Startup Funding Canvas
How smart is your funding?

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Know yourself

Develop a better understanding of your business, of your future goals and of your needs. Knowing yourself is crucial before even considering an investment!

Choose

Make a choice for the type of investment you need and the type of investor you want to attract. Here is your chance to get strategic about your funding!

Get smart

Become really concrete and specific about your offer to and expectation from an investor. Start working out your investment proposition and start researching which investors fit your profile!

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1. What are your strengths and weaknesses on (adopted from Erwin Holtland, 2015):

a. Funding: Your business plan, revenue model and financing strategy.

b. Idea: The value proposition, intellectual property, and market opportunity and validation.

c. Team: The skills, roles, expertise and entrepreneurial experience your team members possess.

2. Are you investor ready?

a. You can use the Golden Egg Check to find out!

3. What are your key metrics (adopted from “wework”, David Ehrenberg) regarding:

 

a. Sales:

Is your business scaling or projected to be scalable? How have your sales developed over time? How much does each customer contribute to your revenue?

b. Customers:

Do you already have a solid client/user base? How profitable are your customers for you? Do you have multiple sales channels linked to multiple customer types?

c. Financial Management:

a. How much cash does your business spend every month (burn rate)?

b. Is your operating ratio low enough to be efficient?

c. What is the value and trend of your gross margin?

What is your exit strategy (adopted from “Entrepreneur”, Stever Robbins)?

Lifestyle business: Doing business to finance a lavish lifestyle.

Liquidation: Closing the business, repaying creditors and dividing the remaining funds amongst shareholders.

Friendly sale: Selling the business to a friendly buyer, an employee, a manager or a family member.

Acquisition: Selling your company to another company.

Initial Public Offering (IPO): Offering your company’s stock to the public stock market.

Do you want to stay on as your company’s CEO or are you more of a serial entrepreneur?

Does your potential investor have a focus on your business’s sector?

Based on your current weaknesses and future plans, what expertise or contribution (beyond money) do you need from your investor?

What are areas in building your business that you could use help with?

1. How much money do you need and for what exactly?

For instance: We need €50,000 for building a prototype, or we need €200,000 for starting mass production of our product.

2. Do you have your sales projections justified using various factors?

3. Can you split up your total investment need into milestones for your growth?

1. What are the funding criteria most significant for your company?

a. What is the urgency of your investment need?
b. What investment amount do you need?
c.Do you want to retain your company’s ownership?
d. What is your business’s sector and which location do you operate in?
e. Look back at your smart needs.

2. Consider startup financing stages to identify your company’s current stage, your current investment requirement and your future plan.

3. Based on your needs and funding criteria, which investment type fits you best?

Here’s a primer on types of startup funding.

a. Revenue

  1. Launching customer(s)/client(s) (get funded from customers)
  2. Bootstrapping (an overview)
  3. Crowdfunding (complete guide)

b. Equity
c. Debt

  1. Basic debt
  2. Convertible debt

d. Grant

1. Based on your investment needs and preferred investment type, which investor type(s) would suit you best?

2. Consider the basic concepts of startup financing and the pros and cons of the various funding options that suit you, before making a shortlist of potential investors.

3. The table shows the typical ​linkage between investment and investor types. Exceptions are always possible. E.g. You can have VCs offer convertible loans, and you can have a friend take on equity in exchange for capital.

  • Remember, you don’t have to just choose one investment type: Combinations are also possible and you can be strategic about such combinations. For instance, choosing an angel investor who has links to a potential client for your business; the angel takes up equity in return for an investment, but he/she also brings in a launching customer, market awareness and revenue.
Investment type Investor type
Revenue Crowdfunding platforms, strategic partners, potential clients, friends and relatives
Equity VCs, Angels
Debt Banks, (convertible loans through investors also possible)
Grant Government bodies

 

1. What is your specific offer to this investor?

2. How do you add value to their business?

3. How does your company fit into your investor’s business model or their portfolio?

4. What is your potential return on investment (ROI) for the investor? But also, how fast can you create that return?

  1. How fast you can create return, of course, depends upon how far your product is from the market and from its full development.
  2. Be aware of both your best case and the worst case; be prepared to show what your “fallback scenario” looks like.

1. Consider your smart needs and ownership preference: Do you want something more than money from your investor?

2. What kind of role do you want this investor to play?

a. For instance, maybe you want an investor who has access to the US market, or maybe you want an investor who can attract solid technical talent to your team.

1. What terms are you willing to accept?

2. How much money do you need now and for your next round? What is your current (and projected) valuation? What equity or conditions are you offering in return? (Refer back to the needs you defined earlier).

