Fundraising and Termsheet 101 with Golden Gate Ventures and Cooley LLP
We wanted to make sure everyone stays safe during the COVID-19 pandemic, so our second fundraising workshop was held fully online last March 27. Cooley LLP supported the workshop as we had 2 of their top lawyers, Ferish Patel and Matthew Bartus, with us to answer your most pressing questions about term sheets. We also discussed the current fundraising climate and how to navigate through these challenging times.
You can find the full recording of the workshop below.
Key pointers of the workshop
A few key takeaways from the workshop.
How to prepare for fundraising
Proper preparation for fundraising is half the job. During a fundraising process, you don’t want to get surprised by questions in the due diligence process or lose momentum by taking too long to produce the requested information. You can break down fundraising in 4 sections:
Preparation. Put your fundraising story together, and discuss internally which expectations the company has for the fundraise and what the outcome should be. Any material you will need during the fundraising process can be added to a simple virtual data room. Documents like your fundraising deck, founder resumes, financials and metrics are a good start.
Sales. Many founders overlook this part of the fundraise but it is crucial to a successful outcome. Understand the investor landscape and knowing who to talk to, will help you get through the raise more efficiently. The sales process is focused on creating your investor long-list, doing investor research (who would be a good fit for the investment), identifying warm leads, roadshow strategy, and setting up warm introductions.
Execution. Once you have the fundraising strategy and sales process in order, don’t hesitate to execute. Speed in your actions will determine how smooth the process with investors will be. Three key pointers of the execution phase are (1) swift replies to questions, (2) following up on investors who have gone silent in the process, and (3) working towards getting a yes or a no from the investors.
Closing. Although the closing process comes last, it is equally important as any other phase. During the closing phase, you will need to inform every party involved (lead investor, existing investors, lawyers, etc) about timelines and closing expectations. Getting through this phase accurately is necessary to maintain momentum and keep investor interest. If the closing part takes too long, investors who soft committed might take back their offer, or the round might fall apart altogether. Work closely with your legal counsel (get them involved in the process early) and use the lead investor to help communication with follow on investors.
Fundraising is a non-stop activity. This means that you want to make sure to stay in touch with investors even after you have closed your round. The fundraising process comes with a short- and long term strategy. The short term strategy is focused on building a strong pipeline of potential investors. It’s advised to leverage your existing network to get warm introductions. This will speed up the conversations. A big difference between the short and long term strategy is that the long term is focused on building relationships and it’s usually non-transactional. The best time to talk to investors is when you’re not actively in a fundraising round. It allows you to build a deeper relationship and it gives the investors time to get to know you and your company. Use the time between fundraising rounds to understand what investors are looking for. Different investors will have different expectations.
Fundraising during crisis
Fundraising during any economical crisis is tough. COVID-19 has already had an immense social and economical impact. The market is going through a free fall and there are concerns about the length of this crisis and an upcoming recession. Can you still fundraise? The answer is yes but you’ll need to make some adjustments. The current environment could impact your revenue or delay client projects. Investors will want to know how your company is going to weather the crisis. The first step is to acknowledge how COVID-19 is impacting your business and what actions you’re taking. Prepare detailed financial forecasts with different scenarios. Once you have identified the necessary actions to take, you’ll need to take action fast. Don’t wait. Now is the time to show you’re able to lead your company and take tough decisions. Work through different contingency plans and talk these through with your investors (existing and potential new investors if you’re fundraising). Be prepared to move timelines. In these times, investment committees will need more time to get to a decision.
How can we be helpful with some free resources?
The Startup Buddy is an online startup building and fundraising platform for founders and investors. Keep track of your companies’ progress on the dashboard, develop products with the toolkits, find expert mentors and more. Joining is totally free. Through the investor portal and online demo days, members can raise funding from 450 investors worldwide. Startup Buddy offered friends of Golden Gate Ventures a promo-code GoldenGateOneMonthFree to try all premium options.
I want to thank Cooley LLP for their participation in this workshop and BTCN for being our video partner.
Stay safe and healthy and wishing you all the best on your fundraise.