Show Me the Money: Pitching and Fundraising for Tech Startups

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“Show Me the $$$$!”…Session 2: Pitching Thursday, October 24 th , 2013 General Assembly / RosePaul Investments Event Learn from VC’s, Angels and Entrepreneurs: What do INVESTORS love (and Hate!) to see in a Pitch? Tom Wisniewski RosePaul Investments To all who attended the SMTM Session 2 on Thursday @GA: Thanks! Hope you enjoyed it and gained something. Feedback welcome. This document lives online at www.slideshare.com/th omaswis ***The next class I will teach at GA is: SMTM 3: Insiders View of Angel Investing (11/19/2013) http:// bit.ly/1h1uFb7 *** Email me at [email protected] m. Connect with me on LinkedIn/Twitter for updates, etc. (Page 23 of this deck has my details) ….Cheers, -TW

Transcript of Show Me the Money: Pitching and Fundraising for Tech Startups

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“Show Me the $$$$!”…Session 2: Pitching

Thursday, October 24th, 2013

General Assembly / RosePaul Investments Event

Learn from VC’s, Angels and Entrepreneurs:

What do INVESTORS love (and Hate!) to see in a Pitch?

Tom Wisniewski

RosePaul Investments

To all who attended the

SMTM Session 2 on

Thursday @GA:

• Thanks! Hope you

enjoyed it and gained

something. Feedback

welcome.

• This document lives

online at

www.slideshare.com/th

omaswis

***The next class I will

teach at GA is: SMTM 3:

Insiders View of Angel

Investing (11/19/2013)

http://bit.ly/1h1uFb7 ***

• Email me at

[email protected]

m. Connect with me on

LinkedIn/Twitter for

updates, etc. (Page 23

of this deck has my

details)

….Cheers, -TW

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Agenda

I. Kick-off and Introductions

II. Some Context and Background: Seed-Stage Fundraising

III. Guest Speaker Q&A: Investor Perspective

• BREAK: Networking and Beverages

IV. Best Practices: Pitching and Communication

V. Guest Speaker Q&A: Founder Perspective

• WRAP-UP: Networking and Beverages

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I. Kick-off and Introductions

a Start-Up of Sorts: …. this class and the SMTM series.

Started out with a 1 hour class and 10 students @GA 2 years ago:

• Angels and Angel Groups.

It experienced: “Product/Market Fit” “Growth” “Product Scope Creep” “Several

Pivots”

“Show Me the Money” series

• Simple formula:

1 part focused, actionable content

2 parts speakers, opinions and discussion

1 part networking

• Hate attending LAME classes and events

SMTM Session 1: Accelerators (July 2013)

SMTM Session 2: Pitching (Today!)

SMTM Session 3: Angel Investing (November: Tues, 11/19)

SMTM Session 4: [TBD Topic] (December: Tues, 12/17)

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The "1 in 100 get funded” ratio = REALITY.

• -----> Raising seed-stage money = TOUGH.

Poor communication ----DRIVES----> the “DING“

Feedback = LIES?!?

Pitching = 10-page PowerPoint.

*NO* shortage of pitch advice! = conflicting = WTF???

Seminar Rationale: Why are we here?

What is the PROBLEM?

CHALLENGING

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So….. what helps?

Understand the basics of “Good Communication”

Leverage other experience: Sales, Interviewing, Dating

Review examples the good and the bad.

Understand the rationale, the "why”

Study. Practice. Pitch. Repeat.

However, we can change the ODDS.

Pitching = Learned ART (and Science)

Everyone can improve their pitch. Channel some energy and

become a "student" of the pitching

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After B-school: joined a start-up management consulting firm Mitchell Madison

Group; focus on Strategy/Operations/IT for financial services, tech, outsourcing,

private equity/VC clients (1993 to 2000)

Walker Digital: helped set-up and run an early “internet incubator” (2000)

Independent Advisor / Turn-arounds: Advised VC and PE Firms on portfolio

company strategy and new investments; joined the management team of two

companies

Currently:

• Early stage investor and advisor to start-ups

• Investor and advisor to VC and PE funds

• Member and director at New York Angels

Tom Wisniewski: My background

Born in NYC; grew-up in Montclair, NJ

Physics and Philosophy major undergrad

(Clark University); MBA at Tuck School

(Dartmouth)

1st Job: Programmer at Morgan Stanley then

moved to Investment Banking

Having received (and delivered!) a lot of good and BAD presentations, I have become

a student of the Pitch myself…

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Additional Introductions

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Pedro Torres Picon, Founder, Quotidian Ventures

Jacob Brody, Partner, MESA+ Ventures

Peter Sullivan, Founder/CEO of JackPocket

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Better understanding of pitching.

