Learn how to develop a road map to master the funding process
Learn how to secure the right investor
Learn basic terminology used in early-stage investing
So that you don't know anything about this blog has that we do of course is that we do. I started do news about a year ago that the broadcast maybe like six months. That of course is a year ago because I really wanted to teach entrepreneurs about basic startup finance stuff that I was seeing entrepreneurs do long. So this course that we're talking about today three steps to raising capital fast actually grew out of my current students so last month we had our broadcast was how to spend a million dollars in 30 days. And that was the course we did in March and that again came out of the student demand. Somebody said hey I see in in finance for Short of course that you talk a lot about crowdfunding you do of course and just on crowdfunding. So we did that and that's up and that class is doing really great. And then last session on Spreecast someone said hey you know we're talking a lot about crowdfunding But what about equity platforms. And that's how this came about. So if there is any topic that you think is amusing or you think is interesting and you want to know more about just let me know you can tweet me my handle is aptly Balfour or if you're a student to me you can e-mail me there you just let me know whatever you want to learn. I'm doing about a new course and that every other month that's kind of a good place because I want to have time to research it and do some case studies and make sure it will be a great course. And so on filling the last time this weekend so we'll have all ready for Tuesday. So again the little link is there and you can check it out. But again if you don't want to take the course I want this recast to also be a standalone that you can actually understand the basics. And if you want to just go and do on your own that's also another option. So the three steps to raising capital let me just quickly give you an overview as to whether everyone is metrics understanding the metrics that you want to show and how to show them. And the second thing is Angel it ANCHOR An angel in mediately even before your moment you want to have your in-use set up at least one perhaps two or three and then that third step is going to be managing the chaos. I like to say it's not a sprint it's a marathon it's a hybrid it's something in between. So again you're three steps are going to be your metrics anchoring angels and then managing the chaos. So what we're going to do today I want to make sure I can even see the question. I see the chance if you want to ask a question just go ahead. It should be here scroll down and you should see something here you have your questions and suggestions so add new questions to share. So just go out and type your questions there and I'll try to scroll back down. I use my laptop with this on the Spreecast and I should use my monitor because my laptop always condenses everything. So am I going to show you here to see what it looks like so then you can see if you just touch something into chat that is fine and you can also put your question there on the bottom so I can scroll myself back up. So let's go and jump into that first one. That first one is the metrics. Now I think that costs a lot of anxiety with entrepreneurs. We just got started we don't have metric I think a lot of entrepreneurs think metrics have to be about revenue or profitability our gigantic customers and if you have those that rate. But if you don't have revenue or customers or or anything that's really impressive and you can look at some other things I would say that they're pretty much cheered. Whereas you know profitability is number one if you have some profitability that's great. And if you don't how about some revenue. If not how about some customers. If not that how about some traffic to see how you can look at them in cheers and say okay we don't have revenue. Our profitability are big customers but we do have some traction. So I want to talk about this in really general terms that in the course I will lay it out. You know this is what you should have for e-commerce is you should have a brick and mortar and so on and so forth. So just a basic example and if we're talking about traffic right and Trappists the easiest one to get you could throw up a Web site today and start getting some traffic to that Web site. Now it's just so much to show who comes there you know who comes to your website and who leaves their email address so perhaps you want to set up a splash page about this great product that you're going to create or this great jacket you're going to produce and you set up a splash page and you collect an e-mail address for people who want to get it when it's ready. OK so how did that go. How many e-mail addresses did you get. That is a good indicator of very basic interest in your product or service. So think about a metric as an intention or a level of interest of course you have revenue and profitability. That's a really great indicator that you don't. Don't be intimidated by metrics. Name some of the ways I see people do this. And there's one ice cream company that I actually made a case study in the course because I think it's great. They actually list their revenues right because it's Ice-Cream. It's not a high tech thing it's not a fancy e-commerce site. They can talk about subscriptions or conversion. It's Ice-Cream. They put their revenues in there because if you're selling a product a tangible product like ice cream and it really is a matter of how many units you're selling it's not a matter of when somebody came to my site and they are they like my Facebook page right. It's really about how many units