The Fundraising Strategy Playbook: An Entrepreneur's Guide To Pitching, Raising Venture Capital, and Financing a Startup

By Arooj Sheikh

How do you raise startup capital to bring your vision to life? 

The Fundraising Strategy Playbook teaches you how to deliver a compelling pitch, generate investor demand, negotiate your terms, and determine your founder/funder fit. You’ll learn how to build your funding stack and get creative with how you source capital to achieve different milestones in your company’s journey. 

Written by a founder for founders, this book empowers entrepreneurs to know their options and take charge of their company’s financial future whether it’s by supercharging early revenue generation, sourcing non-dilutive financing (equity free money!), or raising venture capital.

Packed with insights from entrepreneurs with $600M+ exits, legendary VCs (Kleiner Perkins, Accel, Techstars, 500 Startups, and more), and innovation enthusiasts like Jason Feifer (Entrepreneur Magazine), this book is filled with answers to the questions you wish you could ask the most accomplished entrepreneurial minds.

This is the smart entrepreneur’s playbook on how to intelligently raise capital for the long haul success of a startup.

The contents of this book include:

• Part 1) Fundraising Fundamentals (sources of capital, venture capital fundraising process, and more)
• Part 2) Elements + Design Principles of a Pitch Deck
• Part 3) The Art of Persuasive Pitching 
• Part 4) Fundraising Strategy (how to plan a raise, types of investments, designing your funding stack, evaluating founder/funder fit, and more)
• Part 5) Fundraising Strategy for Female Founders
• Part 6) Fundraising Strategy for International Companies

• Language: English
• Publisher: Publishdrive
• Release date: Dec 14, 2021
• ISBN: 9798719640891

Book preview

THE FUNDRAISING STRATEGY PLAYBOOK:

An Entrepreneur’s Guide To Pitching, Raising Venture Capital, and Financing a Startup

by

AROOJ SHEIKH

Copyright © 2021 by Arooj Sheikh

THE FUNDRAISING STRATEGY PLAYBOOK: An Entrepreneur’s Guide To Pitching, Raising Venture Capital, and Financing a Startup

All rights reserved. The moral rights of the author have been asserted. No part of this book may be reproduced or used in any manner, including information storage or retrieval systems without written permission of the copyright owner except for the use of quotations in a book review.

ACKNOWLEDGEMENTS

This book was a collective effort from all the people who contributed their insights, ideas, helped with revisions, and otherwise contributed to this book. Thank you for your support!

Brad Feld, Managing Director of The Foundry Group and Co-Founder of Techstars

Jason Feifer, Editor in Chief of Entrepreneur Magazine and host of the Pessimists Archive podcast

Arjun Chopra, Partner at Floodgate Capital

Mamoon Hamid, Partner at Kleiner Perkins

Gillian Muessig, Managing Director of the Sybilla Masters Fund and Co-Founder of Moz

Aileen Lee, Partner at Cowboy Ventures

Fischer Yan, CPG startup advisor formerly at GGV Capital & NTT Venture Capital

Cindy Bi, General Partner at CapitalX Rolling Fund

Eric Menees, Founder of TradeUp (Y Combinator)

Nihar Patel, General Partner at Journey Venture Partners & Chief of Staff at Newchip

Andrew Ryan, Founder & CEO of Newchip Accelerator

Dana Kanze, Assistant Professor of Organizational Behavior at London Business School

Ben Quazzo, Venture & Growth at Accel

Atif Khan, Co-Founder & CTO of Alkira; Founding Team Member of Viptela (acquired $600M+)

Michael Asch, President of Anniston Capital, Inc.

Gil Dibner, General Partner & Founder at Angular Ventures

Tanya Hall, CEO of Greenleaf Publishing Group

Ashley Wellington Bieschke, Co-Founder of The Relish and Mentor at 500 Startups

Howard Marks, CEO and Co-Founder of StartEngine

Stephen Lane, Co-Founder of FlyHomes

This book is dedicated to my Dad, for believing in me and always reminding me that anything is possible.

