40+ questions top founders asks in fundraising meetings to gain not only the money

There is a crucial thing that only top founders know better than others: when you meet with VCs, don’t just fixate on getting their money — learn from them. So which question should you ask to gain the most from the meeting?

For any offered meeting with a VC, the possibility it will result in funding is between 1% and 10%. That means you have 90+% chance that you will not raise money from this person. So if money is your only goal for that meeting, you are wasting 90%+ of your time.

It’s better to consider the meeting as an opportunity 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.

Remember that investors see 1000s of companies and have invested in 10s or 100s of them over their careers, which means they’ve likely seen different insights than you have. They see and hear things that you may not. This wealth of experience is sitting right in front of you. You just need to know what to ask, and how.

The right mindset for investor meeting
  • Come to VC meetings as an equal, not as if the VC is above or below you.
  • “Pitch” meetings are poorly named. They are better to be seen as strategy meetings.
  • As a Founder, your #1 job in building your startup is to learn quickly. VC meetings are no exception.
  • Use the first part of this strategy meeting to explain what you know about your business so far, not simply “pitching.” Then the vast majority of the remaining time should be spent asking the VC questions and engaging in dialogue as collaborators. For example: If you have 10 minutes, explain what you know about your business for 4, and ask questions for 6. If you have 30 minutes, explain for 8 minutes, and discuss for 22. It would help if you had a large appendix in your deck that you can refer to during the discussion.
  • The VCs you talk to are likely to give you different pieces of advice because there is no right answer and it also depends on the level of experience with who are you meeting. But over many meetings, you will cobble together the right advice. You’ll then be able to improve your business so that investing in your business becomes a no-brainer.

To help the founder get the best from this mindset, I’ve collected 30+ great questions that I’ve observed from others in the pitching meeting connected by Wiziin and James Currier from NfX. These are useful questions that every founder should ask to open up the dialogue and start building more authentic, open, and long-term relationships with their investor. These questions focused on

  • Getting an Understanding of How Your Company is Viewed
  • Know the downside
  • Competitive Landscape
  • Addressable Market
  • Level Up Your Fundraising Process
  • The Right KPIs
  • How Your Team Measures Up
THE QUESTIONS
Getting an Understanding of How Your Company is Viewed
You’re busy, and a lot of people want to see you. Why did you decide to take the meeting with me? What were you hoping to hear?
When you look at my deck, do you think it good reflects the business as I’ve now described it to you?
When you explain this to your partners, how will you describe this business?
What are the negatives your partners will think of first when they look at this business? What initial concerns might they have?
How much do you think location matters? How should I be thinking about location/geography?
How can you see this company fitting in your portfolio?
Are there challenges to this company fitting in your portfolio?
KNOW THE DOWNSIDE
What is the one thing you think I’m underestimating or being naive about?
What are the main obstacles you see to our success? What are the main concerns you have that could cause you not to invest?
Can you see your partnership investing in this company?
After what I’ve described, are there patterns you’ve seen in the past (positive or negative) that would apply to this business? E.g. ad tech is dead, hospitals are horrible customers, sales teams are great customers, etc.
COMPETITIVE LANDSCAPE
How many other companies have you seen that seem to be targeting the same sector?
Have you seen somebody try this business and fail or succeed in the last ten years?
How common is this idea in the world already? Have you ever seen anything like this before?
Are there successful companies this startup reminds you of? Any good analogies? (e.g. the “Craigslist” of farming equipment)
Do you get the sense that we’ll be able to defend this business once it’s up and running?
Are there any companies you think it’d be natural for this company to partner with either now or shortly?
Is there anything I’ve shown you that is on trend with other companies you’re seeing?
Now that I’ve explained the business, what sectors would you categorize it in?
ADDRESSABLE MARKET
Does the way we’ve calculated TAM feel right to you?
The way I’ve calculated TAM is on this slide. Is there another way you could think of calculating the TAM?
Could we redefine our market to make it a bigger market? E.g. Airbnb TAM as home rentals vs. much bigger Airbnb TAM as hotels.
What’s your opinion of the niche this company is targeting to enter this market? In talking this through, is there any sub-segment of the market where you think the fast-moving water will be?
Can you see this being a billion-dollar company? Why or why not?
What do you think are the biggest opportunities ahead of us in this space?
LEVEL UP YOUR FUNDRAISING PROCESS
If this company were to go public, what would you expect the fundraising history to have been? What would you expect about the future financing and dilution characteristics of this business?
I’d like to fill in this round with a few smaller checks from angels and advisors. Can you think of anyone who would be dynamite to advise me on getting this going even if you don’t invest? (Make it clear that you’re not asking for an introduction.)
Other than you, who would you recommend is the best type of investor for this type of business? Does anybody come to mind? I’m not asking for an introduction.
If you had somebody else helping you evaluate this company, whose opinion would you trust?
I understand that statistically, the chances of you investing in this company are only 1%-10%. I don’t want an intro, but I’m just curious, who else would you expect I’m talking to about raising capital?
THE RIGHT KPIS
What’s the main metric that would prove that this is going to be a great business?
What sort of traction metrics would make investing in this business a no-brainer? Where does this company sit on the ladder of proof based on what you know?
What experience have you had with companies that try to distribute on the channel(s) that I’m planning to use? And what were your lessons with companies working with that channel?
When this company is worth $2B and we look back, what do you think the likely path is that the business would have taken to get there?
HOW YOUR TEAM MEASURES UP
On a scale from 1 to 10, how much do you think we have founder-market fit or founder-product fit?
What attributes do we need to be excellent at to make this business work? What are the skillsets and expertise that we need to be world-class to succeed? E.g. Digital marketing expertise, being a supply chain guru, etc.
Just meeting me, do I feel like the kind of person to make this business work?
When you look at the team that I’ve assembled here, how would you compare them to other investments that you’ve invested in?
Talk with me about the team you see here. What are the pros and cons of the team I’ve built so far?
Who would you like to see me add to this team in the next year?
What are the top cultural characteristics that this company would need to have to be successful? Being aggressive? Careful and frugal? Highly compliant? Breaking the rules? Sales-driven? Tech-driven?
Final words