you're selling So I think it's great to show revenue. I think a lot of entrepreneurs are afraid to show revenue because they think OK I don't want to put myself out there. So when your show metrics on these public forums and I talk about Angel list and rock the post of course there are others I'm with Angel ish. You can create screen screenshots you can show a few PowerPoint slides on the home page and there you can list some generic metrics so somebody might say you know I'm not really we're not really starting up that strong I'm kind of a little bit embarrassed about our metric. So what you can do is show the progress. So think about how you're really your metrics so you don't want to say I'm a conversion rates you know or this you know give a low number for your industry. You want to talk about the Delta. So how has it changed now. How about in Greece because when you first get going your metrics are not great. That's the learning process that you can put that in perhaps a slide that we've increased our conversions by 30 percent. You don't have to tell them we're starting in the end. And you can say that for your investor presentation and we'll talk about that in step three. So again just a recap on metrics and we want to make sure that you're picking the right metrics for your company of course and you want to show that you want to share them in the best possible light so that they're not super great dislike about the Delta or the change the increase. And that'll be a stronger metric now. And Tom just up here Tom can you hear me OK see if you guys have any questions I'm a motor mouth so I can just keep going and going and going and going and going. So I want to stop here. I see Tom is looking at this wrong today. So let's see I'll pick on somebody else. Hey Daniel can you hear me OK. Maybe everybody else is confused about the new layout and really knows how to get a check. OK here we go. So Ali says it's working. So this is working great. Yeah. So whenever we have a new interface ideas rated people are up and would be able to ask questions if you have any questions to jump in. And if I miss your question if you're thinking about something after we move into the next one and we can look back around we'll do a recap at the end so let's go ahead and jump into number two so our first Omas metrics our second one is angering the angel. Now you want to very similar to crowdfunding have something in there right at your sole social proof. It's your validation that you that you have some interest there so this course is called Three Steps to raising capital fat. And I think when people think in their mind is OK so I can get up this broadcast and go put up an angel list and page all of a sudden this money is going to come to me and actually it's the reverse of that. So there's all this preparation that you can do to make sure that once you launch your campaign it's going to happen quickly and fast. So when we talk about angels when we talk about you know who we should have in our campaign we should be thinking about that right now so I think the best time to raise capital is either this spring or this summer I'm sorry the spring of the fall and so we're in mid-May right now. You can take June July and August to really get your campaign right. I work on your metrics work on your angels work on your timeline. And then September wanderer's at 5:00 or whatever. After Labor Day. You can watch your campaign. So when we talk about getting an anchor angel you want to start thinking about that now because it could even be somebody that you don't know yet. So one mistake I see entrepeneurs make is that they'll say OK I go to Angel list or any platform really. And I look at the top 50 those are the most active most high profile most successful investors and by successful I mean not just in building their own companies but also picking the right company. So investors who pick successes in the past and they'll hone in on those. OK. And that's actually wrong for a couple of reasons. The first reason is that you had really thought to yourself hey this is investor knew anything about my industry. Now I'm going to give you an example because it's an example I think everybody knows by now a company called Bark box the bark box is dog products treatment that where it comes a monthly subscription. So let's rewind five years ago and say box art box wasn't here. I mean I want to create this concept. Nobody knows about it. Nobody has been thinking about sending stuff to your dog every month. So if I go to Angel list I think OK which Angel do I want and that angel doesn't have to be angels do you can find an angel anywhere and ask them to join angels already. Really. And what are they to say OK I see Mark Cuban here Mark Cuban. Great. I saw him on Shark Tank every Friday night. I'm going to take Mark Cuban. Now hold on a second. What does Mark Cuban know about dolls or has he ever invest in a subscription model. So perhaps you want to pick somebody like Ted from from dabster dumpster not familiar is a Web site for dogs. It's been around forever I think 10 15 years so clearly somebody like Ted who's the founder of dumpster can deep domain expertise so when somebody comes to your angel list of your post or your whatever page and they see that your anchor investor is somebody who has deep domain expertise in this idea that you're doing and let's admit five years ago Barcott could have seemed like a crazy idea that you're going to get more validation more social than people are going to believe more in doing so when you pick that anchor angel. Don't think it has to be a big name somebody that everybody knows. So that's on TV you know doesn't Mark Zuckerberg It can be somebody who just has a really great domain