outline the percentage ownership stake they have in the business as well and note if they would technically be considered a founder under this agreement. 2. Document Your Business Structure Now that all key persons have been outlined by name and role, be sure to document the structure of your business. How your business is structured can affect the future of the company. Determine how your company will be structured – consider if it makes more sense for it to work as a partnership, LLC, C Corp, S Corp and consider all of the financial and structural implications that come with each option. Determining and documenting this from the beginning is key to building your business from a unified perspective and understanding. 3. Include a Broad Overview of Your Startup Outline the mission statement and an elevator pitch of your startup. A broad overview is helpful to ensure all founder decisions moving forward are aligned to the same vision and mission, with a clear direction of the goal your startup has to accomplish. As the company evolves and grows, pointing back to the agreed-upon overview in the founder’s agreement can help dictate that change and direction as well but will ensure decisions are made with the same foundation in mind. Related Resource: How to Write a Business Plan For Your Startup 4. Have an Expenses and Budget Report Having your finances in order is key to the success or failure of any business. In the Founder’s Agreement, outline where your finances stand. Outline in detail any funding your team has received as a seed investment. Next, outline your company’s operating expenses to ensure all output of money is explicitly documented at the founding of the company and all founders are hyper-aware of the existing spend and burn rate of the company. Finally, outline a foundational budget that each founder has explicit input into. This will ensure that no matter each founder’s unique role or responsibility, there is an agreed-upon budget, especially in relation to the expenses and burn rate of the organization. 5. Include a “Who is Responsible for What?” Section Depending on the makeup of your founding team, there may be a lot of different skill sets and ranges of expertise at the table. Having founders with many different backgrounds and skillsets can be a major advantage for your organization, however, with a versatile set of skills and a unified passion for the startup’s mission, it can be hard for founders to stick to the part of the business they own. Outlining a clear section that documents who is responsible for what in the Founder’s Agreement can ensure that every founder can contribute and master a key area of the business without trying to take on too much or double-dipping in another founder’s role or assigned lane. This will ensure the business scales effectively and every founder appropriately commits to what they will bring to the business. This section can also help define and structure the titles and growth path for each founder and the functional direction of the organization based on which roles are defined and taken on by the founding team first. 6. Management and Legal Decision-Making, Operating, and Approval Rights Piggybacking off of the responsibilities section of your founder agreement, be sure to outline the structure of management at your organization and the hierarchy of various decision-making. If you have a board or plan to have a board, make sure to outline their existing role within the organization. Having an agreed-upon set of rules determining the hierarchy of legal decisions, operation decisions, and final approval rights within the business is key as the company grows and may face big challenges ahead that require a clear, unified plan. 6. Add an Equity and Vesting Section In early startups, founders may not be taking much or any salary at all. This makes it critical to document and clarifies ownership of the business. The goal of every startup is certainly to grow a successful, thriving business. This could mean aspirations as big as an IPO or major acquisition. Establishing early on what percentage of the company each founder owns as well as the schedule that they will vest their shares, or receive full rights to the shares in the company. Having a unified equity agreement and vesting schedule baked into the Founder’s Agreement is key to outlining the years that each founder is needing to stay with the business to reach their full earning potential. This can help solidify the commitment of each founder to the business as well. Related Resource: Employee Stock Options Guide for Startups 7. Include a Salary Compensation Report Even if the salary of each founder is minimal or they forgo a salary as the business starts to save cash, It is helpful to outline a compensation report and even a compensation plan for the founders of the business. A compensation report can outline the initial compensation each founder takes. It can also outline the planned compensation increase for each founder as the profits of the business grow or more funding is granted to the business. Having agreed upon salary compensation documented at the foundation of the company can ensure all founders are aligned on what they are owed and what they are set to earn as the company scales. This will help with tracking financial growth and prevent any major mishaps or founder disagreements about salary and compensation. 8. Dissolution and Termination Clauses Even though most founders plan to stick with a company they found, that is not always the way things shake out long term. It’s important to think through and document what happens with each founder and their ownership and role with the copy under two unfortunate circumstances. Dissolution, or the dissolvement of effective closing down of the company, is something that many startups end up having to do if their company does not take off or has a positive growth trajectory. It’s critical to have documentation in the Founder’s Agreement that determines what will happen to any existing profit or patented ideas or technology in a case of dissolution so that all founders are aware and agreed upon that unfortunate outcome – this can save major legal disagreement down the line. Additionally, an agreed-upon termination clause is also a smart piece of information to include in a founder agreement. This can outline the scenarios of a possible founder exit and what will happen to their shares, intellectual intelligence, or technical knowledge in case of a voluntary or involuntary exit. While the reality for founders going into a new business may be with that company indefinitely, things do happen, and planning for possible dissolution and termination can save the team many headaches and heartache at the end of a business or time with a business. 9. Intellectual Property As part of the termination and dissolution clause, it’s a good idea to highlight all known and defined intellectual property and its ownership within the founder’s agreement. In a situation where a founder exits the business while it is still growing or at dissolution, it needs to be understood where the intellectual property, the ideas, and knowledge that is the foundation of the business, lies while the business is still operating and after. This can help prevent any founder from leaving to start a competitor while the business is operable and ensure that all ideas are documented to the correct owner in perpetuity. What is the Importance of a Founders Agreement? A Founders Agreement is extremely important for a number of reasons but foundationally, it provides a unified, agreed-upon set of rules and guidelines for the founding team to align on and build from. A few of the key reasons a Founder Agreement is so important are: Identifies each owner’s role – having clarity and unified direction on how each owner of the business (both founders and investors) will play a role in the evolution of the business from the very beginning is critical to the success of the business long term. A founders agreement makes ownership and ownership roles crystal clear. Provides structure for resolving issues among founders – Every founding team will have conflicts. Conflict is inevitable when building a business and making tough and risky decisions. Having a Founder Agreement can provide an easy rule book for conflict resolution and managing any issues within the founding team. Because every founder has agreed upon the Founder Agreement, it is a straightforward source of truth when inevitable conflict arises. Protects minority owners – Depending on the origins of the founding team and the company idea, ownership of the organization may not be completely even among founders. This makes the Founder Agreement extremely important to minority owners. It provides a clear outline of what they own, what they are entitled to, and the minimum and maximum responsibility they have to the business. This prevents majority owners from gaming the system by taking advantage of the minority owners’ agreed-upon contributions and responsibilities to the business. Signals to investors that you have a serious business – A Founder Agreement is a critical contract potential investors will look for when considering your business. Having taken the time to solidify the Founder Agreement is good luck for your business and founding team, showing you have a serious business and have thought through all possible points of conflict, future structure, and ownership balance across the founding team. This helps establish your business as a competent, and well-organized one for potential investors to consider. Related Resource: Valuing Startups: 10 Popular Methods How to Create a Founders Agreement Now that we’ve established the purpose for and critical elements of a Founder’s Agreement, let’s follow a simple process to create one. 1. Select a Template No need to start from scratch! Plenty of VCs, business schools, and other private companies provide templates for many different documents and contracts typically used when starting a business, including a Founder Agreement. Check out Visible’s template for this here. 2. Knock Out the Easy Sections First Start with the easy stuff. Your founding team should know your company’s purpose, mission, founder names, and roles and responsibilities. From there, work through the harder organizational and financial details. 