The Smart Founder's Guide to Fundraising with Ashley Martis

With AI, you need less capital to build a big unicorn. There will be very soon a company, maybe in the next 5 years it starts, that with a solo or with 2 founding team members can build a big billion-dollar company. This has never existed before. So the path to when to pursue VC has completely changed to the point where we believe VC is amazing when you have, when you need a strategic fit. With somebody to help you. Maybe you need access to data, some expertise, some connections, but you also need the capital to scale. And today we're going to talk about how startup founders can prepare for fundraising due diligence. What we're going to go through here is about myself, about my company StartupFuel, how to craft a winning pitch deck, how to build a good data room, statistics on fundraising today, what are Where is money going today? What's the state of the market? How do you prepare for this? Where to find and source capital? How do you know to meet with investors? How do you find where investors are? And then we're gonna talk a little bit about a patent-pending technology that we have now patented called StartupFuel's Investability Score and DiligenceGPT. It's a new LLM that we designed to learn, read pitch decks, read business plans and startup documents, and automatically help present some risk ratings on the company. And then obviously, as Eihan said, open up the floor for questions and answers and love to take your questions. So feel free to put them in the chat and Eihan will get to them near the end. So just starting off, like I mentioned to you, I'm a 7-time founder, started my first startup company when I was 17, have gone through multiple exits actually from beginning to the end of the process. I've also helped advise, been a mentor, with Techstars, Founder Institute, um, a bunch of different programs, accelerators, and incubators around the world. I sit as a venture partner on 4 funds, but more than anything, I'm a private equity valuations expert. I'm a CPV, I'm a Chartered Business Valuator, uh, with a specialization in valuing startup companies, tokens, and funds like VC funds themselves. So doing that, I have reviewed over 5,000 investments over the past 12 years, interviewed over 1,000 investors, filed 2 patents in AI that helps run due diligence, worked previously at Procter Gamble, at IBM, at TD Investment Banking, lived in LA, Chicago, New York, from Toronto, uh, but I have traveled to about 986 networking events in close to 35 tech cities around the world, met 80,000 people, have been studying this industry. This is my love, my passion, and I'd love to share with you all the statistics that we're finding and how to get to capital. So let me tell you a bit about StartupFuel. About 6, 7 years ago, we noticed that a lot of investors around the world were giving different reasons or different purposes of investing. When companies came to me and said, hey, help me connect with a VC fund, I want to raise capital, a lot of the requirements of the investment side and their process were quite varied. And what we wanted to do was to build a platform and technology that helps both investors prepare and do due diligence smarter, faster, and less biased, and also provide companies and startup founders a chance to check how they're doing, how to improve with the dashboard. Almost a credit score company like an Equifax or a Moody's, if you know, but built for the venture capital industry. We started adding it as an angel list about 5 years ago. We opened up the platform and had over 3,000 companies join the innovation network, and we work with well-recognized organizations. You'll see names like Techstars, the World Bank, Mentors Without Boundaries Institute, MassChallenge, Generator, uh, and now we're expanding globally to standardize the space. So being a standard in, in startups and in venture capital is important for us to understand where is all the numbers going, where is funding going through all the way from the top, from limited partners all the way into startups themselves. I'll explain all of this. If any of this is new to you, I'll try to break it down and you can always ask questions later. And I'll also drop my contact information. So after this call, you'll be able to reach out as well. So we spend a lot of time studying unicorns. What are making companies doing, do really well? What's happening at the early stage, the mid-stage, and the late stage? But for today, because a lot of you have, may have not raised capital before, this is a pre-seed and an early stage program. We're gonna cover the early side of the market. How do you get those first checks? What do they look like? How do you go through that process? But we designed DiligentGPT as a multimodal LM agent that extracts scores and benchmarks startups' investability. We upload documents into their system and we spit out reports and it's been fine-tuned for a very, very long time to improve it. So we wanna allow people to pitch to investors and understand that it's nerve-wracking, it's a hard experience, but with proper preparation and execution, you can increase your chances of success. Here's some steps to follow when pitching to investors. The most important thing that I see a lot of companies and a lot of founders don't know is to know your audience. Before you pitch to anybody, there are different types of investors. Some people only give out loans, they're maybe providing some sort of a loan back, or even a bank that'll provide a loan. It's very unlikely for an early-stage company to have enough traction and revenue to be, to take out loans. However, it's not impossible. There are lots of programs and lots of banks around the world that do so, even write small, small, you know, early-stage loans. However, because there isn't a lot of significant history, That's a lot of what credit scores and loans are benchmarked against is your ability to return that loan. However, now when you move from that loan side into the equity side, start to raise capital from angel investors, friends and family, venture capital funds, maybe even corporate innovation or government grants, you need to know what type of investor they are and do a little bit of research. The moment you start to uncover what the investor's purpose is, you'll start to see these other two things, thesis and signals, which we'll cover in a second. As you go from stages of investment, all of these things, friends and family, angel investors, they follow a linear path and it's smaller check size. When you go around potentially to your friends and family and ask for things, you may not be able to raise a lot of money unless you are really well connected. Let's just say that you are not, and you, you're looking to go out there and find that early source of capital. As you go up the chain of command and start raising more and more money, the sizes get bigger and the amount of due diligence and the requirements also gets bigger. So let's talk a little bit about the second topic, thesis. Every single, almost every single VC fund, or even some angel investors have something what's called thesis. Which is I want to invest, but I can't invest in everything. So let me try to focus on certain areas that we can help, that we know, maybe you come from the industry before. So a thesis is when I'm an