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.
Following 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:
* 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 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.