Fundraising

Progressive disclosure is an interaction design principle that sequences screens, so users do not feel overwhelmed and inevitably bounce. Progressive Disclosure & Fundraising Founders should take note of this principle when reaching out to potential employees and investors. Your goal is always to get to the next step, not get hitched after 2,000 words. If you are connecting with someone for the first time, your goal should be to receive a response. Keep things between 50 to 250 words (just like this note). As Kunu says, do less. Use Visible for Your Next Fundraise No matter the series, size, or timing of your round, Visible is here to help. With Visible, you can manage every stage of your fundraising pipeline: Find investors at the top of your funnel with our free investor database, Visible Connect Track your conversations and move them through your funnel with our Fundraising CRM Share your pitch deck and monthly updates with potential investors Organize and share your most vital fundraising documents with data rooms Manage your fundraise from start to finish with Visible. Give it a free try for 14 days here.

On episode 5, season 2 of the Founders Forward Podcast, we welcome Ezra Galston. Ezra is the founder and partner at Starting Line, a consumer-focused VC fund located in Chicago. About Ezra As someone who has faced the ups and downs of being a founder (plus the stresses of fundraising), Ezra and the team at Starting Line has made mental health a focus. Every founder in the Starting Line portfolio receives a subsidy for “their first three sessions of therapy, executive coaching, or co-founder counseling (up to $200 each).” Ezra joins the Founders Forward to break down fundraising, founder health, and the consumer market/what excites the team at Starting Line. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Ezra. You can give the full episode a listen below: What You Can Expect to Learn from Ezra How a founder and board’s focus changes from early stages to later stage How venture fundraising differs for the “haves” and “have nots” How Ezra’s experiencing raising capital has impacted how he views fundraising Why Starting Line has a focus on their portfolio founder’s mental health How Starting Line subsidizes mental health sessions Why fundraising is a relationship-based activity Why he likes plenty of context before a meeting with a founder Related Resources Ezra’s Twitter The Starting Line Operating Manual Starting Line’s Visible Connect Profile

On episode 4, season 2 of the Founders Forward Podcast, we welcome Tyler Tringas. Tyler is the founder and General Partner at Calm Company Fund (formerly Earnest Capital). The Calm Company Fund invests in exactly what it sounds like — “profitable, sustainable, calm businesses.” About Tyler and Calm Company Fund Tyler offers a unique perspective as someone who invests in companies that may not be the huge companies that a traditional venture capitalist eyes. He joins us to break down what exactly a “calm” business is, the current market dynamics that are creating more need for funders like Calm Company Fund, and much more. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Tyler. You can give the full episode a listen below: What You Can Expect to Learn from Tyler How companies in smaller markets can still be winners What a SEAL is and how Calm Fund uses them The market dynamics creating a need for more funding options like Calm Fund Why and how they raised crowdfunding How Calm Fund and Venture Capital can co-exist for startups How to best cold email investors Related Resources Tyler’s Twitter Calm Capital — What We Invest In Shared Earnings Agreement Our Original Sit Down with Tyler The Calm Fund Visible Connect Profile Bootstrapping 101: Pros & Cons of Bootstrapping Your Startup

On episode 3, season 2 of the Founders Forward Podcast, we welcome Elizabeth Yin. Elizabeth is the founder of Hustle Fund, a venture fund for “hilariously-early founders.” About Elizabeth As a past founder and current investor (and a founder favorite Twitter follow), Elizabeth knows what it takes to successfully raise a round of venture capital. Elizabeth breaks down how founders can leverage tranches, raising from small funds and angels, and shares other tactical tips to knock out your seed round. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Elizabeth. You can give the full episode a listen below: What You Can Expect to Learn from Elizabeth How to raise capital from angels How small checks can lead to big checks How tranches can be an effective way to raise capital How tranches and meeting cadence can create FOMO Why you should have a 5 slide deck What changes between a Seed and Series A round How to get the attention of an investor via cold email Related Resources Elizabeth’s Twitter Hustle Fund’s Connect Profile AngelSquad by Hustle Fund

On episode 2, season 2 of the Founders Forward Podcast, we welcome Brett Brohl of Bread & Butter Ventures. Brett is the Managing Director of Bread & Butter Ventures as well as the Managing Director of the Techstars Farm to Fork Accelerator. About Brett As a past founder and current investor, Brett has a wealth of knowledge on how founders can best create momentum during a fundraise. Give Brett a listen as he walks us through best practices to build out a fundraising process. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Brett. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Brett How to determine if VC is right for your business How much time you should allocate for a raise How to model financials for a fundraise How to leverage investor Updates to speed up a fundraise Why you should send a 4 slide pitch deck before a meeting How you should think about moving investors through your funnel Related Resources Brett’s Twitter Brett’s Fundraise Faster Video Series Troy Henikoff Financial Modeling Series The Bread & Butter Investor Update Template Bread & Butter’s Profile on Visible Connect, our investor database

On the first episode of season 2 of the Founders Forward Podcast, we welcome Kenn So of Shasta Ventures. About Kenn Kenn is an associate at Shasta and invests in B2B enterprise software companies (with a personal focus on Machine Learning). Kenn joins the Founders Forward to break down the trends taking place that are influencing company valuations. We also dig into how founders can leverage investor updates and cold email to create momentum in a fundraising process. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Kenn. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Kenn Why founders should take the time to pitch associates The supply & demand of venture capital that are impacting valuations Why the emergence of “mega-funds” is changing the VC landscape The risk of raising at too high of a valuation How to create momentum in a fundraising process using an email newsletter What he likes to see in a cold email from a founder Related Resources Kenn’s Book, “Breaking into Early-Stage VC“ Kenn So on Tech Valuations Kenn’s LinkedIn