investor, let's say I'm a VC fund who's raising money to go and invest in many startups. I tell my investors, they're called limited partners, who give capital to the general partner of the VC fund, to come and find startups to invest in. When I go to that group, in more cases than none, I have to give a clear execution path of what I'm investing in, what do I like, and how many deals am I going to do in each of those sectors. So first of all, investors are limited by what types of companies they can invest in, and it's usually a part of their thesis. Sometimes it's openly written on their website. You can find them in Crunchbase or PitchBook or Traction or any of these websites. Sometimes they make it public, or in some cases you may need to ask, you need to ask the investor, so tell me, what do you guys like to invest in? And usually we think of thesis combining 5 different things. The first one is the stage. Am I investing in early stage companies? Am I investing in seed stage, Series A, B, C, D, pre-IPO, IPO? Where is that thesis? For most of you, the investors that will put money into an early stage company will fall between that angel to seed, maybe Series A round. Now those investors, after you figure out the stage, the next major thing is industries. What industries do they invest in? Do they like healthcare? Do they like fintech? Do they like enterprise SaaS? Do they like blockchain? There's lots of different types of industries out there. And in the past, something that has changed— I want everyone to pay attention to this— we used to think that technologies that were underlying the industries, such as like AI technologies, mobile apps, desktop software, we initially considered them in the venture capital industries as industries. However, over time, we've come to realize that any of these technologies can actually be a source of product that comes in as intellectual property or as a change agent for any industry. You can use blockchain technology in healthcare, you can use it in, in finance, you can use it in climate tech. So the underlying technology is starting to be separated and say, okay, where is this AI being used for? So the second one, as we come to understand, is industries. The third one, just segue into it, is the underlying technology. Are we building a mobile application that's building a social network? Are we doing a smaller enterprise technology for a bank? Whatever that piece is, that second is very important because investors also have expertise. Maybe they're an exited founder who built a VC firm but has done an exit in AI technology. So they want to also invest in other companies doing AI. The third, and going into the fourth different thesis item, is actually called location. So where in the world are you located? Many funds are geographically fenced around where they can make investments. Sometimes it's because of the limited partners who are part of it, sometimes it's just your strategy, but not all cases. Some funds, some global funds, some Tiger Global, SoftBank, Sequoia, will invest globally, will have sometimes locally domiciled funds, but in general, they, I would say over 90% of the industry focuses on a geographic segment. The last piece of all of this, the stage, the, is business model. So the fifth thesis category is what type of business models do they like to invest in? Is it direct to consumers? Am I building an e-commerce site or platform that gets direct investment into a startup? Do I, am I building a B2B company that sells to other businesses? Am I building a B2G company? We sell exclusively to governments. Or am I also building a B2E? So normally B2B does come under the, the branch of B2E, which is enterprise. However, we keep them separate because enterprise and small businesses are two separate beasts to go. So knowing exactly which investors are putting money into your space, into your type of idea, is the first step to understand the audience and what they're looking Now you understood, okay, because I'm early, I need to find an angel investor. Now I need to find people that have certain theses. If the group or the angels don't have a thesis, you can also ask, what are you guys good at? What do you— what can you help with? Sometimes it's actually beneficial to try to find investors that are really, really well aligned to your space. And if they— if you have that opportunity, it's called a strategic fit. If an investor can come in, put some capital, put some money, write a check into you, and also help roll up their sleeves, make some introductions, or do some work, bring their expertise, that's an amazing fit. And usually you'll also find that mixed with thesis. Now this last piece, signals. So a signal is actually something that's more dynamic. The thesis of a company, yeah, you can pivot, you change industries, but more than likely you're not going to pivot every single month. You're not going to pivot every single, uh, every 6 months. There's going to be some schedule and you're going to come to a product-market fit where you're like, this is what I want to go after. However, signals are dynamically changing. And what are signals? Are the KPIs that you work your business on. If you're building a technology for the first time and maybe hasn't launched yet, the path, the days or the months until it's commercialized or launched. If you have an app in the market, the number of downloads it has. If Attraction metric like revenue, how much revenue you have. So some investors in some groups, their risk appetite is such that they have to put minimums on this. One VC fund I just spoke to yesterday actually said that they only invest in companies that have at least 2 pilot projects. It could be paid or unpaid, but 2 pilots. Another group said if they're not hitting 10,000 monthly recurring revenue, we don't want to speak So starting to understand the signals are not as easy. It's not gonna be listed on the website. In some cases, people won't know or won't clearly understand, clearly put it publicly what their signal is. However, being able to speak to that investor and ask them, what are you looking for? What gives you and your, your LPs and your team a good indication? And how do I get to there? So in case you're not even at that number or that minimum signal, it's a good thing to work towards and give updates to those investors. So I'm gonna move on here to developing a compelling pitch deck. After reviewing all of these thousands and thousands of pitch decks, putting into an AI engine and studying which companies got funding, which ones didn't, we came and realized that these 10 different areas are super important to be talking about on your deck. And sometimes you may not have all the information across all of this, and the earlier you are, the less of this you need to have. So for example, an ideation or pre-seed company just starting out may not have financials, may not have traction, but can potentially create a projection. It's less important. But as you get up to the seed stage and Series A, this, these questions that you have to answer based on this set of rubrics or this set of framework is super important. Now, the way I think about this, It's chronological. After develop— building 7 companies and working with hundreds of entrepreneurs, then the normal progression of starting a business follows this. Initially, you