Stubbs Alderton & Markiles and the Preccelerator Program are proud to announce the launch of their Startup Superhero Video Series - featuring SA&M Attorneys, Preccelerator Mentors, and entrepreneurs on topics specific to entrepreneurship and lessons learned throughout the journey.
This week we're featuring Preccelerator Mentor Lisa Tsou as she talks about "Fundraising Tactics."
Lisa Tsou provides independent strategy and solutions for entrepreneurs so they can grow their businesses to the next level. She is passionate about working with innovative entrepreneurs and startups to develop unique strategies to grow and fund their businesses. Whether you are a startup on the track for traditional venture-capital financing or an entrepreneur on a more offbeat path, she can collaborate with you to develop and implement a creative and practical strategy for success. Lisa also speaks regularly on issues related to startups, tech and women in business. She has been a featured speaker at events including The West Hollywood Women’s Leadership Conference, The SoGal Summit, The USC Graduate Women in Business Summit, Women Founders Network, and Bruin Entrepreneurs, and appeared in publications including The Huffington Post, CNBC, GenHERation and E The Magazine for Today’s Female Executive and the Business Rockstars program.
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Transcript
Speaker: Lisa Tsou
Moderator: Heidi Hubbeling
Startup Superhero Series-Intro with Lisa Tsou "Fundraising Tactics"
Heidi: Today we are featuring Lisa Tsou of the Winning Pitch and Lisa is one of our mentors here at the Preccelerator. She specializes in fundraising, pitch-investor decks, helping companies with their formal presentation as well as other kinds of strategies for fundraising. Tell us a little bit about yourself and thank you for being here.
Lisa: Thanks Heidi. I started working with startups back twenty years ago this year, when I graduated from law school. Spent many years on Wall Street doing Venture Capital, Ipos, mergers and acquisitions, all with tech and startup companies. Spent my whole career on startups and am now concentrating on the part I really enjoy which is the growth part of startups. Working with startups on their fundraising, their investor strategy and positioning for investors.
Heidi: All very important things, especially at this stage within the Preccelerator and other startup companies in this Los Angeles ecosystem. Going back to the fundraising and preparing the pitch presentation, what exactly are investors looking for when companies are starting that fundraising process?
Lisa: I think the best way to think about what investors are looking for is to think of it as a risk reward ratio. Basically, venture capitalists are looking for a really big reward and as small a risk as possible. They’re looking for things with really big markets or things a consumer or a business would be using with a lot of frequency. Something that can get really big and then they are trying to find things with as little risk with the really big as possible. Things that would be considered as something like a risk would be does your product work? Does the consumer like it? Things like what other competition might be out there? I like to think of it as that kind of ratio.
Heidi: That’s a great way to look at it. In a life-cycle of a company, especially with these early stage companies When is the right time to start fundraising? What are those key metrics?
Lisa: I’m going to say something that I know is going to sound really contradictory, but it’s a combination of as late as possible and earlier than you think. A lot of startups go “oh I should go out there and find a venture capitalist to fund me” without thinking through when do they really need the capital? Can they go a little longer? The longer you can go without outside financing, the stronger position you’re in. If you go very early, the venture capitalist is going to take a lot of your company control and you are not going to get as much capital as you would like. So, on one hand think as late as possible on the other hand, from that point start earlier than you think. It’s going to take longer to get in front of investors, get them comfortable with you and build that relationship. From that point when you think you need capital, I would say start certainly start six to nine months earlier than that.
Heidi: The due diligence process by itself once you actually have somebody who is interested in funding you can take four, six, eight months at that point. Also, figuring out whether or not venture capital funding is right for you, versus angel investors versus small business loans. Whatever funding that type of company might need depending on their scalability.
Lisa: Absolutely! Investors are going to ask questions and you may need to think things through or vet some other elements of your business before they will write a check.
Heidi: What are your tactics? What do you suggest to startups when they start looking for funding? How can they get in front of an investor or a VC?
Lisa: It’s a combination of research and somehow wrangling a warm introduction. The research part being finding the right VC or investor depending on their situation. That makes sense for them. How big a check the investor generally writes and the industries they may be comfortable with investing in. Doing that research which will take time and then wrangling your warm introduction to get to them. A lot of investors are not going to be receptive just cold email or blind submissions to them. Working your way through your network, which may be a five or six step process to finding the person who knows a person, who knows a person, who knows a person, to getting in-front of that investor.
Heidi: That’s very important. So, you have been a value and a resource to the Preccelerator program. What are some of your favorite things about being a mentor here, about the program and working with the companies?
Lisa: I really enjoy working with the Preccelerator. As I said I was an attorney at one point doing this kind of work. It’s fun being around really smart people like at Stubbs Alderton and the other mentors who are also awesome. I just love working with the companies. I think you put together a really smart batch of companies who are doing a lot of interesting things in different industries. It’s always fun to come over here and hangout for a couple of hours and see what they’re doing and see if I can help them.
Heidi: I am proud of them! It was great to have you here and we will see you guys next time at the Startup Superhero Series.
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To learn more about the Preccelerator Program, contact Heidi Hubbeling at .
Stubbs Alderton & Markiles and the Preccelerator Program are proud to announce the launch of their Startup Superhero Video Series - featuring SA&M Attorneys, Preccelerator Mentors, and entrepreneurs on topics specific to entrepreneurship and lessons learned throughout the journey.
This week we're featuring SA&M Managing Partner Scott Alderton as he chats about "How to Position Your Company for Financing." Scott is the Co-Chair of the Venture Capital & Emerging Growth practice at Stubbs Alderton, General Partner of SAM CREATV Ventures, and a thought leader in the startup financing space.
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Transcript
Heidi: Tell me a little bit about your practice and experience and what you love most about working with emerging growth companies?
