THE FUNDAMENTALS

OF START-UP
FINANCING
How the Hell can you
raise money in
Singapore?
Tanguy Lesselin

Agenda

Introduction
How much do you need
Types of investors
Investment criteria
Investor pitching
Investor hook tactics
Valuation and terms

INTRODUCTION

Money is hard
to find when
you need it,
easy to find
when you dont

Raising money is not

an achievement
it is a beginning

Funding = tons of dilemma

questions
How much do you really need?
What % are you willing to sell?
Raise less in order to minimize
dilution?
What duration do you need to cover?
Bootstrap or raise funds now?
Will I still feel at home in my
company?

At what stage are you?

#
companie
s

Idea
Initial team
Prototype
Product-market fit
Traction
Proven business model (*)
Revenue scale ($1m, $5m, $20m)

Valuati
on

* growing paying customer base with positive lifetime

value contribution

Think of financing as
several steps
01.2013

06.2014

01.2016

Seed

Series A

Series B

Pre money
valuation

1.5m

5.0m

15.0m

Investment

0.5m

2.5m

5.0m

Post money

2.0m

7.5m

20.0m

New investor %

25%

25%

25%

Remaining for
founders

75%

Prototype
Founding
team

56%

Product-market
fit
Early
customers

42%

Scale up
2m revenue
1000
customers

Etc.

HOW MUCH
MONEY DO YOU
NEED?

Pre revenue phase

How much you burn
How long you burn it
Number of iterations
to reach product-market fit

EFFICIENCY, SPEED, DECISIONMAKING

You should hate

multiplications
$10k

$20k

$50k

$100k

6
months

$60k

$120k

$300k

$600k

12
months

$120k

$240k

$600k

$1200k

18
months

$180k

$360k

$900k

$1800k

24
$240k
$480k
$1200k
Salaries
are almost
all
of it$2400k
months

Making the right decisions has higher

value than dumb money
No fat, decide well, play fast game

Your funding need

Do your cash-driven business plan, take lowest cash
point and add 30 to 50%
Do not account for revenues yet if plan to launch more
than 3-6 months from now
Make sure you get enough money to reach several
major milestones and still have time to raise a new
round
Dont be forced to raise at the wrong time
Enough to cover 18-24 months of burn + investments
If it is too much then iterate, because you may be able
do more with less (rethink you MVP?)

Why you will always get it

wrong
Underestimate costs and overestimate
revenues
You only know the revenue sauce when
you already make revenues

Build milestones based business

plans with clear go/no go decision
points

INVESTOR
CATEGORIES

Innovation financing (Singapore)

IP
O

Investment

Valuation

Private
Equity

15.0m+

50m+

Venture Capital
(Series A,B,C)

2.0m 15.0m

4.0 50m

Business Angels /
Seed (Series AA)

100k 1.0m

500k 4.0m

3F

30k 0.5m

200k 2m

Incubators

10-30k

100 - 300k

Grants

50 - 500

N/A

You / Bootstrapping

You and your team

(bootstrapping)
Monthly salary

Over 12 months

Founder 1

10 000

120 000

Founder 2

5 000

60 000

Founder 3

5 000

60 000

Founder 4

5 000

60 000

25 000

300 000

TOTAL

No salary is the first source of financing

Salaries make 80%+ of costs in the
beginning
Seek free / super low cost solutions
Get a prototype to show potential clients

Bootstrapping: how long?

As long as needed to attract investors
Pros: efficient cash management, no early
dilution, customer exposure from beginning
Cons: slower (time and money constraints),
may miss the big opportunity
You can get help bootstrapping (Founder
Institute)

Best companies get funded to

take the biggest chunk of the
market

Grants
25k 500k
Take them if easy to take
Make sure you dont add constraints
to your plan: IP vs speed to market
US VCs dont value IP before the
company has reached a stage where
it good to be able to defend

Incubators
10k 50k for 10-20% of equity
(indicative)
Mentorship / networking / accelerator
over short or long time frame
Works for idea / prototyping / ProductMarket fit
Booster for investor pitching
Great for first time entrepreneurs

3Fs: Friends, Family and

Fools
30k 500k
They trust you and want to help you
Make sure you are serious about the
project
Be very transparent on risks
Dont be greedy on valuation
Think of protecting them in future
rounds

Business Angels
100k 1.0m
Seek industry experts and smart
money with investor connections for
future rounds
Seek deep pocketed so you dont
need too many of them and they can
bridge if needed
May pitch BA associations (?)