VCs are a resource. They are pattern recognition machines that have been trained by thousands and thousands of data points from the startups they’ve seen. They’re a strategic wellspring of the startup ecosystem that is there for you to avail yourself of. If you ask the right questions, VCs can help calibrate your business, help you avoid costly mistakes, and ultimately get your startup to become the best version of itself and maximize your chances of success.

Wiziin x UII: STARTUP CỦA BẠN ĐANG CẦN MỘT ĐƠN VỊ ĐỒNG HÀNH?

Nếu bạn có một startup và muốn đẩy nhanh tốc độ phát triển, hãy tham gia ngay Chương trình Ươm tạo Khởi nghiệp tại UII với những quyền lợi và hỗ trợ đặc biệt để giúp bạn:

    ⭐ Biến ý tưởng thành sản phẩm phù hợp nhu cầu thị trường 

    ⭐ Nhanh chóng tìm được khách hàng và thẩm định thị trường mục tiêu

    ⭐ Tiếp cận nguồn vốn đầu tư từ UEH và các quỹ đầu tư

    ⭐ Tìm kiếm đối tác chiến lược

    ⭐ Xây dựng đội ngũ và doanh nghiệp

    ⭐ Tham gia cộng đồng khởi nghiệp UII – gồm các nhà khởi nghiệp và chuyên gia

📌Đăng ký tham gia tại: https://airtable.com/shraJBuH8Kh6ydOXZ

Chương trình Ươm tạo Khởi nghiệp tại UII (UII Incubation Program) là chương trình ươm tạo chất lượng cao, được cung cấp hoàn toàn miễn phí dành cho các startup ở giai đoạn đầu trong các lĩnh vực công nghệ, giáo dục, tài chính, thương mại, v/v, tại khu vực TP.HCM và Đồng bằng Sông Cửu Long. UII Incubation Program kéo dài 6 tháng, được thiết kế với không gian làm việc chung, chương trình đào tạo, tư vấn và nhiều hoạt động khác, để giúp các startup xây dựng sản phẩm từ ý tưởng, tìm kiếm khách hàng và đánh giá thị trường tiềm năng.

📌Thông tin chi tiết về UII Incubation Program, vui lòng xem tại https://bit.ly/UII_Incubation_Program

📌Trở thành thành viên của UII Incubators để tăng tỷ lệ thành công khi khởi nghiệp. Đăng ký tham gia tại: https://airtable.com/shraJBuH8Kh6ydOXZ

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Viện Đổi mới Sáng tạo UEH (UII) là một trong những đơn vị hỗ trợ startup có nhiều hoạt động sôi nổi nhất trong hệ sinh thái khởi nghiệp tại TP.HCM và khu vực Đồng bằng sông Cửu Long. Chúng tôi luôn đồng hành cùng những nhà sáng lập với các giải pháp Đổi mới Sáng tạo – Ứng dụng Công nghệ để giải quyết các vấn đề của cộng đồng.

Từ năm 2022, UII Incubation Program sẽ có mặt tại khu vực Đồng bằng Sông Cửu Long với với sự hỗ trợ đến từ Mekong Incubator tại UEH Vĩnh Long.

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UII – Where every idea has a story!