When is the right time to raise a Series A round of funding? You made it past your initial seed funding round which means you successfully raised money on a story that got your investors excited about you as a leader and the vision of what you were building. You then turned that capital into a solid customer base, consistent revenue, or are hitting other KPIs relevant to your company and now you’re thinking about raising your Series A. At this point, you may be wondering when to start the fundraising process, how investor expectations have changed, and how to get in front of the right investors. You are right to be asking yourself all these questions and mentally preparing to transition to a full-time job of fundraising. The reality is, Series A financing is much harder to obtain than seed financing. First Round Capital shares a founder’s perspective, “Our seed round was super fast and hyper-competitive, and then we went into the A and started getting interrogated about our data. It was like graduating from elementary school and going straight into college.” To better understand how investors are thinking about the A round, Andrew Chen of Andreessen Horowitz distilled the early-stage investment thesis into this: Pre-seed – Bet on the entrepreneur Seed – Bet on the team Series A – Bet on the traction Series B – Bet on the revenue Series C – Bet on the unit economics There’s no getting around the fact that Series A are the new Series B and the heightened competition for capital at this stage means you need to go into the Series A fundraising process equipped with the knowledge and a level of preparedness that will set you apart from the others. The right time to kick off your Series A fundraising process is… before you think. It’s a rare breed of founder that will tell you they closed a financing round in LESS time than they thought it would take. Y Combinator suggests kicking off your fundraising when you have 9 months of runway left but you should be nurturing informal relationships with investors before then (view prospective Investor Update templates here). Additionally, you should always have a finger on the pulse of your burn rate and how it influences your runway. If you don’t know your key metrics cold, you’re not ready to fundraise. Recommended Reading: The Understandable Guide to Startup Funding Stages What if you’re running out of cash but still not hitting Series A benchmarks? With the hurdles for Series A financing reaching new heights, it’s good to think about whether you’re really ready to set these types of expectations with investors. If not, it’s becoming more common for startups to raise seed extensions (Seed II, Seed Extension, Pre-A, etc) to supplement their growth until they are able to hit the milestones that Series A investors are looking for. If this sounds like you, be sure to know the difference between a bridge round and post-seed round. The name of the financing round will attract different types of investors so be sure to consider this early on when developing your fundraising strategy. What is the purpose of a Series A round? To keep things straightforward, your seed-stage round was about achieving product-market fit. Your Series A round, typically between $2 million to $15 million, is about expanding your customer base and product offerings. Investors will also want to see you develop a strategy for generating long-term profit during this stage. What types of investors are good for Series A? It’s important to think strategically about what type of investors you want joining your cap table for your Series A, especially since the average investor + founder relationship is 8-10 years and investors’ brand, reputation, and resources can influence your chances of success. To start narrowing in on what your potential investors will look like, check out this All Encompassing Fundraising Guide for Startups which includes an Ideal Investor Persona outline. If you’re further along in the fundraising process and want to due diligence on an investor, here are some diligence questions to consider: What do other founders in their portfolio (funded or failed) have to say about what the investor was like to work with during hard times? What do your current investors think about this investor? Does this investor have a reputation for working well with others? Does this investor have deep pockets? Are they a potential source of follow-on funding? Do they have great brand recognition? Will being associated with their brand give you instant credibility? Do they provide support in areas you need to grow? (CEO forums, marketing resources, etc?) How available were they during the diligence process? (If they’re busy and hard to reach during diligence, this will likely remain the same or be worse after the deal closes.) Do their ‘terms’ signal they’re in it for the long haul? Avoid these Common Series A Mistakes Being unclear about how much you’re raising Ranges look indecisive and unresearched. Investors know that your numbers may change slightly but you should be raising the minimum amount needed to hit your Series B milestones. Y Combinator suggests this is typically ~3-5x your current numbers. Be sure to do your research in advance and have a specific ask. Not learning from your investor meetings You’re going to spend a lot of time talking with different investors but the truth is there is only a 1-10% chance that investor is going to give you money. This is why James Currier, General Partner at NFX, says it’s better to view meetings with investors as “an opportunity for you to build your company using the information you get from the VC, not just the money you might get. This will give you a higher return on your time.” This means your pitch deck should be evolving over time as you meet with investors. Not tailoring the deck to the investor Just as you wouldn’t send the same resume and cover letter to different employers, you should be tailoring your Series A pitch deck to each investor. Do some research in advance about their investment thesis, criteria, and current portfolio. Make sure you emphasize areas you know they care about. LinkedIn can be a helpful tool to get to know more about an investor before your first meeting. For example, by taking a quick look at their profile you could learn they used to work for a potential customer of yours and then you can include their logo in your deck. Wasting time on investors You will certainly come across investors who will drag you along in the diligence process, keeping your hopes up, only to hear a ‘no’ for obvious reasons later on. Sometimes investors use the diligence process to do their own research on your sector even though they have no intention in investing. To avoid this, listen for doubts during your first investor meeting. If they don’t think your market is big enough or don’t get excited about the problem you’re solving, pay attention to these signals. You can also Automate your Investor Updates to keep relationships warm without wasting time. Recommended Reading: How to Write the Perfect Investment Memo Tips on Pitching a Series A Round Before you start setting up meetings with potential investors it’s wise to invest ample time clarifying your fundraising narrative and creating a winning pitch deck. Tip #1: Start brainstorming your Series A fundraising narrative in a word document before you even open PowerPoint. This will allow you to focus on the important parts of your story without getting distracted by slide formatting. Once you feel confident about the fundraising narrative you’ve outlined in a document, it’s time to make it more digestible for investors. Tip #2: Create a ‘listen to me’ version of your deck in PowerPoint with more visuals and less text (10-14 slides) and a ‘read me’/send away version with more detail (20-22 slides). Here’s an overview of recommended slides to include in your Pitch Deck: Company Purpose Problem Solution Why Now Market Size Competition Product Traction Business Model Team Financials Ask Summary Back Pocket Slides Tip #3: Practice your pitch with current investors, peers, friends/family. Your back pocket slides should include information that answers the most common questions people are asking. Let’s break down what to include in your Series A Pitch Deck even more: Company Purpose This should be concise and can be displayed in a memorable, punchy sentence on your first slide. Problem The title of the slide should boldly communicate the problem you are solving. Consider including a graph/figure/image to demonstrate the gravity of the problem. This is your chance to connect with the investor and get them to relate to what you’re trying to accomplish. Are there storytelling examples you can give? How can you make them ‘feel’ the problem? Solution This slide should focus on ONE solution and it should come across as clear and concise. You should answer the questions — How are you solving the problem? What is your vision and strategy? How are you making the customer’s life better? Feel free to highlight use cases. Why Now Emphasize why investors are joining you at the right moment in time. You can highlight the historical evolution of your industry and define recent trends that make your solution possible. It’s important to highlight growth trends in the market so as not to assume the market has already hit its peak. Market Size Investors want to know you’re creating a solution for a BIG market because market size correlates to potential returns for an investor down the line. Be sure to tell them just how big the space is and your potential market share. To do this you can calculate the Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM). Competition It’s never a good idea to talk bad about your competitors or say you’re the only solution on the market, both approaches make you seem naive. Instead, focus on how you are differentiated and solving a pain point keenly felt by the market. Tip #4: If you don’t think you have competitors, you haven’t done your research. Crunchbase or Pitchbook are a good place to research other players in the space. Product Get investors excited about the state of your product but don’t spend too much time walking through all the hard work it’s taken you to get there. While reaching milestones on time demonstrates your ability to execute, investors care less about past work and more about where you’re headed. In this slide you can highlight the product features, architecture, IP, etc. Be sure to also share your product roadmap. Traction This is where you highlight your key metrics. This is arguably the most important slide because you’re showing the facts to back up your narrative. Business Model This is where you describe how you are making money, your pricing strategy, margins, etc. If it makes sense, you can highlight your sales funnel or metrics such as average account size. This slide should make your investors very confident in the future positive cash flow of your company. Team Just include your key team members and bullet point bios. Consider including logos from reputable past experiences if it makes sense. You can include a separate slide for Advisors. Financials Investors spend over 23% of their time reviewing this slide. Include just a summary on this slide and be sure to clearly communicate your numbers. Be sure to include a more detailed overview of your P&L statements, balance sheet, cash flow, and cap table either in backup slides or another shareable format. Asks Outline your funding roadmap. What have you achieved with your funding to date? Clearly state how much you are asking for and what this capital is going to help you achieve. Summary This final slide tends to stay up on the screen for a while. Instead of including a ‘thank you’ slide, include a summary of your key points. This can spur a more robust Q&A and is an effective way to summarize the most poignant parts of your pitch. Affordable ways to build a great looking Pitch Deck If building attractive slides is not your strong suit, there are a lot of excellent pitch deck designers to be found online. However, if you’re looking to improve your deck design but not break the bank, consider looking for pitch deck designers on UpWork, Fiverr, or 24slides for a quick turnaround. While it’s important to have professional looking slides that effectively communicate your fundraising narrative, remember, investors invest in teams not slides. Aim to be well-rehearsed, conversational, and treat your Q&A like an interview. In addition to evaluating your business’ potential, investors are using this time to assess you for coachability, credibility, and personability. The Do’s and Don’ts of Creating your Series A Slide Deck Do: Do brainstorm your pitch narrative in a Word document first so you can focus on the narrative before getting distracted by formatting. Make a copy of this framework to get started. Create a ‘listen to me’ version with more visuals and less text (10-14 slides) and a ‘read me’/send away version with more detail (20-22 slides) Aim to present it in 20 minutes Do use 34 point font for your ‘listen to me’ version Do include a one sentence summary at the top of each slide Don’t: Exceed 25 words per slide Use acronyms Downplay your competitors Use animations or transitions Use photos without captions or titles Use excessive explanations or caveats Use excessive branding per slide Recommended Reading: How to Write the Perfect Investment Memo Download our Free Template The process of raising your Series A may seem daunting, especially since only ~30% of founders who raised seed funding close a Series A round. This is all the more reason to make sure you’re equipped with the knowledge and resources you need to lead a successful Series A campaign. Start by clarifying your Series A fundraising narrative before you even dive into your pitch deck. Then you can move onto creating your Series A Pitch Deck by using this template which you will want to iterate as you get feedback from investors. Related Resource: Pitch Deck Design Cost Breakdown + Options Next, you should curate a list of prospective investors. You can use Visible’s connect database to narrow in on your list and manage these contacts in a Fundraising CRM. If you’re not already doing so, you should be sending out regular updates to keep in warm touch with potential investors. Companies you send out regular updates are 300% more likely to get funded. Check out Visible.vc’s library of Investor Update Templates to get started today.

