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Summary:

Editor’s Note: Serial founder Aruni Gunasegaram has written for Found|READ about the virtues of ignoring “the experts” (like Michael Porter) and the things no one tells you about VCs. Aruni also wrote about her plans to seek angel funding for her current company, BabbleSoft, which builds […]

Editor’s Note: Serial founder Aruni Gunasegaram has written for Found|READ about the virtues of ignoring “the experts” (like Michael Porter) and the things no one tells you about VCs. Aruni also wrote about her plans to seek angel funding for her current company, BabbleSoft, which builds Web and mobile software tools for parents. Aruni has now amassed what she calls her funding “tool kit,” and she shares it with us here.

sears-toolkit1.jpgFollowing on my post, Other People’s Money – The Hunt Begins, I thought it might be interesting to share what I will be putting in my Fundraising Toolkit. I plan to raise seed financing from angel investors for Babble Soft, and here’s what I have in my toolkit.

Executive Summary. Thankfully people have moved away from the 35 to 40 page business plans that used to be required when I raised money for my first company. Now it’s easier to get your foot in the door with a 5 to 7 page summary. If they are interested, they will ask for additional information. In a typical Executive Summary you will see sections on:

* The Company
* The Problem
* The Solution (i.e., Your Products)
* The Market (including Competitors)
* The People
* The Numbers (i.e., the Financial Projections).

Financial Projections. In my opinion, creating Financial Projections for an Internet startup is often an exercise in futility that shows you have an idea of how you will make money. Most experienced technology investors know that predicting the future is a crazy process at best especially when you are starting from ground zero and success primarily depends on many viral factors. Financial projections for IBM are much different than financial projections for an Internet start-up. The assumptions you make are the most important part of the model as they give the investor an idea of the homework you have done on the market.

Some venture capitalists like high profile Fred Wilson of Union Square Ventures go as far to say that sometimes you can wait to scale before figuring out and executing your business model when describing his stance on Twitter’s lack of a current business model.

Since Babble Soft is not Twitter, I’m not already a gazillionaire, and I have a million things to do, I have a sharp MBA student, Anand Balasubramanian, helping me create an Advertising and Subscription based model. I love energetic, rock star, cheap, student help! He has done a great job so far building a simple, easy to understand financial model for me.

Visuals. Since I’ll be raising funds for products that do not exist yet, I have engaged a great local design, user experience, and information architecture firm, Projekt202, to create a few mock-up pages illustrating both the web and mobile components of our new applications. They seem as excited about the vision as I am and are taking on some of the financial risk with me. It makes me so happy when I find people who get what I’m trying to do! I’ll also have a demo account of Baby Insights and Baby Say Cheese ready to log in to demonstrate our existing applications.

Investor Leads List. However you choose to keep track of your calls, meetings, and referrals it’s important to do so. I have met entrepreneurs who want to raise funds who aren’t organized about the process and end up looking a bit flighty. Unfortunately the investors are allowed to be flighty but they usually don’t tolerate too much flightiness in entrepreneurs. Remember: “She who has the gold makes the rules.” After a while it’s easy to forget what you promised to get to whom and who referred you to whom. It’s important to remember at what stage of the investing dance you are in with each potential investor. On this spreadsheet I plan to keep track of:

* Name
* Contact Information
* Professional Background
* Who Referred Them to Me
* Investment History
* Typical Investment Size
* What Items They Need From Me, and
* Personal Assessment on the likelihood they will invest.

I would be downright ecstatic to put someone on the list referred to me by a reader of my blog. � :-)

Passion Tempered With Wits. I think that often the big thing that can swing an investor, especially an angel investor who has been in your shoes before when building his/her company, is your passion.

* Why are you doing this when there are much easier ways to make a buck?
* What will keep you going?
* What excites you about the business?

I am passionate about helping new parents and caregivers connect and find answers. I am passionate about building a business. I am passionate about finding great people to work with. If that passion is tempered with some logical thinking, that’s a big huge ‘ole plus! All of us entrepreneurs are a bit crazy at times so I just hope I don’t lose my wits in the middle of an investor pitch!

