Guide to Fundraising a Tech Startup

A lot of family, friends and community members reach out to me, asking about raising their first angel check. In fact, two in five Americans plan to start their own business in 2023, so I can imagine more and more people reaching out asking for advice. In light of this new business growth, I’ve decided to write an article to answer many of the basic questions one might have about starting their first technology company.

Here’s a very simple guide to help those in the technology sector get ready to raise their first angel check:

1. How do I create a pitch deck?

The classic Silicon Valley pitch deck framework is via Sequia Capital: https://www.slideshare.net/PitchDeckCoach/sequoia-capital-pitchdecktemplate

You can create a deck using the following programs:

Keynote - if you already have a mac it’s already on your computer ;)

Canva - probably the most professional resource for creating decks and very easy to use

Medium - easy layout for more out-of-the-box article format

Loom - adds your face and voice to the deck - more of a post-production tool

2. Where do I get a Safe Note?

Most founders use a YC Safe Note which you can find here: https://www.ycombinator.com/documents

Most use the first one, a valuation cap with no discount.?

3. How do I value my company?

The valuation of your company is based on market demand. Most companies start at a 2M or 4M Cap pre-product. Then you can double that if there’s a lot of progress and/or a lot of demand from investors wanting to invest. You will learn quickly if investors think your valuation is too high or low based on their reaction with they ask, “What’s your valuation?” You can also change it whenever you want to whatever number before you’ve got a signed Safe and money wired to your bank account.

Once there’s an investor who says ‘yes I want to invest’ and the valuation is agreed upon, you should raise from that amount until you’ve raised it all.?

I must say valuations do differ based on the country and where you live in the country. Silicon Valley has notoriously high valuations whereas other parts of the USA and the world have relatively lower valuations, in comparison to SV.

4. Where do I find these angel investors?

There are a few great places to find investors based on your category: consumer, hardware, sass, etc. They include NFX, Crunchbase, or LinkedIN. For Crunchbase it’s best to look up competitors and see who their investors are. You can also do a simple google search on a competitive company to find out who their investors are.

I’m also a huge fan of RocketReach.co to find emails of the investors you would like to reach. It’s a bit pricey but saves a bunch of time.

5. What is a ‘family and friend’ round? Should I do it?

This is a personal choice. If you have rich friends and/or family members, it does not hurt to get them involved in your investment early. It can be a win/win for you and them if you company does take off and you get some initial investment to get started. However, some entrepreneurs choose not to get family and friends into their company just to divide the church and state. Again, this is a completely personal choice.

6. How do I close an angel investor as a first-time founder?

In order to close an investor, you really need to build trust and show progress to new investors. This is why I always tell entrepreneurs to start to reach out to investors early so they can start the relationship and start to show the investors their progress. Email updates about your progress go a long way for investors who don’t know you well.

7. When should I incorporate and bring on lawyers?

I waited until I closed my first angel check of $50k before I hired lawyers and incorporated. All of this costs money so it depends on your financial situation. I highly recommend startup packages for new founders that should cost around ~$5k by companies like Orrick or other Silicon Valley law firms. I can only give advice from local SV law firms and am unsure how other legal teams and firms work with startup tech entrepreneurs in other states.

8. Should I join an Accelerator?

Yes! I always recommend all first-time founders apply and re-apply to a list of startup accelerators for several reasons. First, you will have an instant community of founders to meet and learn from. Secondly, you will learn the ins and outs of fundraising. Thirdly, you will get some great perks like Amazon credits and other very useful tools to start your company. And fourth, it helps investors respond to your emails and take a meeting since it adds a level of credibility and trust to you as a new founder.

Here is a list of the best accelerators although there are many more so feel free to apply for more + grants if that’s available for you:

1. Y Combinator
2. 500 Startups
3. TechStars
4. AngelPad
5. Launch (Jason Calacanis)

9. What should I do for the initial startup setup?

You should set up an email address, assuming you already have the name of your company and that is not taken. You should set up your email with calendly. This is how people will be able to set up meetings quickly. And also buy Zoom so you can have some extended meetings.

There’s actually a lot to the initial startup setup that can be a whole different article so here are just a few tools above to get you started.

10. Can you show me an example spreadsheet of how to track investors?

Yes, here’s a clip of one of my spreadsheets. I always have the dates I sent out the initial email and follow-ups. Green means they responded to my email and we’re moving forward with a meeting. Green can also mean they are “in” and want to invest. Yellow means I sent an email and they did not respond. Red means I spoke with them and they said no or they rejected to meet with me. Orange sometimes means they are on the fence and have not decided.

It’s important that you keep track of all your investors and write notes so you can remember why they said yes or no and more details about them that can help you later on in this startup or another company you might do.

11. What does your email blurb/pitch look like?

This obviously will change from person to person but it should say who you are, why you are reaching out to X investor, and what you’re trying to build. And WHY you’re the best person for the job. It should be short, around 3-4 sentences, and concise. Here’s an example:

Hi X,

My name is Joe Johnson, a Harvard graduate and computer science major currently building XYZ. XYZ helps bring elephants back to life. I’m very impressed with your donations to the Elephant fund and would love to get your advice.

I’m super passionate about this idea since I spent 10 years in Africa learning about how to live with and grow with elephants. I’m also very excited because I previously worked at a nature preserve and my parents are both zoo keepers.

Let me know if you’re interested in a quick chat. Thanks!

Best,

XO

Or?

Hi X,

I’m Joe Blog, a graduate of Stanford Start X Accelerator and Yale alumni. I’m currently building XYZ, in order to help children learn brail faster. I’m excited to be building the next generation of reading for the blind because I myself was also blind when I was young. Here’s a bit more about me:

• 4 years at Google
• 15-year volunteer at Blind School?
• 1.5M followers on Instagram

Let me know if you’re interested to chat more about this. Thanks!

Best,

XO

12. What are some of your favorite learnings from your experience as a founder for over 10 years?

“Ask for advice, you get $$” - “Ask for $$, you get advice”

This is a very useful quote for a first-time founder. You will need a lot of mentoring along the way and everyone loves to share advice, especially investors. So ask for advice and not money and you will get both!?

My second major learning is that you always have to look at things from the perspective of the investors. They get a lot of pitches throughout the day. How are they going to remember you? Most likely it will be from the way you made them feel. So go into your pitches with a lot of positivity and great energy and they will likely remember you more than the last entrepreneur they spoke with.?

There are many more questions to get to, even ones about how to find a technical cofounder and many more. If you have more questions, feel free to comment and I’ll try to write another article and answer those questions you might still have.?

Dana Loberg is CEO and Founder of Leo AR, the first augmented reality communications platform that gives anyone the power to enrich the world around them with realistic 3D and 4D animated objects and photogrammetry. Follow her @luckyloberg.