think of a problem, you think of something that's out there that can be solved, and you say, okay, is this a real problem? Can we find some evidence that it's, it's a real problem? Then once you understand that, that evidence could be a combination of market research, could be surveys you do, could be also research that somebody else published published. I will show you in a later slide how do you add all this information, all these artifacts, into a data room to show investors. But just follow along for now to see the different items in here. First up is problem. I think there's a problem out there and I want to solve it, so I'm going to go and ask a lot of customers, a lot of potential customers, questions. I'm going to look at online and see if somebody else has done research. Then I'm going to take that, and if there's any gaps in that, I can also go and do my own research and get a waitlist of customers. Second part is a solution. Now that we've identified this is a problem, a real problem, we've got statistics and data around it, we're proposing a solution. And the solution is not necessarily the technology or the product, it's just hypothetically this could solve that. So here's in our case of what startup feel— we believe that a lot of investors and a lot of VC funds and angel investors and startups don't know how to properly understand due diligence, and we wanted to build standardized way of doing due diligence. That's our problem. We interviewed over 100 investors and asked them, how well is your process? 86% of them said, we, we're not completely sure that our due diligence is good, and we could see, we see a little bit of biases that could be improved. So automatically that's been understood as a problem. We next then go and we figured out an AI potentially helps solve that problem. So that was our first problem and solution that we came up with and said, okay, let's go and build a product, a software that uses AI to solve this problem. First, then we come and say, okay, now that we understand this is what we wanna do, who are we going after? Who's our target? Who's our, what's called ICP, initial customer profile. And the more limited we are with that group or those characteristics, the more targeted we can be with our pitch. After that, the secret. So sure, this is a great problem to solve. Here's an awesome solution, but what's secret? What's different that we are doing that maybe a competition or someone out there cannot do? Back to, back to what we were talking about with StartupFuel, we designed this Diligence GPT as a product targeted emerging fund managers, people setting up their first funds, their second funds. So they're still in the process of learning and growing in their venture capital careers. And the secret is to design an AI engine with studying over 30,000 unicorns and other companies have raised, looking at their data and working backwards. To build this engine in LLM is our secret sauce, and our model, it comes next. How do we wanna sell? What's the business model? Do you using, like I said before, as enterprise software that you're selling as an annual subscription? Are you doing a recurring model? Is it a one-time sale? You have to define that clearly. Then you go into marketing and sales. So now that you've got all this great product, awesome, uh, business model, how do you actually get it out there? What's the go-to-market strategy? What's the sales strategy? Are you using Online means are you gonna be doing it in person? You're gonna events? What's the actual plan to get those people in there? If you have an accompanying customer acquisition cost, how much does it cost you to do that? That's fantastic. And even if you don't on day one, you can research these statistics on averages for every industry and sector. Start there and start to adjust upward and down. Next is the market. So now that you've got all these things in place, you've figured out how to get to the market, how, How big is the size of your opportunity? In venture, in startups, we like projects and we like things that have a large scope in nature because as it is, it's a hypothesis that your solution and your secret can solve this and you have to go through the whole pitching customers, going through that. So if there is a large enough size of the market to go after and get a lot of revenue, then it's investment backable. Once you figure that out, you go into the talent side. So now who do you need in your team to get this to happen? You may have co-founders, you may be a solo founder. You then will have some advisors, and it's very recommended through programs like Founder Institute and mentors, or even finding other mentors through other means. It's really important to start to build a good advisory board that will help guide you through the process of some industry experts. I follow this 3 rule in the beginning. Industry expert, operation expert, and technical expert. If you've got 3 of these advisors on your advisory board or your team, this giving you tips and advice, maybe not on a day-to-day, this would be great to help you figure out and navigate most problems that'll be coming up. Once you've understood and find the talent, you also understand what do you need as employees, what's your organizational roadmap as you grow. Do you need marketing? Do you need developers? Do you need a certain marketing, sorry, certain sales staff, you need customer service. All of that you can start to think of and start to figure out who do you need in terms of talent to solve your problem. Next up we come is traction and financials. As you're building it, as you're going through, you want to build traction as early as possible. That's why programs like Founder Institute recommend setting up, once you know your, a landing page where you can start collecting waitlist emails. So collecting pilots, this is a huge, huge piece of de-risking your idea and your business for an investor. The more numbers we see, even if it's not revenue and sales, it's a good indication that the company is growing and getting better. If you understand how business works, it's all fun. You put people at the top of the funnel, you try to convert them by presenting them something cool, selling to them, and all of the process, you're gonna have people dropping off. But as a due diligence expert, if I see a company's KPIs in downloads or usage or something increasing, I know that there will be a future path to convert them into revenue, even if it's there, if it's not there today. But let's just say you did start off with revenue, you did start off with sales. It's awesome to look at benchmarks, um, from PitchBook, CrunchBase, uh, Bloomberg to figure out what are later stage companies that are in your industry, what are they looking at as KPIs and how, when can you start to use the same ones? Finally, the ask. To get yourself up there, you want to understand how much money do you need. If you're actually raising capital, many people forget to actually go through and ask this question. Like, I need half a million dollars and this is why, this is where it's going into, here's what we've been able to solve, here's what we haven't been able to solve, and here's what the money is going to be able to do. But then also, how long is it going to last? If you're not making revenue and you need this capital to build your startup