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Investor Notes

"You need to pitch 100 investors for every 500k that you want to raise" - 500 Startups Accelerator Elizabeth Yin

Table of Contents

Documents

Introduction

  • Your ability to execute matters more than the idea itself.
  • Focus on VC and Angel Investors who have invested in your industry.
    • Focusing on Tech, high scale, and high growth companies.
  • Leverage a linkedin network to find investors and connections.
    • Add everyone you know and browse their connections.
    • Use the search bar to find investors in your industry.
    • Use the "People Also Viewed" section to find more investors.
    • Use AngelList to check if they are open to new investments.
    • Ask for a warm introduction, most investors will not respond to cold emails.
  • Share deck with a link, not as an attachment or PDF and never send a PPT.
  • Attend startup events and pitch competitions. Start befriending people to expand your network.
  • Cold emails should be last resort, but if you do, keep it short and to the point.
  • Always follow up, but don't be annoying.
  • Always be prepared to answer questions about your business.
  • Create an Excel sheet to keep track of your progress, every connection, every conversation, and the status.

If most investors are saying that you are too early, then you are too early. Take it, ask if they would like to stay posted on your traction. Stop wasting time on meetings and focus on product traction.

If they agree to stay posted, then send them a monthly update on your traction. If they don't, then move on. It is very important to keep the contact alive and active.

Seed and Pre-seed funding is typically handled using Convertible Notes or SAFEs. These are debt instruments that convert to equity at a later date. They are used to avoid the valuation discussion at the early stages. STAY AWAY FROM EQUITY AT THIS STAGE.

Typical Investor Flow

  1. Introduction: Warm introduction from a mutual connection.
  2. Pitch Deck: Share your pitch deck with a link.
  3. Initial Call: 30-minute call to discuss your business.
    1. Potential sub-steps:
      1. Follow-up: They may ask for more information.
      2. Second Call: They may ask for a second call.
      3. Pass: They may pass on the opportunity.
  4. Due Diligence: Investor will do their due diligence.
    1. Prepare a data room with all the information they may need.
  5. Term Sheet: If they are interested, they may or may not send you a term sheet to be negotiated.
  6. Negotiation: Negotiate the terms of the investment.
  7. Investment: Close the deal and get the money.

Finding Investors

  • Define your stage and investor type.
  • Investor Research
    • Start in your immediate City.

Links

Youtube Videos

Accelerators and Incubators

EU links

Funding Opportunities

Potential Partners

Crowd Funding

Crowd Funding Notes

  • Kickstarter: For creative projects.
  • Indiegogo: For creative projects.
  • GoFundMe: For personal causes and life events.
  • Patreon: For creators and artists.
  • CrowdCube: For equity investments.
  • Seedrs: For equity investments.
  • FundedByMe: For equity investments.
  • Fundable: For equity investments.
  • StartEngine: For equity investments.
  • Wefunder: For equity investments.
  • Republic: For equity investments.
  • MicroVentures: For equity investments.
  • AngelList: For equity investments.
  • EquityNet: For equity investments.
  • CrowdFunder: For equity investments.
  • Fundrise: For real estate investments.
  • CrowdStreet: For real estate investments.
  • RealtyMogul: For real estate investments.
  • PeerStreet: For real estate investments.

Notes

Types of campaigns:

  • Rewards
  • Equity
  • Debt
  • Real Estate
  • Crypto
  • NFT
  • Donations
  • Revenue Share.

Reward campaigns are the most common and are used for products, films, music, and other creative projects. Equity campaigns are used to raise money for a company in exchange for equity. Debt campaigns are used to raise money for a company in exchange for debt. Real Estate campaigns are used to raise money for real estate projects. Revenue Share campaigns are used to raise money for a company in exchange for a share of the revenue.

Reward campaigns are good for MVP validation, your MVP in this case is a video pitch and you are testing whether the market cares about it.

It is very difficult to raise money for B2B or enterprise products on Kickstarter or Indiegogo. It is better to use equity crowdfunding for these types of products.

  • The key to successful crowdfunding is promotion. Simply being on the platform does not get you backed! You have to hustle with press, blogs, social media, and other marketing efforts to get the word out.
  • Consider the cost of fulfilling and marketing the campaign. Many campaigns fail because they don't account for these costs.
  • The best campaigns are those that have a strong community and a strong story. If you don't have a community, you need to build one.
  • Equity Crowdfunding has a €5 million cap in the EU. This means that you can only raise up to €5 million in a 12-month period. This is a good option for companies that are too early for VC funding but too late for grants.
    • Equity Crowd rounds can create massive cap-tables with tons of investors in them. This can be a headache for future rounds, especially when the majority of the investors are small and have no influence on the company.
      • The solution to this is to create a Special Purpose Vehicle (SPV) (An SPV is a separate legal entity that is formed proportionally to the investor check sizes. This legal entity then invests in the initial startup. SPV must have their own rules to govern themselves and vote on startup decisions - as a single entity) that will hold all the investors and then invest in the company. This way you only have one investor on your cap table, this investor is a legal entity that represents all the other investors.
    • A decent Equity Crowdfunding strategy is to sell, for example, 8% of the company at €23 per share. This way you can raise €1 million and have a valuation of €12.5 million. This is a good way to raise money without giving up too much of the company. Every shareholder can then receive perks, such as discounts on products, or other benefits.
  • It can take 6 - 12 months to prepare for a crowdfunding campaign. This includes starting to build a community, creating a marketing plan, and creating the campaign itself.
  • It's all about early momentum
    • Lock in a newsletter placement with a large newsletter, or the kickstarter platform, that is relevant to your product
    • You need to get 1/3 of your sales as fast as possible, ideally in the first 48 hours.
    • Lean on friends and family to get the ball rolling.
      • Strategy: Create 200 - 300 personal videos where you individually ask friends and family to back your campaign. This is a good way to get the ball rolling. youname.mp4 or something like that.
        • No complication or editing, just a personal message. Turn on webcam, record, and send. Upload to youtube as an unlisted video and send the link.
      • DO NOT have a Thank you reward tier. This is a waste of a reward tier. You can thank people in the updates. If you give people the opportunity to back you for nothing, they will. Sell your actual product.
        • Think, cheapest tier being $50, and the next tier being $100. This way you can thank people in the updates and they will be more likely to back you at the $100 tier.
      • Write individual thank you notes to everyone who backs you. This is a good way to build a community.
  • Advertising is worth the money. You can get a 3x return on ad spend. This is a good way to get the ball rolling.