expertise so anyone who came on were on set to say we did the first one was metrics. That was your first one. Number two was angels just anchoring the right Angel getting that person in there. And of course I call it step zero in the course that just always focusing on your timeline. I think he could sit down right now and figure out OK if I'm going to raise capital on a public forum what is my timeline. I'm going to do at this fall. Okay great. So what happened June July and August getting all this ready. Meet the right investor. I'm getting my metrics in order and getting my paycheck in order and so far so good. And does anyone have any questions about that about picking the right angel finding the right angel. OK. So Sylvia is asking are there any PDX or materials for this call. And of course if you click Check out three steps to capital raising capital fast right over my head. That is where the Course is going to lead. It's currently in production. We're doing other videos this weekend. And the good people like you to me are making an image out for us image for it. So if you go to that page it probably will take you to my Web site where you can preorder for 24 bucks the course and it'll will be like you to me. I think Tuesday morning. So. And then plenty of PBS plenty of materials there in that. So in the course we're going to show all the metrics all the different type of metrics for different revenue models will show different techniques that you could meet angel investors and work really simple thing that I think people should do is that when you sign up for either angel list or rock the post or pretty much any major platform sign in with your linked in address you don't sign up with your Facebook or your Twitter. And if you tweet nonsense that's fine. They probably want to curb it a little bit but you want to think about your fundraising page. What where where were you have an angel list or rock the post is a representation of you and your company. Right so I talked about step zero being the timeline and getting prepared. Start thinking right now about what you look like online so Google your name google your company name and make sure that you have a really good presence and make sure that if an investor were to Google your company's name or your name they would find a Twitter a very popular hopefully Twitter handle with lots of informative tweets and helpful tweets. And you can start blogging right now. Set up your company's page with just a splash page if that's perfect for you. If you don't have much traction you start lobbying start putting a lot more content out there because that's another big thing of this especially when you're talking about investors who have never heard of you perhaps or in a different state or even a different country. I'm going to go online and see what they can find out about. So you can start thinking now made you July August of building your social footprints that when people go looking for you they see something very professional so again I link loggin with LinkedIn when you create your platforms. People can see oh look you know he's connected to somebody who I went to college with or something like that because that's the way that the world works. People use the internet to see what the relationship is. They want to see where you went to school to where you were. If you have recommendations in that kind of thing so think about all those things. You have a Facebook page. Do you have Instagram if that's your thing you give a very visual product a product of an instagram and a pinterest. And then again that's a metric right. So if you're just getting going but you have all this great wall of content then you're really helping people understand this certain problem that you're going to solve your company and you have lots of Facebook followers on Twitter a lot of fans so to speak. That's going to really present you well to an investor to start thinking about that. Know think about getting your image out there getting your LinkedIn profile if you don't already have one. Getting that all cleaned up and you know really demonstrating that you have done a lot in your industry and you can add whatever is most important to you that you're doing something in design it's you know did you interned with the certain you famous design and if you're doing something you know intact. What techniques did you work for. And you know like people just get started on their own. So you've done a certain you know boot camp a coding camp unexplained there. So explain as much as you can about yourself online that when potential investors come looking for you they're going to find something really great. So you've never been on either lock post or angel list and there's there's different tiers of information so that may actually out of the public is different for investors but you've got to remember that a lot of times before an investor actually clicks that I want to know more information. They're just looking at the public data right to make sure that it's it's what you want it to represent. So again we had number one was our metric. Number two was anchoring the right angel making sure that you're presenting yourself well. And then number three is just the whole process. So I was saying it's not a marathon it's not a sprint it's a high run it's a marathon in a sprint because when you're raising capital publicly you want to do it quickly. What are the mistakes I see entrepreneurs make. Is it OK. It takes about three months to raise capital like if you go historically and look at different deals typically takes from the minute you make the introduction until you actually close the deal is about three months. So they can take their time like oh I'm just going to go