3. Thoroughly Work Through the More Challenging Sections Don’t speed through the complicated aspects of the Founder Agreement. Take as much time as needed to work through financial, organizational, and termination details. Consult attorneys, fellow founders, existing investors, and industry peers as needed to ensure you are following the best possible practices and considering all the necessary elements to complete the more challenging, complex sections. You’ll be thankful you took the time to do these parts in a detailed manner when and if it is ever necessary to consult the founder agreement in a difficult scenario. 4. Consider Hiring a Lawyer if Necessary Legal battles are never fun. As mentioned above, while you’re taking your time and going over every detail of the complicated parts of the founder’s agreement, consider hiring a lawyer to consult on and help construct the elements with the most liabilities including salary and ownership pieces as well as termination clauses. Get as much legal advice as you might need, and unless you have in-house expertise on your founding team, a lawyer can be especially helpful in outlining the tax section (you certainly don’t want to mess that up at any stage of your business). 5. Seek a Second Opinion from Fellow Entrepreneurs Founder’s Agreements exist for a reason – they were born out of the mistakes and learnings of previous founders. Consult fellow entrepreneurs who have written and established founders’ agreements in the past. See what worked best for them or what they wish they had included in their founding agreements but did not. No need to reinvent the wheel here, learn from the best in your space. 6. Finalize by Signing Your Founders Agreement With a lawyer present if needed, set a specific date and time to finalize the signing of your FOunder’s Agreement with all founders present. Ensure all founders have enough time to read, review, and contribute to the said agreement so that on signing day you can celebrate finalizing this foundational piece of legal paperwork and the growth of your company. Learn More About Founders Agreements and Startup Funding If you’re looking for more information on Founders Agreements and Startup Funding, check out our other resources for founders on our blog and subscribe to our newsletter, the Visible Weekly. Related resource: The Startup's Handbook to SAFE: Simplifying Future Equity Agreements

As companies scale and grow, they may take on different commitments, challenges, and goals and explore a variety of different paths when it comes to the financial decisions made for growth at the company. There are a number of different ways a company can be set up, a variety of ways it can get off the ground with finances, and many different possible outcomes for a company’s future. How you choose to finance your company, especially early on, can determine a lot about the course your company will take. One option to explore early in a startup’s journey, primarily pre-Series A fundraising round, is convertible debt. Here at Visible, we’ve put together a user-friendly guide on Convertible Debt. What is Convertible Debt? So, what exactly is Convertible Debt? Simply put, Convertible Debt is a loan or a debt option from an investor that is paid with equity or stock in a company. The big difference between a convertible debt investment and a traditional investment is that a traditional investment is typically for an exchange of equity or stock immediately at a known valuation. A Convertible Debt is a loan or debt option that is paid with equity or stock in a company at a future date. This future date maybe when a firmer valuation is determined by the raise of a larger round or big growth in revenue. Typically convertible debts are paid with converted equity in a year or two max. Related Resource: What Are Convertible Notes and Why Are They Used? Convertible Debt vs. Convertible Bond Similar to convertible debt, a convertible bond is a fixed-income loan or debt option that can be converted into a predetermined amount of common stock or equity. There are two main differences between convertible debt and a convertible bond. First, a convertible bond’s conversion timeline is usually at the discretion of the bondholder, while convertible debt’s timeline to conversion is typically monitored and determined by the lender. Next, a convertible bond yields interest payments that can also be converted into equity or stock as well. Convertible debt is pure capital and does not have interest payments associated with it. How Does Convertible Debt Work? Many startups are not able to pull the detailed financial information a big creditor, bank, or lender would typically want to see to offer money to a business. Convertible debts are a great option for startups due to this reason. Convertible debt allows businesses to get the early capital needed based on the future success of the company. Investors who agree to convertible debt agreements want their investments to make money, so they’re more likely to do what it takes to help the company succeed. Because the more a company succeeds, the more money those investors will make. Like any traditional investment, convertible debt happens in rounds or cycles of money being loaned or cashed out and returning in the form of equity or cashing in. At the start of a round, the terms of the convertible debt are set. For example, sometimes a warrant or discount are terms of a convertible loan, or sometimes there’s a limit on the value of the debt when it is converted. In some cases, convertible debt can be structured with discount terms, typically no more than 25%. This means that when the loan ends at the end of the round the investor can purchase stock at an agreed-upon discount. Benefits of Convertible Debt There are a number of different benefits of choosing to take on convertible debt in your startup. Convertible Debt can be a powerful funding mechanism. Here are the top benefits to consider with convertible debt: 1. Convertible Debt is a Simple Financing Option With the terms set in place as part of the convertible debt agreement, it’s a very straight-forward option. X investor loans Y company $100,000 in exchange for $200,000 worth of shares within two years. The founder or startup team, they have 100k in the bank and the support of a connected investor with a vested stake to ensure that 100k converts to the best possible valuation for their future shares as possible. It’s a pretty straightforward transaction, and even if there is a discount or rate increase baked into the debt, it’s set ahead of time and there are no changes over the life of that debt. Related Resource: 409a Valuation: Everything a Founder Needs to Know 2. Convertible Debt is a Low Risk and Efficient Method Convertible Debt is low risk and there is no interest associated with said debt. It also does not require traditional background elements like credit history or existing money in the bank to work. Therefore it also won’t affect any existing credentials like credit score if the debt investment doesn’t quite pan out. By taking on convertible debt upfront, startups can save existing capital and build out a longer runway for themselves making the method of taking on outside investment via convertible debt extremely efficient. 3. Investors with Convertible Recieve Voting Power Typically, investors taking the route of putting up money in a convertible debt deal receive voting power. This is because they can set the equity amount they want and since convertible debt is more common for new, pre-Series A companies, these investors choosing to invest this way can invest an amount that will get them a large enough return percentage for a board seat. This is something that is harder to do at later funding rounds when it’s traditional capital for equity exchange. Investors see the opportunity to get voting power and influence a company as a great benefit to their investment as they can have a bigger say in where their investment goes. This can also be helpful to a founder raising capital – with the incentive of early voting power on the board up for grabs, larger seed rounds may be able to be raised on convertible debt. Related Resource: How to Write a Business Plan For Your Startup 4. Convertible Debt Provides Fixed Income for Noteholders For Noteholders, Convertible Debt is a great option because it provides direct, fixed income over a shorter amount of time for said investment – the guarantee that the investment will convert to equity within a period of time is more predictable and that equity will then grow once it converts and the company continues to grow. Drawbacks of Convertible Debt While Convertible Debt has many benefits, it does come with some drawbacks as well. Be sure to consider all the drawbacks of convertible debt such as: 1. Failure of Repayment If for some reason the convertible debt can’t be repaid with the equity or stock promised, often the lender has the right to demand repayment via other means which could lead to the loss of other items or controls in the business, causing a business to even liquidate its assets for repayment in some cases. 