The most common startup funding stages are: Pre-Seed, Seed, Series A, Series B, and Series C. As the company matures and develops it moves through each of the rounds as it seeks further funding. It all begins at a pre-seed or seed round where companies are often still pre-revenue which is why raising capital, from friends and family for instance, is so important to help get ideas off the ground and form a company from it. Preseed can also be considered a seed round, since it’s also a startups earliest funding stage and includes investment from angels or friends and family. Some note that the main difference between seed and pre-seed is that a pre-seed round is often much less (usually under $150,000k but can also go up to $2 million). It is also obtained through sources outside of any kind of institution, like a bank. It is still common though in the pre-seed round to give up equity in exchange for capital. Three of the main sources for pre-seed funding come from either angel investors, the company founders themselves, or friends and family. The terms and conditions for angel investors though are often different than what you might offer to people you know directly. It’s worth mentioning that this doesn’t mean you shouldn’t provide clear terms to your friends and family, it just means you might structure it a bit differently. Why Should You Raise Money From Friends & Family? Different funding options make sense at different stages of a business’s lifecycle. For example, raising capital with a simple idea and business plan varies greatly from raising capital when you have $100M in revenue. In the early days, more founders are turning to their friends, family, and immediate network to launch their business and prove its ability to grow into a larger organization. Pre-seed funding is used to start the company itself and is therefore considered more of a high-risk investment since it hasn’t had the chance to prove itself. This can make it harder to gain capital from traditional investors or a bank, which is why seeking funding from friends and family can often be an easier choice. This risk is often compensated through more equity given to those who invest early (when the company is at its lowest valuation) rather than later. This makes it compelling and rewarding for those who invest early and is often why there are angels who specifically seek out early-stage companies to invest in, while they are (pre)seed. Knowing this can help shape your mindset from feeling like you’re asking a favor from your friends and family to inviting them to have the opportunity to invest early and reap the potential financial success that can be gained from their investment in your company. Elizabeth Yin, Founder of the Hustle Fund, is a huge believer in small checks from friends and family, check out her thoughts below: Raising from friends and family can also be beneficial because you have people who are not only financially invested but personally invested as well. What people don’t often realize is that your investors will often become contributors to your business in the form of feedback, guidance, and suggestions. When your investors are your friends and family though, you can trust that these suggestions not only have your companies best interest at heart but your own as well. Who Counts as Friends & Family? It is your job as a founder to uncover the potential investors around you. Seeking out VCs is generally a bit more cut and dry (check out our investor VC database, Visible Connect) than friends and family. For example, friends and family investors could be: Relatives Friends or friends of friends (try seeking out the ones that have relevant experience or have a relevant network of people they can reach out to) People you know from school (mentors, professors, classmates) Past work colleagues Community members (virtual or in-person networks that you’re a part of, such as mastermind groups, co-working spaces, and business networks) Who Should you Approach for a Friends and Family Round? This question is best approached by first assessing what kind of round you’ll raise from them- such as equity, convertible notes, loan, or gift. Since this method of fundraising isn’t as straightforward it is important you first decide the form of investment you will take (more information on that to come) since this determines the role that they will play in your company in the future. If you want them to have a seat at the table and are hoping they can bring value through their expertise and network, then it is important that you are more selective. If you are raising via a crowdfunding platform, in the form of a loan, or as a gift then it is likely that your friends and family will have little to no involvement in your business, which means you do not need to be as selective for who participates in the round. Most importantly you want people to invest who believe in you and your business, who understand that there is risk involved, and only contribute what is feasible for them. Lastly, it helps if they understand your business and are able to contribute in other ways through their knowledge, connections, or ongoing support. Who Should you Avoid Asking? It is always tricky to mix family and friends with business or money which is something to be very aware of going into this. Taking certain precautions is advised to avoid any problems that may arise because of mixing personal relationships with business. One of these precautions would be to avoid asking the wrong people. Here are some examples of what to avoid: People who you know will try to give feedback which will not be useful but will be expected to be taken Someone who you can not have open, honest, and constructive communication with If you know that the financial means of the person is unstable and they might be reliant on the money they are giving you People who don’t understand investment risks and wouldn’t be ok to lose the money which they invested in you Avoid these Common Mistakes You want to make people aware that even though you see the opportunity in your business and want to assure it’s a success, there is always a risk of the business failing. Avoid asking people who are in a situation that if they lost the money they invested in you it would cause them serious hardship that could ultimately affect your relationship. You also don’t want to put anyone in a position that as a friend or family member you want to avoid seeing them in. It’s also important to not make your friends and family feel pressured into investing, or bad if they choose not to. You can also let them know that you would also appreciate support in other ways such as time spent with you to discuss things you might be going through, feedback, or helping by creating awareness for your company (this could be in the form of word of mouth or reaching out to their network for additional support). How to Raise a Friends and Family Round Keep it Professional You should try to be as professional as possible and treat communication and documentation of things as you would with a real investor. This means having a business plan, creating a pitch deck, and making sure to share any relevant metrics or successes you’ve had so far, as well as where you expect the business to go and how you plan to grow it. Have a Number in Mind Decide what your target number is that you want to raise and back that number up with the calculations you used to arrive there. This is an important step to share as people want and need to understand how you plan on spending their investment and the milestones you plan on reaching. What are the Terms Then determine what kind of round you want to raise from your friends and family. There are a few options that are very different from the other. The most common are; investment in return for equity in your company, loans, convertible notes, and donation based. Once that is decided it’s best to create a formal contract that documents everything so it’s all clearly outlined and everyone can be held accountable by it. Communicate On an ongoing basis, you can communicate these updates in a less formal way through email, text, social media, etc. Staying in front of the people you potentially want follow on funding from is vital- this is true for this stage but will become even more crucial as you move further along in the next funding stages. Test Social Media! Before you even start pitching friends and family you can also leverage social media to do the pitching for you in an indirect way. Once you’ve caught their attention, spiked curiosity, and inspired them on your idea you might be able to already move them to want to make an investment before you even make the ask. Tell a Story Strengthen your storytelling abilities by taking people on your startup’s journey, so they feel involved and inspired. Having this skill is important as you try to move people to take action whether it be investors or customers. People are more inspired to make decisions when they feel they came up with the idea themselves through compelling factors they calculated based on the evidence you presented. How to Make the Ask in an Indirect Way Avoid coming across in a way as if you were asking for a favor, but rather that you want to offer them an opportunity to gain access to an idea that has great potential for success. They will realize themselves the added benefit that they are also helping you make your company a reality. If you want to take yourself out of the equation to start, it’s best to utilize other platforms that can tell your story and reach more people in an indirect way. This could help ease any uncomfortable confrontations that might come from a direct no. One option is to use a crowdfunding platform, which also allows you to have the opportunity to find other people who are interested outside of your network, so you’re casting a wider net when looking for those first investors. Use the herd effect to help rally others to back your idea after you have your first initial investors on board. People are often motivated and prompted into action when they see that others around them are already taking part. Think of ways that you can showcase this (make sure you ask permission from those that you spotlight) on either a landing page, shoutout on social media, or mention in the opening text of wherever you might be directing people. You can also ask friends and family who have already invested in you to share out information as well since they have proven to believe in your company and are likely able to advocate it well. Also if you were looking to get funding beyond just your inner circle this is a good way to do so as people are more likely to trust recommendations made by people they trust rather than companies themselves. Related Resource: Our Favorite Seed Round Pitch Deck Template (and Why It Works) Common Friends & Family Questions How Much Capital Should You Ask For? There is no right or standard number to go off of here as this completely depends on how much you need to get you through the first few months of your business until you either are making a profit or are ready to raise another round. Ranges are usually anywhere from $10,000 to $150,000 but can also go up to 2 million. Use modeling and advice from the market to get a ballpark idea. You can check out a template for modeling your early financials here. How To Make Sure You Don’t Over-Dilute Your Equity? You will want to set up anti-dilution provisions which help keep the percentage of the investor’s original ownership intact. It’s a clause that is constructed into options and convertible preferred stocks that helps protect investors from their investment potentially losing value. Anti-dilution provisions can discourage this from happening by tweaking the conversion price between convertible securities, such as corporate bonds or preferred shares, and common stocks. In this way, anti-dilution clauses can keep an investor’s original ownership percentage intact. What Do You Offer Your Friends and Family for their Investment? This depends on what kind of agreement you have come to with them based on if the money you are receiving is a loan, gift, or is in exchange for equity. No matter which option you decide to go for you would offer them a document which states in detail either the repayment options or how much stake they now have in your company. How Do You Manage The Relationship Between Your Friends and Family Investors? Just like with any other type of investor you want to keep things professional and offer them regular updates. As well make sure you have formalized and documented any agreements so that everything is in writing to make sure there is no confusion and everyone is on the same page. How Do You Know When To Buy Out Toxic Investors? If you feel that your relationship with your friend or family member is suffering or your business because of their involvement/ investment then it is a good idea to buy them out. It is good to be aware that this possibility exists no matter who it may be. It is wise to already think how you might do this and have something in writing as well that everyone agrees to ahead of time so if the time comes you already have an agreed upon course of action. Use Visible to Manage Your Raise When raising any round, it is most important to keep all stakeholders informed on your process and progress through documented updates. This is also a good practice for you because it forces you to track your success and evaluate important metrics you should be tracking. This process starts with your friends and family round and is good to strengthen for your later fundraising rounds. Share with them anything and everything on your progress. This can include your wins, current status, relevant metrics, insights, and asks- where you could potentially use their help. This can be done through sending an email, arranging a call with all stakeholders, or recording a video to message out (this should be accompanied but something in written form though which is better for people to refer back to). To get inspiration on how an update should look, check out our update template library or try Visible for free to send out those first updates!