A set of specific insights that will *change* your pitch.

A “to-do” list: starting point(s), actions, things to try.

A set of recommended resources to consult and learn more

from.

A few new relationships with others in the NYC start-

up/fundraising ecosystem: fellow entrepreneurs, investors, etc.

Answers to specific questions about pitching that you might

have.

What would I like you to walk away with?

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So….what questions do you have about Pitching?

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xxx

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II. Some Context and Background:

Seed-Stage Fundraising

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Context: Common Sources of Fundraising Capital

Who/what are

they?

• People you already

know, that trust

you, and (maybe)

understand your

venture

• Experienced early stage

investors (individuals or a group)

• Accredited Investors.

• Angel investing is not their “job”;

may not be F/T endeavor

• E.g.: NY Angels, GoldenSeeds

• Firm with multiple professionals that

raises, invests and manages

individual funds (other people’s $)

• Working F/T (this is their job…)

• E.g.: Greycroft, RRE, Union Square

Angel InvestmentFriends and

FamilyVenture Capital

“You”

aka Bootstrapped

Earlier Stage Later Stage

Round Size $: • $10’s of K

to $100K

• $100’s of K

to $1M+

• $500K to

$1.5M

Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K

Valuation (Pre-

Mon):

• < $1 M • $1 – 5 M • $5-10 M

“Seed” VC “Traditional Series A” VC

• $5M-$15M

• $3M – $5M

• $10 – 25 M

“Seed”

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Some Context: “VC” Business Process and the “100 : 1” Ratio

Deal Structuring

and Execution

Deal Sourcing

and Evaluation

Portfolio

ManagementFundraising

“Screening”

100 : 10

The “Universe” of

Companies

1000’s : the “100”

“Evaluation

(and Due

Diligence)”

10 : 3

3 : 1

“Final Due

Diligence

and Legal” “Portfolio”

10’s of

Companies

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III. Guest Speaker Q&A: Investor Perspective

Personal background and story?

Firm background?

Investment focus?

• Stage, investment size, sectors, etc.?

• Minimum threshold? (e.g. company generally needs to have xxx ?)

Some recent investments?

What do you like to see in a pitch?

What are some “Red Flags”?

Common mistakes generally?

What are your “turn-ons” with start-ups and pitches in particular?

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Tom Wisniewski: Investor Profile Direct “Angel” Investor in Companies

• $25K-250K investments; Typical valuations: $1-5 Million,

• Typical Stage: at least some “product” done, some customer/sales traction

• Sector focus: Opportunistic generally within internet/software space;

- fair amount of Saas B2B, and consumer “marketplace” models, ecommerce enablers.

- NOT (or not much?): hardware, heathcare/pharma, cleantech

• NYC based: 50% investments in NYC area companies; total of ~80% NE overall (e.g

Boston, DC), 20% West Coast.

• Examples:

- Sociocast (social/behavioral big data analytics)

- LiveLook (Saas, live collaboration sales/service platform)

- Anvato (Ad insertion to live video streaming via proprietary machine vision)

- Moveline (Uber for the moving industry)

- Bizodo (Saas, paperwork automation; “Adobe 2.0” internet document sharing)

- Movio (Digital “RedBox”; content delivery via “last 100 ft” of wifi internet)

- HeTexted (Relationship advice forum generating content, media opportunities)

- Wanderu (Kayak for ground transportation)

- DealFlicks (a “Priceline” or “Hotel.com” for movie theater tickets)

- iCharts (tool that enables engaging, sharable, embedible chart content)

Investor in Funds

• In addition to direct investments in start-ups, invest in VC and PE funds.

• Examples:

- Social Starts (Seed fund for start-ups leveraging the Social Web)

- Brooklyn Bridge Ventures (Charlie O’Donnell’s fund)

- Entrepreneurs Roundtable Accelerator (ERA Fund)

- Greycroft Partners (Venture Fund)

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III. Best Practices: Pitching and Communication

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Communication is Critical…Why?

“Finding Diamonds in the Rough” problem. There is no shortage of

supply: lots and lots of ideas, pitches, people, etc.

• The problem for investors is finding the “diamonds”.

The “first minute” problem. If you loose someone’s interest in the “first

minute”, you usually loose them.

• “First minute” = “first minute”…sometimes first 30 seconds!

