Startup Funding Canvas
How smart is your funding?

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Know yourself

Where does your company stand today? Knowing yourself is crucial before even considering an investment!

Look ahead

Where do you want to be in 5 years and how will you get there? Your funding strategy is intertwined with your growth strategy!

Next round

What are your plans and expectations about your next funding round? Check if they are compatible with your growth and funding strategies as well as current situation!

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Briefly explain why your startup has a strong growth

Investors generally prefer startups with growth potential, also international, and a scalable business model.

Briefly explain why your startup has a strong competitive edge

Investors generally prefer startups that have a superior value proposition that they can protect from competitors, and that can obtain an attractive position in their value chain.

Briefly explain why your startup has a great investment opportunity

Investors generally prefer startups that have credible yet attractive financial outlooks and exit potential.

Briefly explain why your startup has a great market opportunity

Investors generally prefer startups that have a clear target market that is large and growing.

Briefly explain why your startup has a strong value proposition

Investors generally prefer startups that solve painful problems for the customer, have a clear & compelling value proposition and can demonstrate a market demand.

Briefly explain why your startup has a solid execution

Investors generally prefer teams with ambition that have a solid go-to-market/ growth strategy, and that are able to identify & manage risks.

Briefly explain why your startup has a great team

Investors generally prefer teams with committed entrepreneurs that have relevant domain knowledge & track records, as well as complementary expertises.

Tell us more about your next round of funding:

  • What investment amount are you looking for (in €)?
  • Where do you need the investment for?
  • What type of investor are you looking for?
    E.g. angel investor, venture capital fund, best fit, other (crowdfunding, innovation loan, innovation subsidy, …)
  • When do you want or need an investment?
    Please indicate month/ quarter and year. It’s okay if you’re not actively fundraising at this moment. We want to get you in touch with investors so once you will be fundraising you can hit the ground running. In that case, please estimate when you’ll be fundraising.

Tell us more about your startup:

  • Company name
  • Website URL
  • In what city are you located?
  • When was your company founded?
    Exact day is not important, month and year are)
  • One-liner that summarizes what your startup does
  • What are your market and technology ‘tags’?
    E.g. software, SaaS, e-commerce, e-health, artificial intelligence, hardware.
    Name as many relevant as possible, in order of importance/ relevance
  • Who does your business model primarily target?
    E.g. B2B (business-to-business), B2C (business-to-consumer), P2P (peer-to-peer)
  • What is your revenue status?
    Your run-rate is your revenue per year if you extrapolate this month’s revenue. So: revenue this (or last) month * 12.
  • If applicable, could you explain a bit about the quality of your revenue, e.g. if it is recurring or comes from different customers?
    Investors love recurring revenue because it’s predictable. In this case, with recurring we mean that you have customers that have a subscription on your product and pay you each week/ month/ year/ etc. Also, revenue that comes from multiple customers is preferred for risk reduction reasons.
  • Company size
    # employees, including founders
  • Does your startup already have other investors on board?
    If yes, please explain who and what share of the company other investors own.

 

Convince us why your startup will be successful with metrics, social proof and investment commitment.

Answer these questions:

  • What metrics do you track to measure your startup’s progress?
    Please mention 1-5 key metrics + relevant quantification. E.g. webtraffic (unique visitors): 20k last month.
  • Do you have social proof?
    E.g. selected for accelerator program, won big prize, recommendation of scientific expert, letter of intent from customer
  • Do you have investment commitment already?
    E.g. commitment from a regional investment organisation or angel that don’t want to be lead investors.
  • What other ‘proof’ do you have that your startup will be successful?

Tell us more about your startup’s plans and ambitions. These answers will help us to see if you are really investor ready.

Know yourself descr.

Suggested topics & further reading:

The summary can be a short version of your pitch

There are plenty suggestions for a logical order in your pitch. You can use them to create a summary of your startup. We’d recommend these elements for a brief summary (adopted by henQ’s pitch deck guidelines):

  1. Company purpose – Define the company / business in one sentence
  2. Problem – Describe the pain of the customer (or the customer’s customer)
  3. Solution – Demonstrate your companies value proposition to make the customers life better

Additional elements for your pitch can be:

4. Why now? – Define recent trends that make your solution possible
5. Market size – Calculate top-down AND bottom-up addressable market sizes & growth potential
6. Competition – List competitors and competitive advantages
7. Product – Product description (functionality, features, architecture, IP) and roadmap
8. Business model – Revenue model(s), pricing and metrics
9. Team – Founders & management history/trackrecord/strengths
10. Finance – P&L, cashflow projection and investment deal proposition

Pitchdeck templates

Other great templates for pitchdecks include:

 

Suggested topics & further reading:

Investor Readiness Canvas

You can use the input of the Investor Readiness Canvas (see elsewhere on this website) for this building block.

Investors’ criteria

Research suggests that these are topics that investors find important when assessing the quality and investor readiness of companies:

  1. Team – Investors generally prefer teams with committed entrepreneurs that have relevant domain knowledge & track records, as well as complementary expertises.
  2. Execution – Investors generally prefer teams with ambition that have a solid go-to-market/ growth strategy, and that are able to identify & manage risks.
  3. Growth – Investors generally prefer startups with growth potential, also international, and a scalable business model.
  4. Market opportunity – Investors generally prefer startups that have a clear target market that is large and growing.
  5. Value proposition – Investors generally prefer startups that solve painful problems for the customer, have a clear & compelling value proposition and can demonstrate a market demand.
  6. Competitive edge – Investors generally prefer startups that have a superior value proposition that they can protect from competitors, and that can obtain an attractive position in their value chain.
  7. Investment opportunity – Investors generally prefer startups that have credible yet attractive financial outlooks and exit potential.

