Whether you’re looking for angel investors or considering debt financing, understanding your funding options and the capital stack is key to scaling your company. We recently joined forces with Foundersuite to present a webinar on this topic: “How to Raise Capital in 2017 (and Beyond)”. The presentation included tips on how to raise different types of capital, get introductions, find and connect with investors, build momentum, and close a round of funding.
BJ Lackland, CEO of Lighter Capital, and Nathan Beckord, CEO of Foundersuite, walked through funding options, the capital stack, and how to optimize a capital raise.
Here are some of the key takeaways from the Q&A portion of the presentation – watch the full webinar on YouTube. Thank you to Foundersuite and the attendees for the great content and rich discussion!
Q: Should I change my fundraising approach for a bridge loan?
A: Lackland: “My first piece of advice here is to avoid using the term “bridge loan” … A bridge loan by its nature sounds desperate like you’re running out of cash. Also, a bridge loan is technically a very specific term to investors, so you’ll need to have a clear use of funds and bridge goals, and if you don’t meet those goals, you’re done. Your best bet for a bridge loan may be existing investors.”
Q: Should I pitch low-likelihood investors to refine and tune my pitch?
A: Beckord: “Yes, absolutely. The more interest in your round in general, the better. In addition to practicing your pitch dozens of times with friends and family, it’s good to have your first 3-4 presentations with investors serve as “throwaways” to get you into the flow of pitching. There’s no harm in having conversations.”
Lackland: I think it was Mike Tyson who said, ” ‘Everyone has a plan ‘til they get punched in the face’ ” — and talking to real investors will punch you in the face. It’s very helpful to get feedback before you pitch investors. And with investors, always take the input, always take the questions to figure out how to alter your pitch.”
Q: Should I treat debt financing the same as equity financing with a sales funnel process?
A: Lackland: “Yes, because you want to see what kind of options you have, that’s just smart business. With debt financing, you may not have to cast as wide a net, but you’re still following a process. It won’t be nearly as time-consuming and broad as pursuing traditional equity, in my experience. Try to get 2-3 lenders who are the right fit who are stage and size appropriate for your business – you may need to talk to 8-10 to get to that few.”
Q: Is it appropriate to talk about exit strategy during a pitch to an angel investor?
A: Lackland: “Keep it out of the pitch deck, but be ready to talk about it, just in case. Have a slide ready, but don’t put it in the main deck. Have some thoughtful answers about potential acquirers prepared. You want to talk about how there are many possibilities for who might buy in 3-4 different categories, because if there’s just one possibility/category, that may be a turnoff to investors.”
Beckord: “Know who your potential acquirers are, how you fit into their roadmap and why you’d be interesting to them. Some VCs will tell you that they don’t want you to think about an exit, but to focus on big growth. Angels tend to be more diverse, so some might be looking for quick exits. It depends on how you think about your company, too. If you’re going to do multiple rounds of fundraising, it may not make sense to have an exit slide. If you’re swinging for the fences and think your company will be quickly acquired by a Google or Salesforce because you’re doing something that’s directly in the path of their strategy, then it may make sense to have one.”
Note: This Q&A has been condensed and edited for length and clarity purposes.