• “First minute” = a conversation, a meeting, anything

• I need to quickly figure out whether I should “spend” more time/effort with

you, or move on to something else.

The “0 to 60” problem. Potential investors (or potential employees,

customers, etc.) usually start out knowing nothing about you or your venture.

• Getting someone “from 0 to 60 mph” is very challenging: too much to say,

don’t know where to start.

A Pitch is a “Sale”. You not just trying to “describe”, you are “selling”. Easy

to tell people what you are doing; harder to get them to ‘buy”.

• You are selling your “product” to prospective “customers”. Product = your

company and the opportunity it presents.

• You are interviewing for a “new job”. You and your team = great fit for…

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Principles of Communication: A Starting Point

Audience. Who is the audience? Who are you selling to? …If you don’t

understand someone's “perspective” you will be ineffective

• For example: “they have 6 Saas investments vs. they can’t spell Saas”

• People generally understand things by association (to things *they* know).

Messages. What points you are making? What is the single key thought you

are trying to impart with each page?

• “the market is huge and growing” is a message; a chart, some stats, some

explanation is what makes up the page

Storyline. What is the narrative story you are building with the collection of

messages? Does the story flow well and get to your conclusions?

Goals. What is the goal of this specific meeting?

• Unlikely it is getting a “check”. Getting to the next step in the process.

Situation. What the format of the pitch? What are the constraints?

• 2 minute elevator pitch vs. 10 minute Power Point pitch vs. email

attachment

To start, lets use a simple framework: Audience, Messages, Storyline, Goals, Situation.

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The Communication Pyramid

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Level of Detail in

Different

Documents

1 page summary

10 –page deck

20 –page deck

20 page deck, +++

Level of Detail in a

Document

The Executive

Summary

First Page of Each

“Chapter”

Each Chapter

Each Chapter with

all the Back-up

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“Good” Pitch Deck

From “Triple Play” of VC Presentations by

Mark Suster (former entrepreneur, now VC)

Slide 1 – Team Bio

Slide 2 – 50k foot view of your company

Slide 3 – Problem Definition

Slide 4 – How do you solve the problem?

Demo Web Version and

a Demo Video Example

Slide 5 – Market Sizing

Slide 5 warning: (Market Sizing Pitfalls)

Slide 6 – Competition

Slide 7 – Customer Adoption / Traction

Slide 8 – Team

Slide 9 – Financial projections

Slide 10 – Use of Proceeds

Slide 11 – Fund raising process / Next steps

Appendix – Back-up slides

How to deal with the dreaded question of

valuation?

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http://www.bothsidesofthetable.com/pitching-a-vc/

Adapted from “10 Slides to an Awesome

Pitch” by Dave McClure, 500 Start-Ups

1. Elevator Pitch

2. The Problem

3. Your Solution (Demo Here!)

4. Market Size

5. Business Model ($)

6. Proprietary Tech

7. Competition

8. Marketing Plan

9. Team / Hires

10. Money / Milestones

http://www.slideshare.net/dmc500h

ats/how-to-pitch-a-vc-sept-2010

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V. Guest Speaker Q&A: Founder Perspective

Peter Sullivan Founder CEO of JackPocket

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Find Fit. Does this investor have “fit”? Do they invest in ventures like

mine?

......if not, then move on. (or at least prioritize accordingly)

Prepare! Don’t be lazy; invest some time.

•Steve Jobs: 30 hours to develop, 30 hours of practice…30 minutes of

presentation.

•For example : “Audience”. What have they invested in? Recently?

What can you find out about their background? Interests? Hot

buttons?

- How? Duh….Google: Blogs, Quora, YouTube, CrunchBase; talk

to people they know, better…talk to those they have invested in.

Pitch, Get Feedback, Revise. Repeat. No venture idea was built in

a vacuum. The ONLY way to develop business ideas is to share them,

solicit feedback, make adjustments, develop/refine/add and…..DO IT

AGAIN!

• 1 part “studying” pitching, 1 part “doing” pitching, 10 parts repeating

both……this is becoming a “student”

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Key Success Factors and Take-Away’s

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Better understanding of pitching.

A set of specific insights that will *change* your pitch.

A “to-do” list: starting point(s), actions, things to try.

A set of recommended resources to consult and learn more

from.

A few new relationships with others in the NYC start-

up/fundraising ecosystem: fellow entrepreneurs, investors, etc.

Answers to specific questions about pitching that you might

have.

What would I like you to walk away with?

