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Fundraising Timeline When to Start & How to Plan It with Emily Foote

Zoom recording
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💫 Short Summary

The video features discussions on entrepreneurship, fundraising, and investment strategies, with participants sharing their diverse experiences and insights. Topics include validating problems, user engagement, market demand, fundraising timing, and building strong cultures. The importance of understanding investor expectations, strategic decision-making, and tailoring investment approaches is emphasized. The video highlights the journey of securing funding, engaging with investors, and building relationships, with a focus on transparency, gratitude, and teamwork in the entrepreneurial ecosystem.

✨ Highlights
📊 Transcript
Introduction of Various Participants and Discussion on Entrepreneurship.
01:59
Gonzalo from Canada talks about an online proctoring alternative.
Michael from San Diego presents an online enrichment program for high school students.
Importance of grounded perspectives in entrepreneurship is emphasized.
Diverse backgrounds of participants and their unique experiences are valued.
Introduction of founders from Karachi, Orlando, Chicago, and Atlanta who have created impactful platforms focusing on healthcare education, DEI skills recruitment, HR data, and K12 communication skills.
03:39
The discussion shifts to fundraising timing and the significance of high ROI for founders, with Emily sharing her experiences in the field.
Alberto commends the founders for their impressive work within the Transcend Network, recognizing their dedication and innovation in their respective fields.
Career journey and current focus at Osage.
07:08
Started as a teacher, transitioned to education lawyer, then edtech entrepreneur, and now part of an executive team after company acquisition.
Osage is a Philadelphia-based firm investing in B2B software companies, with a focus on the future of work and education sectors.
Currently fundraising for a $150 million fund to continue investing in these areas.
Aims to be supportive investors to portfolio companies.
Focus on post-revenue investments, particularly in companies with around a million in recurring revenue.
08:59
Willingness to invest in companies with revenue ranging from a few hundred to 750k, with checks written from 500k to 2 million.
Capital reserved to support companies transitioning to the next stage, including providing bridge funding if needed.
Investments in education and the future of work, with examples such as Exec Online and Noodle Education.
Investments in software for tracking post-secondary success and tools for in-classroom data collection to enhance teaching practices.
Considerations for Fundraising Timeline
13:13
Founders should start by validating the problem to be solved and demonstrating demand for the solution.
There is no universal timeline for fundraising, as each company's trajectory varies.
Key metrics such as revenue, product growth, and user retention can indicate demand.
A co-founder shares a personal experience of validating a problem, demonstrating demand, and deciding when to start fundraising.
Introduction of practical skills class to address lack of real-world skills for college graduates.
15:58
National competition for transactional skills initiated, involving 50% of law schools in the US.
Grant secured to develop tech solution for enhancing teaching methods.
Success of competition and high class demand validates need for scalable solution.
Further exploration into tech-based approach for teaching methods initiated.
Transitioning from Grant Funding to Seeking Outside Investment.
17:45
The journey of building a platform and MVP with non-dilutive federal funding, testing demand, and receiving over $2 million in grant funding.
Validating demand through surveys and willingness to pay before seeking outside investment.
Grants as validation tools and investor perspective discussed.
Focus on customer value, product usage, renewal cycles, and growth strategies for success.
Importance of evaluating user engagement and stickiness in startups.
21:48
Context and individual business metrics are crucial in assessing success.
Seed stage investment benchmarks and revenue proxies vary widely.
Understanding user behavior and usage patterns is key to determining success.
Each business is unique, requiring a tailored approach to assessing performance and growth potential.
Importance of validating market demand and understanding market dynamics for business success.
24:31
Key indicators for success include high usage and deep market understanding, especially in early stages.
Building a strong long-term business model involves showcasing these metrics to investors and stakeholders.
Discussion on indicators of user interest, fundraising timing, metrics of success, and considerations for bootstrapping.
25:28
Fundraising decisions based on early indications of product effectiveness and customer demand.
