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  • Raising money is hard.

  • It's so hard most companies fail at it.

  • In this video, we'll look into traction requirements,

  • pitch decks, some alternative funding sources

  • and how to find investors.

  • This is seed funding for startups.

  • (INTRO VIDEO)

  • I'm the CEO of a company called Slidebean,

  • and thousands of startups have used our platform

  • for creating their pitch decks.

  • Their success is our success,

  • and this is why we get involved with them

  • and have learned a thing or to about what works,

  • and what doesn't.

  • I started my first company in 2011,

  • and we failed at raising capital.

  • I know the pain of shutting down this website

  • you worked on countless hours,

  • or having to email all your customers

  • to say it's game over.

  • The problem with that company

  • is that we wasted so much time trying to find investors,

  • that we failed to find some fundamental flaws

  • in our product.

  • For Slidebean, we raised a seed round of $800,000

  • which has allowed us to grow to a team of 25,

  • increase our revenue to seven digits

  • and become profitable in the process.

  • And yeah, it was hard.

  • I'm telling you this because I want you to trust my advice.

  • I tried and failed,

  • and now I can look back and see why I got a 'NO'

  • from most of the 142 investors that we pitched.

  • Yeah, 142 to raise $800,000.

  • So now, let's talk about traction, first.

  • I have this problem with startup press

  • (Except for Jordan Crook, we absolutely love her).

  • It gives new founders a false notion of how fundraising works.

  • You read the story of Yo,

  • an app that just sent notifications saying 'Yo'

  • and how they raised a $1,000,000 seed round,

  • and you assume that's something

  • that anybody with a couple of lines of code can do.

  • Most companies raise money AFTER getting traction.

  • Very few companies raise money with just a prototype and no users,

  • and certainly, NO company

  • raises money without a fully formed founding team.

  • The most extreme case here is

  • tech companies that are trying to raise money

  • to hire their CTO.

  • This makes no sense in the mind of an investor.

  • Tech talent is expensive,

  • and it's scarce,

  • and the first proof that your company

  • is worth something

  • is that you, the founder/CEO

  • managed to find a full stack developer

  • that would turn down this job

  • at Google to work on this idea.

  • As a CEO, you need to be able to find and convince that guy,

  • who joins your for the stock and not for the salary;

  • when he could be making $150,000/yr otherwise.

  • The reality of startup fundraising today,

  • at least in Silicon Valley and New York,

  • is that companies are pitching investors with traction,

  • with excellent traction.

  • Traction usually comes in the form of revenue:

  • Tens of thousands of dollars per month,

  • growing over +20% month-over-month.

  • I'm not making this up,

  • check this article by VC Elizabeth Yin.

  • Pure play, no-revenue traction counts

  • only when you are dealing with millions of users

  • and fantastic retention rates.

  • So how can you get to these numbers

  • if you don't have any money to start with?

  • Yeah well, the answer is bootstrapping.

  • We bought our domain in 2013

  • and started working on our product,

  • but it was only after 18 months

  • that we managed to get any decent money to

  • ramp up growth.

  • It was $100,000 from the 500 Startups program,

  • but we'll talk about accelerators in a minute.

  • From May 2013 through October 2014 we bootstrapped.

  • We did part-time consulting so we could pay our bills.

  • We had a $1,000 salary each,

  • and we shared an apartment.

  • It was barely enough,

  • but the backgrounds of the three founders

  • made up for all the talent we needed at that point.

  • No need to hire anybody.

  • Our company burn rate was probably $3,500

  • including our 'salaries' and the services we needed.

  • It sucked;

  • but if you can live on a budget

  • and put up with your co-founders

  • while having no idea what's going to happen,

  • you've passed a very tough,

  • initial test for your company.

  • I've been through too many startup accelerators,

  • more than I like to accept.

  • It was a program called Startup Chile that allowed us to drop consulting and finally

  • dedicate 100% of our time to the product.

  • We love Startup Chile!

  • They provide +200 startups a year with a $35,000 government grant,

  • no equity in exchange.

  • All you need to do is move down to Chile for six months,

  • and get involved with the local startup community.

  • It's insane if you think about it, free money!

  • It might as well be all the capital you need

  • to launch your product and start generating revenue.

  • And we did it.

  • We actually moved to Santiago,

  • and this is where we launched our first beta

  • and signed up our first few thousand customers.

  • Thanks to the traction we got here

  • we eventually got accepted by 500 Startups,

  • which then provided $100,000 in funding,

  • plus it allowed us to move to Silicon Valley

  • for a few months.

  • High end, top tier accelerators like

  • 500, YCombinator, TechStars, and DreamIt Ventures,

  • they provide you with so much more than just cash:

  • They give you an office space, they give you advice,

  • a community of brilliant people to bounce ideas with

  • and more importantly, validation.