3. What milestones can you present?

4. Do your preferred terms align with your investor’s typical terms? And do they conform with the market standards of your location?

a. The market standards of the Netherlands, for instance, can be gauged by researching what investment amounts are typically offered by Dutch investors, what ROI is usually expected, how much risk aversion is prevalent etc.

1. What do you know about this investor’s offerings and portfolio?

a. Is the investor well-reputed? Is the age of the investment firm young enough for it to be sustainable for your business growth? (You should avoid an investor that is nearing the end of their investing term; as that creates unwanted haste, less commitment and less focus towards attracting further investments for your company.)

2. What is this investor’s sector of focus and their mandate (the typical stages of companies they invest in, the nature of products they invest in, the locations of startups they prefer to invest in etc.)?

a. Knowing about the investors of your investor can help in understanding your investor’s mandate. E.g. a public fund (whose investor is the government) will more likely have a mandate for investing in technologies and companies that boost the local economy.

3. Is this investor interested in your company or just the deal? Can they later attract further external investments to your company?

1. Do you know this investor’s typical terms? Have you considered the concepts underlying a term sheet they could offer?

a. Have you researched how they carry out their due diligence and how long that process usually takes?

b. Take initiative in the process of drafting the term sheet; it could improve the deal you get!

2. Have you checked for killer terms? Are you taking on too much risk for your company?

3. Are you giving away too much equity at an early stage of your business?

a. Be cautious; this could limit your potential for scoring future investments and could hinder your further growth.

4. What documents do they typically require? Are you able to show them how your business has the potential to mitigate risk for them?

1. What kind of role does this investor want to play in your company? Do they want to advise, be actively involved or just want to be passive?

2. Does the investor offer sufficient added value (beyond capital) for building, supporting and/or scaling your business model?

3. Have you checked the investor’s track record concerning the extra value they offer? Have you checked how many successful exits they’ve been able to orchestrate?

a. It can be a good idea to talk to some companies in your investor’s portfolio; they can give a good impression of your investor’s track record in creating value and incentives for the portfolio companies.

Funding resources

Videos

Books

  • Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist
    Venture deals is ideal for acquainting yourself with the venture capital process–from the first to the last step. The book covers how VCs operate and covers all the essential terms surrounding investing; from vesting and anti-dilution, to drag-along agreements. It relates all the terms with real business cases, and is full of advice from venture capitalists and entrepreneurs. It is also a great primer for preparing yourself for a venture negotiation, with negotiation tactics and a review of the most crucial terms of a term sheet. A must-read if you’re seriously looking into raising capital. View book
  • Mastering the VC Game
    Written by someone who has been in both a startup role and a VC role, this light read is a great guide to understanding the relationship between a startup and a VC negotiating for a deal. It can guide you through ways of negotiating a funding deal, such that the VC’s vision coincides with your’s–and the deal grows into a partnership. It also covers ways of pitching your startup and highlights the important details of a single deal. A book full of insights, examples and narratives drawn from the author’s experiences and from interviews of people in businesses. View book
  • What Every Angel Investor Wants You to Know: An Insider Reveals How to Get Smart Funding for Your Billion Dollar Idea
    A great read for any smart funding enthusiast! It uncovers ways for establishing relationships with investors who match your smart needs. In a light, though-provoking manner, the author shows the very specific smartness that investors want to experience in a company, even before getting to the financial details. It illustrates the need for: an exit strategy, “do” (rather than “due) diligence, authenticity and concrete evidence of customer validation. It goes into the minds of angel investors, showing how they view crowdfunding, teams, scalability, due diligence and term sheets. View book
  • The Art of Startup Fundraising: Pitching Investors, Negotiating the Deal, and Everything Else Entrepreneurs Need to Know
    A very practical guide to raising capital in the modern world of digital finance. It gives generic, but concrete explanations, tips and tricks on the entire funding process from seed stages to growth stages; giving a set of tools to build financing strategies in the modern startup world. With insights on setting milestones, understanding investment types, identifying funding rounds, gaining momentum and avoiding the common mistakes, this book is a fine blueprint for carving your financial game plans. View book
  • The Entrepreneurial Bible to Venture Capital: Inside Secrets from the Leaders in the Startup Game
    In the author’s own, concise words: “The Entrepreneurial Bible to Venture Capital is packed with invaluable advice about how to raise angel and venture capital funding, how to build value in a startup, and how to exit a company with maximum value for both founders and investors. It guides entrepreneurs through every step in an entrepreneurial venture from the legalities of raising initial capital to knowing when to change tactics.” View book
  • Raising Capital: Get the Money You Need to Grow Your Business
    With hypercompetitive landscapes in scoring startup funding, this book stands out with its highly practical, straightforward tools for fulfilling all the formalities surrounding: financing, business plans, loans, offering materials etc. It covers everything from VCs and IPO, to franchising and acquisitions. With its concrete nature that incorporates lists, charts and template forms, this book offers detailed strategies for building the financial wing of your business. View book
  • The Startup Funding Book
    Perhaps the most accessible, comprehensive and straightforward book on the market – specifically geared towards the topic of startup funding. It answers all the key questions that startup founders can have regarding funding; from whether they even need external financing, to knowing how to contact investors to get it. This book practically teaches you how to think like investors, and to use those insights to be more persuasive towards banks, VCs and angel investors. Definitely a must-read for any startup looking for smart funding, with the first hundred pages of the book downloadable for free! View book