2. The Risk of Bankruptcy Plain and simple, failure of repayment can lead to the liquidation of a company’s assets which can lead to bankruptcy. This is a major risk if convertible debt goes wrong. 3. Stringent Indenture Provisions A strict set of rules, agreements, and details – or stringent indenture provisions – are to be expected when taking on convertible debt. This can be a major drawback depending on how long-term said provisions are. Depending on the growth of your company you may be bound to your lender in a way that has negative consequences for the founder/owners or the business as a whole but has great benefit to the investor. Consider all provisions and contingencies and review them thoroughly when taking on convertible debt. 4. Losing Control in the Company While a benefit of a lender with convertible debt is a voting board seat or voting power within the organization for certain decisions, this can lead to a major risk for the company. If the controlling stake is removed from the founders, or the vested interests of the voting members changed, the original founding team may no longer have a say in their company and the vision and early mission may evolve without their knowledge. In some cases, this could also lead to the removal of original leadership from the company that raised the convertible debt round in the first place. Why do Startups use Convertible Debt? At the end of the day, despite the drawbacks, the pros of quick, efficient, and straightforward financing in the form of convertible debt are why startups choose to use it. Any opportunity to secure large investments quickly without a detailed credit history and the benefits of bringing on seasoned investors to help a business at its earliest stages are great bets to take into the risk and reward consideration, with the reward justifying the risks of taking on this debt. Related Resource: Valuing Startups: 10 Popular Methods Convertible Debt Example One great real-life example of a company using Convertible Debt is Ledgy. The equity management software company from Zurich talks through their own company’s experience of using convertible debt to grow their business. Read more about it here. Looking for More Information on Startup Funding? Subscribe to our newsletter to stay up to date on all the latest startup funding processes, tips, tricks, and updates. Sign up here. Related Resource: How To Find Private Investors For Startups

Overview Fundraising is difficult. Founders are responsible for hiring, building, and fundraising all at the same time. There are very few people that truly know what it takes to build a company or raise capital while being a strong leader. The best way to learn is from someone who has been there before. Being a founder can oftentimes be an “asymmetric experience.” As Seth Godin, the business author puts it: “In these asymmetric situations, it’s unlikely that you’re going to outsmart the experienced folks who have seen it all before. It’s unlikely that you’ll outlast them either. When you have to walk into one of these events, it pays to hire a local guide. Someone who knows as much as the other folks do, but who works for you instead.” In order to help you find your “local guide,” we went along for a fundraising ride with a founder in our community. Jonathan Gandolf is the CEO and Founder of The Juice, The Juice collects and consolidates resources from across the internet onto a single platform where you can save, share, and enjoy content on demand. Be sure to check out The Juice and sign up to discover the best sales and marketing content for you. Spoiler: The Juice Achieves Major Milestones in Revenue and User Growth Over the course of ~4 months, we sat down with Jonathan on a regular basis and picked his brain on the state of his fundraise and what he was learning along the way. We cover everything from his first meetings to due diligence. For founders who are gearing up for a pre-seed or seed round and are feeling lost, Jonathan offers great insight as he shares his fundraising journey from day 1. Give it a listen below: Week 1 — The Basics of the Round To kick things off we give more background about the Founders Forward Fundraising series and the goals behind it. We dig into the business behind The Juice and the fundamentals of their pre-seed funding round. Jonathan is ready to go with a list of 60 potential investors and a pitch deck in hand. Hop around and learn more about what we covered in week 1 below: The Juice business model How Jonathan is building his investor outreach list What Jonathan’s plans are for reaching out to investors The pitch deck feedback loop Where to listen: Spotify Apple Podcasts Google Podcasts Where you generally listen to podcasts Related Resources: The Juice — the best sales & marketing content at your fingertips Visible Connect — our investor database The Fundraising Wisdom That Helped Our Founders Raise $18B in Follow-On Capital How Starting Line Helps Founders Address Their Mental Health with Ezra Galston Week 2 — Finding Investor Intros Jonathan joins us after his first few weeks of heads-down fundraising. We discuss how he is going about adjusting and tweaking his pitch deck as more feedback comes in and how he is leveraging his network (and customers) to find intros to potential investors. A few other key topics we hit on: Managing pitch deck recommendations and changes Designing a pitch deck with a small team Finding introductions to potential investors Leveraging customers for investor introductions Related Resources: Our Teaser Pitch Deck Template Creating Momentum in Your Fundraise with Brett Brohl Week 3 — Revenue vs. Product vs. Team In week 3 of Jonathan’s fundraise, we break down what investors are looking for at the pre-seed stage. As The Juice has a strong product, Jonathan has been featuring and demoing his product during pitches. We also dive into how The Juice ideal investor has transformed since they’ve started their raise and how they are adding new investors to the top of their fundraising funnel. A few other key topics we hit on: How to talk about revenue with investors How Jonathan leveraged their product while pitching Adding investors to the top of an investor funnel Identifying your ideal investor Related Resources: Building Your Ideal Investor Persona Week 4 — Finding a Lead Investor Jonathan has been busy with investor meetings and pitches since the last time we chatted. Jonathan breaks down the “VC speed dating” event he attended and updates on other investor conversations. Finally, we hit on financial projections at the pre-seed/seed stage and what investors are looking for in the early stages of financial projections. A few other key topics we hit on: VC speed dating Feedback on the size of round How to nurture potential investors Sharing financial projections Related Resources: How to Raise Your Series A with Michael Rangel of Novo How to Build an Investor List with Gale Wilkinson of Vitalize Week 5 — Pitching Investors We are back in the heart of The Juice fundraise. They are a few weeks in and starting to get to the middle of the “3 months of pitching.” We discuss how Jonathan is leveraging verbal commits to build urgency with new investors and discuss what is being shared in The Juice’s data room. A few other key topics we hit on: The timeline of fundraising Using verbal commits to create urgency What Jonathan is sharing in his data room Related Resources: Creating Momentum in Your Fundraise with Brett Brohl What Should be in an Investor Data Room? Week 6 — Launching on ProductHunt Coming off of their first ProductHunt launch, Jonathan joins us to share the current status of the round. We discuss what they’ve been focusing on internally as a business. Finally, we discuss the term sheets that are on their way. A few other key topics we hit on: Lessons from launching on ProductHunt How to build a campaign for ProductHunt Hunting for a lead investor Related Resources: The Juice’s ProductHunt Launch How We Topped Product Hunt (Overnight) Week 7 — The First Term Sheets The first term sheets are in hand and the end of the raise is in sight. Jonathan joins us to discuss the term sheets he has in hand and what due diligence has been like so far. Finally, we talk through what hiring plans and projections look like once the cash is in the bank. A few other key topics we hit on: Leveraging the first term sheets for urgency Modeling different fundraising outcomes Lessons from first rounds of due diligence Standing on the shoulders of giants Related Resources: 6 Components of a VC Startup Term Sheet (Template Included) Navigating SaaS Partnerships as a Startup Week 8 — Closing the Round They did it! Jonathan and the team have wrapped up their raise and they are in the process of finishing up the round. Jonathan shares what he has learned during the raise and what is next for The Juice. Related Resources: The Juice Achieves Major Milestones in Revenue and User Growth Learn more about The Juice The Juice collects and consolidates resources from across the internet onto a single platform where you can save, share, and enjoy content on demand. Join for free to explore the best sales and marketing content here.