and your company to grow, how long does that last for? The average in pre-seed and seed and somewhat Series A is about 12 to 18 months of runway. So let's just say that in your talent section, you realize you need 14 members, each of them, let's say, making $100,000 each. That's $400,000 in total. You at least want to raise, like, that's a year, by the way. So you'd actually want to raise $1.6 times, about 18 months of that. So if you think it's $400,000, only cost you have, let's say, an extra $100,000 for miscellaneous server, other costs. If you need half a million to get yourself to commercialization before raising the round, make sure that you are raising a little bit more than that, maybe $750,000 to start to do it. And then finally, now the timing. Why now? This is a really, really important question. Why are you the team or the people to do this? And why in history is now the right time to build this type of business? Has something changed? Is something out there? About 4 years ago, I met Sam Altman and I met OpenAI in San Francisco, and I realized looking at this technology that this is incredible. ChatGPT is gonna be awesome. However, when you go into domain-specific items like venture capital, like due diligence, it doesn't perform as well because it's been trained on a more of a generic dataset. So for us, the timing was awesome to be able to say that right now we peaked in how much data there is in startup investments in VC, and the AI technology has gotten further enough that we can take that information and start to build engines out of that. And even more than 2 years ago, none of this was possible. So timing is also can drive a great reason to why to invest in a company. So having all of this is important, but how do you actually set up your pitch deck? We don't— we as investors, as venture analysts, we don't want to see everything all at once. We want to see this type of pot committedness, and you also don't want to give everything up all at once as a company. You want to slowly explain and tell the narrative of your story your way. And the best way I recommend this is to separate out your pitch deck into 3 versions and a potential 4th version slash data room. One is a one-page slide, one slide that covers the high level of what you're doing. It could be in bullet point form, a problem you're solving, your solution, your team, what you've got, where you are right now. Once an investor likes that, they say, okay, yeah, do you have more information? We'd like to see that. Send a teaser, a 10 slides. If you dedicated one slide to each one of these topics from here, you would be golden. Even though this is actually 12 different items, you don't need to have certain items in here depending on your industry. And I can't tell you right here which items in here should and shouldn't belong in a teaser. I think you gotta think about it from your perspective and figure out what have you been able to think about and formulate the best in these categories. If you have a great target, put that as part of the template. But somewhat covering all of these areas is great. And then obviously the full 16, 15 to 16 slides. I wouldn't try to stay less than 20 as much as possible and look at putting everything else, appendix data into a data room. Now I'll go over what a data room is afterwards, but this is the natural progression. It's the perfect way to pitch to investors. Here's a one-pager on who we are so I can look at it really quickly and say, does it fit my thesis? Does it fit the signals? And the type of investment. Yes, check, check, check. Fantastic. Thanks, startup founder. Please send me more information. Teaser deck comes out. Now this one actually probably has more information on signals like what are you doing, what, who you work with, do you have any logos of big name brands you're working with? Do you have any partnerships? Do you have anything? That will be a good indication if it fits my signal, I can move over to get more information on potentially the financials and more. So this is a great step process to get and reach out to investors and shows high levels of discipline. Also, next thing is to practice your pitch. You should practice your pitch until you feel confident and comfortable presenting it. You should also be prepared to answer any questions that investors may have. And these are the 4 areas that when you're talking to somebody, you're doing a pitch in person, you're doing it on stage at a conference, at a pitch competition, Whatever it is, these 4 categories are what we have found as winning pillars in people who get invited to send these next documents over. First of all, what's the story? How did you guys get together? What is the idea behind this? How'd you come up with the problem? And then what's the secret? How are you gonna get this off? Why can nobody know? What do you know about the industry that nobody else knows? Team. Who do you have with you that is extraordinary and can deliver on this, can actually solve this problem? And again, back to question time. Why now? If you have a solid answer for all these 4 categories, you will get in the door at least to have the next conversation. Be passionate, be confident. We want to see that you as a company are actually very passionate about what you're doing. Want to have some reason to a motivation that's deeper than making money or you're bored or trying to use your degree. It's, I genuinely see this problem and I want to solve it. Why am I here on this call right now? Why am I doing this as Passion Startup Fuel? Because I've met 20,000, 30,000 entrepreneurs around the world who are struggling, who have a hard time understanding what investors want, and I just, I feel for them. I know how much work they're putting in, and I want to be on their side to teach them how to follow good principles and processes. And I believe in the power of entrepreneurship to reduce wealth inequality in, like, in our lifetime. And this is my whole passion. I've seen it and I think it can be done. And now to present that know-how and data through AI to everybody in the world will help advance society. And this is my purpose. When you explain and tie your business to your personal purpose, you get a lot more buy-in because people believe that you're doing this. And even with the ups and downs and the struggles and the troughs of building a startup, you will still be able to persevere and be resilient through that. Know your KPIs and do your market research. It's not hard to go on Google and search up what are my KPIs, what are the main KPIs for my industry, and feel free to use tools like ChatGPT and ask questions like, hey, Hey, you know, what are the major KPIs out there for the fintech industry that are used? And look at the source, ask for the source, go and see if it's true, validate and fact-check yourself. But there is lots of market research online, and I'm happy to provide sources, free sources that you can go to figure out what is important. If you can tell an investor, this is my major KPI because I believe all the companies that are more mature in this industry are using this to say how good they are. And either you can start tracking that now, or you have a point in the future when your MVP is launched, or when you have been able to start getting sales, or when you're closing larger partnerships. That's the