Programming Fact Sheet
Russell Colbourne : Your Money Machine
Season 5 Episode 12 – Strategic Funding
21 June 2021
Your business is Your Money Machine. Starting or growing a business has been likened to assembling an aircraft midway through its first flight. Having started and exited from a number of businesses including an Airline, I know what it takes to get your business off the ground. In this show, I’ll share some of the stories and lessons I’ve learned over my 30 years of entrepreneurial business experience as a Chartered Accountant with companies like Sir Richard Branson’s Virgin Group. During season 5 we’ll be following a structured path to building a globally scalable, investable business based on the Founder Institute Pre-Seed Accelerator flagship program that will create a logical roadmap to success. I’ll take you through some real life business building examples including my recipes for creating high performing organisations and we will take a look at some the mistakes I made along the way and the lessons I learned from them.
This show won’t build your business for you – only you can do that, but I will show you how to build your business efficiently and effectively, so you won’t have to waste time and money doing things out of sequence, back tracking over work already done or making the same mistakes I and many others have made before you.
Today’s show is about sharing the most viable funding options available to new startups and how you can allocate the proceeds from fundraising.
We will discuss the different types of investors and what they expect to see with respect to progress on team, product and traction. We’ll go over on how long it takes to raise the various funding types, how you can identify friendly investors to test your pitch on and how you will know when you are ready to fundraise.
What You Need to Know - The What
#1 (Minimum Victory Condition) Set a Victory Condition to achieve after three months
#2 (Funding Strategy) Consider a Funding Strategy to achieve the Minimum Victory Condition.
#3 (Hiring Plan) Update your Hiring Plan to meet the Minimum Victory Condition
#4 (Sales Plan) Update your Sales Plan to meet the Minimum Victory Condition
#5 (Product Plan) Update your Product Plan to meet the Minimum Victory Condition
#6 (Use of Proceeds) Examine the capital needs of the business.
#7 (Advisor Strategy) Organize calls with your Advisors to review the Plans.
#8 (Business Plan) Organize the various Plans into a short Business Plan.
#9 (Capitalization Table) Update and automate your Cap Table.
#10 (Draft Investor Pitch Deck) Refine your Investor Pitch Deck.
#11 (Company Profile) Create a company profile on the major startup and business platforms.
#12 (Deal Room) Create a Deal Room for future investors.
#13 (Target List) Identify local Angel Investors and Seed Accelerators, ignoring Venture Capitalists and Seed Funds.
#14 (Event List) Identify upcoming Pitch Events.
What You Need to Do - The How
#1 (Minimum Victory Condition) Set a Victory Condition to achieve within three months. There is a Minimum Victory Condition that fast growing companies have historically achieved within Three Months. The Minimum Victory Condition has a Team, Product and Traction component. For Team, the Minimum Victory Condition is that the Founders are all working exclusively on the business and have high profile people involved in the company. For Product, the Minimum Victory Condition is that there is functional version of the solution that is engaging customers. For Traction, the Minimum Victory Condition is that the Product has demonstrable demand and actual usage from a representative set of customers.
#2 (Funding Strategy) Consider a Funding Strategy to achieve the Minimum Victory Condition. As a startup, there are are two high level funding Strategies: to Bootstrap or to Fundraise. With Bootstrapping, the startup leverages the savings of the Founder and revenues from customers to grow the business without professional investors. With Fundraising, the startup grows to hit a business milestone. Upon reaching this goal, the startup then raises money from professional investors to achieve the next business milestone. If a startup grows quickly, the company normally requires Fundraising to sustain the growth, regardless if they were previously Bootstrapping, and, once a company starts Fundraising, then the company no longer Bootstrapping. At this phase, there are three Fundraising options available to startups: raising a Founding Round from people that you know, entering a Seed Accelerator or raising money from Angel Investors. First, choose your Funding Strategy, whether to Bootstrap or to Fundraise, and consider why this strategy makes the most sense for your business at this point in time. Next, rank order the following three options based the needs of the business: raising a Founding Round, joining a Seed Accelerator and raising from Angel Investors. Consider the benefits and disadvantages of each opportunity for your business, even if you are Bootstrapping. The rank ordered list is your Funding Alternatives, since, as a Founder, you must always have a list of viable options for the capital that you need to grow.
#3 (Hiring Plan) Update your Hiring Plan to meet the Minimum Victory Condition of the Team within 3 Months. The caliber of your team is one of the most important facets of fundraising at this point in your company development. It is critical that you identify at least one very strong addition to the team. Consider what categorises your successes with hiring to date. Think about any struggles you may have had with hiring to date. Document your plan to recruit and onboard Team Members given your successes and failures, and make sure to target a strong team addition. Provide a bulleted list of the steps that you will take to achieve the Hiring Plan during each week over the next three months for a total of 16 weeks.
#4 (Sales Plan) Update your Sales Plan to meet the Minimum Victory Condition. Another important facet of fundraising is having customers using and paying for your solution. This demonstrates to investors that there is a real market need. Think about your successes and your struggles with sales to date. Document a plan to increase the top of your sales funnel each week with new sales targets and convert as many of these sales targets to paying customers through the Steps to Revenue. Create a bulleted list of the steps that you will take to achieve the Sales Plan during each week over the next three months for a total of 16 weeks.