ahead and put this up there and you know take my three months but what I think you really need to understand is that you want to keep a certain date certain level of interest. So it's going to be up there for about 30 days. That doesn't mean that you get the money in 30 days. It just means that for about 30 days you're going to be make introductions getting information and when we talk about crowd funding you know we're talking about a $20 or maybe even a hundred dollar pledge to get this product or service so the ask is really small. So you know somebody's going to your Kickstarter page and getting you 50 bucks is not there's not a lot of trust that has to happen and it's a pretty low threshold but if you are on Angel list Iraq the post or any art form and you're asking 50000 bots there's a lot of trust that needs to happen there. So keep in mind that when you are managing a you know public platform accuity platform it's a lot different because the ask is higher. So keep in mind that you're going to want to pace yourself. I talk about this in the course about getting all your due diligence materials together and if you go and you just Google due diligence checklist you'll see a lot of different checklists out there and they seem kind of cumbersome because there's a lot of information into your board meeting notes probably don't have a board right. So I like to tell entrepreneurs when you think about the due diligence checklist you get that anything that you're presenting in your paycheck. So if you're showing that I have these customers and these ones I have a letter of intent and blah blah blah and you start talking about your pipeline you need to back that up. Right so you're saying you have everybody lined up you have letters of intent you should put those letters of intent in your due diligence package and you could put your doodles and package on like a drop box or a box or any any kind of share a place on the line or you can do an actual physical paper find whatever works for you. Put them on a disk or whatever makes sense for your industry. There are a lot of different you know digital warehouses and libraries where you can send data. So that's a really important piece of managing the chaos is get all of your materials in order start figuring out if your industry is the type that wants these imprint or watch them digital. I think most investors are moving towards digital. I've been sort of getting that ready now. Get your due diligence folder ready now so that when you're in the process and so you put your page up you have all these people asking you know to meet you. You should have pitched at the state talking on the phone or meet in person. Now they're ready but they want to see the due diligence right to make sure that you have that ready it's prepared and then the whole process happens where they give you a term sheet you'd have that they don't have it hopefully have an attorney you should have an attorney look at that and say yeah this is the this is a good perhaps negotiating negotiation that happened so of course I have a whole section of resources where you can see OK what is a convertible note. What does it mean there other types of convertible notes talked about this I think three months ago something called safe and that's a woman. Carolyn Labby from Y Combinator. She is an attorney who has created this whole different kind of instrument that says it's a convertible note but it doesn't have interest because romanced angel investors are not interested in any interest that they're going to get from their investment. They're looking for long term growth. So that's just a simplified version of the note. So you can start getting familiar with these things now so you understand a convertible note you understand a seat that doesn't have interest. You understand that you wish the capsule valuation cap and valuation. And that's another little exercise that you have to do. So what can evaluate the angel is just great because there's actually a little section that you can click and see you know aggregate data. Course it's not specific companies but you can see levels of valuations I would say that if you look at historical data it's about 2 million the sea model. It's a really hot company of course is going to be a lot higher. And if you're in an area that doesn't have a lot of activity it's going to be lower but. So figure out your valuation you know what you want your valuation have to be valuation cap is just helps to figure out how to use convertible note. Investors will convert into the series A. To explain how all of that works. The more you know the better. Don't wait too. You need to know to find out start doing your homework now. Again going back to step zero which is all building your timeline figuring out when you're going to need to know this information and learning it now so you're not learning it on the fly. You don't want to wait till September when you have investors interested and now they're talking about term and you have no idea what they're talking about so just kind of start figuring all this out now. And so again going back to the high red marathon and Sprint You can see how you know you've got to keep momentum going like every single day you're constantly talking to the investor giving them new information leading rather than showing the due diligence checklist looking at the term sheet talking to the attorney negotiating evaluation blah blah blah so you can see there's a lot of stuff going on. And it differs from a crowd funding campaign where it's pretty much what you're doing a crowd funding campaign you're on all the time but you're not on with a legal document. You're not on with valuation of your company. You're not on with all these