Raising venture capital for your startup is difficult. Raising venture capital for your startup with little to no revenue can feel impossible. However, venture capital funds have started to invest earlier and earlier into startups. The emergence of pre-seed rounds has led to more interest in pre-revenue startups. Related Resources: All Encompassing Startup Fundraising Guide & Seed Funding for Startups 101: A Complete Guide Luckily, there are countless startups that have done it before. In order to better help founders navigate a fundraise with little to no revenue, we break down lessons from startups and investors that have taken part in a pre-revenue funding round below: What is Pre-Revenue Funding? Pre-revenue funding is equity or debt financing for companies that have yet to generate revenue. Pre-revenue funding can apply to companies across different sectors, markets, verticals, etc. Startups might have a product or a product in development but have yet to take it to market. Pre-revenue funding generally helps a company at this stage build its product or put a go-to-market motion to practice. Related Resource: The Understandable Guide to Startup Funding Stages What Does It Mean To Be Pre-Revenue? Pre-revenue startups can be at varying stages in their startup lifecycle. For example, if a company is working on an incredibly large scale project revenue might come much later in its lifecycle. On the other hand, there might be companies that have developed a product and are ready to take it to market but need capital to hire talent and put their product and distribution to work. For the sake of this post, we will generally be speaking of companies How Do Startup Founders Get Pre-Revenue Funding? The most common form of funding to receive before revenue is venture capital. Startups and venture capital funds generally follow a power law curve. This means that investors need to find a few companies that can generate massive returns for their LPs. Because of this, they are willing to invest in more companies at early stages in return for a larger equity percentage with the hope that a few of the companies will pan out to generate huge returns. Related Resource: Understanding Power Law Curves to Better Your Chances of Raising Venture Capital In order to improve your odds of raising capital at the pre-revenue stage, you need to understand the VC thought process and demonstrate why you can grow into a company that will generate returns for its investors/LPs. How Investors Evaluate Pre-Revenue Startups Every startup investor will use a different method or style to evaluate potential investments, especially pre-revenue startups. Understanding how venture capitalists think about making investments will greatly increase your odds of raising a round. Check out a few of the common methods and valuation styles below: Related Resource: A Quick Overview on VC Fund Structure 1) The Berkus Method As we wrote in our post, Valuing Startups: 10 Popular Methods, “The Berkus Method is an attempted way to assess value without the traditional revenue metrics that many methods take into account for more mature organizations. The Berkus Method quantifies value by assessing qualitative qualities instead of quantitative ones. Value is assessed in the Berkus Method with five main elements. The elements considered within the Berkus Method include value business model (base value), available prototype to assess the technology risk and viability, founding team members and their abilities or industry knowledge, strategic relationships within the space or team, existing customers or first sales that prove viability. A quantitative value can be tied to each relevant quantitative factor with the Berkus Method.” 2) Risk Factor Summation Method As we wrote in our post, Valuing Startups: 10 Popular Methods, “The Risk Factor Summation Method is used with risk as the primary method for evaluation. This approach values a startup by taking into quantitative consideration all risks associated with the business that can affect the return on investment. An initial value is calculated (possibly even using one of the other methods discussed in this post) and then the risks are assessed, deducting or adding to the initial value calculation based on said risks to the return. Some of the different kinds of risks that are taken into account are managing risk, political risk, manufacturing risk, market competition risk, investment and capital accumulation risk, technological risk, and legal environment risk.” 3) Venture Capital Method As we wrote in our post, Valuing Startups: 10 Popular Methods, “This method is one of the most common, if not the most common method used for evaluating startups that are pre-cash flow and seeking VC investment. The VC Method looks at 6 steps to determine valuation: Estimate the Investment Needed Forecast Startup Financials Determine the Timing of Exit (IPO, M&A, etc.) Calculate Multiple at Exit (based on comps) Discount to PV at the Desired Rate of Return Determine Valuation and Desired Ownership Stake It’s ultimately a quick, rough estimate informed by as much information as is available based on the market, comps, any existing quantitative and qualitative info from the company at hand, and an assumed amount of risk from the VC Firm.” 5) Scorecard Method As we wrote in our post, Valuing Startups: 10 Popular Methods, “This valuation method looks at these similar companies and sees what types of valuation they received from other investors. From there, the median will be calculated from the value of all the similar companies’ valuations and this median will determine the average value of the target company. In addition to the median value placed on the competitive landscape, scorecards are looking at the strengths and weaknesses of the market as assessed by other investors and score their investment in question weighted with the following criteria compared to the other companies in the space: Board, entrepreneur, the management team – 25% Size of opportunity – 20% Technology/Product – 18% Marketing/Sales – 15% Need for additional financing – 10% Others – 10% A company may be valued higher than the median with the scorecard method if the size of opportunity or board/management team is exceptional quality or vice versa, may be docked if the tech is strong but the leadership is assessed as in-experienced.” Looking for Fundraising? Visible Can Help! Running a process to raise capital, especially before generating revenue, is a surefire way to improve your odds of success. Find ideal investors with Visible Connect, add them to your Fundraising Pipeline, and share your pitch deck all from Visible. Give Visible a free try for 14 days here.

