Investment 101 : Fundraising Fundamentals

In our efforts at 249Startups to connect high potential growth startups with local and international investors and strengthening the investment ecosystem and culture in sudan , We have launched series of articles where we will be summarizing important concepts around investments and fundraising to better help entrepreneurs prepare more to meeting investors .

And, with the 2nd 249Startups Investment Demo Day approaching, we are preparing for showcasing this year portfolio of startups to angle investors , accredited investors and corporate to link high growth startups with funding .

General Fundraising Tips

1. Figure out a story for your startup (how it matters for the future).
2. Find the right investors.
3. Be organized (List investors, their priority, interests, and availability).
4. Bitch to all of them.
5. Agree on a reasonable price.
6. Get money into the bank.
7. Get back to work in your startup.

Answers on fundraising basics:

1.      Why VC exist:

• High growth startups need money.
• In exchange they offer investors great returns.

2.      Why raise money:

• To cover growth expenses.
• Bootstrapping is extremely hard.
• Gives the startup a competitive advantage.

3.      When to raise money:

• When your business metrics are good.

4.      How much to raise:

• Figure out your expenses and how much you need to hit milestones and reach profitability.

5.      How to raise:

• Pitch yourself to investors (remember that investors in early stages are investing in you).
• Tell the story of the startup (it should be interesting, believable, memorable and tells the future).
• Story must include:

1. Large opportunity.
2. Compelling product or traction.
3. An impressive team and story tellers.

6.      How to build a story:

1. Begin with the idea.
2. Create 1- or 2-line description.
3. Prepare your key points.
4. Create a two minutes pitch (remember that you are selling the story to the investors).
5. Prepare what co-founders share and what makes them the right team.

7.      What valuation:

• Valuating your startup too high or too low kills the fundraising process.

Fundraising mechanism:

1. Equities
2. Convertibles (SAFE and notes).

Convertibles:

• A promise of a future equity.
• It is fast and simple (2-5) pages.
• Low legal fees.

Equities:

• Issuing new shares to investors.
• High legal fees.
• Gives investors rights in the company.

Dilution:

• It Is a decrease in existing shareholders ownership percentage of a company because of issuing new shares increasing the total number of outstanding shares .
• Convertibles complicate dilution because you have not sold shares yet (in the case of pre money convertibles).
• Dilution calculation will depend on how much money you raised beside the convertible (there are tools like angle calc to help you calculate it).
• Post money SAFE is debt mostly (it is easier to calculate dilution in post money SAFE).

Investment ecosystem:

1. Angels: Individuals investing their own money so passion plays a larger role.
2. VC: Investments funds that invests other people’s money so the care more about business metrics.
3. Crowdfunding: Does not play a large role usually used before an investment round to raise some cash to hit milestones before the round.
4. ICO (initial coin offering): Type of fundraising that uses cryptocurrency by creating additional tokens (coin) and sell it to investors in exchange for money (usually cryptocurrency).

• Does not come with ownership rights.
• Can be private or public.
• Has low regulations.
• Offers high returns to investors.

5. Seed: Records to use convertibles in this stage.

6. Series A, B, C, …
7. IPO : Initial Public Offering

Meeting investors:

1. Prepare and research (know their history and passion).
2. Simplify pitch.
3. Bring a demo or a prototype.
4. Listen to what investors say.
5. Practice pitching.
6. Do not leave without a conclusion (what will you do next).
7. Prepare pitch deck.

Negotiations:

1. Understand what investors care about.
2. Offer alternative options.
3. Investors are better at negotiating, so it is better to delay.

Common mistakes:

1. Over-optimizing: Focus on product more than fundraising.
2. do not be a bad actor (be responsive).
3. Do not exaggerate.
4. do not take rejection personally.
5. Remember that fundraising is a tool not the goal.

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About 249Startups Demo Day

Our 2020 Demo Day is the culmination of all the hard work for our latest startups. We’re proud of the great strides made to improve their product-market fit and increase their customer traction. 249Startups supported them by hundreds of rigorous training and coaching sessions on topics ranging from growth hacking to financial modelling, supplemented with weekly mentorship sessions.

Join our 2nd Demo Day

During This year Demo Day, the startups will present the results of their work and investors will be able to discuss further cooperation with them. This year we will go digital due to COVID19 . Accredited investors will be invited to engage directly with the founders, invitations will be emailed to vetted guests.If you are interested in invest in 2020 portfolio startups feel free to contact us at space@249startups.com . Demo Days are invited only events exclusive to  Angel Investors network , partners & accredited investors