different you know really important decisions so when when we say you know it's a marathon or a sprint I think a campaign when you're not doing equity is pretty much a miracle. Right it's a slow slow process fifty dollars here 100 there. No one is really into a really deep level of commitment and there's no legal documents to look at. And when you're doing an equity platform and basically you're doing a convertible note you're not getting equity. Yes. Remember it's a convertible. So there's an intent to give back what you said when you're on the coast or you're on Angel list or if you're doing an equity deal anywhere just keep in mind that you are eventually giving these people equity so there's a lot more paperwork a lot more to think about. It's more intense. So get ready for a very long long sprint. Let's see Brian has a question. My computer wants to update something about not right now and so for a Web site which is metric which its metric is based upon traffic or a large user base. At what point is the right time to approach control message at any time. So he is asking basically if your Web site is based on traffic users so think about a good example examples Pinterest Hello. Pinterest is just amazing. Like it really is all about you know just the traffic. I mean you have heard that they have a little bit of revenue but they haven't really established a robust revenue model and Pinterest is a good example like it's all about the traffic they have the number of users that they have. And then of course the old standbys Twitter and Facebook which we talk a lot about the economic forces we do a little case study in there and we look at you know Twitter for example how much they raise they may raised a billion dollars and they you know not been profitable yet but they had tons of users. And I personally and bullish on Twitter. I think it's a great company it's a great platform and just the massive amount of people users on here on the platform is amazing and also the quality of how we constantly go to our Twitter for news. We commonly go to Facebook for news and so we go back a little bit and talk about metrics and we talk about this in the course I think I'll add it here in the new Well your monthly active users your daily active user so monthly active users is going to tell you like Who's coming. You know during the 30 day period. Right. You don't understand the ratio of daily active because if someone's coming like Twitter and Facebook every single day. That's a good number to know so what's the ratio between daily active users and monthly active users who want it a little bit about it. You know these kind of the benchmarks of some work. And again I said in the beginning that don't be embarrassed of your metrics because they're not really great. You can say you know what are our. You two are and they are daily active to our monthly active was only here three months ago and now it's up here. So again show them the Delta show them the change. So you're not just saying our daily active users two monthly active users 2 percent goes up and it's higher than 80 percent but show them the change because when you're just getting started I think there's a temptation to look at somebody else's real and compare that to your behind the scenes. Right. So look at Twitter look at Facebook wonder wonderful traction people are obsessed with looking at news on Twitter. Any time anything happens you go search Twitter you know hey it was a fire. You can find out on Twitter. So don't expect your metrics look anything like Facebook or Twitter today. And those are good benchmarks to have but you just want to you know hopefully be progressing constantly fine tuning and then showing the investor why you improve. So you say you know we were here for six months or our ratio was not very good. And then we added this feature we added certain you know editorial content to our site. We changed this feature or you updated it in some way and all of sudden it jumped all of a sudden or our our daily active monthly active research showed up. So right there you're showing the investor that we have figured out the equation. We know what works for our target audience so as not to be a high ratio as long as you're improving that ratio that is a good indicator. I think a lot of times and testers are afraid to show their metrics. They think oh gosh we barely have any revenue and we barely have any users or patients aren't that good. But you know just as long as you're progressing that's the you know. I the example I love to use is Air B and B if you don't know your whole history go back and read that story just google the history and they'll show you that companies that we look at today we look at their sizzle reel so to speak where they look so great go look and see how they start it because it was not always an easy road it was very hard and there were times I had a great great benefit of hearing and be speaking in person and they talked about you know how they really didn't think get going to maybe at some point you know just felt like they were never going to figure out get traction and get moving and look where they are now. And the example why I think you're a great example for me to watch her read about is because when you see everybody in the news today they are constantly constantly whether it's just go or you are up against cities who are trying to battle them regulations and trying to shut them down. And a lot of times you can just look at this at face value and think How can these guys ever be a B just keep going when they're constantly being threatened by all this litigation. And to me what I think it is is because when she'd been battle tested once she'd gone through things like say cockroaches right you just