📧uii@ueh.edu.vn

🌐http://uii.ueh.edu.vn/

☎️077 696 1010

🏢UII Startup Incubator: 232/6 Võ Thị Sáu, Phường Võ Thị Sáu, Quận 3, TP. Hồ Chí Minh

🏢Mekong Incubator: 1B Nguyễn Trung Trực, Phường 8, Vĩnh Long

Why business model fail: pipes vs platform

Why do most social networks never take off? Why are marketplaces such difficult businesses? Why do startups with the best technology fail so often?


There are two broad business models: pipes and platforms. You could be running your business the wrong way if you’re building a platform, but using pipe strategies.

More on that soon, but first a few definitions.

Pipes

Pipes have been around us for as long as we’ve had industry. They’ve been the dominant model of business. Firms create stuff, push them out and sell them to customers. Value is produced upstream and consumed downstream. There is a linear flow, much like water flowing through a pipe.
We see pipes everywhere. Every consumer good that we use essentially comes to us via a pipe. All of manufacturing runs on a pipe model. Television and Radio are pipes spewing out content at us. Our education system is a pipe where teachers push out their ‘knowledge’ to children. Prior to the internet, much of the services industry ran on the pipe model as well.
This model was brought over to the internet as well. Blogs run on a pipe model. An e-commerce store like Zappos works as a pipe as well. Single-user SAAS runs on a pipe model where the software is created by the business and delivered on a pay-as-you-use model to the consumer.

Platforms

Had the internet not come up, we would never have seen the emergence of platform business models. Unlike pipes, platforms do not just create and push stuff out. They allow users to create and consume value. At the technology layer, external developers can extend platform functionality using APIs. At the business layer, users (producers) can create value on the platform for other users (consumers) to consume. This is a massive shift from any form of business we have ever known in our industrial hangover.

TV Channels work on a Pipe model but YouTube works on a Platform model. Encyclopedia Britannica worked on a Pipe model but Wikipedia has flipped it and built value on a Platform model. Our classrooms still work on a Pipe model but Udemy and Skillshare are turning on the Platform model for education.


Business Model Failure

So why is the distinction important? Platforms are fundamentally different business model. If you go about building a platform the way you would build a pipe, you are probably setting yourself up for failure.
We’ve been building pipes for the last few centuries and we often tend to bring over that execution model to building platforms. The media industry is struggling to come to terms with the fact that the model has shifted. Traditional retail, a pipe, is being disrupted by the rise of marketplaces and in-store technology, which work on the platform model.

Pipe Thinking vs. Platform Thinking

So how do you avoid this as an entrepreneur? Here’s a quick summary of the ways that these two models of building businesses are different from each other.

User acquisition:

Getting users onboard is fairly straightforward for pipes. You get users in and convert them to transact. Much like driving footfalls into a retail store and converting them, online stores also focus on getting users in and converting them.

Many platforms launch and follow pipe tactics like the above. Getting users in, and trying to convert them to certain actions. However, platforms often have no value when the first few users come in. They suffer from a chicken and egg problem, which I talk extensively about on this blog. Users (as producers) typically produce value for other users (consumers). Producers upload photos on Flickr and product listings on eBay, which consumers consume. Hence, without producers, there is no value for consumers and without consumers, there is no value for producers.
Platforms have two key challenges:

  • Solving the chicken and egg problem to get both producers and consumers on board.
  • Ensuring that producers produce, and create value.

Without solving for these two challenges, driving site traffic or app downloads will not help with user acquisition.

Startups often fail when they are actually building platforms but use Pipe Thinking for user acquisition.

  • Pipe Thinking: Optimize conversion funnels to grow.
  • Platform Thinking: Build network effects before you optimize conversions.

Product design and management:

Creating a pipe is very different from creating a platform. Creating a pipe requires us to build with the consumer in mind. An online travel agent likeKayak.com is a pipe that allows users to consume air lie tickets. All features are built with a view to enabling consumers to find and consume airline tickets.
In contrast, a platform requires us to build with both producers and consumers in mind. Building YouTube, Dribbble or AirBnB requires us to build tools for producers (e.g. video hosting on YouTube) as well as for consumers (e.g. video viewing, voting, etc.). Keeping two separate lenses helps us build out the right features.

The use cases for pipes are usually well established. The use cases for platforms, sometimes, emerge through usage. E.g. Twitter developed many use cases over time. It started off as something which allowed you to express yourself within the constraints of 140 characters (hardly useful?), moved to a platform for sharing and consuming news and content, and ultimately created an entirely new model for consuming trending topics. Users often take platforms in surprisingly new directions. There’s only so much that customer development helps you with.

  • Pipe Thinking: Our users interact with the software we create. Our product is valuable in itself.
  • Platform Thinking: Our users interact with each other, using the software we create. Our product has no value unless users use it.

Monetization.

Monetization for a pipe, again, is straightforward. You calculate all the costs of running a unit through a pipe all the way to the end consumer and you ensure that Price = Cost + Desired Margin. This is an oversimplification of the intricate art of pricing, but it captures the fact that the customer is typically the one consuming value created by the business.

