What kind of capital should I raise?

financing venture capital Apr 05, 2022

This table shows the typical sources that are best based on your company’s stage of development. Your mileage may vary.

 

Friends & Family

Angel Investors

Venture Capital

Crowdfunding

Usually Called

Friend and Family Money

Seed or Bridge

Series A, B, C etc.

Several types depending on size. SEC regulated. Types are CF, A which have different requirements for reporting, etc.

Employees

0 to 10

1-15

10+ to 500

0 to infinity

Annualized Revenue

$0 to $500K/year

$0 to $2M, more the better. Path to profits with scale clear

Rarely $0 or less than $500K annually, but can be any amount.

$0 to $2M, more than that you may have better sources that can be more helpful.

Product Maturity

Idea to prototype

Close to or have an MVP already.

Working product with likely improvements in the pipeline but operating at many customers.

Idea to $2M annual revenues.

Deal Structure

Convertible or SAFE note with a discount on the next round of 10% to 25%.

Convertible or SAFE note with a discount on the next round of 10% to 25%.

Complex and negotiated with many covenants, terms and restrictions including board seats and veto power on many things.

Whatever you propose, but good investors will avoid unfair deals. Generally, you will/can get a better valuation, because you set it, than professional investors would pay.

Typical pre-money valuation

$500K to $5M but convertible note gets around the need to set a valuation, so not really needed. A conversion “cap” is usually set.

$1M to $5M. Could be $10M to $20M in some industries and situations for syndicate deals.

$5M to $1B depending on many factors. An art and a “what the market will pay” issue, really. Perception can override reality. Look at Theranos.

Varies wildly based on risk and size of opportunity. Can be a note with fixed interest rate or a multiple (maximum) return. Or equity. Or anything you like that meets SEC crowdfunding laws.

 Some may argue these numbers are “conservative” and you could get money with less.  Others may argue the opposite. Ask yourself: How many deals have they closed in this same stage of company development? If the answer is zero, ignore their uneducated opinions.

Click here to get this Financial Package

 

How to Raise Millions for Any Company - Online Video Course


Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. And helps established companies scale faster using the six AirTight Management™ systems. And helps companies successfully raise capital.

Call (619) SCALE06 or email [email protected] for a complementary strategic consultation.

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