CONTENTS

INTRODUCTION

HOW TO USE THIS BOOK

PART I: FUNDRAISING FUNDAMENTALS (SECTION OUTLINE)

WHAT IS A STARTUP?

STAGES OF STARTUPS & FUNDING ROUNDS

Early Stage

Series A - Achieving Product Market Fit

Late/Growth Stage

GOAL OF INVESTORS

SOURCES OF CAPITAL

VENTURE CAPITAL

Fund Mechanics

Roles at Venture Capital Firms

Financial Incentives

ANGELLIST ROLLING FUNDS

CORPORATE VENTURE CAPITAL

Benefits For Startups

Tips For Pitching To Corporate VCs

ANGEL INVESTORS

FRIENDS & FAMILY

FAMILY OFFICES

CROWDFUNDING

STARTUP ACCELERATORS

VENTURE STUDIOS

GRANTS

TRADITIONAL LOANS

FACTORING

ACCOUNTS RECEIVABLE FINANCING

BOOTSTRAPPING

VENTURE CAPITAL FUNDRAISING PROCESS

Pitching

Partner Meeting

Term Sheets

Due diligence and Investment

Fundraising Stories

HOW TO GET IN FRONT OF INVESTORS

PART II: ELEMENTS OF A PITCH DECK

WHAT IS A PITCH DECK

ELEMENTS OF A PITCH DECK

Title Slide & Elevator Pitch

The Problem

The Solution

The Market

Competition

Competitive Advantage

Business Model

Traction

Vision & Timelining

Financials

Team

Call To Action (CTA)

Appendix

DESIGN PRINCIPLES

Organization Guidelines

Visual Principles

Branding Guidelines

PART III: THE ART OF PERSUASIVE PITCHING

STORYTELLING

Founder & Team Story

Product Story

Vision Story

Your Bulletproof Storytelling Outline

General Storytelling Tips

PERSUASION

Establish Common Ground

Confidence

Credibility

Framing

Using Vivid Language

Scarcity

Reciprocity

Turn Objections Into Strengths

Commitment and Consistency

PART IV: FUNDRAISING STRATEGY

HOW TO PLAN A RAISE

Should You Raise Capital?

When Is The Best Time To Raise?

How Much To Raise

TYPES OF INVESTMENTS

Convertible Note

SAFE Notes

Equity Financing

Revenue Sharing

EXIT STRATEGY BASICS

FUNDING STACK

HOW INVESTORS EVALUATE STARTUPS

Investment Thesis

The Most Common Reasons an Investor Passes on Your Startup

Investment Memos

HOW VCs WIN DEALS

FOUNDER/FUNDER FIT

HOW TO ORGANIZE YOUR ROUND

Geographic Diversity

Capital With Complementary Skill Sets

Funding Stack

Likelihood of Follow On Capital

AFTER YOUR RAISE

Investor Relations

Engaging Your Investor

PART V: FUNDRAISING STRATEGY FOR FEMALE FOUNDERS

CHALLENGES

Imposter Syndrome

Presumption of Competence

FUNDRAISING ADVICE FOR FEMALE FOUNDERS

Prevention vs. Promotion Questions

Pitch Where You Will Be Understood

Nailing Your Numbers

WHY WE SHOULD INVEST IN WOMEN

PART VI: FUNDRAISING STRATEGY FOR INTERNATIONAL COMPANIES

INTERNATIONAL COMPANIES FUNDRAISING IN THE UNITED STATES

Why Should You Consider Fundraising In The United States?

Targeting VCs for International Investments

Company Formation

INTERNATIONAL COMPANIES RAISING INTERNATIONALLY

Targeting VCs for International Investments

Company Formation

REFERENCES

INTRODUCTION

Can you imagine how many brilliant ideas humanity must have missed out on? How many brilliant ideas didn’t come to life?