On a platform business, monetization isn’t quite as straightforward. When producers and consumers transact (e.g. Airbnb, SitterCity, Etsy), one or both sides pay the platform a transaction cut. When producers create content to engage consumers (YouTube), the platform may monetize consumer attention (through advertising). In some cases, platforms may license API usage.

Platform economics isn’t quite as straightforward either. At least one side is usually subsidized to participate on the platform. Producers may even be incentivized to participate. For pipes, a simple formula helps understand monetization:

Customer Acquisition Cost (CAC) < Life Time Value (LTV)

This formula works extremely well for eCommerce shops or subscription plays. On platforms, more of a systems view is needed to balance out subsidies and prices and determine the traction needed on either side for the business model to work.

  • Pipe Thinking: We charge consumers for the value we create.
  • Platform Thinking: We’ve got to figure out who creates value and who we charge for that.

However, platform thinking applies to all Internet businesses.

If the Internet hadn’t happened, we would still be in a world dominated by pipes. The Internet, being a participatory network, is a platform itself and allows any business, building on top of it, to leverage these platform properties.

Every business on the Internet has some Platform properties. I did mention earlier that blogs, e-commerce stores, and single-user SAAS work on pipe models. However, by virtue of the fact that they are Internet-enabled, even they have elements that make them platform-like. Blogs allow comments and discussions. The main interaction involves the blogger pushing content to the reader, but secondary interactions (like comments) lend a blog some of the characteristics of platforms. Readers co-create value.
Ecommerce sites have reviews created by users, again an “intelligent” platform model.

The End of Pipes

In the future, every company will be a tech company. We already see this change around us as companies move to restructure their business models in a way that uses data to create value.
We are moving from linear to networked business models, from dumb pipes to intelligent platforms. All businesses will need to move to this new model at some point, or risk being disrupted by platforms that do.

There are two types of business models: Pipes and Platforms. Startups that don’t realize this fail. Startups with the best technology often fail because they build the wrong business model.
In the future, every company needs to be a tech company. This is why most social networks and marketplaces fail.

Source: Wired

How to evaluate late-stage funding sources

As a later-stage company, you will have a broader set of investors to choose from than you did in the early days. If you are a high-growth company choosing from a strong crop of investors, consider the following factors when selecting a later-stage funder:

Follow-on capital. Some late-stage funds can deploy hundreds of millions or billions of dollars. Is the fund able to follow on as you raise larger rounds?

Public market impact. Some public market investors, such as T. Rowe Price and Fidelity, send a strongly positive market signal, as they are known as long-term holders of general equities. As you go public, they may hold your stock over the longer run, and this may impact your post-IPO perception and performance.

Note: At least one public market investor recently began publicly listing month-by-month changes in value in their private market portfolio (which makes no sense—can you really change a public company’s valuation on a monthly basis?). This has caused issues for these companies in follow-on fundraises, secondaries, and employee morale.

Strategic value. Late-stage investors may have specific industry knowledge, partnership/introduction potential, or country-specific knowledge. For example, when entering the Chinese market, Uber originally set up a stand-alone subsidiary through which money was raised from Chinese funders who can help with government relations and other aspects of entering China. An investment from a strategic investor can also solidify a key partnership. For example, when Google signed the deal to power Yahoo! Search (at the time a company-making move), Google took an investment round from Yahoo!

Simple terms. Some late-stage private equity firms or hedge funds ask for complex structures or extra liquidation preferences when doing investments. Terms may include additional issuance of shares under an IPO price, extra clawback of value during a sale under a certain price, and the like. If you are able to keep terms simple that is often worth the trade-off of also getting a lower valuation.

Board seats. A number of late-stage investors are willing to invest without taking a board seat—something DST pioneered. Avoiding a bloated board may become challenging as the number of rounds a company completes grows.

Ability to buy secondary stock or drive tenders. Some companies will couple a primary financing event (buying preferred stock) with a secondary sale or tender (allowing employees, founders, or early investors to sell part of their stake). Depending on the fund they may or may not have the appetite or the SEC registrations

KEY TERMS

Late-stage financings are not that different from earlier-stage rounds for the key terms to consider. However, at the later stages the two most important items you’ll weigh tend to collapse down to preference and board membership.

Preference. While top-tier early-stage investors tend to have a clear preference structure (i.e., non-participating preferred 1), private equity firms and family offices may ask for unusual preference structures that effectively convert an equity round into a debt round. For example, if the company and investor cannot agree on valuation, the private equity fund may ask for a 2X or 3X preference, as well as a ratchet on the next round. Similarly, later-stage investors may put in special provisions around IPOs (e.g., if the IPO prices under a certain valuation, or takes longer than six to nine months, the investor gets extra stock), future fundraises, or other aspects of the company’s life cycle. In general, you should avoid these special terms if you can, although you may not have the chance to do so, especially if your valuation starts to exceed your core business metrics or capital is scarce.