There are different instruments and financing options when it comes to raising capital for a business. SAFEs (or Simple Agreement for Future Equity) have been one of the more dominant options since Y Combinator introduced them in 2013. As a founder it is important to know what financing options and instruments are available to your business. Learn more about SAFEs and what they mean when it comes to a fundraise below: Related Resource: All Encompassing Startup Fundraising Guide Note: We suggest consulting a lawyer when determining what financing options are right for your business. What Does SAFE Stand For? SAFE is short for Simple Agreement for Future Equity. As we mentioned above SAFEs were introduced in 2013 by Y Combinator and are here to stay. SAFEs are a type of convertible instrument that converts to equity at a later date. This means a founder is promising equity in their company at a later date when a founder goes out to raise money on a priced round. As Paul Graham put it in the 2013 blog post announcing SAFEs, “A safe is like a convertible note in that the investor buys not stock itself but the right to buy stock in an equity round when it occurs. A safe can have a valuation cap, or be uncapped, just like a note. But what the investor buys is not debt, but something more like a warrant. So there is no need to fix a term or decide on an interest rate. Safes should work just like convertible notes, but with fewer complications.” Related resource: The Startup's Handbook to SAFE: Simplifying Future Equity Agreements The Difference Between SAFE Fundraising and Other Types of Investment Rounds While SAFEs are popular in the market there are other funding options that can be compared to them. Learn more about how SAFEs stack up against other funding instruments below: Related Resource: How to Secure Financing With a Bulletproof Startup Fundraising Strategy Note: We suggest consulting a lawyer when determining what financing options are right for your business. SAFE vs. a Priced Round One alternative to a SAFE is a priced round. As the team at Vincent puts it, “A priced round is an equity-based investment round in which there is a defined pre-money valuation. This means that before completing the investment, the asset has a valuation and, thus, a price-per-share. In Venture Capital, priced rounds are the most common investment structure.” This means that a company has a determined valuation when working through a priced round. As for a SAFE, you are setting a valuation cap to hit in the future. Because of this, SAFEs only require you to negotiate 2 things when raising: How much money the investor will put into the company What is the valuation cap On the flip side, a priced round will require more negotiations as you are determining a valuation. SAFE vs. a Convertible Note Another funding option is a convertible note or convertible debt. As the team at Investopedia writes, “A convertible note is a debt instrument often used by angel or seed investors looking to fund an early-stage startup that has not been valued explicitly. After more information becomes available to establish a reasonable value for the company, convertible note investors can convert the note into equity. Investors have the option to exchange their notes for a predetermined number of shares in the issuing company.” How Do SAFEs Work? Of course, when seeking out to raise using a SAFE you should be able to understand the components of a SAFE. When looking at the document from the team at Y Combinator there are only 5 sections (link to the Y Combinator documents here): Section 1 — Events Equity financing – This explains what happens in the event of equity financing Liquidity event – This explains what happens in a liquidity event Dissolution Liquidation priority – who comes first to be repaid in the listed events above. Section 2 — Definitions Section 2 will help you understand the different language and terms used throughout the document. A few of the key terms from section 2: Section 3 — Company Representations Section 4 — Investor Representations Section 5 — Miscellaneous/Legal Language We encourage founders to check out the document from Y Combinator above as they offer definitions and thorough breakdowns of how SAFEs work. How Do SAFEs Benefit Investors? SAFEs have not picked up in popularity by luck. SAFEs can be a beneficial instrument for both investors and founders. In order to understand if SAFEs are right for your business, you need to understand how they work from the investor’s perspective. A Streamlined Process to Acces Early-Stage Investments Due to the ease of negotiations when it comes to raising via a SAFE, investors are able to see more deals. For example, if an investor is constantly negotiating with potential companies, they will be hindered when it comes to deploying capital in an efficient way. Ability to Convert Investments into Equity Investors also have the ability to convert their investments into equity. Because of the valuation cap and discount rate, investors can convert their equity at better terms than newer investors. How Do SAFEs Benefit Founders? Of course, SAFEs only make sense if they are beneficial to you as a founder as well. As we’ve previously mentioned the main benefit of SAFEs is their simplicity for both founders and investors. However, there are a few other benefits: Enhanced Flexibility With Shareholders When making an investment via a SAFE, investors are not entitled to voting rights and rights that might create interference and additional work on a founder. Faster Access to Financing Speed is crucial when it comes to building and financing your business. SAFEs are a great tool to speed up a financing round and allow founders to get back to what matters the most, building their business. 3 Questions to Ask Before You Raise a SAFE Before going out a raising a SAFE, there are a series of questions you should be able to confidently answer. As we’ve previously mentioned in this post, we suggest consulting a lawyer when determining what financing options are right for your business. 1) Are You Willing to Give Up Equity? First and foremost, you need to ask yourself if you are willing to give up equity. Although you are not giving it up in the immediate, you ultimately are promising to give up equity at a later date. While it can be tricky to determine exactly how much you’ll be giving up, it is important to meet with lawyers and financial advisors to model how much you will be giving up. 2) Are You Considering Raising Money in Your Next Priced Round? Seeing the future, especially as a startup founder, can almost feel impossible. But when it comes to a SAFE you should have an idea of how much you would like to raise in a future priced round. This way you’ll be able to avoid over diluting future investors and keep all parties involved happy. 3) How Will You Track Your SAFE Investments? Of course, you’ll need to a way to track your SAFE and manage your cap table after closing a SAFE. We recommend using a cap table management tool, like the tool from the team at Pulley. Learn More About SAFEs & Fundraising SAFEs are one of the many funding options available to you as a startup founder. No matter what instrument or vehicle you determine is right for your business, you need to have a gameplan in place to find, nurture, and close potential investors. Learn more about how Visible can help you with your next fundraise here.