Series AA
Typically 500k
A few funds in Singapore
Convertible debt or priced

Venture Capital
2.0 15m
Series A still limited in Singapore
Look also outside of Singapore

Some important trends

Government funding
Crowd funding: Kickstarter (US)
Start-up competitions, demos, prizes
Incubators: JFDI,
Online networks: AngelList
Multi-stage funds / investors

VC INVESTMENT
CRITERIA

Main criteria
Idea

Team

Product

Traction

Idea and Market

Big and
Bold

2 main investor mindsets

Disrupting an existing market

Creating a new market

Playing Big is as easy as playing Small

VCs seek the $100m revenue opportunities

Misconceptions on market
size
Online travel agency is not USD XXX
billion, it is only the size of
commissions and fees (addressable
market)
Also do a bottom-up analysis to
triangulate

A winning team
A+ people
Complementary
skills
Proven working
relationship
Ability to recruit
other top people
Ability to reach product-market
fit fast
Fact-based, ego put aside decisionmaking

Traction and metrics

Dependent on
development stage
Activation & Retention
Acquisition & K factor
Revenue & Profits

Your unfair competitive

advantage
Big market
lead
Big
technology
advantage
Exclusive
marketing
partnership
with industry
leader

Criteria ranking?

tion > Team > Product > Idea Ma

Dont rate
average in all
criteria, be
exceptional in

INVESTOR
PITCHING

Process and documents

First contact via introduction
Executive summary (1-2 pages)

First meeting
Pitching presentation (10 slides)
Product demo

Before Term Sheet

Simple XLS business plan
Team CV book
Cap table
Others as required

Pitching presentation
1. Elevator pitch
2. Problem
3. Solution (demo)
4. Market size
5. Business Model
6. Unfair advantage
7. Competition
8. Marketing & Sales
9. Team
10.Finance and milestones

10 slides
20 minutes
30 point font

INVESTOR HOOK
TACTICS

DREAM

Business Angels
Fund when you can make them
dream
before product development,
before launch,
before pivot implementation

Worst case: you have a product that

does not (yet?) solve customers
problem (trapped in the middle)

Business Angels
Predefine everything
Valuation
Shareholder Agreement
Process and Timing

Secure the first 30% quickly, adjust

terms with the first investor
Create a list of targets
Get introductions and go fast

Seed / VC stages
Get PR before starting funding
Sexy and committed Advisory Board
Key people pool (20% pre money for
instance)
Future team hires
Some key milestones fully achieved
No mess to clean up (leaving cofounder, )

Approaching VCs is a lot of

work
Better if they approach you (PR, competition)
Investor Relationship Management
Meet informally so you can call back later
Build a target list
Filter (investment size, geography, portfolio, fund
maturity date, )
Call portfolio companies
Test with one or two low priority and refine pitch
Introduction contact (Partner level)
Meeting 1
Follow-on

Create a competition
You want investors to feel the
pressure
Competition enables better
valuation, easier terms, and faster
closing

Fundraiser or not?
No for Angel / Seed stage
Potentially yes for Series A
Probably yes for later rounds
(Technology oriented investment banks)

Why?
-

The good ones know more investors and know them

well
Help you package your start-up and pitching
Help negotiate and close

Cost of fund raiser

-

Retainer (from 0 to 10k per month or lump sum)

Success fee (5-6%)

VALUATION AND
TERMS

Valuation?
There is no good model (DCF, P/E,
P/S)
Comparable (check thefunded.com
and other fund raising from
comparable start-ups)
You have to be a compelling
investment opportunity

Try to work backwards

VCs want to make
10
successful
X
BAs want to make
20
120
100
successful
X
80
60
3

100

10

Pre-money
valuation

40
20
0

if

if

Comparable:
IPO, trade

Terms?

You

VC

You

VC

You

VC

What is fair (personal

feeling)
Information rights: open books
Liquidation preference: 1X
Pro rata right of first refusal
Dragalong, tagalong
Board: try to keep control

Some of the ones you want

to avoid
Some veto rights (new financing)
Forced sale in 3 to 4 years
Too short to force liquidity

Preferred dividends
Take equity-like risks if you want to own equitylike benefits

Ratchet
do not come back on agreed upon valuation

Progressive cash inflows based on

milestones
Milestones are irrelevant (like budgets) in a fast
moving environment

You need to do your

homework

References
Financing Map Singapore:
http://sgentrepreneurs.com/wp-content/uploads/2009/03/megs-2
0090219.
png
Milestones based business plan (example): http://db.tt/fi4le3Rc
Capitalization Table (to simulate fund raising): http://db.tt/fi4le3Rc
Mint investor presentation:
http://www.slideshare.net/hnshah/mintcom-prelaunch-pitch-deck
How to pitch a VC:http
://www.slideshare.net/dmc500hats/how-to-pitch-a-vc-aka-startupviagra-how-to-give-a-vc-a-hardon
Guy Kawasaki:http
://www.slideshare.net/huer1278ft/the-art-of-the-start-37633
The VC perspective:http
://www.slideshare.net/benholmes/venture-capital-an-entrepreneur
smanual

Tanguy Lesselin
t.lesselin@cartouche.sg
+65 91 000 667