Board membership. As with all financings, a key element to think through is whether or not to add a board member as part of the round. In general, larger boards are harder to manage. However, late-stage investors may bring a perspective to the board that has been lacking up to this point—around financial discipline, for example, or the state of the public market. This perspective can be helpful or destructive, depending on the board member and broader company context. On average, later-stage investors will be more numbers/revenue/margin driven, and this can drive a company down either a very good or a very bad path.

Additionally, later-stage investors may not be as used to dealing with the many “oh shit” moments that a startup typically faces in a rapidly evolving market, with a shifting product road map, and a changing org structure. Some late-stage investors are notoriously hands-off/founder-friendly (e.g., Yuri Milner and DST). However, many are used to “safer” late-stage investments and can cause trouble for a high-growth startup that’s still rapidly evolving.

Choose your board members carefully! And consider avoiding new additions altogether, unless your late-stage investors can help in unique ways. Depending on the dynamics around your fundraising, you may not have a choice—e.g., if the investor requires a board seat and you do not have a good alternative option.

Before adding anyone as a board member, make sure to (1) do due diligence on her past investments and board seats; (2) have frank conversations about company direction and expectations; and (3) decide if there are other ways to give late-stage investors meaningful impact and access to company information—without adding a board seat. Alternatively, a late-stage investor may be able to add enormous value to your board and even help to clean out poorly performing early-stage investors. See the section on Removing Board Members for more information on this.

Sources: THE HIGH GROWTH HANDBOOK BY ELAD GIL

APPLY TO BLOCK71 GLOBAL STARTUP RUNWAY – COHORT 4

BLOCK71’s Global Startup Runway is a 12-month intensive equity-free incubation program designed to help the most promising Founders leverage BLOCK71 and its partners’ global network and expertise to take on uniquely Asian markets, and scale high-impact solutions to create value for society and industry. Wiziin collaborated with the program as a community partner.

They’re always excited to work with startups looking to scale high-impact solutions that address challenges and opportunities for Smart Environments, Future of Food, Health and Wellbeing, Industry 4.0 and/or Web3.

Join BLOCK71’s Global Startup Runway for privileged access and dedicated support to:
✅ Secure strategic grants and funding
✅ Land business deals and partnerships
✅ Develop defensible technology
✅ Expand and localize to new markets
✅ Scale sustainably for impact

Wiziin is in a long-term relationship together with BLOCK71 Saigon to bring the best support for Vietnam startups to grow and gain more traction to enter the global market. We believe these world-class programs can give much-needed resources to startups’ needs. Let’s catch the chance!

Be a part of this program’s next Cohort in Vietnam!

Google for Startups Startup Academy Vietnam 2022

According to AlphaBeta’s data in the report “Unlocking Vietnam’s digital potential,” if fully utilized, digital transformation can bring an annual economic value up to VND 1,733 trillion (US$74 billion) for Vietnam by 2030. Knowing that situation, getting a tech program to Vietnam is one of Google’s priorities.

Google for Startups Startup Academy Vietnam, organized by Google and the National Innovation Center (NIC) – Ministry of Planning & Investment (MPI), is a five-day, intensive onsite Bootcamp for early-stage Vietnamese tech startups.

Wiziin collaborated with the program as a community partner. We believe this is the greatest chance for Vietnam Startup to go big, go global.

The program is designed to fast-track Vietnamese tech startups in education, retail, and healthcare by providing them access to the best of Google’s expertise, resources, and network.

Apply now if your startup wants to get to know best practices in design, product, and technology. people leadership and fundraising from Google’s experts, the ones behind many successful tech products we use daily.

Besides that, you will also have access to Google network of mentors who are successful entrepreneurs, industry experts, and experienced investors like Diệp Nguyễn (MoMo), Hùng Trần (Got It, Inc), Vy Lê (Do Ventures), Thạch Lê Anh (VSV), Đô Bùi (ThinkZone Ventures), etc.

The Academy will consist of two cohorts in 2022: Ho Chi Minh City cohort in October and
Hanoi cohort in November

The program will be conducted in English (and when applicable, Vietnamese), and accepts applications from startups headquartered in Vietnam.

Register here:https://goo.gle/join-googleforstartups

Deadline: 12/8/2022

Wiziin x CardinalRain Partnership Announcement

On June 22, 2022, Wiziin is honored to sign a memorandum of understanding (MoU) with CardinalRain – CardinalRain Inc. Representative, including Founder, Mr. CY Huang; Vice President, Ms. Nicole Chan; Director, Mr. Julian Su, InnoSquare Project Manager, Ms. Pham Thi Thoa, and InnoSquare project managers, Mr. Dang Thanh Chung and Mr. Nguyen Trung Quan. Representative Wiziin Inc. including, Founder and CEO, Mr. Nguyen Ngoc Tien; Head of Marketing Department, Ms. To Tam; Head of Operation Department, Ms. Lai Tram; Investment association, Mr. Nguyen Duy.