Being a startup founder and CEO is difficult. CEOs of large corporations are oftentimes groomed over the course of years for the position. There is no playbook for startup founders. Most first-time founders are learning on the fly and are responsible for making just about every decision for their company. As a startup founder, there is no one better to learn from than the person who has been there before. Luckily, there are thousands of founders, investors, and operators who have been there before to share their learnings. Related Reading: Business Startup Advice: 15 Helpful Tips for Startup Growth 23 Books For Startup Founders Check out our favorite books for startup founders below (broken down by subject). Operations When it comes to operating a startup, there is no better person to learn from than a founder or operator who has been there before. Check out our favorite books for operating and scaling a startup below: The Lean Startup by Eric Ries Before writing The Lean Startup, Eric co-founder IMVU where they efficiently built a minimum viable product in 6 months. “The Lean Startup approach fosters companies that are both more capital efficient and that leverage human creativity more effectively. Inspired by lessons from lean manufacturing, it relies on “validated learning,” rapid scientific experimentation, as well as a number of counter-intuitive practices that shorten product development cycles, measure actual progress without resorting to vanity metrics, and learn what customers really want. It enables a company to shift directions with agility, altering plans inch by inch, minute by minute.” The Startup Playbook by Rajat Bhargava & Will Herman Rajat Bhargave and Will Herman both have careers founding and leading startups. As the authors put it, “The Startup Playbook is full of our advice, guidance, do’s, and don’ts from our years of experience as founders many times. We want to share our hard-earned knowledge with you to make success easier for you to achieve.” Zero to One by Peter Thiel & Blake Masters Peter Thiel co-founded PayPal, Palantir, and Founders Fund. It is safe to say that he knows what it takes to innovate and invent. “Zero to One presents at once an optimistic view of the future of progress in America and a new way of thinking about innovation: it starts by learning to ask the questions that lead you to find value in unexpected places.” Check out why Su Sanni, Founder of Dollaride, has found Zero to One to be the book that has helped him most during his time as a founder below: Measure What Matters by John Doerr John Doerr has been a venture capitalist at Kleiner Perkins since the 1980s. He has invested in companies like Compaq, Amazon, and Google. “In Measure What Matters, Doerr shares a broad range of first-person, behind-the-scenes case studies, with narrators including Bono and Bill Gates, to demonstrate the focus, agility, and explosive growth that OKRs have spurred at so many great organizations.” Leadership & Management Startups are in constant competition for 2 resources: capital and talent. A founder or CEOs ability to lead and manage their team is vital to a startup’s ability to attract and retain top talent. Check out our favorite books to help founders improve their leadership skills below: Startup CEO by Matt Blumberg Matt Blumberg is the CEO of Bolster (and former CEO of ReturnPath). Being a startup CEO, especially for the first time, is difficult. There is no playbook or training to become a startup CEO like there is for large corporations. In Startup CEO, Matt draws on his own experience to cover what he has learned in everything from hiring to company strategy. The Hard Thing About Hard Things by Ben Horowitz Ben Horowitz started his career as a founder but is most famous for his role at Andreessen Horowitz. In The Hard Things About Hard Things, Ben is honest about the difficulties that come with founding and running a successful company. He shares “the insights he’s gained developing, managing, selling, buying, investing in, and supervising technology companies.” The 7 Habits of Highly Effective People by Stephen Covey Stephen Covey has a successful career as a business and self-help author. Stephen studies highly successful people and lays out the 7 habits that help individuals move from dependence to independence. The 7 habits are: Be proactive Begin with the end in mind First things first Think win-win Seek first to understand, then to be understood Synergize Sharpen the Saw; Growth The Alchemist by Paulo Coelho As put by in the infamous book’s reviews, “Paulo Coelho’s masterpiece tells the mystical story of Santiago, an Andalusian shepherd boy who yearns to travel in search of a worldly treasure. His quest will lead him to riches far different—and far more satisfying—than he ever imagined. Santiago’s journey teaches us about the essential wisdom of listening to our hearts, of recognizing opportunity and learning to read the omens strewn along life’s path, and, most importantly, to follow our dreams.” Check out why Aishetu Dozie, Founder of Bossy Beauty, has leaned on The Alchemist for both business and life below: Company Culture Building a strong culture oftentimes starts with the founders and leaders. The books below offer advice to founders looking to create and maintain a culture that will attract top talent. The Culture Code by Daniel Coyle Daniel Coyle is a NY Times Bestselling author. “In The Culture Code, Daniel Coyle goes inside some of the world’s most successful organizations—including Pixar, the San Antonio Spurs, and U.S. Navy’s SEAL Team Six—and reveals what makes them tick.” Radical Candor by Kim Scott Kim Scott has spent her career as a CEO coach at some of the most storied startups of today (before that she spent time at Apple, YouTube, and Google). Kim shares her three principles that she believes make up a great boss. “Radical Candor offers a guide to those bewildered or exhausted by management, written for bosses and those who manage bosses. Taken from years of the author’s experience, and distilled clearly giving actionable lessons to the reader; it shows managers how to be successful while retaining their humanity, finding meaning in their job, and creating an environment where people both love their work and their colleagues.” Do Better Work by Max Yoder Max Yoder is the CEO and Founder of Lessonly. As we wrote in a separate blog post, “Do Better Work is a rare book that falls in both categories. In it, author Max Yoder weaves the philosophical and the practical together, seamlessly and to great effect. The result is a leadership book that is not only helpful, but delightful and surprising to read—one where step-by-step instructions for, say, sharing work before you’re ready or achieving clarity, fit neatly alongside the lessons we can learn from philosopher J. Krishnamurti or the vulnerability of superheroes.” Venture Capital & Fundraising Raising venture capital is a difficult job for a startup founder. At Visible, we like to compare fundraising to a process that oftentimes mimics a traditional B2B sales process. To learn more about the process and thought process behind a venture fundraise, check out the books below: Secrets of Sand Hill Road by Scott Kupor Scott Kuport is the Managing Director of Andresseen Horowitz, the infamous venture fund. In Secrets of Sand Hill Road, Scott breaks down the fundamentals of venture capital to help explain how they make decisions. Founders can use this information to better their odds of raising capital and better their relationships with venture capitalists. (You can read more about Secrets of Sand Hill Road in our post, “Understanding Power Law Curves to Better Your Chances of Raising Venture Capital”) Venture Deals by Brad Feld Brad Feld is the Managing Director of Foundry Group (and Co-founder of Techstars). During his career it is safe to say that Brad Feld has seen the intricacies of a venture fundraise. “Venture Deals shows fledgling entrepreneurs the inner-workings of the VC process, from the venture capital term sheet and effective negotiating strategies to the initial seed and the later stages of development.” Crack the Funding Code by Judy Robinett Judy Robinett has a career full of leading private and public companies and working with venture firms. “Crack the Funding Code will show readers how to find the money, create pitches that attract investors, and then structure fair, ethical deals that will bring them new sources of outside capital and invaluable professional advice.” Sales & Marketing Being able to market and sell a product is essential to startup success. To help founders sharpen their selling skills, we’ve shared our favorite books below: Start with Why by Simon Sinek The infamous TED Talk, How Great Leaders Inspire Action, by Simon Sinek discusses why leaders need to “start with why.” Since the original TED Talk, Simon has expanded on the idea and turned it into a bestselling book. Start with Why “shows that the leaders who’ve had the greatest influence in the world all think, act, and communicate the same way.” Predictable Revenue by Aaron Ross Aaron was responsible for creating an outbound sales process that helped Salesforce add $100M in recurring revenue in the early 2000s. After his time at Salesforce, Aaron published Predictable Revenue to help leaders build a “sales machine.” As described by Aaron, “This is NOT another book about how to cold call or close deals. This is an entirely new kind of sales bible for CEOs, entrepreneurs and sales VPs to help you build a sales machine. What does it take for your sales team to generate as many highly-qualified new leads as you want, create predictable revenue, and meet your financial goals without your constant focus and attention? ” Pitch Anything by Oren Klaff Oren Kleff is the Managing Director of Intersection Capital. Pitch Anything draws on Oren’s experience raising capital and pitching teams during his career. “According to Klaff, creating and presenting a great pitch isn’t an art it’s a simple science. Applying the latest findings in the field of neuroeconomics, while sharing eye opening stories of his method in action, Klaff describes how the brain makes decisions and responds to pitches. With this information, you’ll remain in complete control of every stage of the pitch process.” Reality Check by Guy Kawasaki Guy Kawasaki is best known for marketing the original Macintosh at Apple in 1984 and coining “evangelism marketing.” “Reality Check is Kawasaki’s all-in-one guide for starting and operating great organizations-ones that stand the test of time and ignore any passing fads in business theory. This indispensable volume collects, updates, and expands the best entries from his popular blog and features his inimitable take on everything from effective e-mailing to sucking up to preventing bozo explosions.” Ask by Ryan Levesque Ryan Levesque is the founder and CEO of The Ask Method. Ryan has staked his career on The Ask Method. As the team at Fusion Results puts it, At its simplest level, the ASK Method is asking an audience what their challenges are, or what their desired results are and then segmenting those responses into something Ryan refers to as segment” or “buckets.” Product Development Being able to build, iterate, and ship product quickly can be a true differentiator for an early-stage startup. Luckily for founders, many operators and product managers have shared their tips and tricks behind product development below: Hooked by Nir Eyal Nir Eyal is an expert in all things behavioral engineering. His expertise and schooling brought him to write, Hooked: How to Build Habit-Forming Products. “Hooked is based on Eyal’s years of research, consulting, and practical experience. He wrote the book he wished had been available to him as a start-up founder—not abstract theory, but a how-to guide for building better products. Hooked is written for product managers, designers, marketers, start-up founders, and anyone who seeks to understand how products influence our behavior.” Shape Up by Ryan Singer Ryan Singer is the Head of Strategy at Basecamp. In Shape Up Ryan uncovers the product development process at Basecamp. Ryan shares how the team uses 6 week cycles to ship more work. As Ryan puts it himself, “Shape Up is for product development teams who struggle to ship. If you’ve thought to yourself “Why can’t we ship like we used to?” or “I never have enough time to think about strategy,” then this book can help. You’ll learn language and techniques to define focused projects, address unknowns, and increase collaboration and engagement within your team.” The Four Steps to the Epiphany by Steve Blank Steve Blank has founded 8 companies and has been a staple in Silicon Valley since the 1970s. The Four Steps to the Epiphany breaks down his four-step customer development process (that launched The Lean Startup movement). As Steve puts it, “The book offers the practical and proven four-step Customer Development process for search and offers insight into what makes some startups successful and leaves others selling off their furniture. Rather than blindly execute a plan, The Four Steps helps uncover flaws in product and business plans and correct them before they become costly. Rapid iteration, customer feedback, testing your assumptions are all explained in this book.” Product Management by Intercom Intercom is one of the most successful modern day startups. They have become synonymous with a strong product. The Product Management book is their framework to help startups build and ship more products. As they put it, “You’ll learn: How to evaluate your current product and spot areas for improvement. Why “no” is the most important word in a product manager’s vocabulary. How to roll out new features and actually get them used by customers.” The Innovators Dilemma by Clayton Christensen Regarded as one of the most important business books of all time, “Christensen explains why most companies miss out on new waves of innovation. No matter the industry, he says, a successful company with established products will get pushed aside unless managers know how and when to abandon traditional business practices.” Learn why Renjit Philip, Founder of Explain.Care, loves it below: Summary As Seth Godin puts it, “It’s unlikely that you’re going to outsmart the experienced folks who have seen it all before… When you have to walk into one of these events, it pays to hire a local guide. Someone who knows as much as the other folks do, but who works for you instead.” Learning from the founder, investor, or operator that has been there before can be transformational for a startup founder.