Kickstarter or Indiegogo:

Indiegogo has a very good account support and provides account reps to help you with your campaign.

Kickstarter has a larger community and is better for creative projects.

Indiegogo might be willing to cut a deal that if you reach a certain amount of money, they will promote your campaign to their community via marketing emails and other content.

Negotiate your email placements EARLY in the campaign. This is a good way to get a boost in backers.

Be sure to establish a relationship with your account rep early on and ask them for advice on how to make your campaign successful. Setting up weekly calls with them is a good idea. Ask for whatever resources they have to help you build your campaign.

Plan

Pre-launch:

  • Building up a buzz, build assets.
    • email list
    • social media following
    • press contacts/media outreach
    • friends and family
    • create the expectation that something is coming.
  • Momentum
    • Stretch goals
    • add-on's (up-sells)
    • Facebook/instagram/TikTok ads
    • Media outreach
    • Announcements
    • Maintain a sense that this is a limited opportunity.
      • Take advantage of FOMO.
        • Early bird reward tiers
        • Limited number of rewards
  • List WHY someone is going to back the project
    • List the reasons why someone would back you, to narrow in on the messaging.
    • Example Reasons:
      • Benefit Focused
      • Social Proof
      • Support the creator
  • Kickstarter Launch Formula:
  • Email Acquisition:
    • Social Media adds to a lead generation landing page.
      • Checkout the Facebook ads library to look at competitors ads.
    • Unbounce platform for landing pages.
    • €1.50 - €2.50 per email and 2% - 5% conversion rate.
      • €1500 - €2500 for 1000 emails should convert to 20 - 50 backers.
    • Find an advertising partner that can help you with this.
      • invest a few thousand euros to do personal ads to get the ball rolling, then spend up to 7k more with the partner.
      • Common to have advertising agencies that will take a setup fee and then take a commission on the sales.
      • Ask for a weekly report on the ad spend and the return on ad spend.
        • Amount spent, # of sales, revenue, daily budget
        • Weekly metrics: ROAS, CAC, Conversion rate, CTR, CPC, CPA
          • Total AD Revenue
          • Total Costs (ad spend + agency fees)
          • Margin
          • Avg Customer Value
          • Avg Customer values: - Platform Fee and Card fee
          • Take home (After comm, spend, fees)
    • Ad spend is worth it, as the momentum keeps the campaign in the trending category, which drives backers who the ad agency does not take a commission on.
  • Consider the cost of fulfilling:
    • Duties and taxes
    • Shipping
    • Import
    • Packaging

How to set your Campaign Goal:

Set a goal that is achievable. If you set a goal that is too high, you will not get funded. If you set a goal that is too low, you will not get funded. The goal should be the minimum amount of money that you need to fulfill the rewards + some extra for business and unforeseen expenses.

Try to achieve 30% of your goal in the first 48 hours. This is a good indicator of whether or not you will be able to achieve your goal.

Consider the optics for potential backers, it is always more attractive to back a project that doing really, really well.

This is all about early momentum. Getting to €30,000 of a €30,000 goal is much more attractive than getting to €30,000 of a €75,000 goal. This will propel your campaign to the top of the platform and get you more organic traffic, as well as press releases and other media attention.

How to Find a Manufacturer:

Prep

Launch

Extra

Contact Template for Manufacturers:

Subject: Quantity Need: 3000-5000 pieces

Hello,

My name is [Your Name] and I am the founder/partner of [Your Company Name]. We are a [Your Company Description] and we are looking for a manufacturer to produce our product.

I am looking to start a business relationship with a manufacturer that can produce [Your Product] in quantities of 3000-5000 pieces. We are looking for a manufacturer that can produce high-quality products at a competitive price, and came across your company page.

[fill in the details about your product and what you are looking for, ask pertinent questions about their capabilities, and request a quote]

What is the cost per unit at your lowest minimum order quantity?

What is the cheapest price that you can offer and at what quantity would need to be reached to get to that price?

What is the lead time for production?

What is the cost of shipping to [Your Country]?

Can I visit your factory if we decide to do business with your company? Where exactly is it located?

What are the options for custom branding and packaging? Please provide media and examples of the readily available options.

Where are/is your [material(s)] sourced from? Can you let me know all of the details about the materials that you use?

Can we order samples? If so, what is the cost of 10 - 20 samples and the shipping to [Your Country]?

What is the payment structure for the first order?

Please provide us with a quote and let me know if you're available next month for us to visit and inspect the factory should we decide to move forward. We are flexible on dates but do require a factory visit if possible.

I look forward to hearing back from you, thank you.

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