We hear stories of companies like Facebook, Google, and Apple disrupting industries and fundamentally changing the way people go about their everyday lives. But what about the scores of ideas that were brushed off? The ideas we passed on because of a less than stellar pitch or simply because we didn’t have our coffee that morning?

What if someone had already figured out the key to scalable, sustainable energy or discovered the cure to all genetic diseases?

How many crazy, Elon Musk-like personas must we have had for one to finally stick?

Thomas Edison, the famous inventor, said it himself, many of life’s failures occurred when people did not realize how close they were to success when they gave up. How many companies at the helm of truly changing things died because of something so inconsequential as running out of funding? How many ideas were one step away from success?

According to Brad Feld, Managing Director of The Foundry Group and Co-Founder of Techstars, every single successful company that I’ve been involved in has had at least one near-death experience.

Starting a company is hard. Doing something meaningful is hard. You do it because you believe the world is going to be fundamentally different. You’ve seen the future, and you’re trying to pull the world into that future kicking and screaming because it’s a significantly better one, says Arjun Chopra, Partner at Floodgate Capital.

This book is about empowering world-changing ideas. Capital is the lifeblood of innovation, and this is the playbook on how to get it.

Good Ideas Are Always Crazy Until They’re Not - Elon Musk

According to Jason Feifer, Editor in Chief of Entrepreneur Magazine and host of the Build For Tomorrow podcast, historically, people have been notoriously bad at predicting the future and adapting to things.

The waltz, which is now considered an elegant and classy dance, was perceived as scandalous and even dangerous when it first gained popularity. Before TV and video games, novels were considered distracting and a bad influence, accused of corrupting the youth and planting dangerous ideas into the heads of housewives.

It’s interesting to see how people tried to predict the future in the 1900s because they just take the modern technology of the day and then drive it forward, says Jason. People often have difficulty fast-forwarding and imagining the complete restructuring of everything we know because we start from the old and accelerate the ideas that already exist.

For example, when Henry Ford invented the car, it was advertised as a replacement for horses. The problem is that people don’t like change. They liked their horses. They were comfortable with their horses, so why did they have to swap it out for something new?

The solution was to start advertising the car as the new horse. People need to understand innovation as a new version of something they already like. According to Jason, early marketing campaigns had to build a bridge of familiarity for new ideas. That’s why we refer to the power of a car engine as horsepower.

An example from Jason’s podcast, Build For Tomorrow, is that people wouldn’t get into automatic elevators without a human operator, so they added a soothing female voice to build a bridge of familiarity.

The point is, you can’t connect the dots looking forward. Building something new is an iterative process. Sometimes adoption will be immediate, and other times it might be hilariously slow to catch on only to spread like wildfire after.

There are so many different ways to make things happen. There’s no step by step process to building an amazing company. Revolutions don’t happen linearly, which is why sources of financing like venture capital, angel investors, crowdfunding platforms, and others exist. It’s to give you the space to experiment, fail, and figure it out.

Life can be broader once you discover one simple fact: Everything around you that you call life was made up by people who were no smarter than you. And you can change it. You can influence it…You can build your own things that other people can use. Once you learn that, you’ll never be the same again. - Steve Jobs

Walt Disney was fired for lacking imagination. Oprah Winfrey was told she was unfit for television news by a TV producer. She went on to become the host of The Oprah Winfrey Show, which aired for a whopping 25 seasons. Anna Wintour was fired from her first job as a junior fashion editor at Harper’s Bazaar. She went on to become the Editor in Chief at Vogue.

Failure is just success in progress. If all of these people could do it, why not you? Why not your idea?

If you’re building a startup, strive to create a company that will fundamentally change something in the world. Make sure that humanity would have missed it if it didn’t happen.