can't kill them. You become stronger you know they say it doesn't kill you it makes you stronger. It's so true that when you're building a company if you know you fail and fail and you fail that you just keep getting back up eventually a failure or somebody coming against you. Litigation all of a sudden this doesn't really phase you because you're pretty much battle tested. So again Air B and B is a great great story to read and understand. You know how hard it is to actually get going and get traction. And as you know the is really great they're pivoting point was that they started going out and quote unquote doing things that don't scale. So they did not refer in there taking pictures of the places and putting them online because prior to that you know people were just putting their own photos up on Air B and B they were very attractive. You know you'd go look at hotels and then you'd go look at pictures on ebay and you're like OK you got to stay in a hotel but then air be what change for them is sort of getting obsessional photographer in there. And then really showcasing how beautiful these places were and all of a sudden their their bookings went up so you got to figure out you know what's that thing that's going to turn the corner and figure out what it means for you. So OK. So just to recap you all. The first step was the metrics understanding the metrics understanding whether it is your users or your daily to monthly active whether it's your conversion rate whether it's your sign up rate whether you're doing something for enterprise software or perhaps you're not going to have any of those. And it's just a matter of how many big customers or do you have customers that you're going out to. I talk about this a lot in the previous course is that the best money you can get is from your customer so hopefully that's how you're building your company you're building your company by going out to your your customer or your target audience or your end user and you're focused on getting their attention. So that's your metric right you're building your metrics if you're going out and finding data customers who are going to get the feedback and you know finding your product Those are your or your metrics you know we got 500 beta customers and that was so. Never be afraid to put your metrics out their opponents simply great. Just focus on how they are getting better. I didn't want your worrying. That's really the process of building a company is just learning and getting better and better and better. So so great. I always like to go for 30 minutes. We call this the office hour or my course and I just hit a button that says pause if I can put it back. I think I just paused you guys and I passed the chat. Yes. We always go for 30 minutes even though it's called up is our zoom shot here we go again. So yes so many questions about metrics about it finding that anchor angel investors going to make a big impact about managing the chaos. Anything I threw out there. And so anything that you want to know more about let me know now because we are building the course Porsche right now I'm just right now finishing today. All the content what we do typically do is we put everything into a Microsoft Powerpoint and all the documentation document documentation. And then we take the backlog right now if you wanted me to add something I can definitely do it. I mean over the weekend probably Saturday and Sunday we film all the videos so it's a screencast and they're going to experiment this time and do more on talking head video. So if you have an opinion on that let me know. But I do want to say about the class because I take a lot of classes too not just on me but everywhere. The thing that drives me crazy is when I want to learn more about know marketing something I started doing and I went to this it was really great. But like the first 20 minutes of the class was the woman telling me how to set up a MailChimp and I was like OK I pretty much know how to set up a male team if you to go. That's not what I need to know so I'm a big fan of time management so I'm never in my courses do I show you how to sign up for stuff so I will not show you how to sign up for an angel is to count or how to sign up for Rock the poster or anything. What would I do it we'll do it because I have accounts on both. You know I have my clients with accounts is that I am in a document what most entrepeneurs get confused about. If you go to angels and ask you what your evaluation happens I don't expect everyone to know that. So I will document. You know explain valuation gap and we talk about that a few sessions ago like you did and I'll do it again. So I'll explain valuation have explain you know what is it. What does a term sheet where you find a term sheet because that's one thing you can start doing now is get your turkey in order start reading it and start working with an attorney if you need them and figure out. And of course once you sign the term sheet you'll be working with an attorney. But just for this this part of discovery you can just go ahead and make some links in the weeks and term sheet and just start studying them and figuring out you know what's liquidation preference. What are rights. How many board seats do I give away or do I even have to get four seats away just all the things that I think you're not going to know. But I'm not going to tell you how to populate it because I find that annoying because what I end up doing I'm taking a course like that I'm like oh great. So I just go to email and I'm like responding to e-mail and waiting for that you know session to pass and then I want to hear you know tell me about you know marketing techniques that work. Don't tell me how to create my MailChimp account.