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SMTM coming up……Join us:

SMTM Session 3:

•Angel Investing (November: Tues, 11/19)

SMTM Session 4:

•[TBD Topic] (December: Tues, 12/17)

“Curious about Angel Investing? Love to be a fly on the wall

to see how it really works?” - Who are these Angel Investors? Why do it?

- Where do you find them? Why would you want to?

- What are Angel Groups? How/why do the work?

- What about AngelList, “Soper Angels” and Angel Funds?

- How do Angel Investors differ?

- What does the Angel Investment process look like?

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Thanks! Thomas Wisniewski

Contact Info

Email: [email protected]

LinkedIn: http://www.linkedin.com/in/thomaswis

Twitter: @thomaswis

This presentation: http://www.slideshare.net/Thomaswis/

New York Angels www.newyorkangels.com

New York Angels Educational Meetup: http://www.meetup.com/NY-Angels/

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Additional Slides

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Sources of Investment: Seed Fundraising, Angels and VC’s

Stage (Pre-Round):

• Expected to

have:

• An idea, initial/rough

b-plan

• Initial founders, key

advisors

• Path to ???

• Detailed b-plan,

• Key founders (bus & tech) full-time

• Prototype/alpha done and tested,

• Some piloting (paying?)

customers, some revenues?,

• All legal documentation in place,

board of directors

• Path to break-even or next funding

• Significant variation among firms

but…. Angel req. +:

- Anchor clients on board, revenue

growth (B2B),

- Growing base of users, with strong

usage trends (B2C)

- …..Growth potential! Credible

path to $100M Rev

• Don’t Expect: • $ Rev, Customers,

Minimum Viable

Product (MVP); full

legal documentation

• Income (e.g. cash flow positive);

all key management ; completely

developed business model (e.g.

understand it will change)

• Income (e.g. cash flow positive)

Who/what are

they?

• People you already

know, that trust

you, and (maybe)

understand your

venture

• Experienced early stage

investors (individuals or a group)

• Accredited Investors.

• Angel investing is not their “job”;

may not be F/T endeavor

• E.g.: NY Angels, GoldenSeeds

• Firm with multiple professionals that

raises, invests and manages

individual funds (other people’s $)

• Working F/T (this is their job…)

• E.g.: Greycroft, RRE, Union Square

Angel InvestmentFriends and

FamilyVenture Capital

“You”

aka Bootstrapped

Earlier Stage Later Stage

Round Size $: • $10’s of K

to $100K

• $100’s of K

to $1M+

• $500K to

$1.5M

Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K

Valuation (Pre-

Mon):

• < $1 M • $1 – 5 M • $5-10 M

II. Pitching to Prospective Investors

“Traditional Series A” VC

• $5M-$15M

• $3M – $5M

• $10 – 25 M

“Seed”

“Seed” VC

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Given this landscape, how do I get to the pitch?

Who are the “right” investors? Where is there a “fit”?

• Reality Check. “people invest in things that they understand and have experience with”

- Target find Fit: Find investors that come from industries, sectors, business models

etc. that are same/similar to your venture and your customers

How to “get” a pitch meeting?

• Connect. The hard part.

- Avoid “cold-calls”; look for “warm introductions”

- Networking. Who do you know that knows them?

- Find them at an event. (Email sucks!)

Really you should be thinking…How do I build a relationship first?

• Pitching by its very nature can be awkward. “This guy wants something from me.”

• Most investors mean-well, and would like to help…but are busy

Solution: Build a relationship before you need to pitch. OK, How?

• Give, don’t Ask: what can you do for them?

• “Ask for advice, not money”

• Debate / Discuss a topic, Ask opinion about X.

• Find ways to “show” rather than “tell”:

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Common “Forms” of Pitch Communication. What are they? Which should I use?

“Document” Simplistic Description Common Situation/ Use

1-pager “1 pager Exec Summary, Word

doc”

• Email attachment or handout

• Online platforms e.g. Gust, AngelList

Email Brief “Teaser paragraph of text / bullets” • “In the intro email” (w/ attachments)

Business Plan “10-40 page Word doc” • Detailed discussions (similar use)

• Stand-alone, due diligence

Pitch Deck “10 page PowerPoint

presentation”

• “15 minute stand-up presentation”

• Email attachement

Long-Form Pitch

Deck

“20-40 page version of 10 pager;

PowerPoint presentation”

• “60-90 minute follow-up meeting with

smaller group”

Elevator Pitch “No document, just you talking for

60 seconds”

• Your quick intro after you meet

someone in person

“Video” Pitch “10 minute video of your deck/

demo w/ you voice”

• Email attachment

• Online platforms e.g. Gust, AngelList

Due Diligence Docs “All the detailed spreadsheets,

data, etc. that back-up your pitch”

e.g. Financial Projections, Sales

Funnel, Legal Docs

• For detailed discussions with

interested investors, usually post-

term-sheet

• Online platforms e.g. Gust, AngelList

The Good News:

• you don’t need to have all of them (maybe ever, certainly 1 or 2 to start is fine)

• much of the content, messages, storylines can be shared and reused

• Preparing thoughtful docs ……refines your thinking and your venture.

