Putting Your Best Foot Forward In A Capital Raise

The Milestone Team June 20, 2023

Meet The Panelists: 

Christopher (Toph) Day: CEO at Elevate Ventures

Toph is a proven wealth creator and investor during his career. His entrepreneurial undertakings over 25 years have led to co-founding of eight businesses in seven sectors. Toph has been a part of $600M in transactions where he has delivered nearly 4x cash-on-cash return for investors when exiting. His experience ranges from strategic, venture capital, and private equity investors, making him the perfect candidate for this webinar. 

David Kerr: Managing Director at Allos Ventures

David is a career entrepreneur with experience on both sides of a capital raise. Currently, Allos Ventures focuses on Series A and seed companies. He brings over two decades of experience in building and growing businesses of various sizes. 

Most recently, David served as CEO of Octiv, a B2B SaaS company that was acquired by Conga. Prior to Conga, David was the VP and General Manager of Groupon and the General Manager of eCommerce at Angie’s list. David is also the founder of Flatworld Equity LLC and a member of Gravity Ventures. 

Tom Gabbert: CEO at Milestone and Host

Tom Gabbert has been a pioneer and thought leader in the outsourced accounting industry since 2003. He is a successful entrepreneur who loves helping fellow entrepreneurs realize their dreams. Tom understands the unique challenges of starting, growing, and exiting a business. Not only has he done it twice himself, but he has guided numerous clients over the years through successful exits. Along the way, Tom has also helped his clients raise over $250M in growth capital (seed, Series A, Series B). He has a unique background that combines extensive financial and operational experience with a proven track record of client success.

Topic 1: Current Climate

Toph and David highlighted 5 points in the current climate. 

  1. There’s increased scrutiny. Specifically, if companies are willing to right-size. 
  2. Burn rate and growth rate benchmarks have changed to burning less cash and not needing as high of growth rates. 
  3. Valuations are less favorable for entrepreneurs than a couple of years ago
  4. Companies need to go narrow and deep
  5. The typical deal structure has changed, but diligence is no longer than before. 

Topic 2: What Should An Entrepreneur Know At The Beginning Of Fundraising?

David and Toph both highlighted the person and knowledge of the problem as fundamental to their investment. Toph called for entrepreneurs to be simple, specific, and true-to-the facts. David then shared an anecdote about Endcamp and the investment Allos made to highlight the type of entrepreneur VCs are looking for. 

Topic 3: Structure of a Deal: Safe (Simple Agreement for Equity) Notes vs. Convertible Notes vs. Priced Equity Rounds

Toph led the discussion, adamantly arguing against safe notes. His argument boiled down to safes are not founder friendly. They can be both legally and financially detrimental to young, small business owners. 

David also preferred founders stray for safe notes and raise money in a priced round. Both experts dove into depth about deal terms following their discussion about fundraising types. 

Topic 3: Fundraising ToolKit

  • Financial Model – All 3 panelists stressed this as the most important part of the fundraising toolkit. Not only does a quality financial model put the best foot forward, it also acts as a decision-making tool for entrepreneurs to leverage weekly, if not more often. 
  • Pitch Deck – Toph again harped on specificity and high-level points. David pointed listeners to Emergence Capitals open source tools. They’ve invested in some of the most successful businesses, including Salesforce. Here is the link. 
  • Pro Forma Cap Table – Tom chimed in to add a pro forma cap table. This tool is specifically designed for entrepreneurs to understand the dilution of their company from their investors. Most entrepreneurs do not understand this well and end up diluting their company too much. 

Topic 4: Mistakes Entrepreneurs Commonly Make

Here are some of the common mistakes Toph and David highlighted:

  • Too wide of scope (selling something to all people)
  • Messy cap-table
  • Stacking too many convertible notes or stacking safes
  • Too high of a burn rate
  • Too many sales motions and 
  • Moving from founder-led sales too early
  • Having a strong finance partner from day 1
  • Leveraging the board meeting as an asset

About Elevate Ventures

Elevate Ventures is a cross-sector investment company giving money to ideation, pre-seed, seed, and Series A companies. Elevate manages $215 million in assets and writes checks between $20,000 and $2 million in any given round. Elevate invests in 17% of the companies that make it through to the pitch. They are predominantly (50%) software companies, but see that ratio changing in the near future. 

About Allos Ventures

Allos is 13 years old with $150 million in assets under management. Allos mainly invests in seed and Series A companies located in the midwest, mainly Indiana and Ohio. Allos specifically invests exclusively in B2B SaaS companies. Their checks start at $250,000 and up to $2.5 million. Allos looks for passionate founders who have experience in entrepreneurship and the problem they are solving. 

About Rally Innovation Conference

Rally Innovation Conference is aiming to be the largest cross-section innovation conference. This is the inaugural year with speakers such as Magic Johnson and Moira Gunn. Within the event is an up to $5 million dollar pitch competition. 

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