Don’t Freak Out, The Fundraising Bible is Here
Everything a startup needs to know before raising funds
I work at The Family, selecting and supporting our entrepreneurs. One thing they have in common is the glint of terror (and excitement) in their eyes when the dreaded word comes up: F-U-N-D-R-A-I-S-I-N-G.
This Fundraising Bible is meant to lead you step-by-step towards a solid understanding of fundraising. At first, it may seem like a black box, where literally none of the words, concepts or references make sense. But you’ll see, patience, curiosity and the knowledge here will help you gain an understanding that is deep enough to reassure and impress any investor.
This Fundraising Bible is for you if you are an early-stage startup that is looking to raise a seed round or wondering whether it is the right time. It was curated over the years based on real founder needs that we have witnessed at The Family. It brings together the best resources for every aspect of fundraising and gives you our top tips & insights about each piece of content so that you can hopefully find exactly what you are looking for.
Table of Contents
- The very basics (when, how, how much to raise, what is an investor, what you should expect)
- Financials (understanding financial mechanisms, the nature of a deal, and the incentives behind investing)
- Getting investment-ready (pitch deck, pitching, and due diligence)
- Testimonials from real founders (what does it feel like to raise funds)
- More, more, more (so that you can become an actual expert)
Fundraising: First Steps
1. Get Yourself Warmed Up — Oussama Ammar
Fundraising is basically a sport. And like any good athlete, you should get warmed up. There is nothing better for that than a video called “Power. Money. Respect”. It tells you about investor psychology, what it means for a startup to raise money today & why it's important.
→ Good to know: Oussama is one of the founders of The Family. This is a great way to break down all the preconceptions you ever had about what it means to raise funds, and really start with an empty slate.
2. How to Raise Money — Paul Graham
Now that you are ready, here is a landmark article to get you going. “How to Raise Money” is a great general introduction to the basic “rules” of fundraising, like what it means to be in “fundraising mode”, attitude towards investors, best practices for picking the right investors, weighing risk…
→ Good to know: It was written by Paul Graham, the founder of Y Combinator, the world's most famous accelerator.
3. A Guide to Seed Fundraising — Geoff Ralston
Let's dive into this in some more detail — this guide tells you all about when and how much to raise, as well as different financing options available.
→ Good to know: It includes a glossary of basic fundraising terms, which is really good if all this just seems like complicated jargon ;)
4. A Fundraising Survival Guide — Paul Graham
This “Fundraising Survival Guide” by Paul Graham was written in 2008 but it is still very relevant — it deals with the psychological aspects of fundraising like managing expectations, handling rejection, frameworks to think about money and the mental flexibility required for this exercise.
→ Good to know: This one is quite long but it's a great read to really get into the fundraising mood and start to prepare for the challenge ahead.
5. 16 Common Questions About Fundraising — a16z
Because you definitely still have questions about the basics, here’s not-just-any-other FAQ. It combines really helpful insights from the investor, some slightly random questions, and a very conversational feel. It covers everything from financial mechanisms to understanding industry standards and what to expect from your investors.
→ Good to know: Post was written by a16z, one of the best funds in the world (investors in Facebook, Airbnb, Lyft, GitHub…). They have a lot of in-depth content about industries and trends, so there is no doubting the value of this source.
Understanding Financial Mechanisms
6. High-Resolution Fundraising — Paul Graham
Convertible notes are something you will need to understand — here is a primer on why they were created, how they help you avoid fundraising deadlocks and all the controversy you might encounter.
→ Good to know: This was written in 2010 and gives you a bit of a historical perspective on the “why” behind convertible notes. It is a great way to develop your intuition on incentives and investors.
7. The Truth About Convertible Debt at Startups — Mark Suster
Here is Mark Suster, General Partner at Upfront Ventures, explaining all the terms you didn’t understand about convertible debt in a very engaging article. It walks you through the different scenarios and the longer-term implications you might be faced with.
→ Good to know: Fictionalized case studies show you the different ways things could go.
