How to Raise Startup Funding: EVERYTHING You Need to Know（原声文稿）

You've got a business idea and it's going to change the world. And all you need to make it happen is funding.

million dollar rounds at million dollar valuations.

If that company managed to raise money, why can't you?

I'm going to explain everything I know about startup funding in this video.

From starting the company to a series A, B, and only alphabet series. We're a venture-bred company ourselves.

do for a living is teach founders how to navigate this stuff.

to understand first, which is whether or not your startup can raise money. Startups fall into one of two baskets.

the million dollar rounds, the crazy valuations, the tech crunch kind.

company because they are betting on that explosive money that they invest in is if A, another company buys which I I guess also means people acquired this business.

OG investors in a company can make 300 times their original investment.

That is the venture capital game. But what about this other basket?

Well, this business is not looking to be sold or to IPO.

It's looking to just be a normal business and make money.

Maybe the founders really like working for that company, being their own boss. Maybe they wanna inherit this business to their children. Maybe they don't wanna share control with anyone. They want that 51%.

raise money from investors in the other basket.

You don't get to raise a million dollars for 15% of your company.

funded, but today we're not gonna focus on that kind. Today we're focusing on the explosive growth kind. So let's finally talk about funding now.

out and doing this will cost you a lot of money.

actually spending more money than your company makes.

Think of how much money Facebook burned before it made a profit, or Amazon.

goal, and if it pays off, it pays off really well.

But to get there quickly absolutely requires external capital.

of funding all the money that this company will need up front, so you have is launched and when it's growing, and they're raised to make B rounds are for companies in their $10 million revenue range.

preset company, you should not waste time talking to seed investors really wasting your precious time.

The requirements for product.

Seed decks are much more about customer traction, tactics and making sure that you can replicate them.

financials are healthy and as the rounds get bigger understanding what The bulk of the work that we did was precisely around this, metrics would make for a good case on the pitch deck that would prove to investors that the company understood how to take over the market at that point Series B.

Series B, so the approach must have worked.

want to check that out.

Now, very crucially, as you go through these rounds, Series B stage, founders will no longer own a controlling total shares will represent less than 50% of the means that the board can fire you if you don't do your job well.

company or do you wanna own 20% of a $500 million business?

I hate the term lifestyle business, but this is what the 100% of $1 million means.

probably more money than you would do on a normal job.

can probably find the exceptions, but for the most part, that's the way it works.

Your business is going to rely on investors for many years.

And there are horror stories about founders being ousted by the board.

couldn't raise the next round of funding because they just depend on them.

One of the most common reasons for this is getting stuck between rounds.

sinking ship pre-seed money should last you to seed finish your product and you aren't able to launch it situation too early for a seed round But too late to raise pre-seed money again survive and well That's a story for another day actually need and budgeting that accurately is crucial mostly your job as a founder I had to learn how to do this myself and it's a free download too, I'm going to link it in the description.

founders master this stuff, the financial modeling, the forecasting, the formulas.

It's a live, very intensive spreadsheet geeking week, I'll also link that below.

about being absolutely 100% sure that the money to get the company to the next fundable milestone and not get stuck in the middle. But let's actually talk about the funding route now. What's the procedure to get investor money into the company?

I have a little trivia for you. How do you give shares to investors?

A, the company creates new shares for every new investor.

B, the company reserves some shares to give to them.

C, the founders sell part of their shares to investors.

Or D, the percentage ownership is redistributed every time. Let me explain this in the simplest terms I can.

want to split it equally, they'll each get let's say 10 shares, 50-50.

Walt's shares will never change hands or be sold to investors, nor will Jesse's.

to their startup, what will happen is the company will create new shares for them.

still have 10 shares and the new investors will get new shares in their name. And by doing that, the company's total shares will change.

but not the shares that each one of them owns.

work, especially for C-corps in the US, which is the standard business type.

for multiple rounds of funding because you have to distributed shares all the time and it's a very complicated legal mess.

Now the question is, how many shares would an investor get? And for that we need to talk about valuations.

and what reward to get if the investor is right.

be enough to keep them motivated and working hard for years or decades to come. So let's use a story that we're all pretty familiar with, Facebook.

and he agreed to give Mark and Eduardo $500,000 in exchange 10% of the company, that means the entire company is worth because assumes the money is already part of the business.

pre-money valuation. So now let's think of that in bricks.

had established the company with a total of 100 shares.

Again, if the company is worth $4.5 million, then each share is worth $45,000.

enough to buy about 11 shares of this business, adding up to $495,000.

So the company creates those shares and sells them to Peter. So we end up with 111 shares.

Peter has 11 out of 111 shares, which is about 9.9%.

For example, Eduardo's 30 shares, for example, have been diluted. They no longer represent 30% of the company.

They are now 27% of the total.

the number of shares that you start with as a founder probably hasn't changed.

bunch of new shares for your investors and potentially for your employees.

number of shares that represent a different percentage of the business now there is no real way to put a value on a business That makes no money.

There is no way to value an idea or a team forecast but trust me, most of the time, that is pretty useless.

the investors on how much risk versus reward there's going to be.

If you don't have a choice and there's only one investor interested, well, you don't really have a lot of bargaining power. Remember that we're in the explosive growth basket.

All businesses in this basket are supposed to become huge unicorns, public companies.

So your forecasts today aren't what makes the difference.

They don't make you special. It's your ability to execute.

these days are three to five million dollars.

company that you're working on is a hundred million dollar or more company. At seed stage and on, it's a bit different. There is revenue now or there should be.

on a multiple of your growth, maybe five or 10 times your annual revenue.

Now, a quick disclaimer here is that having investors in your cap table, with complications, extra work.

There's compliance, they're going to get.

And one way to delay all those awkward about how convertible nodes work if you want to access to monthly office hours with our team to clarify all these questions gonna link that See you guys in the next one.