perfect time to explain, that's when we're gonna put this KPI in. Be realistic. Okay, a lot of people are— there's a fine line between being super optimistic, you wanna have a big market, take over the world, and being realistic. That's when we say focus on the target and the ICP and make it very small. They should be less than, if you're in B2B, less than 50, 100 customers that are perfectly fit in your ICP. It might not be the extended groups that you want to go after and might not be the bigger plan in place. However, it's a great starting point and it shows realism. For me, I would love to sign every VC fund on the planet to be using our technology to run due diligence. It'll help the entire ecosystem. However, that's unrealistic to get right away. So we want to focus on smaller groups like angel networks, emerging VC funds, family offices, groups that are digestible, that we can get to, and to be more realistic. When you show that niche and you expand from there, it shows a possible actual way of executing the plan. And then follow up after the pitch. Ask for money, you will get advice. Ask for advice and you'll get money. This is a very important rule. When you speak to people, when you talk about somebody who has a thesis in a certain area, they may also have expertise in that area. When you ask them, hey, what do you think of this? Can you explain to me? I'm having some problems and I'm, or I'm, I found out some really interesting facts. Can you validate that for me? People start to get interested to know that you are coming to them not just from seeing them as a check or for money, but for them for deeper, for being able to take their expertise and use that. Follow up with investors after you send over these documents for additional questions. There are lots of great tools, I'll show you some of them later, but things like Foundersuite, CRM tools out there that allow you to track your investor leads, to go and respond to them, be cognizant. Another good one, VisiblyVC allows you to give updates to investors and what, what exactly are you doing in traction, how to keep them in newsletter. Lots of great tools, and I think I'll even provide to Ehan and Founder Institute a great list of resources that I think we put together for founders to use in the process of raising capital. But have your data room and have your offer document ready. What is your offer document? Are you gonna be raising on a SAFE contract? Are you gonna be raising on a convertible note, term sheet, and SPV? These are 4 of the most common ways to raise outside of equity crowdfunding, which also sometimes uses SPV. TB, but it differ— it depends differently in different markets. But the most common one that Y Combinator introduced, the SAFE contract, is a great place at the early stage to use. It's called a Secure Agreement for Future Equity, and it's meant for the investor and the company not to worry about valuation. It's a good measure to kick that conversation on valuation down to when a more institutional round will happen, and it's usually a discount, giving the investor some discount on the valuation on the next round. So having these two ready shows a lot of discipline and confidence that an investor can come in and say, yeah, hey, I love what you're doing, can you please share over your documents in your data room so we can start to do due diligence on you? Here's some good fundraising statistics to understand. At the pre-seed, a lot of companies are, you know, want to be, um, somewhere between that post-revenue but super early on, MVP is built, you've got some early users, First users have come in in the growth mode, and the goal with the funds is to product engagement with the small audience. When you get to seed stage, it's, you're probably somewhere around $0 to $1 million in ARR. The product, a small group that loves your product. So instead of just early customers, you've got at least 10. If you're a B2B business, you have about 100 to 200 customers. If you're B2C, just, you know, the numbers range based on what you're trying to do, but it's important to know that like these, the different groups vary. Organic and referrals are also important at this phase. If you get, if your customers can give you organic referrals to others, that'd be awesome. And then the reason you're raising funds for at the seed stage is to discover your growth engine. That means you haven't discovered it yet. You're still figuring out the scale, but you probably found product market fit. Finally, Series A, $1.5 to $4 million in ARR, maybe even $1 million. And these range, right? They're different. Deep tech companies take a long time to raise capital, they might be a Series A a little bit earlier. An e-commerce company can make revenue right away. They might be able to make more than $4 million ARR because they take a percentage. So it changes, it varies. The product itself will have an 80 to 150% net retention. That means people turning, jumping off, you continue to use it. There's already a scalable revenue engine. You can see that. And the goal with the funds, is to 3 to 5x revenue in 18 months so you can raise again. Remember that 18 months number I told you before. Here's some information, and I'll share the source with you guys as well in this deck. You can click here when you come and take a look at this deck. But here's investments as of September 30th, so not less than about 21, 30 days ago on the state of investments in this year compared to previous years. 2022 to 2024 is showing a record low amount of large public listings. Main reasons are lack of exits and returns to the VC sector, and it's due to cost of capital being very high with interest rates. So what does this mean? Remember I told you this is the flow of how, how VC funds get capital. They go to limited partners who are usually family offices, pension funds, high net worth individuals, corporates, or governments who will allocate a large amount to them and say, You go invest in these companies. The thing is, when the startup grows 5 years, 7 years in, goes to do an exit, then the money gets returned back to the GP, the VC fund, who then makes distributions back to LPs. The problem is, in the last couple of years, since the pandemic and since interest rates have been high, inflationary environment, there haven't been a lot of exits globally, which has caused a lot of the LPs who gave money to VCs that now have to wait to invest more capital because in previous years they would've gotten that. Like you see in 2021, there's a small spike in exit count, the black bar, which means they would've gotten that, some of that money back to make more investments. But if they don't have that capital, they have to be more restrictive. So you'll see that deal activity pulls back from Q2. You'll, you see as the chart's going up, The Q2 of 2024 had increasing deal activity. Q3 slowed down a little bit. And the main reasons are the lack of returns, like I said, for VCs and LPs. But focus is on certain sectors. In deep tech, you're seeing generative AI getting a lot of capital. AI infrastructure like NVIDIA's technologies and earlier technologies are getting a lot of it. Other industries are seeing slight declines, but also some new industries, some like Web3 are picking up right now. So there's something I really want everyone to understand is called dry powder. Dry