Scott: Sure, I have been doing this for a long time. My practice is broad-ranging. Early on in my career, I was more of a corporate & securities lawyer doing traditional SEC type of work with larger companies. As this thing called the “Internet” began to develop in the '90s, it looked like it was interesting, I transitioned my practice to being more of a technology and venture capital lawyer. I really like working with companies all along their evolutionary path, but I really like working with early-stage companies. They have diverse, wide-ranging needs, they typically don’t have the resources that large companies have. I feel like I can play a vital role as an advisor even more-so than a lawyer. The lawyering part is the easy job to me, the advising part is really the fun part.
Heidi: Let’s talk a little bit about emerging growth companies and how they approach financing. What are some of the things an early stage company should be thinking about when they are going for funding. If they are really early, how do they attract investors?
Scott: I think it's really a couple of things. The first thing that every company needs to do is to decide what its vision is and what kind of company it's going to be. Venture capital is not right for every company and there’s lots of different ways to fund your businesses. The overwhelming majority of businesses do not get funded with venture capital. Venture capital is a way of financing a business through its growth stage. When it has a proven product, when it's found its market and when it now needs to scale and grow. That’s when venture capital comes in and helps a company do that, but to get to that point is challenging. First you need to decide; am I a company that is going to require venture capital and am I company that is going to address a large scaling market, be disruptive, grow to be very large? That’s a venture fundable business. Through the early stage, the second thing you need to figure out is - how am I going to get to the point where professional investors are going to be interested in me? Professional investors are not going to be interested in every company like I said they are going to be interested in companies where they can apply their capital, grow and scale the business.
Heidi: As far as some of the tips that you would give to them, for them to actually attract investors - where do they look for them? Are warm introductions the best thing? What are some of the tactics?
Scott: First of all, don’t look too early. Understand that if you are really going out and seeking traditional, professional investment that you are going to have to have some metrics. You’re going to have to have at least a MVP of a product, you’re going to find a market where that product is being accepted. You are growing and scaling a business in that market. Whether its users or customers - whatever it is - you have to get to that stage first. How do you get to that stage? Well, you get to that stage by raising money from friends and family, from people who know you. From people that are going to invest in you, because you’re the entrepreneur. They believe in you. Relatives, friends, strategic business partners. A second way to look at that is for people who ultimately will be interested in your product, even though you have no metrics or proof of your product today. They will invest in you because they want your product to hit the market. Might be a strategic investment. Figure out a way - come hook or crook- to raise that initial capital to where you can develop your product. Find a market place and the other doors will open.
Heidi: From a legal and business stand-point, how do they best position themselves?
Scott: Early stage companies by necessity cut corners, right? You don’t have resources. You’re boot strapping. You’re making promises that you can’t fully document. You can’t always afford lawyers or professional advisers and that’s fine. Do not second guess any of that. You got to where you are, but when you reach that point where you are now ready to go out and find professional capital, it's important to look internally first. That you look at yourself, do the same kind of diligence with yourself that an investor is going to do on you. That way there are no surprises. Figure out capital issues and fix them. Figure out your employment issues and fix them. Figure out your commercial contracts that you have done on a whim and fix them. So that investors don’t look at you and think good concept, but I am not going to take all this risk.
Heidi: There’s another topic that startups tend to think a lot about but aren't typically fully educated on - how should they approach valuation and dilution?
Scott: I think that people get hung up on valuation because they have some number set in their mind or they have some experience that they talk about with other entrepreneurs. They think they either have to hang on to a certain percentage of their business or it’s not appropriate to give a certain amount at a certain round. You have to come into a financial transaction with an open mind and understand not just what you’re selling and what you have to give up for that. Also, where you are going and where that money is going to take you? I see entrepreneurs being penny wise and a pound foolish all the time. They think they don’t want to be significantly diluted. They end up throwing a wrench in the negotiation or they loose a financing deal because they want to hang on to a few points of equity. In reality that money is going to take them so far that they are going to be vast and more valuable. Its a simple proposition of - there’s a pie and you want a piece of that pie. It's much better to own a smaller piece of a gigantic pie than it is to own a big piece of a small pie.
Heidi: Appreciate you for being here and I’m sure we will have you back for other topics some time soon.
Scott: Thanks, looking forward to it.
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To learn more about our Venture Capital & Emerging Growth Practice, contact Scott Alderton at .
Stubbs Alderton & Markiles, LLP announced that it represented client Milk and Eggs in its $2.5M financing round led by Morningside Venture Investments.
Milk and Eggs is a farm-fresh grocery delivery service. Their goal is to connect customers to great farmers. Customers sign up for subscriptions of milk, eggs, dairy, meats, vegetables, and fruit on a weekly or bi-weekly basis, with free membership and delivery and the ability to change orders at any time. All vegetables, fruits, dairy, eggs, and meats will be the freshest available as they are locally acquired. And, with an environmentally friendly aggregation and delivery system, it’s a win for their customers and the environment.
SA&M attorney that represented Milk and Eggs was Joe Stubbs
For more information about our Venture Capital & Emerging Growth practice, contact Joe Stubbs at .
SAM Client and Digital-video studio New Form announced this week that it has raised $18 million in second-round funding from the U.K.’s ITV and Discovery Communications, with ITV taking a minority stake in the company. In addition, with its investment ITV entered into a strategic partnership with New Form, which includes a multiyear commercial agreement that will bring New Form content to the ITV Hub starting in 2017. Congratulations to New Form on this success!
Stubbs Alderton attorneys representing New Form in this transaction were Greg Akselrud and Kelly Laffey.
To read the full feature in Variety Magazine, click here.
For more information about our Internet, Digital Media & Entertainment Practice, contact Greg Akselrud at or (818) 444-4503.