6 fundraising lessons from Techstars' David Cohen

April 30, 2014

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As a part of its 7 Weeks of Awesome tour, Techstars hosted a talk on April 21st highlighting the intricacies of finding and securing funding for your startup. Techstars founder and CEO David Cohen headlined the event, sharing his top tips for "fundraising awesomeness":

1) Make decisions that benefit the investor and the company

“The goal is to protect the founder, not screw the angel." You want an investor that believes in both you and your vision. This requires surrounding yourself people that also share that vision.

2) There are two major stipulations in financing

- Control Terms: This involves voting rights, limit your control. Make sure to guarantee voting rights for board members. Important point in seed round agreements to watch out for: can the board fire the CEO?

-Economic Terms: When securing financing you will need to keep in mind your valuation cap and ownership percentage. It is typical for investors to ask for 1x liquidation rights and to ensure you are not running a scheme. Option pools come from the founders, they reserve the right to issue stock to future employees to attract talent.

3) Know your market norm and valuation range.

These are different everywhere and typically come in the $2.5 million to $5 million range for Colorado.

4) Don’t go out for too much money, ask for a manageable amount.

80 percent of tech companies raise more than they set out looking for initially. Most companies go in knowing a range of what they want to raise, instead of going in knowing what they want to accomplish.

5) Gain positive momentum.

Rule of thirds: The first third of funding is the hardest. Amass followers, get to one-third and then make noise. Investors are in no real rush. They will not be the first committer because of the herd mentality.

6) Finesse the deal.

A soft commitment for investment is a "yes" under specific conditions. Once you get that soft commitment, ask the investor if you can use their name to help you get the next investors onboard. Deals usually happen in three months. Six months is a little too long, people get fatigued.

Check out our last Techstars post on growth hacking tips from DigitalOcean

Applications for Techstars Boulder are open, the final deadline is 5/4.

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