Since I am still working on everything above except for my passion which has recently been reignited, I’ve got a lot to do before the meetings I already have set up with potential investors in the next couple of months. If you have suggestions on other things I should have in my fundraising toolkit, let me know by leaving a comment below. It’s been a while since I have raised money and I’m always open to learning new things.

Join me for the journey. Subscribe to my blog and hold on to your stomachs, it’s bound to be a scary roller coaster ride at times!

aruni.jpgAruni Gunasegaram is the founder, with her husband, of Babble Soft. Previously, she founded Isochron, a dotcom founded in 1997 that was sold in 2002. Read Aruni’s previous Found|READ contributions on the virtues of ignoring experts like Michael Porter) and a few things no one tells you about VCs. For even more, see her blog, entrepreMusings.

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  1. philip wilkinson Friday, January 11, 2008

    Hi Aruni,

    Definitely need a section in there about the “risks” your business and market has going forward and some ways you might be able to prepare or counter them. Needs to be a really honest assessment.

    Good Luck!

  2. I think you should also get a smart CS student to get the babblesoft website to work with firefox.

  3. Hi Philip – you are right about including the risks in there. I will definitely make sure to address some of those.

    Hi Steve – as far as I know our application site and website works with firefox. the one we’ve had more issues with is safari. if there is something in particular that doesn’t work, please let me know. It works on my firefox browser.

  4. Aruni – I think Steve was referring to Firefox on Mac. It’s unlikely that potential investors will be visiting the site on that combination, but there are some issues on the landing page. I’ve taken a screenshot so you know how it looks;

    http://dotneil.com/shared/images/babblesoft_firefoxmac.jpg

    Tell your designer to add the ‘clearfix’ fix to the stylesheet, and to apply the rule to the floated divs; the table element containing “Whether you need breast feeding support….” has floated up into the element above because of a ‘float: right’ rule.

    Back to the original topic: For the last few months I’ve been going through the same ordeal as you. However, I’ve been in the bizarre position of being offered angel money right from the inception of the idea (I can put together front-end interfaces, so I was able to demonstrate what looked like a finished product, and I have lots of very helpful, high net worth contacts), but I now strongly believe that Web businesses are far better-off finding the right founding team (i.e. capable of getting the product to market) and building the product without doing the investor dance – especially VCs. You’ll always struggle with VCs if you’re pre-revenue, even if you have the right introductions. I’d rather hang on to equity, get the right founders on board, and find a revenue stream that supports the businesses’ growth.

    If you have to go in to angel or VC negotiations without customers, revenue, or some kind of adoption, you have to be 100% confident and have completely unwaivering faith in your business proposition. Being able to talk an investor through the customer experience, step-by-step, is also a must. This is especially true for Web start-ups, for which the customer (user) experience is everything.

  5. Neil – thanks for the link. I had not checked the site out recently using Firefox on a Mac. You are very right about waiting as long as possible to take money. If you can find the right founding team who will work for free and get everything out there and start showing significant traction then you are in a much better place to negotiate. Sounds like you have the right approach.

  6. Good assessment! You are pretty much on target. Executive summary is right. Financials(or lack thereof) is right. Visuals is right. Investor leads list is right. This one is very important. Do your homework on any and all angel groups. The good ones will respond well if you know a little about the group. Doing your homework will keep you away from the bad ones. Passion for what you do does count.
    Here’s a list you might want to take a look at:

    http://www.angelcapitalassociation.org/dir_directory/directory.aspx#4

    Good luck!

  7. “My Funding Toolkit” « Friday, January 11, 2008

    [...] “My Funding Toolkit”  From FoundRead.com: [...]

  8. Good post and good comments. I’m posting a link to this to my own community, startuplounge.com.

    — mike

  9. @Knox – thanks for the link to the angel association. I did not know a larger organization existed. I know they have groups in Texas in each of he major cities.

    @Mike – thanks for linking back to the article. I hope it helps other entreprenuers.

  10. entrepreMusings » My Fundraising Toolkit Tuesday, January 15, 2008

    [...] Jan 12, 2007:  Found|Read republished this very post  on their blog and called it My Funding Toolkit.  Check out that post for some great comments!  They have many more readers than my blog [...]

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