If you step back to the 1990s, very few financing options existed for startups. The venture capital space was dominated by a few large firms. Founders had to turn to their personal bank account, loans, or family and friends to raise capital for their business. In the early 2000s the internet takes the world by storm. The capital required to build a business begins to decline and new investors step in to help more entrepreneurs start companies (like Y Combinator in 2005). A few years after YC and we see more venture capital firms and financing options pop up. Today the financing and investor options for founders continue to evolve. The rise of rolling funds, pre-seed funds, and seamless revenue financing has allowed more entrepreneurs to secure the right financing for their business. If you’re deciding what investors to raise from, check out the different types of investors below: Recommended Reading: The Understandable Guide to Startup Funding Stages 6 Types of Startup Investors Throughout the lifecycle of a startup, different financing options and investor types will become available. Depending on the market and stage of the business different investor types may make more sense. Banks Traditionally bank loans are the most common type of investor for a company. A bank loan usually requires operating history with revenue to ensure they will get paid back. According to the Small Business Administration, “For established businesses, owner investment and bank credit are the two most widely used kinds of financing.” Considerations As the team at Point Park put it, “Loan-seekers will usually be required to produce proof of collateral or a revenue stream before their loan application is approved. Because of this, banks are often a better option for more established businesses.” Requirements According to MyCorporation, “To get approved, you typically need to meet requirements like the following: You have been in business for 2 years or more The business has strong annual revenues (typically at least $100,000) Good credit (like a score of 640+)” Keep in mind that when applying for a loan through a bank, you will be required to share financial documents. Speed up the process by having your financials in order and ready for review by the bank. Friends & Family When a founder has a product or service they are ready to take to market but no operational history they may turn to equity investors to help with initial capital. Considerations When raising capital from friends and family, it is incredibly important to be transparent during the process. Early stage companies are generally a very risky investment and can lead to a loss of capital. Consider who has expendable income in your immediate network when reaching out. Keep in mind that if they are buying equity in your company, your business relationship will exist for the foreseeable future — remember to choose individuals that you can build a business relationship with. Requirements While there are no requirements when raising capital from your friends and family there are major risks involved. Make it clear why they should invest in you or your business. You will likely not need to formally pitch them as you would a venture capitalists but it is important they understand how they will generate returns on their investment. As we mentioned above, be transparent about the investment and make it clear that there is a chance they will lose their investment. Angel Investors Like venture capitalists, angel investors buy equity in startups. An angel investor is generally a wealthy individual who is looking to invest spare cash in an alternative investment. As we wrote in our post,How to Effectively Find + Secure Angel Investors for Your Startup, “This means that an angel investor may have alternative motives (personal interest in the problem, product, founders, etc.) whereas a venture capital firm is focusing on maximizing their returns.” Considerations A step above a “family & friend” investor, an angel has a better understanding of the risk at hand and more experience in the space. Oftentimes, angel investors are all around you and you may not realize it. As Elizabeth Yin puts it, “Angels may not know they are angels. It’s your job to plant the seed in their heads that you are open to an investment from them!” Requirements Like friends and family investors, there are no strict requirements when raising capital from angels. As most venture capitalists invest in software-enabled businesses, large markets, companies with huge valuation upside, etc. angel investors can fill the void for countless other businesses. Whereas a traditional investor is looking for returns, an angel investor might be intrigued and motivated by other things. As Elizabeth Yin goes on to write, “Angels are motivated by many different things; figure out how to tie your story to something that they want; getting an investment – much like sales – is about solving for their needs not yours.” With that said, the requirements of the pitch may be slightly different as you may want to hit on things outside of financials and the market. Related Resource: Top 6 Angel Investors in Miami Venture Capitalists Going a step deeper in the equity financing world are venture capitalists. Unlike angel investors, venture capital firms are professional investors dedicated to generating returns for their limited partners (LPs). As we explain in “Our Guide to How Venture Capital Works,” venture capital firms can generally be split into 3 main buckets (however, this can be broken down much more granularly). Related Resource: How to Create a Startup Funding Proposal: 8 Samples and Templates to Guide You Related Resource: What Is a Limited Partnership and How Does It Work? Early-stage/Pre-seed/Seed — Early stage firms are responsible for making one of the first investments in a company. They are generally investing in the team, product, or market in hopes of the company executing and generating returns. Oftentimes the riskiest investments with the most upside. Series A/B — Series A/B investors are generally in search of companies that have started generating serious revenue and have found product market fit. Expansion/Growth — Expansion and growth stage investors are looking for companies that are en route to an IPO or major acquisition (sometimes similar to a private equity firm). They write huge checks in huge companies. Considerations As venture capitalists cover just about every stage and every vertical, it is important to find the right investors for your business. The venture capital fundraising process can be extremely intimidating and generally requires a system, similar to a B2B sales process, to keep things organized and efficient. Consider how much capital you are raising and at what valuation. From there, start to target the right investors for your business. To learn more about finding the right investors for your business, check out this post. Related Reading: Everything a Startup Founder NEEDS to Know about Pro Rata Rights Related Reading: 23 Top VC Investors Actively Funding SaaS Startups Related Reading: How to Secure Financing With a Bulletproof Startup Fundraising Strategy Related Resource: How to Model Total Addressable Market (Template Included) Requirements Different venture capitalists will have different requirements. Obviously a pre-seed investor will have an entirely different set of requirements than a series B+ investor. There are countless tools and databases to help understand what VCs are right for your business — like our own database, Visible Connect. To learn more about requirements and benchmarks for different VC firms, check out our post, “The Understandable Guide to Startup Funding Stages.” Related Reading: Building A Startup Financial Model That Works Crowdfunding Over the last few years, crowdfunding has become a more popular way to raise equity financing. As the team at Republic defines it, ‘Crowdfunding is a way to raise money from a large number of people. Large groups of people pool together small individual investments to provide the capital needed to get a company or project off the ground. Individuals, charities or companies can create a campaign for specific causes and anyone can contribute.” Considerations Raising equity crowdfunding is a slightly different process than raising from angels and venture capitalists. Most solutions allow you to create a page/profile where investors will decide to invest (as opposed to one off pitches). A few popular equity crowdfunding solutions: Republic Fundable SeedInvest Wefunder Requirements Different platforms will likely have different requirements for companies looking to raise equity crowdfunding. Generally the companies are vetted by the platform before being posted for investment. Check out different platforms to understand their requirements. Related resource: Understanding The 4 Types of Crowdfunding Fundraising Disruptors There has continued to be innovation in the financing space over the last few years. The introduction of rolling funds has transformed how VCs can raise from LPs. There has also been an explosion in alternative financing options that can be beneficial to founders. Considerations There has been an explosion of alternative financing options over the past few years. More options means more opportunities for founders. A few of our favorites that have popped up in the market: Pipe Pipe turns MRR into ARR. It’s a trading platform for recurring revenue streams to get upfront capital. As we wrote in our post, Alternatives to Venture Capital, “For example, if you have a customer paying $1000/mo then the annual value would be $12,000. Let’s assume they are taking 10% (purely a guess, we are not sure what the actual terms are) that would result in $10,800 in cash ($12k*90%). This allows SaaS companies to get cash up front and hold in their bank account or use for customer acquisition. Presumably, their % take is less than what most SaaS companies offer for an annual discount as well.” Earnest Capital “Earnest Capital provides early-stage funding, resources and a network of experienced advisors to founders building sustainable profitable businesses.” Earnest Capital uses their own financing instrument called a Shared Earnings Agreement (SEAL). Essentially, SEALs are geared towards bootstrapped companies who are profitable or approaching profitability. Corl Rather than explaining it ourselves we’ll let the Corl website explain what they do. “Corl uses machine learning to analyze your business and expedite the funding process. No need to wait 3-9 months for approval. Corl can finance up to 5x your monthly revenue to a maximum of $1,000,000. Payments are equal to 1-10% of your monthly revenue, and stop if the business buys out the investment for 1-3x the investment amount.” To learn more about new and alternative financing options, check out this post. Requirements Each alternative financing option will have very different requirements. However, most of these options set clear expectations and requirements that will allow you to apply and/or qualify in a matter of minutes or days. Summary At the end of the day, every business is different. Each business has their own set of needs and expectations. Understand what type of investor will be most beneficial to your business and form a gameplan to raise capital. As more financing options become available, more founders and startups will have opportunities to succeed. No matter what type of capital you decide to raise — pick the investor that can help your business the most, not the investor that will look best in headlines. To learn more about raising capital, check out our blog here. If you are raising venture capital, check out Visible Connect, our investor database, to kickoff your round. We personally verify investor profiles to make sure their data is up-to-date. From there, add investors directly to our Fundraising CRM, to keep tabs on your raise.

Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. With the continued surge to work-from-home, companies all over the world are becoming more dependent on cloud-based and collaborative services such as Slack, Zoom, Notion, and more. Where there is business, there is capital. Below, we list out security-focused VC firms to keep an eye out for. ForgePoint Capital ForgePoint Capital is founded by pioneers of cybersecurity. Led by Alberto Yepez, Donald Dixon, and Sean Cunningham, ForgePoint has been early-stage investing since 1998 and made over 50 investments in the space. They offer some thoughts and insight into their take on cybersecurity throughout their blog. Investment location: United States, Australia, Canada, Global Funding stages: Series A, Series B, Series C Notable investments: RapidFort, Instabug, TruEra Dreamit Ventures Dreamit Ventures looks to help startups with their Securetech program. Throughout this, their focus is on scaling, customers, and capital, not on building your product. Mel Shakir stands as the Managing Director of Dreamit’s Securetech sector. Investment location: United States, Global Funding stages: Accelerator, Seed, Series A, Series B, Growth Notable investments: Fohlio, CareAlign, SpecTrust Option 3 Ventures Option 3 Ventures finds and develops attractive investment opportunities at the frontiers of cybersecurity and immediately adjacent technologies. They have a robust venture capital team, led by Manish Thakur. Investment location: United States Funding stages: Series A, Series B Notable investments: Dellfer TenEleven Ventures TenEleven Ventures is solely focused on helping cybersecurity companies survive and thrive. They look to provide counsel, capital, and connections to security entrepreneurs. The Boston-based firm is led by Alex Doll and Max Hatfield. Investment location: Global Funding stages: Seed, Series A, Series B, Series C, Growth Notable investments: HiddenLayer, Immuta, Ordr Allegis Cyber Capital AllegisCyber Capital does one thing: cybersecurity. Cybersecurity takes industry knowledge and AllegisCyber has many years of investing experience, led by Bob Ackerman. Investment location: Global Funding stages: Seed, Series A, Series B Notable investments: Dragos, SkyHive, SafeGuard Cyber Paladin Capital Group Paladin Capital Group is comprised of active investors who leverage their deep industry experience and networks to maximize returns. They are a DC-based team led by Michael Steed, Mark Maloney, and more. Investment location: Global Funding stages: Series A, Series B Notable investments: GreyNoise, Nisos, Semperis Acrew Capital Acrew Capital is a venture capital firm that provides investable assets for diverse angel investors to fund tomorrow’s companies. Investment location: Global Funding stages: Seed, Series A, Series B, Growth Notable investments: Arthur, Carats & Cake, Pie Insurance Greylock Partners This venture capital firm invests in all stages, exclusively in consumer and enterprise software companies. It led the Series B round for both Facebook and Linkedin. Investment location: Global Funding stages: Pre-Seed, Seed, Series A, Series B, Growth Notable investments: Facebook, LinkedIn Kleiner Perkins Kleiner Perkins is a venture capital firm specializing in investing in early-stage, incubation, and growth companies. Investment location: Global Funding stages: Series A, Series B, Growth Notable investments: SpinLaunch, Lumafield, Open Raven Lightspeed Venture Partners Lightspeed Venture Partners is a venture capital firm that is engaged in the consumer, enterprise, technology, and cleantech markets. Investment location: United States, China, India, Israel Funding stages: Pre-Seed, Seed, Series A, Series B, Growth Notable investments: Remedial Health, Soda Health, Community Labs Related Resource: 9 Active Venture Capital Firms in Israel Bessemer Venture Partners Bessemer Venture Partners is the world’s most experienced early-stage venture capital firm. With a portfolio of more than 200 companies, Bessemer helps visionary entrepreneurs lay strong foundations to create companies that matter, and supports them through every stage of their growth. Investment location: United States, Bay Area Funding stages: Pre-Seed, Seed, Series A, Series B Notable investments: LinkedIn, Shopify, Yelp SixThirty SixThirty focuses on Fintech, Insurtech, and Cybertech. They are a fast-moving company that evaluates over 500 companies per year. SixThirty invests in companies that have a working product, market traction, and in most instances, recurring revenue. Investment location: Global Funding stages: Seed, Series A Notable investments: Global NightDragon NightDragon brings 25+ years of industry operating experience and market expertise to our portfolio companies. They work hand in hand with management to help scale their business and execute their strategic vision to drive successful outcomes. Investment location: Global Funding stages: Series B Notable investments: Immuta, Source Defense, Capella Space Security Leadership Capital Security Leadership Capital seeks to partner with a wide range of what would be considered “standalone” cybersecurity companies as well as other sectors that require a strong cybersecurity foundation to differentiate their offering, e.g. fintech, healthcare IT, blockchain, and cloud/datacenter infrastructure. Investment location: United States Funding stages: Seed Notable investments: DeepFactor Lytical Ventures Lytical Ventures is a New York City-based venture firm investing in Corporate Intelligence, comprising cybersecurity, data analytics, and artificial intelligence. Lytical’s professionals have decades of experience in direct investing generally and in Corporate Intelligence specifically. Investment location: United States Funding stages: Seed, Series A Notable investments: Careviso, Clausematch, Bold Metrics Get Connected to Cybersecurity VCs with Visible Finding the right investors for your business is only half the battle. Having a place to communicate with investors and track the progress of your raise allows you to spend more time on what matters most — building your business. Find the right investors with Visible Connect, track your conversations with our Fundraising CRM, share your pitch deck with investors, and update them along the way all from one platform. Give Visible a free try for 14 days here. Looking to learn more about fundraising? Check out some of our popular resources below: FinTech Venture Capital Investors to Know VCs Investing In Food & Bev Startups A Quick Overview on VC Fund Structure

On episode 11 of the Founders Forward Podcast we welcome Lolita Taub of Community Fund and Eric Bahn of Hustle Fund. Eric and Lolita recently launched The First Pitches Podcast “where famous founders share the first version of their pitch.” Combined with the fact that they are both investors in early stage startups it is fair to say they’ve seen their fair share of fundraising pitches. We could not think of a better one-two punch to help founders improve their storytelling and fundraising. About Lolita & Eric Lolita and Eric breakdown what they’ve learned from their podcast and investor roles to give founders actionable advice to kick start their next fundraise. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Lolita & Eric. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Lolita & Eric The importance of Twitter when it comes to networking and fundraising If a founder has to be an expert in a subject for them to be funded How to nail a first impression with investors How they view and analyze a deck in the pre-seed/seed stages What makes a great first pitch Why they care about what metrics a founder is measuring Related Resources First Pitches Podcast Lolita’s Twitter Eric’s Twitter Hustle Fund Community Fund The Founders Forward is Produced by Visible Our platforms helps thousands of founders update investors, track key metrics, and raise capital. Try Visible free for 14 days.

