Comments on: How to raise money with no lead

By: David

David — Fri, 24 Sep 2010 00:30:53 +0000

In the vid, they mentioned that if you raised 1 million from “institutional investors” its like a mini VC round.

How or why would an institution
(JP Morgan, UBS, Blackrock, citi) even be interested?

The DD alone would kill the deal, like going to the bank and trying to get a $100 loan, you may be good for it, but the bank wont make any money, its easier for them to do a loan for 10k.

Next, why would a lead or whatever you want to call it, the first outsider to invest want to invest a dime without a timed close or even without a firm raise amount?

Remember from school, the time value of money?

So you are saying you close investor A in Q1 and investor B in Q3 at the same terms? Why wouldn’t investor A wait around where is his immediacy?

All of this “hacking” is just that a hack for hacks.

One last thing, if your friends/family are accredited investors, pitch them if not don’t. Why blow out all of your kin and friends over a business thing if it doesn’t work. Leave the risk to professional investors. Period.

By: Ralph L. McNeal

Ralph L. McNeal — Sun, 05 Sep 2010 21:19:03 +0000

After spending over 20 years as a V.C. and small business advocate…never heard so much “malarky” in my life. My organization reviewed over 150 deals a year and our goal was to do four. We analyzed the business plan (which is a selling document), applied our due diligence, research, etc. and produced a “Letter of Agreement.” That letter of agreement was then passed on to the participants lawyers, closing documents came forth to be signed, sealed and delivered. We acted as lead investors, and syndicated where necessary. Worked in concert with Governments, Economic Development folks, Corporations and others that could bring “Added Value” to the deal. Our goal was to bring the “Added Value” based on experience with other new ventures and industries, contacts, networking, campaigning, board representation, etc.

By: Anonymous

Anonymous — Wed, 25 Aug 2010 15:05:26 +0000

Thanks @maconic. This information clears this up for me and I’m sure others. Ed

By: @maconic

@maconic — Tue, 24 Aug 2010 20:17:47 +0000

Convertible promissory notes are such that they convert to equity in a future financing round at an X percent discount of the that round. Angels use this strategy when they don’t want to pick a valuation (“I’ll invest $50k for 10% of the company stock”) . Instead the angel is saying , “I’ll invest $50k for a 20% discount off the stock price the next round of investors get.” If in the Series A round the investors buy the stock at, say, $10 per share, the angel would get it at $8 per share (assuming a 20% discount). This discount is basically the “conversion price” of the convertible note.

Yokum talks about this a bit here:
http://startuplawyer.com/convertible-notes/the-convertible-note-discount-price-cap

Here is a sample convertible promissory note:
http://www.uvm.edu/~techtran/graphics/promissory_note.pdf

By: Anonymous

Anonymous — Tue, 24 Aug 2010 15:44:25 +0000

In your statement:

“We’re hoping to close by such-and-such a date, or we are going to close by such-and-such a date. There are x dollars available, and it’s a convertible note and it’s capped at a valuation of x and a discount of y.”

What do you mean by “a discount of y?”

Thanks

By: Chris Werner

Chris Werner — Thu, 05 Aug 2010 11:54:22 +0000

Great insights, thank you.
You stress that family and friends are the first target for fund raising which is of course mainly because there is a level of trust and relationship that is hard to replicate with outside parties.
This is, however, reinforcing that the art of communicating about what you do, how it benefits potential investors, why they can trust you + finding the right channels and the right tone are what differentiates firms that succeed from those (with equally good ideas) that don’t when fund raising from outside parties! It is essential for start-ups where family and friends cannot provide the funds needed, that they learn how to properly communicate: The recipe is actually simple. Be authentic, honest, open and proactively provide information.

By: Phil Hill

Phil Hill — Wed, 04 Aug 2010 14:53:40 +0000

Where can i find some examples of great investor decks i.e. the 10-15 slides. i already have the elevator pitch etc covered. thks

By: Jefrey Bulla

Jefrey Bulla — Tue, 03 Aug 2010 05:03:57 +0000

thanks for the presentation, very useful. My recomendation is to do it with video to see you guys, it makes it more dinamic.

By: Kevin Dewalt

Kevin Dewalt — Mon, 02 Aug 2010 13:57:25 +0000

Another excellent article guys. Bravo.

I’d only like to add one nitpicky comment that positioning the Lean Startup and Customer Development strategies in the “before you have resources” context may reinforce the common confusion that Lean Startup = Cheap Startup, although I realize this isn’t at all what you’re proposing.

Whether you’re a part-timer with $500 in the bank or General Electric, every exercise in innovation needs to innovate faster with less waste.

Eric, Steve, and the other advocates of the movement they’ve launched are educating a new era of innovators who will make a profession out of perfecting this process.

By: Chris McCann

Chris McCann — Sun, 01 Aug 2010 21:23:51 +0000

Very relevant article to us right now and many founders I know are going a similar situation..

PS – StartupDigest now covers 45 cities and 3 Universities