  • The process to get in is hard and extremely selective,

  • but again, it's a fantastic validation

  • of the potential of your business.

  • Check out this link for more info on how to get into an accelerator.

  • We wrote a good article about it a few months ago.

  • There are hundreds of lesser-known accelerators,

  • and they certainly provide less value or lessfunding,

  • but for many of us,

  • they are the crash courses we need to get to a fundable point.

  • Once you feel ready to raise money, and hopefully

  • you have the traction you need,

  • you need to come up with a pitch deck.

  • DO NOT try to reinvent the wheel.

  • There is the standard pitch deck template structure most investors expect.

  • You can just download a template for this deck on the links below.

  • We've also prepared an in-depth video,

  • breaking down every single slide

  • and giving you insights

  • on how to complete each one of them.

  • Check that out.

  • The key points are that,

  • - Simple is better, again, don't get creative

  • and don't make it longer than 15 slides.

  • Consider this a hard rule

  • - Don't overcrowd your slides.

  • If it doesn't fit,

  • then it probably shouldn't go on the deck.

  • - Your pitch deck is an intro to your company

  • and more importantly,

  • the story of your company and your founders.

  • Don't get into advanced tech details

  • or wild revenue projections;

  • save those for the follow-up meetings.

  • - Most investors take about 4 minutes

  • to review a deck they got over email,

  • and if it's longer than that,

  • chances are they will skip it,

  • so no point adding that information anyway!

  • Another common mistake

  • is treating your pitch deck like a state secret.

  • No investor on the planet will sign an NDA

  • for the chance to see a pitch deck.

  • It's a rookie move that will probably

  • burn that connection for you.

  • These guys look at hundreds of decks a year,

  • and the liability of signing NDAs for each

  • one of them is just not worth it.

  • Don't get upset with this,

  • but most ideas are worthless without execution:

  • it's your ability to execute

  • that matters.

  • If anyone seeing your pitch deck

  • can go on and start a clone company of their own

  • and beat you to market,

  • then it might not be a great idea to begin with.

  • I heard at 500 Startups that you need to pitch

  • 100 investors for every $500K you want to raise.

  • At least in our case, the math held up.

  • Getting in touch with 100 investors is no easy task,

  • but the point here is don't expect

  • that you'll get funded by the first, second, third

  • or tenth investor you speak to.

  • You need to get in front of many, many more.

  • The first thing to know

  • is which type of investor you are targeting.

  • My experience and my advice relates to VCs and Angel Investors,

  • which are normally interested

  • in tech, high growth, high scale companies.

  • These guys look for companies that can raise

  • $1MM or so as a seed round;

  • and use that to get them to a

  • $4-$5MM Series A stage in 18 to 24 months.

  • This means 3x annual growth and a huge market opportunity.

  • If you are building a more traditional business

  • that can't sustain that sort of growth,

  • you should aim for a different kind of investor.

  • So first of all,

  • leverage your LinkedIn network.

  • Make sure you add everyone you know and

  • tirelessly browse their connections.

  • If you find a match,

  • - Check that the investor is actively investing.

  • You can use AngelList for that.

  • - Ask for a warm intro.

  • This will almost guarantee a chance to share your pitch deck.

  • Many investors just don't reply to cold emails.

  • - Share your deck with a link

  • (don't send a PDF file and NEVER send a PPT),

  • that way you can track activity,

  • or remove access if they say no,

  • then they can't check it again.

  • Once you've depleted your LinkedIn contacts,

  • start attending startup events and befriending people.

  • Just talk to them, add each other up,

  • and expand your network.

  • If you play your cards right,

  • you can eventually request introduction from them.

  • This is another point where accelerators are really, really useful.

  • If you absolutely don't have a network,

  • then that 5% or 7% that the program asks

  • in exchange for their help,

  • becomes much more valuable now

  • because they will unlock those contacts for you.

  • We recently launched a (free) product called FounderHub

  • as a branch of Slidebean.

  • We connect founders with potentially interested

  • angels and accelerators.

  • We also have the contact information of

  • thousands of investors that you can browse,

  • filter and target, but remember,

  • cold emails should be your last resort.

  • You'll want to keep a spreadsheet

  • and keep a log of every conversation

  • and the status of your relationship;

  • trust me, by the fifth you talk to

  • your brain will start mixing people up.

  • You can go to FounderHub to download the template

  • of the spreadsheet I used when we raised funding.

  • A typical investor flow goes like this:

  • -You do an email intro.

  • - They ask for the Deck, and you send it over.

  • - If there's interest, maybe some follow up questions.

  • If that works, then you get a meeting

  • These meetings usually are 1 hour long.

  • And they consist of a quick 10-15 minute pitch.

  • Make sure that you stay on time.