Decide which type of investor to target for raising capital

TechCrunch | 11/14/2019 | Staff
erinmmarionerinmmarion (Posted by) Level 3
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David Teten is a Venture Partner with HOF Capital. He was previously a Partner for 8 years with HOF Capital and ff Venture Capital. David writes regularly at teten.com and @dteten.

Why are revenue-based VCs investing in so many women and underrepresented founders?

VC - Fund - Use - Investing

Should your new VC fund use revenue-based investing?

I recently wrote Should you raise venture capital from a traditional equity VC or a Revenue-Based Investing VC? Since then, I’ve talked with a number of other firms and greatly expanded my database: Who are the major Revenue-Based (RBI) Investing VCs?

Venture - Capital - Options - Business - Question

That said, venture capital is just one of many options to finance your business, typically the most expensive. The broader question is, what type of capital should you raise, and from whom?

I find many CEOs/CFOs default to approaching investors who have the most social media followers; who have spent the most money sponsoring events; or whom they met at an event. But, fame and the chance that you met someone at a conference do not logically predict that investor is the optimal investor for you. In addition, the best-known investors are also the ones who are most difficult to raise capital from, precisely because they get the most inbound.

Step - Capital - Structure - Financing - CFOs

The first step is to decide the right capital structure for your financing. Most CFOs build an Excel model and do a rough comparison of the different options. Some firms provide tools to do this online, e.g., Capital’s Cost of Equity estimator; Lighter Capital’s Cost of Capital Calculator; 645 Ventures’ cap table simulator. A similar, open-source, highly visual tool focused on VC is Venture Dealr.

For each of the major categories of investors, you can find online databases of the major providers. Major options include:

Equity - Venture - Capital - Equity - Startups

Traditional equity venture capital and private equity. For early-stage startups in particular, I suggest Foundersuite*, Samir Kaji’s Master List of...
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