At Visible, we believe that a venture capital fundraise often mirrors a traditional B2B sales and marketing funnel. At the top of your funnel, you are adding new investors, nurturing them throughout the middle of the funnel with email and meetings, and hopefully cashing a check from them at the bottom of the funnel. Related Resource: All-Encompassing Startup Fundraising Guide Luckily, there are tips, resources, and tricks that will help you build momentum in your fundraising efforts so you can focus on building your business. Learn more about how you can create a fundraising strategy and build a more efficient fundraise with our guide below: Startup Fundraising: How It Works Just how a sales and marketing process might differ from business to business, so will a fundraising process. The ideas and systems behind the process might stay the same but there will be subtle changes when it comes to approach, communication, and more as a business grows. A couple of different stages that we will hit on in this post: Pre-seed Seed Series A, B, and C How should startup founders prepare for these funding rounds? Check out our breakdowns for each stage below: Pre-Seed Funding As we put in our post, The Understandable Guide to Startup Funding Stages, “A pre-seed round is a round of venture capital that is generally the first round of institutional capital that a startup raises. A pre-seed round generally allows a founding team to find product-market fit, hire early employees, and test go-to-market models.” Pre-seed funding rounds have become more common over the past few years and have turned into a powerful resource to help founders get their idea and business off the ground. The purpose is to give founders the capital they need to see their product through. Investors are largely betting on the team and idea as revenue is little to none. Pre-seed rounds greatly vary in size but generally fall in the $300K to $1M size. However, we’ve seen pre-seed rounds get close to $5M. Typically, valuations might be in the $2M to $5M range. Seed Funding As we wrote in our post, Seed Funding for Startups 101: A Complete Guide, “Seed funding is a startup’s earliest funding stage. Often, seed funding comes from angel investors, friends and family members, and the original company founders. An early-stage startup may also look for funding through bank loans, but angel investments are usually preferred. Seed funding is used to start the company itself, and consequently, it is a fairly high risk: the company has not yet proven itself within the market. There are many angel investors that specifically focus on seed funding opportunities because it allows them to purchase a part of the company’s equity when the company is at its lowest valuation.” At this point, a startup likely has some sign of product-market fit and is ready to scale its go-to-market efforts. At the seed stage, rounders are typically in the $2M to $5M range (but like pre-seed funding can often be much larger than this). Valuations typically sit around the $8M – $12M range. Series A, B, and C Funding Beyond a seed round comes Series A and beyond (Series B, C, D, etc.). At the point of a Series A round, a startup generally has demonstrated product-market fit, is making senior hires, has a strong product, and is executing new releases at a high level. Once you get beyond a Series A, the same ideas hold true but an investor is likely more focused on the numbers behind a business. They’ll want to make sure that the business can efficiently grow into a huge company. Typically a Series A round is anywhere between $5M and $20M. This is a large range but we still occasionally see companies raise much larger amounts. Revenue is like in the $1M to $5M range and all signs point to that number continuing to grow quickly. How to Create a Startup Fundraising Strategy As we said earlier in the post, approaching a fundraise with a strategy and system in place is a great way to build momentum in your fundraise. Founders are being pulled in a hundred different directions and a fundraise is a part of that. By having a system in place, you will be able to focus on the other aspects of your business. There is no right or wrong way to approach a fundraise but as long as you have a strong system and cadence in place you are already ahead of the curve. We recommend treating a strategy like a sales and marketing funnel. Find investors to fill the top of the funnel, both warm and cold “leads,” communicate and nurture them with email Updates throughout the middle of the funnel, and hopefully close them as a new investor at the bottom of the funnel. Check out a few tips to help you get started with your fundraising strategy and system below: Getting Started: Ask the Right Questions Outline some of the basic questions that a fundraising strategy should address. When getting started with your fundraising strategy it is important to understand why you’re raising, who are you raising from, and the financials of your round. Check out a few example questions below: Why is your startup raising capital? Who is your startup reaching out to for financing? How much capital will your startup raise – now and in the future? When is your startup raising capital? What is your startup’s process for raising capital? Before even building out the rest of your fundraising strategy you need to be able to properly answer the questions above. You may learn that venture capital is not the right financing option for your startup, which is totally fine! (Related Read: Checking Out Venture Capital Funding Alternatives) Related Reading: How to Write a Problem Statement [Startup Edition] Undergo a Valuation of Your Startup Of course, a major aspect of raising capital is the valuation of your company. Setting a valuation is generally a mix of art and science, especially at the early stages. As the team at Silicon Valley Bank puts it, “​​The most basic valuation method borrows from the playbook used by realtors, who assess the value of a home by looking at “comps,” or comparable homes. Mendelson recommends establishing a startup’s valuation that is “on scale” with those of other early-stage companies. The more similar the startup — be it its sector, location or potential market size — the better.” As your company grows and raises later-stage financing, setting a valuation will be based more on the data and metrics from the companies history. This is a great starting point and can be enhanced by adding in other factors like a founding team’s management experience, proven track record, market size, risk, etc. Related Resource: Valuing Startups: 10 Popular Methods Set Milestones Setting clear, specific, achievable, measurable, and time-bound goals is invaluable to creating an effective fundraising strategy. Naturally, investors are incentivized to hold off on investing as long as possible. Why? They want to collect as many data points as possible and see how activity looks with other investors. It is your job as a founder to build momentum and incentivize investors to move quickly. Having set milestones is a great way to wrap your head around a timeline and give you an idea of when you want investors to be moving along by. Brett Brohl of Bread & Butter Ventures estimates that most early-stage companies should estimate 5 months to complete a raise. He breaks it down using the 1-3-1 rule: 1 month — Preparation. Creating a deck, materials, and investor lists to kick off your raise. 3 months — Pitching. Actually out pitching and taking meetings with investors. 1 month — Closing. Finishing up due diligence and legal work to close new investors. Research Your Investors Once a term sheet is signed there is no turning back. With the average founder + VC relationship being 8-10 years it is important to make sure founders are bringing on the right investors. There are different factors and things you should look for in a potential investor. As we put in our post, Building Your Ideal Investor Persona: Location – Where are you located? Do you need local investors? Or maybe you are looking for connections and networks in strategic geographies. Industry Focus – What type of company are you? Where should your future investors/partners be focused? e.g. If you’re a B2B SaaS company don’t waste your time with marketplace-focused investors. Mark Suster suggests that it is best to prioritize investors with companies in your space. Stage Focus – What size check/round are you raising? e.g. If you’re raising a $1M seed round avoid a firm with $2B AUM. If you’re raising a $30M round avoid a firm with $75M AUM. Current Portfolio – What type of companies should be a signal to you that they’re a good fit? Is there a high likelihood they’ve invested in one of your competitors? If so, best to avoid as they likely won’t double down their bet with a competitor to a portfolio co. Motivators – What do want to get out of your investors and what do they want to get out of you? Do they need to match your values and culture? Deal Velocity – Are you in need of capital as soon as possible? Or are you taking your time and looking for strategic investors? Varying investors have different philosophies for the velocity they’re making deals. Point Nine Capital and Kima ventures are both regarded as top firms in Europe. However, Point Nine makes ~10 investments a year whereas Kima makes 1-2 investments a week.” Finding the right investors for your business can be tricky. Using Visible Connect, filter investors by different categories (like stage, check size, geography, focus, and more) to find the right investors for your business. Give it a try here → Determine How Much Capital You Want to Raise Determining how much to raise can also be a daunting task. You need to base this on facts and realistic assumptions around your business. As a starting point, forecast where you’d like your business to be