The Signing Ceremony between Wiziin Inc & CardinalRain

Founded in Taiwan, CardinalRain is an active accelerator program that has a strong strategic innovation ecosystem for startups, partnering with Amazon Web Services, New Taipei City Government, and FCC Partners which help Taiwan startups to scale up to other markets in South East Asia.

During the signing ceremony, the two sides emphasized the importance of the development vision to the international market for Startup Vietnam and Taiwan and expressed their desire and goal to create a startup ecosystem in the region of Asia Pacific. The two sides agreed in the coming time to continue to promote cooperation in knowledge sharing, expert connection, and investment opportunities on three main aspects including

  • Web 3.0 blockchain technology
  • Fintech and
  • Impact Business

CardinalRain’s founder, Mr. CY Huang shared, “The signing of the memorandum of understanding marks an important step in promoting cooperation between Taiwanese and Vietnamese startups, which promises to be a great future. bring more cooperation results in the future”.

The founder and CEO of Wiziin Inc., Mr. Nguyen Ngoc Tien shared that the two sides will gradually realize the set cooperation plans, and believe that the cooperation of the two sides will create great value for both sides for the startup communities in Vietnam and Taiwan.

Things early-stage startups need to know for an efficient pitching

With early-stage startups, what you already have may not be enough for investors to linger longer to “find out” your potential. So, show your team’s potential in the most impressive way at your PD. The article will give a simple guideline as well as some tips from a VC perspective to help teams have the most effective PD and pitching.

1. COVER

  • Introduce the product with a brief, impressive summary
  • Contact of CEO, founder

2. MARKET AND PAIN POINT

Key question: Is the market you selected big enough and has enough room for you?

  • Market: Briefly describe the market you choose
  • Market size: The size of the market with specific figures, demonstrating its potential
  • Key metrics: TAM (Total Addressable Market), SAM (Serviceable Available Marke), SOM (Serviceable Obtainable Market)

Pain points:

  • What is the size of the customer group that is having this problem?
  • What are they doing to deal with not using your product?
  • Why is the current solution of the customer group not optimal?

3. SOLUTIONS

Key question: How does your product solve the pain point of the market?

  • Summarize the solution that your product brings in the most understandable way.
  • Specify how your product solves the pain point.
  • Highlight the optimization of your solution. Is this optimization worth the money customers spend?

4. BUSINESS MODEL

Key question: How does your product make money?

  • How will the cashflows in/out of your product?
  • Clarify break-even point as well as expected profit growth of the product

5. COMPETITION

Key question: How do you outperform your competitors (directly and indirectly)?

  • A panoramic, objective view of your competitors and yourself in the market.
  • What is your competitive advantage over your competitors? Does this advantage make customers choose you over your competitors?
  • If there is a new player entering the market with a product similar to yours, what is your competitive advantage?

6. TRACTION AND FINANCIAL INDICATORS

Key question: How is your product performing?

  • Traction (Product performance): The indicators depend on your product. However, for early-stage startups, the most important metrics revolve around users: number, growth rate, return rate, paid rate:
    • Total user, MAU, DAU, PU
    • Growth rate:
    • Retention rate:
  • Financial indicators:
    • Profit and Loss in total and per user
    • Cost allocation: Operation cost, Acquisition Cost, etc.
    • Financial assumptions

7. GROWTH STRATEGY AND KEY MILESTONES

Key question: How do you develop strategies and specific plans to realize them?

Business expansion strategies typically include:

  • Product development strategy: develop, improve what features?
  • Customer strategy: How do you attract new customers and retain old customers?
  • HR strategy: Plan to develop personnel (in terms of skills, capabilities) or recruit more, etc. when the business expands.
  • Market expansion strategy: does the team plan to expand into another geographical area, another field?… However, with an early-stage startup, you should seriously consider including this factor. or not to avoid being judged that “standing in this mountain and looking at that mountain”, “distracted”. Mention this strategy when you can really convince the listener/reader.

Put the strategy into an Action plan with specific timelines and actions the team takes to realize it.

8. TEAM

Key question: Why should investors believe that you will do what you say?

This is one of the most important factors, because in the early stage, all the numbers are not certain and clear enough. At that time, a quality and enthusiastic team will be an extremely important factor for investors to believe.