Insights on evaluating if a business is suitable for a venture model, with speaker's experience and Osage's evaluation criteria.
Importance of clear metrics and understanding customer needs in making fundraising decisions.
Motivation behind starting a business: financial gain or making a significant impact.
28:33
Speakers had different priorities but aimed to create a large impact quickly.
Recognized the need for funding and pursued external investment.
Founders looking to fundraise from venture capital can find practical advice and past session recordings.
Fundraising and Responsibilities in Investment Firms
31:10
Limited partners and general partners play key roles in raising funds for investment firms.
Investors expect responsible fund management with a focus on returns and timelines.
Assessing a company's potential return is crucial for meeting fund targets.
Contractual obligations include distributing dividends and ensuring growth within a specified timeline.
Evaluating companies for investment potential based on revenue multiples and fund return goals.
36:43
Assessing company valuation and potential return on investment.
Consideration of market readiness and demand for growth.
Importance of understanding fund size and return expectations for venture firms.
Focus on achieving fund goals through profitable investments.
Highlights on Fund Size and Return Expectations in Investment.
38:18
Different fund sizes and investment stages result in diverse return expectations, with a goal of tripling initial investments over a decade.
Higher success rates are anticipated for companies in later stages of investment, leading to adjusted return expectations.
Fund strategies may involve investing in a smaller number of companies to increase the likelihood of success.
It is crucial to customize investment approaches based on fund size, investment stage, and anticipated returns.
Discussion on transparency and conversation flow during a chat, with founders sharing experiences in the Venture world.
42:24
Insight into initial interactions with founders and investor preferences for materials like pitch decks in decision-making.
Emphasis on the diverse and creative problem-solving approaches seen in the venture industry, highlighting the privilege of witnessing impactful solutions and social contributions.
Transition from operational roles to venture investing noted for its unique exposure to innovative thinkers and real-world issues.
Importance of a slide deck in pitching to investors.
43:36
Key elements include problem identification, solution validation, market size, and team strength.
Process of investor engagement from initial contact to term sheet negotiation.
Advises startups to focus on building relationships with investors by showcasing goals and progress.
Significance of understanding investor's timeline for decision-making and diligence process.
Key Highlights in Fundraising Strategy
46:21
Initial calls with potential investors should focus on introductions and progress updates.
Deeper discussions should cover pain points, solutions, traction, go-to-market strategy, and funding needs.
Further evaluations involve preparing data rooms with financial models, sales pipelines, and market research.
Extensive reference calls post-term sheet are essential to ensure a good partnership, focusing on industry and culture fit with the CEO.
Importance of building a strong culture to attract and retain talent in companies.
49:35
Extensive due diligence process after giving a term sheet to uncover dishonesty in companies.
Rare pulling out of deals unless fraud is uncovered during the deep diligence process.
Deep diligence helps prepare investors to be hands-on and good partners in the business.
Acceleration model post-investment focusing on talent, sales, marketing, product, customer success, engineering, and strategy.
Importance of Equity Before Debt in Securing Deals
51:17
Resource center connects CEOs to portfolio companies and helps fill leadership gaps.
Deep diligence is crucial for effective use of investment dollars.
Consumer multiples are higher than B2B, with examples from edtech sector.
Fluctuating multiples range from high to conservative valuations, emphasizing leadership team building in venture investments.
Key Highlights:
55:09
Founders need to attract and retain the right people to fill gaps in their team, showcasing awareness and commitment to seeking help.
Valuations in the fundraising market of 2023 are rationalized due to decreased M&A activity, leading to lower company valuations and a focus on cost control.
Founders must prioritize keeping burn rates low to extend their Runway, with a shift towards having at least two years of financial stability.
Entrepreneurs are adapting to survive uncertain market conditions by working with fewer resources.
Summary of Emily's insights and focus on transparency and gratitude.
57:10
Participants were thanked for their time and encouraged to participate in a team cheer to close the event.
Positive and collaborative atmosphere with a sense of unity and appreciation for the exchange of ideas and experiences.