Startup tools

  • The Complete Startup Toolkit
    It is exactly what the name says it is! Contains countless valuable resources: tool directories, curated lists, freebies for entrepreneurs, tools to learn programming, web development resources, digital marketing resources and much more View tool
  • Startup Resources
    “Tightly curated lists of the best startup tools”; features tools nicely categorized into a really diverse set of topics. View tool
  • StartupStash
    “A curated directory of resources & tools to help you build your Startup”: Contains everything you need from A to Z. View tool
  • Steve Blank’s Startup Tools
    A comprehensive list of startup tools; on topics ranging from finding co-founders and developing apps to customer development, recruiting and startup funding. View tool
  • Y Combinator’s Startup Library
    A curated list of articles covering everything surrounding startups: Scaling, hiring, pitching, equity, fundraising, valuation etc. Also contains must-read startup books and a free course on starting a startup. View tool

Websites and articles

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About
Startup Funding canvas

Why a startup funding canvas?

StartupDelta developed the startup funding canvas–in cooperation with startups, investors and other stakeholders–to help sharpen the investment strategies of startups. Often, startups go out looking for funding without knowing: exactly how much funding they need, what their future-oriented financial strategy is, if they are ‘investor ready’ or what investment terms they should be aware of. On the other hand, investors sometimes use terms that can damage the growth potential of startups, without being aware of it. There is also a mismatch between what investors think startups are aware of about funding, and what the startups are actually aware of.

To get the Dutch startup ecosystem to the next level, and to fulfill this knowledge gap between startups and investors, we have felt the need to professionalize the way funding strategies are orchestrated in the ecosystem. This canvas has been a product of that drive. It will hopefully help both startups and investors to ask the right questions, and will therefore improve the matching between startups and investors.

What is the startup funding canvas?

Fundamentally, the startup funding canvas is a tool to help you build an investment strategy. Like the business model canvas , it helps you structure your thoughts, get feedback on them and become more aware of the strengths and weaknesses of your funding strategy. But it is not so much a brainstorm tool, as it is a canvas that allows you to dive deeper and gather knowledge about all the aspects that are relevant for building a sound investment strategy. The startup funding canvas is going to follow an open-source model. It will strive to be a decentralized tool that encourages open collaboration. It will remain a continuously evolving prototype. We hope the startup community will provide us with feedback and will be filling the canvas with tips, tricks, stories and must-reads; and we hope the community will think together about ways of helping startups and investors to make strategic financial choices to enhance their success.

How is the canvas built up?

The canvas consists of three sequential phases for developing a financial strategy. The first phase is called, “Know Yourself” and it involves developing a better understanding: of your business, of your future goals and of your needs (financial and smart ones). The second phase is “Choose”, where you make a choice for the type of investment you need and the type of investor you want to attract. Finally comes the third phase called, “Get Smart”, where you become much more concrete and specific about your offer to and expectation from an investor. This is when you work out your proposition to an investor and this is also the phase where you start researching the investors you’d like to meet. The three phases can be worked out iteratively, and are meant to be constantly improved after every insight you gain from an investor meeting or from an online article. It is meant to encourage you to keep learning and to keep sharpening your funding strategy!

How this site works

For every block in the canvas, there is a short introduction about the topic and a list of questions you should be able to answer to know if you are ready to proceed further. For every block, we also give you tips, tricks and links to other sites that provide tools or interesting content on the subject at hand. After every deep dive into external content, you can return to the canvas and proceed to the next block.

The canvas will help you:

  • think about and construct a funding strategy.
  • make a choice about what kind of investor(s) you need to talk to.
  • get ready for meetings with investors.
  • get a practical understanding of your financial needs and how to meet them.
  • have a feedback loop to keep improving your funding strategy.

Bear in mind though: this canvas is not going to guide you to one right answer, since a funding strategy is quite personal. But it will help you in asking yourself the right questions and becoming more knowledgeable about the subject of startup funding.

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