powder is the amount of capital that is currently sitting in VC funds that is not invested. So what does that mean? Why is it not invested? How, uh, let's say I'm trying to raise a $30 million VC fund to invest $1 million into 30 companies. I'll keep it simple. I will go out there and maybe talk to LPs. Maybe I just want to find 3 people who will write $10 million to 3 $10 million checks. What happens is they don't give that $10 million right away. They'll give a small management fee, roughly around 2%, to run operations every single year for a certain amount of years. I will spend that as an investor to hire staff, build, you know, pay for conference tickets, open up office space, do all that stuff, and then we'll start to do due diligence and find deals. When I like something, we go through the proper process, find the valuation, write everything, and the moment I now need to invest, I call, I do what's called a capital call. I tell my LPs, hey, I like this company, I wanna pull down $1 million from your $10 million to invest in this deal. And in many cases, the LPs will be like, here's your million, go and invest it. What's happened over the last couple of years is some of those limited partners, like I said, need more distributions from previous exits that haven't happened. But some people also go to banks and say, I don't have this money sitting around, but I have a lot of assets. I got real estate, I got other stocks. Can I lend against that and invest in this, in the fund that I need to? With inflation, with the interest rates going up, that cost to borrow that money has also risen, which makes it harder for them to say yes. So many LPs have told their VCs that they gave money to, don't invest this year, wait till interest rates come down, wait till things get better, get some liquidations. But that doesn't mean that that money isn't still allocated. So there's so much money that is sitting waiting to be invested in startups, and it will open up over the next 12 months. It'll, what'll happen is as interest rates come down, as inflation globally comes down, and the money that LPs will make outside drops, they'll start to put more money into the venture game. So it's hard to predict exactly when that'll happen. Even if an interest rate drop happens, it doesn't mean right away. But it does mean, it does signal, and I just don't mean the Federal Reserve, I mean globally, everywhere around the world, the European Union, in Canada, in Asia, a lot of places are currently in high interest rate mode. As that comes down, more money will be opened up for companies. Right now the statistics show that pre-revenue, this is a little bit from last year, and again I'll give you the source, uh, pre-revenue, the top valuations that are being get future work prop tech, AI infrastructure, gen AI, and B2B SaaS in that order. The from $0 to $250,000 in annual recurring revenue supply chain, prop tech, climate tech, and fintech in that order are getting the highest median valuations. And then above $250K ARR and more, starting to get the seed and Series A category, prop tech, cybersecurity, health tech, and fintech are getting the most investments. And some of this is just a natural Gen AI and B2B, Gen AI and AI infrastructure is working its way up to early stage investments. And I will see, you are seeing in 2024 more of that in the second category and third category here. But I wanted to touch briefly on finding and sourcing capital. Some people are well connected. They've got family members that can come in and write checks and all the power to them. Great. That's a great place to present initially friends and family to get capital. What if you don't have, and they don't come from an affluent family? What if you don't have those connections, those resources? There are two ways to also look at finding capital sources. What I'm, what we're seeing now is 82% of people, 82% of funding comes from manual and 18% comes from automated. So this is globally. So friends and family, like we spoke about, going to networking events. I have been up to 986 There are tons of events happening all over the place in your local ecosystems or bigger conferences in other countries that you can buy tickets and attend. There are angel networks locally and syndicates, college and alumni groups might have investments if you have attended one, referrals in your network, people you know, you've worked with who wanna refer you to somebody else. And customers, customers are one of the best investor bases. You can use those customers. And if you're building something big enough, you can ask them, would you be willing to pay, ahead of time so we can build this. If you can get a couple of those contracts where the customers pay ahead of time to build what you are, you are golden. This is an amazing business model, and it's— from a signaling standpoint for investors, it's awesome. It means that people are so bought in to solve that problem you're trying to do that they're willing to pay early before the solution is even launched. But there's also automated ways, and you shouldn't discount or remove the automated approach while you're fundraising. Equity crowdfunding obviously is one. There's different, different markets. You can look up your local market's rules and find a company. In the US, they have WeFunder. In Canada, companies like Ecovesto and Frontfunder exist. So different ones around the world. Email outreach, going and getting access to investor databases, finding and filtering your thesis and reaching out to them with updates, with new news, is awesome to do. Platforms like Foundersuite and AngelList are great to use. An accelerator program. Going through an accelerator, going through the demo day, being in Founder Institute, getting into the Funding Lab program, working with the mentors and getting in on their investor list and talking to them is another awesome way to get out there. And in some cases it is a bit manual to go and reach out to people, but accelerators also have investor relations teams that help you out with this. Um, you build a data room. So we talked about this once an investor's Likes it, you like the deck. You will see all of these different categories. If you can build a Google Drive, a Dropbox, DocuSend, or some sort of a digital repository that has these folders with information below here, incorporation, your pitch deck, your any domain names, patents and copyrights, founder and personnel information, agreements, business plan documents like market research, product, business model, The marketing strategy, go-to-market, who's your competition, your funding history. Each one of these don't have to be separate documents, but if you do make them separate, it's amazing for us as due diligence and analysts to go through them and see some discipline. Some of these documents are static, like articles of incorporation will not change or will rarely change if you're, unless you're reincorporating somewhere else. The other ones like cap table might change, you might add investors or team members over time, but things like your use of funds, your traction, your financials— those ones need to be updated regularly. And I'd recommend reviewing your dynamic assets in your data room once you build it at least once a month. And again, any information in here, you'll see it, you can ask questions later.