In 2020 we launched the Founders Forward Podcast. The goal of the podcast is to enable founders to learn from their peers and leaders that have been there before. Over the last 7 weeks our CEO, Mike Preuss, has interviewed a different founder or startup leader every week. Related Resource: 11 Venture Capital Podcasts You Need to Check Out Here are some of our favorite quotes and takeaways from the first 7 interviews: Lindsay Tjepkema, Founder of Casted Our first episode of the Founders Forward was with Lindsay Tjepkema. Considering she is a podcasting expert, we figured there could not be a better first guest. We chat all things podcasting and alternative media types. However one of the tidbits we found most interesting was Lindsay’s outlook on venture fundraising. Oftentimes fundraising can be a frustrating journey but Lindsay views the process as an opportunity to promote her business and tell her company’s story. Give the full episode a listen here. Amanda Goetz, Founder of House of Wise House of Wise is Amanda’s second go as a startup founder. However things are no less difficult than her first time around. Her first journey was spent worrying about legal aspects and the basics of getting her business running. That was easy with House of Wise but she has faced new challenges (and opportunities) during her second journey. Give the full episode a listen here. Jeff Kahn, Founder of Rise Science Jeff has 10 years of sleep science experience and research. Before starting Rise Science Jeff spent time publishing academic articles and supporting world-class athletes and teams with better sleep. Jeff Kahn is a true expert in all things sleep. During our interview with Jeff, we chatted about how sleep can improve a founder’s leadership skills and productivity. Give the full episode a listen here. Aishetu Dozie, Founder of Bossy Cosmetics Aishetu Dozie started her career in banking and eventually made the transition to starting a cosmetics company. Just like any founder, her first time journey has been full of highs and lows. Aishetu, like many founders and leaders, has struggled with imposter syndrome. We love her thoughts below on how she has tackled imposter syndrome. Give the full episode a listen here. Kyle Poyar, Partner at OpenView Ventures OpenView Ventures is credited with coining the term “Product-Led Growth.” As Kyle and the team at OpenView continue to help SaaS companies grow and become market leaders he has seen it all. From the early days of defining PLG and the impact of COVID-19 Kyle is full of first-hand stories and the data to back it up. Check out how Kyle defines and thinks about PLG below. Give the full episode a listen here. Yin Wu, Founder of Pulley Yin Wu has been through Y Combinator 3 times and has successfully exited 2 companies. Over the course of her founder journey it is safe to say that she has spent a good amount of time fundraising and chatting with investors. Yin likes to bucket investors into 3 categories to structure who she should be chatting with and raising from. Give the full episode a listen here. Cheryl Campos, Head of Venture Growth at Republic Over the past 3 years, the funding options for startups have continued to transform. Over her 3 years at Republic, Cheryl has watched as the market has changed and crowdfunding has become a more viable option. Check out Cheryl’s thoughts on the new funding options below. Give the full episode a listen here. We have plenty of new episodes recorded and ready to share in 2021.

What is a cap table (i.e. capitalization table)? “Cap Tables” or capitalization tables are a critical term to understand for any startup founder or aspiring founder. But what is a cap table and why is it important? At the core, a capitalization or cap table is a table or spreadsheet that lays out the equity capitalization for the company. The equity capitalization is the total value of all the shares of the company and the breakdown of how those shares are divided. A cap table is an intricate breakdown of the shares value, holders, and projections. The cap table typically includes specifics of a company’s equity ownership capital such as common and preferred equity shares, warrants, and any convertible equity. Why is a cap table important for startups? Cap tables are important for startups for a variety of reasons. It is fundamental for a founder to understand the full scope of a cap table and why they are so important to execute. Cap tables are important because overall they illustrate the health of a startup for investors. Ownership Breakdown Founders need to be aware at all times of what their cap table means for ownership of their company. Understanding ownership is critical as the company grows and develops. Cap tables tell investors who owns what part of a company. Current investors want to see who has control. They also want the ability to forecast potential payouts and dilution under specific scenarios based on the ownership split. The breakdown of ownership in a startup can overall affect the value of the company for future fundraising rounds as well as who needs to be at the table for certain critical company decisions. Related Resource: How to Fairly Split Startup Equity with Founders Understanding Contributed Equity: A Key to Startup Financing Value Tracking An up-to-date and detailed cap table is important for tracking the value of a startup over time. Beyond current investors and founders understanding the value of a growing startup, employees find cap tables useful as well. A detailed, well-kept cap table is helpful for employees to access if they have options or equity stakes in the startup they work for. Offering equity is an appealing way to draw in top talent at leading startups. The ability to track value real-time by viewing a cap table is an important component of the value of a cap table. Fundraising In addition to current investors utilizing a cap table for forecasting and dilution predictions for different outcomes on their investments, potential investors and future fundraising can also be affected by cap tables. Potential investors can evaluate how much control and leverage could be maintained during negotiations by viewing a cap table. Historical insight provided in a cap table can affect negotiating current valuation for new funding raises. Additionally, an existing shareholder can easily determine what percentage of the company to give to the new investors in exchange for the capital contributed. Potential Audits In the event of an audit on a startup, a well-managed cap can allow your legal team to present your company’s history and holdings with accurate and well-organized information via a cap table. In general, a well-organized and well-maintained cap table is critical for the health and growth of a company across all financial situations. What does a cap table look like? Cap Tables are built out on two axis’. Typically, cap tables include a list of names or groups associated with the startup including founders, investors and common share stakeholders along one of the axis. Along the other axis the items that the various stakeholders and owners own. These items include things like types of securities, how many of these securities they own, when they invested in the company, and the percentage of company owned. Carta provides a good example of a Cap Table below: How do you make a cap table? Cap tables can be created and managed in a variety of ways. Typically it is common for new startup founders to build their initial cap table in a spreadsheet. However, as your startup grows and the valuation and stakeholders get more involved and complex, simple cap table design in a program like excel won’t work. Some companies will use a tool, such as CapShare or Carta to build and manage their cap tables. These tools are typically more dynamic and less manual than managing via excel. They can be easier to utilize to share out and circulate with employees and investors. In other scenarios, it might make the most sense to outsource the production and management of a cap table. When founders choose to self-manage their own cap table they are susceptible to risks. Some of these risks include miscalculating valuations which can lead to giving up too much equity and over-diluting shares in new investment rounds. Additionally, there might be tax consequences or legal issues that come up from mis-management of a cap table. By outsourcing the production and management of a cap table. Typically this management is outsourced to a legal team to ensure accuracy and compliance. Outsourcing is more expensive than managing with a software but can be much less expensive the cost of major mistakes or miscalculation of value. How to use a cap table? When using a cap table, it’s important to understand the following formulas: Post-Money Valuation = Pre-Money Valuation + Total Investment Amount Price-Per-Share = Pre-Money Valuation / Pre-Money Shares Post-Money Shares = Post Money Valuation/ Price-Per-Share Investor Percent Ownership = Investor Shares / Post-Money Shares These formulas are essentially what will be laid out in a cap table so understanding them is crucial. These formulas can also be used to update the cap table as it grows more complex via different significant financial rounds. The more investment rounds or other significant financial changes on the table, the more complex the cap table gets. This breakdown essentially showcases the additional steps and participants who are stakeholders in the startup. Founders round – this is the simplest version of the cap table and will typically showcase the simple split of equity between the founders of the company. Seed round – this introduces investors to the table who now own a portion of the company along with the founders and have given cash to the startup altering the overall value. Options pool round – when options are provided for new employees, this changes the value and breakdown of the company as represented by the cap table. Overtime, as more employees are hired and more options are granted, the more complex the cap table gets. VC round(s) – With any additional funding rounds taken on by the startup, the valuation drastically changes as does the list of stakeholders on the cap table. All of these events or rounds are significant and will change the breakdown and complexity of the cap table. How do you keep a cap table updated? With the array of cap table management tools on the market updating and keeping tabs on your cap table is easier than ever before. Generally founders need to stay on top of their cap table management. If you raise a new round, offer new employee grants, terminate an employee, etc. you need to make the changes as soon as possible to avoid future headaches. If you put off updating your cap table in real time it could end up being a costly mistake as you need a lawyer to update and correct the table. We highly recommend using software to manage and update your cap table to make your life as easy as possible. There are countless options but we recommend using Pulley. You can learn more about cap table management (and Pulley) in our Founders Forward Podcast with Pulley CEO and Founder, Yin Wu, here. Cap table examples/templates Instead of starting from scratch, many founders will use a template to build out a cap table. Alexander Jarvis provides an easy cap table template here. S3 Ventures offers a template in Excel that they recommend for their portfolio companies. Manage Your Stakeholders with Visible Manage relationships with your investors and other stakeholders using Visible. Centralize your key data, share updates with investors, and track your interactions with current (and potential) investors all from one place. Learn more and try Visible for free here.