AWS Startup Day Guadalajara - Fundraising

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Fundraising Essentials:
Raising a Seed Round Efficiently
Francisco Ruiz
Amazon Web Services
Luis Delgado
Guru de Viaje

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It’s more than just Venture Capital
Non-VC
• Non-dilutive grants
• Friends and Family
• Angels
• Angel Funds and Groups
• Accelerators
• Crowdfunding
VC
• Pre-seed VCs
• Seed VCs
• Multi-stage VCs
• Corporate VCs

How long should fundraising take?

Experienced seed fundraisers can put a seed
round together in as quickly as a month

The Secret
Generate authentic competition for your round, giving
investors FOMO (fear of missing out) and a sense of
urgency

What we’ll cover
1. Establishing ground rules
2. Drafting your round composition
3. Crafting your fundraising narrative
4. Prospecting your initial funnel
5. Initiating fundraising mode and stacking meetings
6. Pitching and closing

Rule #1:
Fundraising will change your relationship with your
business and the range of acceptable outcomes

$0 raised, $15M+ ARR
$416M raised, $465M acquisition

Rule #2:
You’re either in full fundraising
mode or you’re not fundraising

Rule #3:
Fundraising should be
one person’s full-time job

Rule #4:
Be direct and confident,
but not arrogant

Rule #5:
Fundraise in parallel (not in sequence) and
put yourself in a position to say “no”

3:1

Rule #6:
Don’t try to manufacture Investor urgency
with made up close dates

Rule #7:
Time kills all deals

Create scarcity by
working backwards from
your ideal cap table

Create scarcity by
working backwards from
your ideal cap table
$2M
Seed round
1
Lead VC:
$800k
2
Follow VCs:
$600K
5
Angels:
$600K

Understanding VCs

Being a successful VC is hard
$10M
Fund size
33
# of investments

Being a successful VC is hard
10
Startups fail
11
Get 1x
6
Generate 3x
returns
3
Generate 5x
returns
2
Generate 20x
returns
1
Generate 50x
returns

The Seed VC Rule of Thumb:
Every investment needs to have the
potential to return the entire fund (~50x)

Seed VCs will want you to
keep climbing the VC path

“Venture capital is not even a
home run business. It’s a grand
slam business.” – Bill Gurley

Understanding Angel Investors

Angel Investors have more
diverse motivations

Angel Investors have a lower
bar for a “good” outcome

Angel Investors may be
more passively involved

Round composition takeaways
• Understand how the investor’s business works
• Make sure your goals are aligned with investors’
• Be deliberate about the types of investors you want in your round
• Draft your round composition before you start talking to investors

What is a fundraising narrative?
A concise explanation of what you do, what’s most compelling about
your business, why you’re raising money, and your long-term vision.

A good narrative can do the
following in 20 seconds

First 10 seconds
1. Simply explain what you do
2. Communicate the single
thing that’s most compelling

First 10 seconds
2. Communicate the single
thing that’s most compelling
Second 10 seconds
3. Outline your progress-to-date, future
milestones, and long-term vision

Bad example
“We provide data and analytics in a
comprehensive project management
suite, enabling audio content
creators to glean insights that
inform decisions throughout the
production cycle.”

“We’re an analytics tool for
podcasters”
Good example

2. Communicate the single thing
that’s most compelling
What is the one reason that an investor should invest? (Choose one)
• Traction
• Team
• Market size/trends

Good example
“We’re an analytics tool for podcasters,
and we’re a team of former podcast
producers who produced 5 of the 20
most downloaded podcasts of all time.”

3. Use milestones of de-risking the business to outline your
progress and future plans
1. Progress to date
2. Next milestone
3. The future

Bad Example
“We have 20 customers and we’re raising
$2M to continue building out our product
and hire a sales team.”

Good example
“We have 20 independent podcasters paying
for our product and loving it.
Now, we’re raising $2M to find a repeatable
customer acquisition strategy so we start
dominating the independent podcaster
market.
Once we do that, we can go upmarket to
podcast studios which will give us the most
advanced podcast dataset in the world.”

Support your narrative
with a financial model
Goal #1:
Verify the story you’re telling
Goal #2:
Show the assumptions you’re
making

Fundraising narrative takeaways
• Keep it simple and concise
• Frame progress and future milestones in terms of de-risking
• Back up your narrative with math

Work backwards from the 3:1 rule
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $100k
Angel #2: $100k
Angel #3: $100k
Angel #4: $100k
Angel #5: $100k
Cap table

Lead VC’s
(3)
Follow VC’s
(6)
Angels
(15)
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $100k
Angel #2: $100k
Angel #3: $100k
Angel #4: $100k
Angel #5: $100k
Cap tableFinal Diligence
(3:1)
Closed
(1:1)

Lead VC’s
(10)
Follow VC’s
(20)
Angels
(50)
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $100k
Angel #2: $100k
Angel #3: $100k
Angel #4: $100k
Angel #5: $100k
Cap tableInitial Meeting
(10:1)
Final Diligence
(3:1)
Closed
(1:1)

Lead VC’s
(20)
Follow VC’s
(40)
Angels
(100)
Lead VC: $800k
Follow VC #1: $300k
Follow VC #2: $300k
Angel #1: $100k
Angel #2: $100k
Angel #3: $100k
Angel #4: $100k
Angel #5: $100k
Cap tableProspect
(20:1)
Initial Meeting
(10:1)
Final Diligence
(3:1)
Closed
(1:1)

People > Firms
• Fundraising is about relationships
• Focusing on people is more effective than firm-hunting
• People have different investment autonomy and investment
focuses

Prospecting Tactic #1: Research

Prospecting Tactic #2:
Other Founders

Prospecting Tactic #3:
VC Associates

Prospecting takeaways
• 20 prospects for every spot available
• Focus your prospecting on people – not just firms
• Get prospects through research and relationships

1. Build relationships before
turning on fundraising mode

2. Make sure you have your materials
• Teaser deck
• Full Presentation deck and Readable deck
• Supporting financial model
• Safe/Convertible note

3. Quietly close at least one investor,
then turn on fundraising mode

4. Keep filling the top of the funnel

Goals for the first meeting
1. Discover if there’s goal alignment
2. Learn about their decision-making process
3. Get them excited about the opportunity

First Meeting Rule #1:
Meet in person

Ask questions before you
start pitching

Don’t discuss valuation

Keep it conversational

Questions you should ask in the first meeting
• What is a good outcome for you?
• What is your typical check size and/or ownership target?
• What is your investment process?

Typical VC Process

“No” is better than “maybe”

Summary
• You’re giving up scarce equity in your company, not asking for
money
• Create a sense of urgency by cultivating authentic competition
• Startup <> Investor fit goes both ways
• Put yourself in a position where you’ll have to say “no” to investors
• This is a full-time process that should be done as quickly as possible
• Remember the 3:1 rule
• Every interaction can be net positive for your business and career

Thank you!
Mike Wilner
@mwil20

AWS Startup Day Guadalajara - Fundraising

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