We want—

I want to talk to you about StartupFuel's investability score. So we've spent a ton of time buying data, building and collecting information on companies, how well they're doing with the VC sector, and and we've designed a new patent-pending AI engine that reviews the risk of a startup investor. We've collected over 30 years of data. It's dynamically bell-curved because it's live from information from PitchBook and Crunchbase and is trusted by the World Bank, by Techstars, by accelerator programs, venture capital firms, governments, and corporate innovation like IBM and Sony. Now DiligenceGPT, which is the end product of this, is a trademarked engine designed to rank and score companies and provide these reports for investors. We are introducing this because we're going to start to actually allow startups as of November to start assessing themselves and see where they rank and what they need to do to keep improving. So I'm going to leave this here. We— you can click here, scan this QR code and drop your contact information. You can click this link, uh, and also be able to drop your information. But we are giving opportunity for companies now to evaluate themselves and to be— to see if they're ready to be invested. So I'll leave it right there, guys, and I'll open up the floor for Q&A.

Awesome, Ash, thanks. Um, well, so I guess everyone, if you want to take a screenshot of it, screenshot, because I'll need to remove it so we can do the Q&A. But I think, uh, this has been a great presentation, Ash. Good to see you educate a lot of the founders about the different space. All right folks, we have about 10 minutes until Dinesh has to hop off. So I just wanna make sure that we can kind of get through as many questions. So please dump it into the Q&A section and try to upvote and I will try to be, I'll pick the most popular ones if that makes sense. All right, so Asha, Emma is asking and a few people were asking this is, you talked about setting up an advisory board and having 3 advisors. Can you elaborate please?

Yeah, so once again, 3 advisors, or 3— even if you have 2 advisors that cover these areas, I don't think one person would be good enough to cover all 3. But industry, so somebody that knows the industry you're working in. So if you're in healthcare space, or you're in banking, or you're whatever, somebody who's an expert, an executive in that space, or somebody who works in there with credible, like, work experience would be great. Second one is operations. Somebody who's built a company before, who's gone through the headache of setting up incorporations, accounting, doing CRM systems, the process part of building a business. And the third one is technical. So whatever you're doing, you might even open a brick and mortar store, you might have a restaurant, you might have a mobile app, you might— someone who has experience in building that type of technology or medium, but has experience not necessarily in that industry or that operation, but specifically in that type of disruption you're trying to do. So you cover those three areas. I have seen many companies who have not done well go back to the advisory board, and the advisors in these three areas give them great direction. Company's turned around, and now they've gone and raised and become big, big companies. So this is what we have found with data to be very important.

Awesome, thanks so much. One thing to add is the advisory board can also just help with like customer feedback and all that other stuff, right? So it's very, very important to have a solid one. Um, I really like this question by, uh, Irish from Portland. Do you have a recommended criteria to use to evaluate whether VC funding is the best route to pursue compared to slower growth? And if you can elaborate, like a lot of founders said they might not be VC fundable just yet, so can you talk about the difference between angel and VC? And like when— and I know you talked about in the presentation, but just bring it definitely.

