On April 5, 2016, CED hosted “Raising the Dough: Tech” workshop with 70 early-stage tech entrepreneurs who are raising capital or looking to fundraise in the near future. Here are a few key takeaways on fundraising that emerged during the half-day event:
- Get ready for the time commitment.
Lizzy Hazeltine of The Startup Factory told the audience of entrepreneurs to prepare for “50% of your CEO’s time to be spent on fundraising. You have to accept and be certain you are ready for that." As Mike Doernberg of ReverbNation noted, raising capital is a “huge undertaking, completely distracting.” Know your capacity. Understand and accept the commitment to fundraise.
- Start with an intro.
The panel on Angel Investor Perspectives consisted of angel investors from RTP Capital, IMAF-RTP, and Triangle Angel Partners (TAP). Each investor said that their organizations get at least 300 requests for capital each year. When asked about the first step in getting past the top of the funnel, their suggestion: get a warm introduction. During the “Raising Venture Capital Money” panel, David Jones of Bull City Venture Partners encouraged the entrepreneurs in the room to “get to know us. Let us know about your company and send us updates.”
- Have self-awareness.
Mike said the process of pitching to investors “makes you dig deep and see yourself through somebody else’s eyes.” It is tough. It is scary. Mike noted, “On its best day, it is uncomfortable. On its worst day, it will completely expose you.” Lizzy said that in her experience listening to pitches, “Most companies are not as far along as they think they are.” When angel investor Elaine Bolle of RTP Capital was asked what she looks for in a pitch, she answered: “self-awareness.” And angel investor Bruce Boehm of Triangle Angel Partners said he looks for “intellectually honest” CEOs who listen to the market. Know yourself, and know your company.
Once you take an honest look yourself, it is time to get organized. When preparing to pitch an investor, familiarize yourself first with the investment criteria to determine if you are the right fit. Lizzy referred to the process as “getting your house in order” by organizing and updating your materials so they are ready to share with the investor. (She referenced this resource from Seqouia Capital.) In preparing for a pitch, Karin Reed of TriPoint Media suggests that you think about what it’s like for someone who has no idea about your company to learn about it. “The curse of knowledge” is that you want to share everything you know. But the best approach is to keep it simple. And also, according to Mike, it is critical that entrepreneurs learn “how to tell your story from every angle, in every way…If you cannot walk around in your story in every way, you will end up trapping yourself.”
- Become a salesperson.
You can't just know your story. You have to sell it. Investors from both the angel and venture capital perspectives said that the first most important thing they look for in a CEO is if he or she is a good salesperson. One investor noted that the Triangle region “has a lot of technical talent, but companies need sales orientation.” And startups that already have that sales orientation are at an advantage when seeking capital. During the venture capital panel, David Gardner of Cofounders Capital asked Jim Zidar, a workshop attendee and CEO of Stealz, to share his experience when pitching to Cofounders. Jim said that David Gardner drove him around to various local businesses and attempted to sell their product on the spot. Jim noted that this was the single most impactful experience that he’s had with an investor.
- Follow through.
You’ve had your first meeting or pitch with a potential investor. Now you have to deliver. The consensus among the investors was this advice: “do what you say you are going to do." David Gardner noted that executing and delivering on action items from investors are crucial to building trust. Investors need a CEO in place that they can trust. On the venture capital panel, the three investors unanimously agreed that management is most important in their decision to invest, even more so than business model. So, follow through. Communicate. Deliver. And the relationship will build.
- Get educated on term sheets.
You’ve committed to raising capital, prepared for meetings, followed up after pitches, and now you get the term sheet. But what really matters? What’s binding? According to Justyn Kasierski and Anna Tharrington from Hutchison PLLC, “there is typically not a lot in there that is set in stone.” Justyn and Anna presented entrepreneurs with a crash course in term sheets and provided resources to learn more. Justyn noted, “When you look at a term sheet, think about certainty of price and certainty of deal.” The term sheet should spell out exactly what needs to be done, and the path to take, from term sheet to closing the deal.
And take a closer look at how CED supports entrepreneurs through Connections to Capital.
Special thanks to our speakers, panelists, and moderators who each contributed to this summary of lessons learned:
Bruce Boehm, Triangle Angel Partners
Elaine Bolle, RTP Capital
Joe Colopy, Bronto Software
Lister Delgado, IDEA Fund Partners
Mike Doernberg, ReverbNation
David Gardner, Cofounders Capital
Lizzy Hazeltine, The Startup Factory
Fred Hutchison, Hutchison PLLC
David Jones, Bull City Venture Partners
Justyn Kasierski, Hutchison PLLC
Karin Reed, TriPoint Media
Joanne Rohde, Axial Exchange
Bill Warner, IMAF- RTP
Anna Tharrington, Hutchison PLLC