in 12-24 months. From here, you can backfill what resources and hires you’ll need to make to hit those goals. This can be a great starting point for determining how much to raise. From here you can tweak it with interest from investors, the current markets, and more. Related Resource: Building A Startup Financial Model That Works Build Out Your Fundraising Strategy Of course, you can take all of the individual aspects from above and still have a disjointed raise. You can tie them all together to create a fundraising strategy. The above points are a great starting point but need to make sure you have everything in place to reach out to investors. A couple of things to keep in mind: Where will you track your conversations with potential investors? Check out our Fundraising CRM to keep tabs on potential investors (Pro tip: You can add investors directly from Visible Connect, our investor database, to our Fundraising CRM). What data will you need? Do you have clean metrics and financials in place? Having a place to easily pull your key metrics and share them with potential investors will be a huge help. What assets do you need? Do you have a pitch deck ready to go and a plan to make tweaks if needed? Read more: Tips for Creating an Investor Pitch Deck How do you communicate with investors after a meeting? Nurturing potential investors with Visible Updates is a great way to keep them in the loop with the developments of your round. How do you share your pitch deck? Having a great way to share and understand how investors are engaging with your pitch deck and materials is important. Check out our pitch deck sharing tool to learn how it can help with your raise. Remember: Your Strategy Will Stay the Same, But Your Pitch Won’t The idea is that your strategy will stay the same throughout a round. The mechanics, financials, and pitch will vary but the strategy will stay the same. Being thoughtful with your strategy will pay dividends in the long run as your fundraise gets underway. Startup Fundraising Strategy Pitfalls Just like any strategy or process, there are pitfalls that can arise. Luckily, there are thousands of founders that have done it before so there are pitfalls and things you can look out for below: Not Understanding Your Fundraising Stage One of the more common (and avoidable) pitfalls of a fundraise are not being clear with your stage and aspirations. Pitching any investor that lands in your vision can be dangerous. You want to make sure that you are pitching investors that are the correct stage, not too early or late. Focusing Solely on Fundraising As we mentioned earlier, founders are being pulled in a hundred different directions. On top of hiring new employees, retaining current employees, building products, and communicating with stakeholders, founders are responsible for finding financing for the business. Being able to balance the day-to-day as a founder with the pressures of financing is a must. Related Reading: The 23 Best Books for Startup Founders at Any Stage Failing to Provide an Accurate Total Addressable Market (TAM) Analysis At the end of the day, investors want to invest in companies that can turn into massive companies. Modeling your total addressable market and demonstrating how you can turn into a large company is a great way to pique the interest of investors. Learn more to properly model your addressable market in our post, How to Model Total Addressable Market (Template Included). Related Resource: Down Round: Understanding Down Round Funding and How to Avoid It Related Resource: Navigating the Valley of Death: Essential Survival Strategies for Startups What Are Some Other Ways to Obtain Funding? After reading this post you may be thinking that venture capital is not the right financing option for your business. Over the past few years, there has been an explosion of alternative financing options. Check them out below: Related Resource: 6 Types of Investors Startup Founders Need to Know About Accelerators or Incubators Accelerators and incubators are a great way to get your business off the ground. If you find you are too early to raise a seed round, an accelerator or incubator are a great way to wrinkle out your business plan and hit the ground running to find customers and determine if VC is right for you in the future. Crowdfunding Crowdfunding has become increasingly popular as more options become available. The crowdfunding instruments have become easy to manage for founders and more widely accepted across the industry. Related Resources: How to Raise Crowdfunding with Cheryl Campos of Republic Understanding The 4 Types of Crowdfunding Loans As the team at U.S. Small Business Administration puts it, “If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan. To increase your chances of securing a loan, you should have a business plan, expense sheet, and financial projections for the next five years. These tools will give you an idea of how much you’ll need to ask for, and will help the bank know they’re making a smart choice by giving you a loan.” Business Plan Competitions Business plan competitions are common at universities and for startups that have potentially not made any progress on developing a product or building a team. The competitions generally reward entrepreneurs with a small check or capital to get started and pursue their vision. Related Reading: How to Write a Business Plan For Your Startup Streamline Your Fundraise with Visible Being able to tie everything together and build a strategy for your fundraise will be an integral part of your fundraising success. Check out how Visible can help you every step of the way below: Visible Connect — Finding the right investors for your business can be tricky. Using Visible Connect, filter investors by different categories (like stage, check size, geography, focus, and more) to find the right investors for your business. Give it a try here. Pitch Deck Sharing — Once you’ve built out your target list of investors, you can start sharing your pitch deck with them directly from Visible. You can customize your sharing settings (like email gated, password gated, etc.) and even add your own domain. Give it a try here. Fundraising CRM — Our Fundraising CRM brings all of your data together. Set up tailored stages, custom fields, take notes, and track activity for different investors to help you build momentum in your raise. We’ll show how each individual investor is engaging with your Updates, Decks, and Dashboards. Give it a try here. Related resource: Top 18 Revolutionary EdTech Startups Redefining Education

Every startup is aiming for a high valuation for their business. In business, valuation is the process of evaluating the present value of the asset in hand, in this case the overall value that a startup is worth. For startups, there are a variety of popular methods folks use to evaluate a business and determine its overall valuation. Different valuation methods are used for different reasons. To help break it down, we’ve outlined 10 popular methods for valuing startups. Related Reading: Pre-money vs Post-money: Essential Startup Knowledge + 409a Valuation: Everything a Founder Needs to Know 1. The Berkus Method Startups are risky. Less than 10% of startups make it past the first year of existence so determining the valuation of a startup, especially a brand new one with only months of lifespan can be extremely challenging. The Berkus Method is an attempted way to assess value without the traditional revenue metrics that many methods take into account for more mature organizations. The Berkus Method quantifies value by assessing qualitative qualities instead of quantitative ones. Value is assessed in the Berkus Method with five main elements. The elements considered within the Berkus Method include value business model (base value), available prototype to assess the technology risk and viability, founding team members and their abilities or industry knowledge, strategic relationships within the space or team, existing customers or first sales that prove viability. A quantitative value can be tied to each relevant quantitative factor with the Berkus Method. Source: Angel Capital Association Pro Tip: When To Use This Method The Berkus Method should be used pre-revenue. It can be a valuable valuation method when a new startup is formed with expert founders or former successful startup leaders at the helm or when a strong, viable product is in place. In these examples, there is enough qualitative information at hand to justify a quantitative value. Related Resource: What is Pre-Revenue Funding? 