  • Academic background and Past experience of key members: Presenting the most outstanding, most relevant, and special experiences of the founder, CEO, and CTO.
  • Team structure: Should list no more than 5 people in the founding team, should choose the most prominent and relevant experienced members to introduce.
  • Briefly share the team’s story (if any). It can be the inspiration, goal, vision that makes your team more cohesive, more determined to win this game.

9. FUNDING

Key question: How would you recommend investment cooperation?

  • Current cap table
  • Use of proceeds: How much do you want to call? With what form? Purpose of use of that money

Startup valuation: How to valuation and the back of it

Startup Valuation: Estimating the value and performance of a startup, is an important part of the fundraising process because it helps founders determine how much money should be offered to investors.

It is also a measure by which investors estimate future profits. So it’s not possible to come up with a random number and claim that’s your company’s valuation. It takes math and all the data to come up with a fair and acceptable valuation.

But valuation is NOT an exact figure, as a company’s true value cannot be known, and a lot of startups are yet to generate revenue and profits. Therefore, valuations are mostly conjectures agreed upon between the founder and the investor. The only thing it shows is how much the market is willing to pay for a startup and how willing the founders are to accept that number.

And since valuation is often determined when transactions like investments or acquisitions take place, much of the value also depends on how the founder and investor negotiate. And founders should be wary when a transaction appears to be undervalued or overvalued.

Being overvalued will make the next round of fundraising more difficult. So in case no one tells you this, just remember: If your startup is unbelievably overvalued, you might want to consider asking for less. “Meaning negotiate down?” “Yeah” “Can do that?” “YES”.

Still undervalued will be diluted in the previous rounds, but overall, this is a minor issue if the company is doing well. At the next stage, you can raise at a better valuation with less dilution later on.

Valuation is one of many indicators of success, not the only one. Getting caught up in business valuation will distract the founder from running a good business. Entrepreneurs need to focus on creating value. Focusing on business development will not lack investors. Above all, investment deals should not be seen as merely an opportunity to earn additional capital. Investor can also act as a mentor and advisor to the founder. There are many cases when founders and investors get stuck discussing valuation and forget that a potential partnership between them would be more profitable for the parties involved.

Finally, it’s important to remember that we’re in the long haul and there will be times when you’ll make mistakes and the company is going through a tough time. At that point, you’ll want to build a sufficient trust base with shareholders that they’ll be willing to bang the table for you before their IC committee or their fund because of their faith in you.

So no matter if it’s a VC or a startup founder, take a really long-term view of negotiating terms and pricing rather than pushing every penny, for money or those fringe terms, Honestly, it won’t work in the long run. But the relationship you build with your shareholders will be more helpful and impactful.

SOME METHOD OF STARTUP VALUATION:

1. Discounted Cash Flow (DCF): This method calculates a startup’s valuation based on the present value of expected future cash flows.

This method often focuses on the company’s numbers, without taking into account market factors such as investor enthusiasm, meaning that using this method can ignore market considerations. important. This model requires accurate figures for revenue and expense projections (recommended for startups in series D or higher, early stage startups will have a hard time predicting exact numbers).

2. Relative method: compare key business/financial metrics of the business with other companies in the industry. This method provides comparison and checkpoint for founders and investors, as it uses other companies in the industry as a benchmark.

However, it is susceptible to market hype, meaning the number could be overvalued or undervalued, depending on investor sentiment towards the industry in question.

3. Valuation Multiples Method: this method is the most favorite because it can be applied to almost any startup, any stage or industry. The first thing to do is determine the multiples.

Some common ways (The numerator is the inherent value of the company, and the denominator is the main business/financial metric):

  • Enterprise value/Revenue
  • Enterprise Value/EBITA
  • Price/Earnings

Once the multiples have been determined, the next step is to find the points of comparison. To do this, make a list of comparable companies (“comps”). Must be companies in the same industry, ideally at the same size and maturity level as your business. Compare with public companies, because they will make the data public. If you want to compare with other startups, check the latest funding rounds to get the right number.

If you’re valuing a startup’s next 12 months of revenue, you’ll also need to compare it to revenue next 12 months. Based on that, you can calculate the multiples of each comps. That leads to the final step – applying multiples. Based on the company multiples, you can apply the average to the numbers to calculate the value. However, because valuation is not an exact science, remember to stress test the numbers. You can also look at the 25th and 75th percentiles as guidelines to give you a range for your valuation.

In case you are a bit confused, let’s come to the example of Fancy Fintech Ltd. The startup is about to call a series A round, with $10 million in sales last year and growth forecasts this year.

Founder of Fancy Fintech decided to use Enterprise Value/Revenue as the main multiple because it is simple and easy to compare. Then find competing fintech businesses and come up with a list of 3 to 6 that are relative in terms of size, product, business model, and geography. Then calculate each ratio Enterprise ValueRevenue of the company. Finally, apply multiples.