So I'll bring back this slide over here, but let me, let me explain this. So one thing that I want to mention that has changed in the last year and a half in the world of startups, and even VCs themselves don't even know about this yet, they were starting to give them information on this. With AI, you need less capital to build a big unicorn. There will be very soon a company, maybe in the next 5 years, that starts that with a solo or with 2 founding team members can build a big billion-dollar company. This has never existed before. So the path to when to pursue VC has completely changed to the point where we believe VC is amazing when you have, when you need a strategic fit with somebody to help you. Maybe you need access to data, some expertise, some connections, but you also need the capital to scale. Once you found product-market fit, which means you interview customers, you tell them this is their problem, they agree with that. You tell them this is a great solution, they agree that that could be an awesome solution and they wanna sign up for a waitlist for a product and use it. This is a great time to know that when they're using it or when they're attempting to want to join this waitlist is still an early time. When you figured out a customer has purchased it or have a path towards it, it's the VC comes in to scale. it doesn't come in to solve these problems. Maybe there are pre-seed and early stage VCs that can help with solving these problems, but in majority of cases, you approach venture capital when you wanna, no pun intended, pour fuel on the fire. You know, you've got a great sales model, you know, you've got a, a good customer base that wants this, you've got lists, and now you just need to hire a bunch of sales staff to close. You need to hire a bunch of developers to finish up the product. Something that is holding you back that is required, but on the other side has good intentions. One last thing, coming back to that, if you're building a lifestyle company that potentially does not have the opportunity to grow to multi-million or to $10 million in revenue, you may consider that VC is not the right path for you. Maybe you want to build up slowly with customers, get a loan and grow. And some companies like Mailchimp, I'll tell you, we love Mailchimp, $3 billion exit, didn't raise a dollar of venture capital, but grew with customers. So every scenario is possible, but to focus on it, get product-market fit, build your scalable growth engine, it's a perfect time to reach out to VCs.

Okay, awesome. Let's do one more question and then we'll wrap things up. So I like this question from Leo who's asking, what do you think about solo founders? Would you invest in them? And the reason I like this is because, uh, J Cal brought this up in one of his pitches, or one of his events he did with us a couple years ago, saying like, hey, you know, the least amount of founders you have, or like, you know, sole founder is very hard to fundraise, multiple founders much easier to fundraise. What are your thoughts on this? What does the data say from your side?

So the more people you have in a founding team, the better the, the less likely the company's gonna fail. And it actually, the average company that has raised has 2.2 founders, which means that actually having 2 co-founders, maybe a third one is good. However, they cannot be the same backgrounds. If they're the exact same, we're both 2 business people doing sales, doesn't help you, doesn't help your case. I have 1 technical, 1 business, fantastic. And I also try to find, use the advisory as a great reference check too. Operations, industry, and technical. If you have a 3 co-founder team, somebody who's built a business and exited before, somebody knows the industry, was an executive there before, and somebody who's a CTO or some technical person, these companies do the best out there. This is what we see in data. However, we understand the dynamics. I have started solo companies and exited them. I've started co-founded companies and exited them. So it's not necessarily you need to do that. It just de-risks it further because now there's more people to spread the risk amount in case tomorrow something happens to you, you get sick, or God forbid something happens, the company's risk is now spread out to multiple people.

Awesome, Ash. Thank you so much. I wanna be respectful of your time. You know, this has been great. We have a few minutes left. Everyone shows Ash some love, go follow him on LinkedIn, Twitter, wherever he's at. The way I like to wrap these up is, Ash, any piece, the last piece of advice you have for the founders on the call today? What would you like to wrap up with?

So I'd like to say that don't, it's tough, this environment is a little bit tough, but we're coming out of it. The next 6 months, we're gonna be building, the world is gonna be building game-changing technology still. Lots of money's gonna be coming back into the global VC space. Maybe not as much as the 2020 levels because that was low cost of capital, but persevere, find, be resilient to find good ambitious founders who can weather the storm, make it work somehow, raise a little bit of money, get customer content, be scrappy, but still start trying to solve their problem, we will be waiting on the other side waiting for you. We're waiting for people like that. So if you are, feel like you're that or working towards it, please reach out.

Awesome. Thanks. Thanks so much. And everyone, do take up Ash on his offer. He's a really great person. He's well connected. He can give you feedback and help you to kind of shape your startup idea. Anytime he does give to founders, we're very much appreciative. All right folks, we'll wrap up here. We're gonna break up for virtual networking. I know Ash has to hop off, so we'll rename his table. But Ash, thank you so much for doing this. This has been great. Let's get you back sooner than later, all right?

No problem. I just dropped in the chat my email, and I also put our diligence startup. If you have any questions generically towards due diligence, data room, put it in, send it to diligence@starterfield or myself. I can get my team to come in and as well help you, uh, answer those questions. But, uh, we're here to help founders. We are all founders ourselves and we want to help you guys out.

Perfect. I just threw it up on stage just so people can see it.

Perfect.

Uh, all right, I'm gonna end the session and we'll see you out in the networking tables. Thanks everyone, enjoy the rest of your day. Thanks so much for joining. We'll send out everything on the email, on the follow-up email.

Take care, everyone. Take care.