I had the pleasure of moderating a panel on startup funding strategies at the LSA Innovation Summit with renowned angel investor Manny Fernandez from DreamFunded, Pablo Fuentes from Proven and Jose Huitron from Crowdismo.
It was a great panel with useful insights and most importantly Manny, an experienced and successful angel investor in Silicon Valley, was there to address questions directly. However, I felt the conversation needed to be further explained by providing attendees with concise resources.
Manny Fernandez was adamant about pushing you into the ring and giving you the tools that you need in order to fight. Those tools are capital, human network and long term support. Pablo from Proven was keen on the fact that you have to be ruthless when it comes to building your business. Jose gave a few examples of how Crowdismo is able to continue to build its product by connecting his startup to existing ecosystems like Startup Weekend.
Those are all examples of how to hustle. Pablo hustled his way to a funded pivot. Manny is ruthless about recruiting more startups for his fund. Jose is the perfect example of a bootstrapped startup making it happen by defying the odds. Jose is not in Silicon Valley but has been able to find a strong supportive network in Santa Barbara.
One important thing to understand though, is that funding stories are never the same.
The only common denominator among our panelists is that they are completely different. Every time you talk to a founder, you’ll see a very distinct set of features that make them fundable. Every single startup worth talking about has a unique story worth investing in.
The reason why the funding story is unique is because it comes from a very personal creation story from where the founders draw the power to explain the problem to potential investors. The funding strategy becomes clear as time progresses.
That said, there are some things that you need to have in order for investors to take you seriously: the pitch deck and the terms.
The Pitch Deck needs to be crisp, complete, positive and most importantly truthful. It needs to demonstrate your vision, passion and operational capabilities. The founders need to be able to explain the problem clearly and in a way that is relatable to potential investors. There’s a caveat here. Not all investors are the right investors for your startup. Make sure to look for the ones that connect with you and your product. Those are the angel investors you definitely want on your cap table.
The Term Sheet needs to be founder friendly and standardized for the round. It also needs to provide protection as well as potential upside for angels. The reason for standardizing the terms is optimization. If you are successful you are going to have multiple angel investors and the easiest way to save money and move fast is to provide standard interest bearing convertible notes with the appropriate provisions for change of control and conversion.
There are other methods like YCombinator’s safe financing documents that have been open sourced as well.
Please remember that the slide deck and the term sheet are secondary to your product and vision but they need to be present and in good shape. Angel investors don’t have the time to guide you through the legal aspects of your first round. So, optimize as much as possible before your first meeting.