8. Announcing the Safe, a Replacement for Convertible Notes — Y Combinator
Last but not least, YC introducing the Safe: A safe is like a convertible note, in that the investor buys not the stock itself but the right to buy stock in an equity round when it occurs.
→ Good to know: The closest French equivalent is the AIR, and you can find it here, for free.
Getting Investment-Ready
9. The Pitch Deck Template — Jean de La Rochebrochard
Pitch decks might be dying, but you will still probably need to make one. They are sent to investors to present the company and give them enough information to get them interested, but not so much that they feel like they know everything. Pitch decks are also used as communication tools inside funds so that investors can provide support when they talk about a deal. It will be more convincing than telling their colleagues ‘hey, I spoke to this cool AI-for-washing-machines startup’. So let’s brace ourselves and start with a bit of theory. In this wonderfully concise article, Jean de la Rochebrochard, Partner of Kima Ventures, explains the structure and content you should include in your pitch deck. It will give you guidelines about what not to miss. Super simple, expedient and practical.
→ Good to know: Jean used to be a fundraiser, so he was literally a professional deck maker, and is now an investor. All the know-how you could possibly need on the matter.
10. Pitch Decks Archive — Product Hunt
Time to get inspired. Let’s see how founders have put this theory into practice and give you some idea of what great looks like. This is a compilation of the best decks the world has ever seen.
→ Good to know: Make sure you check out the date and the funding round. More recent decks will likely be more aligned with the current “standards”, although older ones are inspiringly simple and clean. PS: If you want to make your decks look this nice, Ludus is a great tool to make a deck that really stands out.
11. The Last Pitch Article You’ll Ever Need — The Family
Pitching is as much an art as it is a science — read this post by Younès Rharbaoui to learn everything about the Why and How behind the perfect pitch (yes, there is such a thing).
→ Good to know: If you want to check out some really great pitches, Americans are definitely the reference point. You can start getting some insights on what that looks like here.
12. Startups need to do due diligence, too
Startups are not the only ones that should be submitted to a due-diligence process. You need to watch out for your investors, too — here are a bunch of red flags 🚩
→ Good to know: Few founders think they have the ‘right’ to do this, because they are being given money. But they do: “Do your homework. Do it early. Do it often. Don’t be afraid to ask for references and more info about the person who’s investing. If they’re sufficiently motivated and interested in you, they should be happy to do it. If they’re sufficiently smart, they’ll respect you asking.”
Testimonials: Founders on Fundraising
If you want to go the extra mile
13. Venture Deals — Brad Feld
If the articles weren’t enough; this is an essential book to learn everything you need to know about fundraising. It covers all the terms in depth, explains the structure of the fund, who is responsible for what, and some pretty clever negotiation tactics.
→ Good to know: Watch out, non-US founders, the technical bits are usually different across countries and standards may vary for what is ‘normal’ or not. But no matter what it will give you a good idea of what to expect; and, quick tip, there are many editions of this book so try to get the newer versions.
14. How to Convince Investors — Paul Graham
You might have noticed, Paul Graham keeps coming up a lot. Here he covers strategies to persuade investors to invest in your company. He walks you through the process from an investor’s point of view and covers topics like how to speak about yourself and your market …
15. Pitching Hacks — Venture Hacks
If you are really keen on pitching, and want a bit of entertainment, here is an entire book on the subject.
16. If this is your first time raising money — Twitter
To finish us off, here is a fun (very short) series of tweet-like conventional wisdom from prominent investors in the US — a summary of lessons learned. Hopefully, they will make sense by now.
17. The Art of Raising Funds on Linkedin — Pietro Invernizzi
If you haven’t found what you wanted, or you don’t think institutional investors are the right fit for your company, consider other alternatives. Raising from people who might have a personal interest in your business could be an option. This article details how you should approach business angels that you do not know. It’s very practical and will give you a brand new perspective on investment sources.
→ Good to know: This article has been used by startups at The Family to complete fundraising rounds with business angels, or even get them out of serious cash-flow problems.
If you have any great content that you have come across about fundraising that you think should be added to this list, please reach out, I would love to check it out :) emilie@thefamily.co