For Fancy Fintech, their average Enterprise Value/Revenue ratio is 8x. So take the revenue of US$10 million multiplied by 8 to get a pretty viable amount of US$80 million.

In general, which valuation method you use largely depends on the original rationale. In addition to the method above, you can choose from other less common valuation calculations, each with different use-case applications such as:

If you are an investor and are looking to acquire a company, you can also consider duplicating pricing. Let’s say, as a company when buying a startup, how much does it cost me to recreate this startup.

A prime example was when Google acquired YouTube in 2006. At the time, Google had a competing video product, Google Video, but in its review, the tech giant determined that it was in order to start. keeping up YouTube will cost more than acquiring it.

In addition, how the value is determined will also depend on the stage of development of the company, mainly because investors look at different aspects of a business, depending on its maturity:

During the seed round, investors will consider whether the idea is a promising idea and business potential. So it depends a lot on the aspirations of the founders, as there are not many achievements or traction to judge.

  • In series A, there are many factors that go into whether you have said what your aspirations are? And how is the business? Will you be able to follow through on what was said?
  • In series B, they will determine if you are a market leader or not? Because if this industry and business is something right, there will be more than one player, and the question is are you a top player? Because the market leader has a higher chance of survival and a higher probability of success.
  • In series C, the focus is on profitability as a company.

After all, the above formulas are still just formulas. Since valuations are often determined when investments or acquisitions take place, the founders’ ability to negotiate throughout these processes is also important. It is for this reason that many people consider startup valuation to be both an art and a science.

Should I raise debt or equity?

Startups often raise their seed round by selling convertible debt instead of equity because debt is simpler and cheaper. Read Yokum Taku’s excellent series on convertible debt for a primer.

Seed stage convertible debt agreements are fairly simple, especially if your investors are angels. There isn’t a lot to hack into these agreements. You should be more careful if your debt investors are VCs, but these debt financings are still much easier to negotiate than equity financing.

Later stage convertible debt can get complicated and adversarial. We know companies that took convertible debt from a corporate investor and couldn’t pay the debt back on time—which triggered the corporate investor’s right to take over the company. Fun stuff.

If you are raising convertible debt, you should focus on negotiating simple and short documents, closing quickly and cheaply, and maintaining your options for Series A. But first…

Determine whether you should sell debt or equity.

Let’s say your seed investors purchase debt with a 20% discount off the Series A share price. If you eventually sell shares in Series A for $1 each, the seed investors will convert their debt to equity for $0.80/share.

Now, let’s say your seed investors are willing to buy equity for $0.90/share instead of buying debt. Should you sell debt or equity?

You should sell debt only if you can use the money to increase today’s share price by over 25% before the Series A financing. Otherwise, sell equity.

In this example, debt is worthwhile if you think you can sell Series A shares for over $0.90/share × 125% = $1.125/share.

Let’s say you decide to sell debt in your seed round and you raise a Series A at $2/share. After applying a 20% discount, your debt investors pay $1.60/share for their Series A shares. You were wise to sell debt to your seed investors in the seed round instead of selling them equity for $0.90/share.

But if you raise a Series A at $1/share, your debt investors pay $0.80/share for their Series A shares. You should have taken their offer to buy equity at $0.90/share in the seed round.

In general, you should sell debt only if you think it will increase your share price over today’s market price for your shares ÷ (1 – discount).

Selling debt is usually better than selling equity in a typical seed round.

If you are raising a typical seed round, say $50K-$500K, you probably want to sell debt instead of equity. If you raise enough seed debt to last 6-12 months, you should have enough time to increase your valuation by the 25%-100% required to overcome typical discounts of 20%-50%.

For example, if you raise $250K in a seed round in return for 15% of your equity, your seed round pre-money valuation will be $1.42M. You should raise debt instead if you expect your Series A pre-money valuation to be at least

$1.42M ÷ (1 – .2) = $1.77M (in the case of a 20% discount)

or

$1.42M ÷ (1 – .5) = $2.83M (in the case of a 50% discount).

In general, if you don’t think you can increase your share price and valuation by 2 to 3 times in every round of financing from Series A to Series C, you should probably pack up and go home. In fact, the company’s share price typically increases the most from the seed round to the Series A as the business goes from nothingness to product, users, or revenue.

Selling lots of debt may be worse than selling equity.

If you are raising a large seed round, say $1M, you may want to sell equity instead of debt.

For example, if you raise $1M in a seed round in return for 15% of your equity, your seed round pre-money valuation will be $5.67M. But if you raise $1M in return for debt at a 25% discount, your Series A pre-money will have to be at least

$5.67M ÷ (1 – .25) = $7.56M

for the debt to be worthwhile. $1M of seed financing may not take your Series A valuation above $7.56M—you may want to sell equity instead of debt in the seed round.

How have you decided to raise debt or equity?