2. Comparable Transactions Method This valuation method at the highest level is essentially valuing the business based on what consumers would currently pay for it. This is one of the most conventional methods of valuation. To make a comparable transaction valuation, an investor or evaluator will look at companies of a similar size, revenue range, industry, and business model and see what they were valued at or sold for. This method is looking at validation from what others were willing to pay for similar companies in an acquisition or merger and use that to make a fair, or comparable, offer on the company seeking valuation. Pro Tip: When To Use This Method The most common scenario where the Comparable Transaction Method might be used is through a big M&A (Merger and Acquisition) deal. 3. Scorecard Valuation Method When a company hasn’t produced any revenue yet, as an early-stage startup, it can be hard for investors to make a solid bet on the probability of their investments’ success. The Scorecard Valuation Method is one method that relies on the past investments of others taking similar bets and risks on pre-revenue startups. Similar to the comparable transaction method, the scorecard valuation method looks at similar startups or companies in the company at questions’ industry. This valuation method looks at these similar companies and sees what types of valuation they received by other investors. From there, the median will be calculated from the value of all the similar companies’ valuations and this median will determine the average value of the target company. In addition to the median value placed on the competitive landscape, scorecards are looking at the strengths and weaknesses of the market as assessed by other investors and scoring their investment in question weighted with the following criteria compared to the other companies in the space: Board, entrepreneur, the management team – 25% Size of opportunity – 20% Technology/Product – 18% Marketing/Sales – 15% Need for additional financing – 10% Others – 10% A company may be valued higher than the median with the scorecard method if the size of opportunity or board/management team is exceptional quality or vice versa, maybe docked if the tech is strong but the leadership is assessed as in-experienced. Pro Tip: When To Use This Method This method may be used by a startup that is in a crowded space such as marketing tech, sales tech, fintech etc.. and is pre-revenue; With a lot of similar or adjacent companies raising rounds and receiving valuations, a scorecard can be used successfully because there are is a lot of adjacent validation in the market. 4. Cost-to-Duplicate Approach Startups are a risky investment for many reasons, but one big one is that it typically takes a lot of capital to run and scale a business and many startups struggle to manage their run rate and burn rate efficiently. The Cost-to-Duplicate Approach to valuation considers all costs and expenses associated with the startup. The costs and expenses reviewed include the development of the product and the purchase of physical assets. A fair market value is then determined based upon all the expenses at hand. The negative of using this type of valuation approach is that it does not consider the future growth and potential of the company, only the current efficiency based on expense and it also doesn’t take into account intangible assets such as the talent of the leadership team, brand, patents, etc. Pro Tip: When To Use This Method The Cost-to-Duplicate Approach might be the right approach to asset valuation when the product is simple and won’t require a lot of expensive development, the team is lean and the burn rate of capital is extremely slow or even non-existent. Lean startups with one or two folks at the helm, or with a founding team that isn’t taking a salary yet could use this method to justify their first infusion of cash to start taking a salary or start making bigger financial moves. 5. Risk Factor Summation Method Every venture capital fund or any investment firm is spending time unpacking the potential risks of each and every new investment they make. The Risk Factor Summation Method is used with risk as the primary method for evaluation. This approach values a startup by taking into quantitative consideration all risks associated with the business that can affect the return on investment. An initial value is calculated (possibly even using one of the other methods discussed in this post) and then the risks are assessed, deducting or adding to the initial value calculation based on said risks to the return. Some of the different kinds of risks that are taken into account are management risk, political risk, manufacturing risk, market competition risk, investment and capital accumulation risk, technological risk, and legal environment risk. Pro Tip: When To Use This Method This method is often used by investors when looking at a new space or as a second pass on assessing the value of a potential investment. 6. Discounted Cash Flow Method This method is predicting the valuation of a company based on its assumed future cash flows. The hope is that the DCF (Discounted Cash Flow) is above the current cost of investment resulting in projected positive return and higher valuation. A discount rate is used to find the value of present future cash flows. For example, the discount rate might be the average rate of return that shareholders in the firm are expecting for the given year. That percent (maybe 5%, 10%, etc.) is then used to make a year-over-year assumption. This hypothetical informs investors that based on the current cash flow and discount rate chosen to asses, the expected cash flow can be anticipated from this investment. Pro Tip: When To Use This Method This is a great valuation method to use for a company that has relatively predictable and stable up and to the right growth up until the time of investment. Related resource: Discounted Cash Flow (DCF) Analysis: The Purpose, Formula, and How it Works 7. Venture Capital Method This method is one of the most common, if not the most common method used for evaluating startups that are pre-cash flow and seeking VC investment. The VC Method looks at 6 steps to determine valuation: Estimate the Investment Needed Forecast Startup Financials Determine the Timing of Exit (IPO, M&A, etc.) Calculate Multiple at Exit (based on comps) Discount to PV at the Desired Rate of Return Determine Valuation and Desired Ownership Stake Its ultimately a quick, rough estimate informed by as much information as is available based on the market, comps, any existing quantitative and qualitative info from the company at hand, and an assumed amount of risk from the VC Firm. Related Resource: A User-Friendly Guide on Convertible Debt Pro Tip: When To Use This Method Most startups should expect that this valuation method will be applied when seeking early rounds of funding, especially from popular venture capital funds. 8. Book Value Method The Book Value of a company is the net difference between that company’s total assets and total liabilities. The idea of this valuation method is to reflect what total value of a company’s assets that shareholders of that company would walk away with if that company was completely liquidated. Book Value is equated to the carrying value on a balance sheet. To calculate book value, look at the total common stockholder’s equity minus the preferred stock and then divide that number by the number of common shares in a company. Pro Tip: When To Use This Method This valuation is extremely helpful in determining if a company’s current stock value is under or overpriced when attempting to determine overall valuation. 9. First Chicago Method Named after the VC arm of The First Chicago Bank, this valuation method uses a combo of multiple-based valuation and discounted cash flow to make a valuation of a company. Essentially, this method allows you to take into account many different possible outcomes for the business into the valuation – to keep it simple, you can think of this method as taking into consideration the business’s best case scenario, worst-case scenario, and average scenario. Looking at all 3 scenarios, an estimate is made as to how likely each scenario is. Next, you multiply the probabilities by their respected values and add them up. This gives you a weighted average valuation from the combo of the 3 most likely scenarios – valuing the business on the average of what will probably happen. Pro Tip: When To Use This Method This valuation method is recommended for dynamic, early-stage growth companies. It’s used when companies have a future with many possible outcomes that could come about based on the next decisions made. 10. Standard Earnings Multiple Method A multiple is a fraction in which the top number (the numerator) is larger than the bottom number (the denominator). The earnings of a business are defined as income or profit. The Standard Earnings Multiple Method looks at the earnings of the business over an industry-standard multiple. Every industry and sector may have a slightly different average multiple. Pro Tip: When To Use This Method One common scenario where this method is used is to measure stock pierce earnings with price/earnings ratio, which measures stock price to earnings. P/E ratio tells what the market (stock buyers) are willing to pay for the company’s earnings with a higher ratio indicating that people are willing to pay more. Share Your Startup Valuation With Visible Use Visible to communicate with your current investors. Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. Related Resources: A Complete Guide on Founders Agreements Who Funds SaaS Startups? Types of Venture Capital Funds: Understanding VC Stages, Financing Methods, Risks, and More Top Creator Economy Startups and the VCs That Fund Them