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Who are these “Angels”? What do they look like?

Experienced, successful entrepreneurs: frequently multiple exits

• Some from “tech-start-ups” some from other businesses

• Usually some link to

Successful “corporate” business people: CEO or CxO-types

Older: most are in the 40-60 age group. But there are also notable angels

in their 20’s and 30’s e.g. newly minted start-up millionaires

3 – 10+ Angel Investments

~10% of investible capital in Angel Investments

Differ *widely* in: Industry/Functional Experience, Investment Expience,

Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal

do’s/don’ts and hot buttons.

Lists? Not many. All are partial. AngelList? Gust? Other?

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NY Angels Profilewww.newyorkangels.com

Member Profile: ~80 investor/members; several early-stage funds; Member

backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:

software, e-commerce, ad-tech, finance, media

Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC

Area.

Stage. Mostly early stage (with some customers/revs), some seed stage (pre-revenue)

Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M – 4M;

investments tend to range from $250K to $1M+;

• For larger rounds, NYA often leads the deal and helps find the rest of the capital by

sharing/syndicating the deal with other Angel Groups

Group Structure / Investment Decisions. NYA core structure is as a group of individual

investors. Individual investors “opt in” to deals and make their own investment decisions.

• Typical member invests $25-50K in a deal.

• In addition to the core “opt-in” model, NYA has just closed a small seed fund that will

operate in parallel (using a “democratic model” for investment decisions)

History/Background. NYA has invested $45M+ in 70+ companies.

• We are very active in the NYC entrepreneurial / early-stage ecosystem

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Variations on the Theme: Other Players

“Super Angel” (vs. Angels, Angel Groups). Sophisticated angel investor with a large portfolio

of early stage investments (30? 50?) and that is investing frequently (10 + per year). E.g. David

Rose, Fabrice Grinda

Microfund or Micro VC Fund. Small VC fund ($1-10 M) often run by a single person typically

making “angel” size investments in early stage companies.

Seed Fund. VC fund focused on “seed” (aka Angel) stage investments: often pre-revenue,

pre-product. Some VC’s that typically invest in “Series A” rounds will reserve a portion of their

fund for seed investments: e.g. $250 – 750K investments at $1-5 Million valuations

Incubator/Accelerator. Entity that provides non-monetary support/services (in addition to $’s)

to early stage ventures. Typical support/services can include: space, IT infrastructure, shared

admin service, advice/feedback, introductions/networking. Public vs. private, independent vs.

captive. Examples: TechStars, ER Accelerator, DreamIT, Y-Combinator

Strategic Partner/Investor. Some operating companies will invest in ventures. Typically it is

in an industry/ sector / product-space similar to theirs (sometime with an eye toward potential

acquisition in the future)

Crowd Funding Platforms. Currently this is financing via donation or “pre-sale” of products.

Equity financing under JOBS Act is TBD. Not obvious this will be a good match for most Tech

AngelList. Similar to an angel group, but without centralized control. More of a open

“marketplace” of individual investors and ventures to facilitate funding.

Gust. Software platform that most angel groups utilize (and many small VC’s) to run their

investment process and connect angel groups together to share deals.

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Additional Thoughts…..

Lots of start-up advice out there. Lots about the art of fundraising.

• Huge volume of blogs, articles, Quora-posts, etc.

• Well…….that’s good, right? Yes.

• But why doesn’t it help?

- Overwhelming

- Conflicting

- Not specific

- Not enough context

- It’s just advice, ideas, …..not interactive, not experience.

• Need to understand the “why” behind it all and adapt it to your venture, your situation.

Beware of simple answers, absolutes. As you are reading and listening to all these

opinions, data sources

• For any “fact” “rule” “truth”… if you don’t understand how it is both true/false, you don’t

really understand the point.

- Under what circumstances is this “rule for fundraising” “true”? Where does it apply

well With whom?

- How and when is it not true (Or less true)?

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