#5 (Product Plan) Update your Product Plan to meet the Minimum Victory Condition. Another important facet of fundraising is to have a strong solution or prototype of the solution. Using the lessons from your product development initiatives and speed of product development to date, update your Project Roadmap and Project Specification. Document your desired state of the product after three months from now working at the same pace. Produce a bulleted list of product development Sprints that you plan to achieve to hit this desired state during each week over the next three months for a total of 16 weeks.
#6 (Use of Proceeds) Examine the capital needs of the business. Extend your Financial Model to project revenues and expenses for a total of 24 months. Create a copy of the Financial Model and label it Use of Proceeds, which is the amount of money that you may need to raise from investors. In the Use of Proceeds spreadsheet, create a field that allows you apply a multiplier to the total revenues and a multiplier to the total expenses. Over the next 18 months from now, multiply your revenues by 0.5 and your expenses by 2.0. The total negative balance in this period will be your Use of Proceeds.
#7 (Advisor Strategy) Organize calls with your Advisors to review the Plans. Set up a 30 minute call with each of your Advisors and briefly review the Funding Strategy, Hiring Plan, Sales Plan, Product Plan and Use of Proceeds. Create a bulleted list of feedback from each Advisor, and update each of the Plans with the feedback that you feel is valuable. At the end of the call, discuss a strategy to engage the Advisors with your various Plans over the next three months. Think about the ways that each Advisor will help you with your various Plans.
#8 (Business Plan) Organize the various Plans into a short Business Plan. Take the Funding Strategy, Hiring Plan, Sales Plan, Product Plan, Use of Proceeds and the Advisor Strategy and combine them into a single abbreviated one page plan to share with your Advisors and your Directors.
#9 (Capitalization Table) Update and automate your Cap Table. Ensure that it includes everyone that you have granted equity, options or warrants to, including your Advisors. Validate that you have properly signed agreements by all parties for every grant. Review various online resources to manage your Cap Table online, such as eShares and CapTable.io. Implement your Cap Table into one of these online systems.
#10 (Draft Investor Pitch Deck) Refine your Investor Pitch Deck. Take your existing Investor Pitch Deck and refine it with all of your work to date, including details from your various Plans. Research at least two publicly available pitch decks from successful companies in a related space. Update your pitch deck with the best practices from the related company presentations. Ask at least one of your peers and at least one Mentor or Director to listen to your presentation with the Investor Pitch Deck, which should take approximately 20 Minutes. Watch the body language of the participants and take detailed notes on their reactions and their feedback. Update your deck with the best insights, making it the Draft Investor Pitch Deck.
#11 (Company Profile) Create a company profile on the major startup and business platforms. Go to Linkedin, AngelList, F6S, Gust and Crunchbase, as well as any other platforms that are relevant in your local market, and create a profile for your business. Use the short and simple language that describes your business.
#12 (Deal Room) Create a Deal Room for future investors. Take all of the relevant documents for investors in your File System and place them into one folder with subfolders, named Deal Room. These files include the 'Pitch Deck,', 'Company' documents with legal, 'Team' bios, 'Board Materials,' 'Financials,' 'Sales' information, 'Marketing' materials and 'Intellectual Property.' If and when you decide to raise a professional financing round, you will need to have these documents in good order.
#13 (Target List) Identify local Angel Investors and Seed Accelerators, ignoring Venture Capitalists and Seed Funds. Coordinate with your Advisors and other peers to develop a spreadsheet that will have two tabs: 'Angels' and 'Accelerators.' The Target List should include at least 100 local angels, 25 regional and 50 global seed accelerators. Do not add Venture Capitalists or Seed Funds to your list. Most founders are not ready to raise capital until they meet the Minimum Victory Condition, so the Target List is for future use.
#14 (Event List) Identify upcoming Pitch Events. Coordinate with your Advisors and other peers to develop a spreadsheet that has all of the major local events where you can pitch your company. Look to add events where Angel Investors will be attendance that you identified for the Target List, and during the events, look to make connections with these Angel Investors for future use.
Written by Russell Colbourne, FCCA, GAICD
Your Money Machine
Russell is a CFO and Entrepreneur who has worked across a diverse range of industries over the past 30 years. After a short service commission as a pilot flying Seaking Helicopters in the British Royal Navy, Russell studied business and qualified as a Chartered Certified Accountant (ACCA) in the UK. Since then he has been integral with the start-up of many successful companies and operations within larger organisations. He has bought, sold and spun off business operations in the UK, Australia and the US.
In 1994 Russell joined Sir Richard Branson’s Virgin Atlantic Airlines where he was responsible for a number of innovative services that were, at the time, ground breaking and helped revolutionise air transport. From launching the world’s first limo boat on the River Thames to developing the world’s first handheld check-in device and implementing drive through check-in booths around the world, Russell has helped the Virgin Group deliver unparalleled customer service. In 2000 Russell was the first of the Virgin team to arrive in Australia to start a new low cost Airline, and within 8 months had built a team operating flights between Sydney, Brisbane and Melbourne.
Russell now works as a Part Time CFO for a number of SME businesses in South Australia. He is the owner of www.chiball.com.au a health and wellbeing business, and www.feesable.co a crowdfunding website for educational costs. In 2019 Russell and his business partner Peter Hattam created Feesable which graduated from the Founder Institute Program in 2020. He is one of the local Directors of the Founder institute Program in Adelaide where he lives with his wife and 3 teenage sons.
To find out more about the Founder Institute program and how you can take your idea to a globally scalable, investable business, please see www.fi.co The material used in this show is based on the Founder Institute program and is used with permission.
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