Startups have different options when it comes to financing. One of the most popular options is venture capital. To better understand if venture capital is right for your business, check out our breakdown of different types of venture capital below. If you believe you are ready to raise venture capital, understanding how and why the function will improve your odds of raising capital. To learn more about raising venture capital, check out our “All-Encompassing Startup Fundraising Guide.” Related Resource: Types of Venture Capital Funds: Understanding VC Stages, Financing Methods, Risks, and More What are the Types of Venture Capital Funding? As venture capital continues to grow and evolve so do the types and expectations of funds. As the team at Crunchbase found, venture funding by year is growing, mainly between early-stage and late-stage funds: Related Resource: Exploring VCs by Check Size Learn more about different types of funding below: Seed Capital Seed funding, which oftentimes includes “pre-seed” funding, is generally the first round of financing for a startup. There typically tend to be funds that specialize in pre-seed/seed-stage financings. However, as the seed stage has continued to grow so have the funds — later stage funds are now moving their way down to make seed investments. As the team at Crunchbase put, “One of the reasons many venture firms are stockpiling funds to invest into seed startups is that getting in at the earliest stages with a young startup lets those investors have a say in crucial decisions early on.” Check out the average seed size (from “large” investment funds) over the last 10 years below (from the team at Crunchbase): VCs will typically get more attractive terms as they are taking on more risk at the seed stage. Because of this, seed-stage investors oftentimes make more investments in the hopes that a small percentage of their investments will turn into huge returns (learn more about the power-law curve in VC here). Related Resource: Seed Funding for Startups: A 101 Guide Early Stage Capital Post seed or pre-seed funding comes to Series A and Series B funding. While some might categorize them as a later stage, both are earlier stage financings that come post-seed round. Early-stage capital is often when a company might have some traction and promise that it can grow into a massive company that is worthy of an exit. Related Resource: How to Model Total Addressable Market (Template Included) Related Resource: The Rise of Venture Capital in Utah: A Look at Utah’s Top 10 VC Firms Related Resource: Breaking Ground: Exploring the World of Venture Capital in France Expansion Capital Once a company has proven they have product-market fit, a massive market, and a repeatable sales process — chances are they are ready to expand. With this comes larger check sizes that will help you put your growth strategies to work. Venture funds at this stage are likely huge funds that make fewer investments with larger check sizes. At the point of investment, most companies will have proven success to in turn will raise at higher valuations. Related resource: Understanding the Role of a Venture Partner in Startups Late Stage Capital Lastly comes late-stage capital. These are borderline private equity funds and can be used to bridge financings for larger companies. This might be a final injection before a company sets to go public or to fund expansion into a totally new market. Related Resource: Private Equity vs Venture Capital: Critical Differences Rolling Funds More recently, “rolling funds” have become a point of interest in the space. While they are not typically dedicated to a specific stage (like the examples above) the way they raise financing and treat the general partner to limited partners relationship differs. Learn more about rolling funds here. Related Resource: 12 Venture Capital Investors to Know Venture Capitalist Fund Structure To better improve your odds of raising venture capital, you need to understand how they function. When pitching investors you’ll want to keep a few of these things in mind so you can fit into their duties as a VC. Check out a visual of how venture capital funds are structured below: Related Resource: A Guide to How Venture Capital Works for Startups and New Investors Guide A couple of key terms to understand when it comes to a venture funds structure: 1) Venture Fund As the Bank for Candian Entrepreneurs puts it, “A venture capital (VC) fund is a sum of money investors committed for investment in early-stage companies.” A venture fund is simply capital that is ready to be deployed by the venture capital firm (or the management company). 2) Management Company The management company is the people behind the fund itself. Not be confused with a venture fund. A venture management company can raise multiple funds. As the team at AngelList writes, “A management company is a business entity created by a venture firm’s general partners (GPs). It’s responsible for managing a venture firm’s operations across its funds.” Management companies often receive a management fee from their funds to help deploy and grow their funds. A management company is responsible for prospecting investments, collecting fees and expenses, branding, and more. 3) General Partner (GP) A general partner is someone who manages a venture fund and likely the management company. As defined by the team at Angel List, “A GP is a manager of a venture fund. They may be a partner at a large VC firm like Sequoia, or an individual investor using AngelList. Like fund managers in other arenas (stocks, mutual funds, crypto, etc.), they analyze potential deals and make the final call on what to do with the money they manage.” General partners are typically paid between their carried interest and management fees. Carried interest is typically where a general partner makes a living. Typically carried interest for a GP is 20% which means that 20% of a funds profits will be paid to the GP. It is worth noting that GPs oftentimes invest their own money so they have skin in the game. You can boil down a general partner’s responsibility into 2 key things — deploying capital in high-quality companies and raising future capital. 4) Limited Partners (LPs) You might be asking yourself where does capital for a venture fund come from? The answer is limited partners. Limited partners are generally much larger funds and are looking to diversity their investing via venture capital funds. Traditionally, limited partners tend to be: University endowments Sovereign funds Family offices Pension funds Insurance companies Etc. Because VC funds are competing with traditional assets, it is vital that they provide outsized returns to improve their odds of raising venture capital in the future. Learn more about the power law curves in our post, “Understanding Power Law Curves to Better Your Chances of Raising Venture Capital.” 5) Startups Of course, there are the actual startups and investments that a venture fund are making. For a startup to be deemed venture-worthy they generally have to operate in a large market, have promising economics, and the ability to create a massive return for their investors (and their LPs). Related Reading: Building A Startup Financial Model That Works Limited Partnerships & LLCs Role in VC Fund Structure As the team at Investopedia puts it, “A limited partnership (LP)—not to be confused with a limited liability partnership (LLP)—is a partnership made up of two or more partners. The general partner oversees and runs the business while limited partners do not partake in managing the business. However, the general partner of a limited partnership has unlimited liability for the debt, and any limited partners have limited liability up to the amount of their investment.” Because LPs do not partake in managing the business (e.g. the venture firm) they are relying on the GP and venture firm to be experts at investing. At the end of the day, every venture fund and firm wants to set out and raise a new fund every 10 years or so. This means that GPs need a strong record with LPs so when they seek further capital they have someone they can lean on. This also means that LPs are expecting massive returns as they are trusting and deploying their capital with a general partner, likely in a space lesser-known to them. Related resource: What is a Capital Call? Three Examples of How Returns Are Generated Of course, the goal of any venture fund is to generate returns for its limited partners. As we put in our post on power-law curves, “A small % of VC funds take home a large % of venture returns. VCs are constantly working to make their way into the “winning” part of the curve so they can continue to attract capital from limited partners. How does a VC fund become a “winner?” The best VC funds portfolio returns also follow a power-law curve. A small % of a VC funds investments will yield the majority of their returns.” This means that VCs need to create liquidity and get returns to their investors so they can go out and raise capital again. This generally comes in 1 of 3 ways: Related resource: Carried Interest in Venture Capital: What It Is and How It Works 1) Mergers and Acquisitions (M&A) One of the most common ways that a startup exits are via a merger or acquisition. As put by the team at Investopedia, “Mergers and acquisitions (M&A) is a general term that describes the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.” The terms of the merger or acquisition will impact how a VC is paid back. For example, an investor that invested at the seed stage will likely be greatly diluted if the exit is later in a companies lifecycle. Related Resource: From IPOs to M&A: Navigating the Different Types of Liquidity Events Related resource: What is Acquihiring? A Comprehensive Guide for Founders 2) A Buyout of Shares Less common is that startups shares will be bought out. This means that a new entity is taking a larger or majority stake in a company. This could come via a specific fund exiting their position or a founder finding liquidity. No matter the case, the terms, and conditions will greatly impact any fund. 3) Startup Reaches an IPO Lastly, there is an IPO (initial public offering). Becoming rarer, an IPO has the opportunity to create huge returns for a venture capital fund — especially their seed and early-stage investors. Looking To Get Funding for Your Startup? Understanding if venture capital is right for your business is a small part of the battle. Determining how to raise capital, what investors to raise from, and pitching investors is where the real fun begins. Having a system in place to raise venture capital is a great way to increase your odds of raising capital. Related Resource: All-Encompassing Startup Fundraising Guide Related Resource: 8 Most Active Venture Capital Firms in Europe Related Resource: 7 Best Venture Capital Firms in Latin America Related Resource: Exploring the Growing Venture Capital Scene in Japan If you’ve read this post and determined that venture capital is a good fit for your company, let us help. Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days.