There are a
number of ways to fund your company's growth. One way is to take on external
capital to support you. However, raising funding is not something that is right
for everyone and it needs to be entered into with your eyes wide open.
of least resistance is often to take money from people you know but with that
comes sense of responsibility to look after it, and some people do not like
this added pressure. Taking money from other external sources, be that Angels,
Family Offices or Institutional Investors will also change the dynamic of your
Company. Not only is the process time consuming and distracting but simply put,
it will no longer be your Company, as you now have shareholders and with it
comes expectations and obligations. That said, raising money is typically
something a Founder will need to do so the aim of the session was to arm the
Fellows with some tips.
emotional and mental impact of fund raising needs to be considered but at the
SLP session we focused mainly on the more practical aspects of it. We had some
external guests join the night to pass on and share tips and advice. My aim of
the class was to cover late Seed / Series A, as this is the point when
typically Founders see their first terms sheets. If an Angel sends you a term
sheet, you should walk away, they clearly don't know what they are doing!
and setup of the class
grateful to have spoken to previous SLP class organisers who passed on some
great tips of what worked well and what didn't. My intention was to tweak a
little it to allow as much interaction and exposure to the guests as possible.
I also tried
to engaged with the Fellows a bit over the Christmas period via email and WhatsApp,
including sending them an example term sheet so they were familiar and also
asked them what sort of topics they wanted me to cover. It was good to get a
feel of what the class wanted before the event.
class falling just post-Christmas, it meant that briefing the guests ahead of
the class was a little challenging. We were lucky to be joined by three Series
A funds, two lawyers and two post A founders, with battle scars in place.
happened on the day?
arrived before the class members so I was a little worried we would have more
guest than members. However, in the nick of time everyone arrived. Phew!
I opened up
the class with some intros and a brief presentation of my experiences to date
of fundraising and some key aspects of a "normal" term sheet, thank you
google for helping me here. There were a few comments and questions but after
25 mins we moved to the next part of the night.
split into two groups and had two breakout rooms (thanks Deloitte). In the lounge (business class) were the VCs
and in the less comfy room were the Founders. Each had a lawyer. After 40 min
we swapped the Fellows. It was
interesting to hear the different perspectives and the smaller groups worked
part of the job for the Investors, the feedback was positive, and many were
interested to hear more about the SLP businesses as they developed.
– what did we learn?
There were a
huge number of tips shared but here are a few:
stage rounds keep the docs super simple - feel free to use template terms but
its worth getting a lawyer to check them through. You are unlikely to see a
term sheet at this stage.
first institutional round - it takes a min of 6 months and often closer to 9 to
raise so make sure you start talking to investors in good time, many VCs are
happy to hear about your progress and form a relationship with you if you are
in their sweetspot. If you are not in their sweetspot then don't waste your
time. Try and get your house in order pre raise (data rooms etc.). Engage a
lawyer at the term sheet stage, let them help you early on and before you sign
the term sheet. Focus on what is important and don't forget to keep working on
your business, you need to continue to grow during the raise or you may lose
your deal. It is hard work and a times stressful. Lots of other items were
shared and many myths dispelled.
the Class of 2021
The title of
session is a little misleading, I think. While it's called Term Sheets, I think
it really should be called Term Sheets and the Fundraising process. I
intentionally didn't spend too much time on the details of a term sheet as it
is something you can read up on or learn it when you need to. We focused more
on the fundraising process.
Give me a
call and the other class CEOs - I am happy to help. Having guests is incredibly
powerful and frankly makes you need to do less yourself, so line them up early.
The class timing is challenging so overbook guests as some may cancel. Given it
falls post-Christmas I would recommend sending a few messages to the Fellows
beforehand to make sure they are fired up and turn up.