The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it. - Michelangelo

HOW TO USE THIS BOOK

Whether you’re a first-time founder looking to get up to speed on everything you need to get started with a fundraise or an experienced founder interested in learning about how to strategically finance your company for its long term success, this book is just the resource for you.

While this book can be read through, feel free to skip around to sections that are most helpful to you, since each chapter is largely self-contained. This book is a reference guide that you can frequently refer back to. Let’s do a quick overview of how the book is organized:

Part one is Fundraising Fundamentals, which talks about stages of startups and funding rounds, evaluates several different sources of capital, and outlines the venture capital fundraising process.

Part two is Elements + Design Principles of a Pitch Deck. It goes into detail about best practices in building a compelling pitch deck.

Part three is The Art of Persuasive Pitching, which discusses the importance of storytelling and the psychology behind a memorable pitch.

Part four is Fundraising Strategy, which talks about how to plan a raise, the different types of investments such as convertible debt vs. equity, and exit strategy. Furthermore, this section has numerous insights on how to develop your funding stack (i.e., a combination of different types of capital you use throughout your company’s life cycle), how to evaluate founder/funder fit, and other guidance around financing your company.

Part five is Fundraising Strategy for Female Founders, which discusses strategies to tackle the funding gap for women-led startups.

Part six is Fundraising Strategy for International Companies, which talks about international companies raising in the United States, as well as international companies raising internationally.

When it comes to fundraising and pitching, there are many nuances depending on the industry, stage, geography you’re in, among several other factors. This book attempts to generalize good advice, but every individual company’s situation is different. Though this book’s information can give you a strong starting point, you should always consult with your mentors and advisors before making decisions regarding your company’s specific situation.

PART I: FUNDRAISING FUNDAMENTALS (SECTION OUTLINE)

WHAT IS A STARTUP?

A startup is a high growth company aiming to solve a problem ingeniously, often disrupting a market or creating a new market altogether in its wake.

We’ve all heard the stories of companies like Uber that transformed the transportation industry by providing quick, convenient, and transparent ride-sharing services. Airbnb allowed locals to open up their homes to travelers for a new stay experience, disrupting the hospitality industry along the way. Companies like these and many more have changed the everyday lives of individuals going about their daily lives. Whether you’re starting, working at, or investing in a startup, it’s an exciting venture to be a part of.

STAGES OF STARTUPS & FUNDING ROUNDS

A startup’s life cycle progresses in stages that frequently coincide with funding rounds.

Startups can be categorized into the early stage and the late stage. Early stage companies have a product focus, whereas late stage companies (also known as the growth stage) have a scalability focus.

The stages break down into pre-seed, seed, Series A, Series B, Series C, and sometimes beyond (Series D, E, and F). These stages of startups are often referred to as funding rounds - as indicated by the stage of your company and the amount of capital you are raising.

Qualitative and quantitative factors define these stages, and what they look like for each individual company varies. Additionally, the stage and the range of financing raised can vary greatly depending on your company’s industry and geography.

For example, biotech and hardware startups are very capital intensive due to high R&D (research & development) costs, so they often require more funding than startups in other industries. In places like Silicon Valley, funding rounds tend to be larger than other cities, given the vast capital availability.

The best way to think about these stages is as phases in a startup’s life cycle rather than specific funding rounds. Some companies skip rounds, and some never progress to the next one. This general framework determines what stage your company is at and what investors will expect your financing needs to be.

When you are looking to finance your company, you should raise enough money to get to the next round and achieve a set of milestones, rather than asking for how much money you think it’ll take altogether to see your whole vision come to life. Each consecutive round de-risks the company for further investment.

Early Stage

Early stage companies include pre-seed, seed, and occasionally Series A companies depending on their industry. In the early stage, your focus is to develop and refine the product. Here, you’re proving a hypothesis about your market.

There’s a pain point in the market, and you hypothesize that your product can solve it. The early stage consists of intensive experimentation and iteration of your product. Here, you ask questions about the nature of your problem and market.