Golden Egg check assessment

Curious about how you score on potential, feasibility and investor readiness? You can request an account at Golden Egg Check to do your own assessment and see which investors are most relevant to your company (€125 excl. VAT).

Suggested topics & further reading:

What is traction?

Traction, as defined by AngelList co-founder Naval Ravikant, is: “Quantitative evidence of market demand.”

Traction is proof that somebody wants your product. Ideally, it should communicate momentum in market adoption.

Broadly, we find traction most convincing in the following order:
– Profitability
– Revenues
– Active users
– Registered users
– Engagement
– Partnerships/clients
– Traffic

Of course, traction depends on the type of startup and the context of it. Find your way to measure and communicate traction.

Learn more about traction in these blogposts and tools:

 

Suggested topics & further reading:

Current investors

Who are current investors in your company, if any? You can mention them by (company) name and by type of deal (e.g. seed capital, (convertible) loan, angel investor). This can also give you some ‘social proof’ to new investors.

Cap table

A cap table shows who current shareholders are and what percentage of the company they own. This is relevant information to new investors, for example to see that founders still have a significant enough amount of shares to keep being motivated and to understand what other investors have a say in the direction of the company.

Reading:

Financial agreements

If your startup raised funding from investors before, including equity, debt or convertible debt, you’ve had to make financial agreements, e.g. on:

  • Valuation
  • Interest rate and repayment agreement
  • Discount rate and valuation cap (for convertible)

You can summarize the key financial agreements that you made in the past, as this helps new investors to understand the ‘financial legacy’.

Suggested topics & further reading:

As a founder, your job is to keep everyone else happy by giving away your company. Give it away carefully, but give it away, because not doing so guarantees you will be the majority shareholder in a worthless enterprise.

As a founder, your function is to manage the distribution of your own holdings so that you end up with fewer shares but more wealth. The idea is to end up with a thinner slice of a thicker pie. Which requires strategic thinking and long-term planning. – Pascal Finette

Startup financing stages

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

Milestones

What are foreseen milestones (i.e. significant steps of risk-reduction and value creation) in your growth plan? Can you split up your total investment need into milestones for your growth?

Practical tools & relevant blog posts

Suggested topics & further reading:

What is your ambition?

Where do you want your company to be in 5 years from now? What will your focus be:

  • Growth or profit?
  • Profit or impact?
  • Go big or go home?
  • In control or ‘outta control’?

What is your go-to-market strategy?

How will you get to problem-solution fit and product-market fit? What is your (initial) target market?

Recommended articles and tools in this regard are:

What is your growth strategy?

How will you capture the market? Will you focus on growth or on profit? What’s your plan to scale-up, also internationally? What is your projected growth rate? What is your business model, e.g. are you cheaper or better than incumbents?

Have a look at these articles:

Milestones

What are foreseen milestones (i.e. significant steps of risk-reduction and value creation) in your growth plan?

What is your exit strategy, if any?

How do you see the future of your company? Do you plan on an exit (i.e. sell your shares) or do you want to create a sustainable, profitable business.

  • Profitable business: No foreseen exit but instead sustain a healthy, profitable business
  • Acquisition: Selling your company to another company.
  • Initial Public Offering (IPO): Offering your company’s stock to the public stock market.

Partly adopted from Exit Strategies for Your Business by Stever Robbins.

Other recommended articles in this regard are:

Suggested topics & further reading:

Of course you cannot predict the future; but you should have a clear idea, based on your business plan, how much money you will need to finance your growth. Investors will want to know about your burn-rate and your breakeven point, so be prepared. Be realistic but ambitious: if you ask too little now, you might slack behind the competition. But then again, there is no such thing as free money.

FUNDING NEED

How much money do you need and for what exactly?

For instance: We need €50,000 for building a prototype, we need €200,000 for starting mass production of our product, or we need €1.000.000 to strengthen our sales team and scale internationally.

Choose the funding need in such a way that it will allow you to achieve a new value creation milestone. You should consider the balance between not raising too much, as the capital is probably more expensive when you’re still is a risky phase, and not raising too little, as you’ll be spending more time fundraising than running the company. In general, we advise startups to raise enough to cover 18 months of runway. Use sales projections to determine your exact funding need.

Practical tools for making a financial plan

Suggested topics & further reading:

Compatibility is actually a very important thing to consider. It’s about how all section in this Startup Funding Canvas are connected and if that makes sense. It’s important to realize that you can’t have it all. You can’t optimize for the long-term if you don’t consider the short-term. The interests of the founders are not always perfectly aligned with the interests of investor. How will you manage that? What are potential ‘areas of conflict’?

They could include:

  • Traction with Funding need
  • Investor readiness with Investor type
  • Growth strategy with Funding strategy
  • Funding strategy with Terms (valuation and ownership in later rounds: will founders have a big enough stake and will this leave enough upside for investors?)
  • Terms with Investor legacy (blocking terms from previous rounds)
  • Growth strategy (e.g. scale-up internationally) with Smart needs (e.g. experience in scaling up companies internationally)

Suggested topics & further reading:

Valuation

How much is your company worth? If you’re raising an equity investment, this is a relevant question. You need to know how much ownership you are willing to give to investors in return for their investment.

Be careful not to give away too much equity at an early stage of your business as this could limit your potential for raising future investments and could hinder your further growth. VCs generally love to see that the founders still have a significant stake in the company.

 

Term sheet

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

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

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

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

Suggested topics & further reading:

investment type

Depending on the type of company you have, as well as the growth and funding strategy, some investment types are more relevant than other. Our advice? No venture capital is an option. No value creation for your customers is never an option.

Here’s a primer on types of startup funding.

a. Revenue (money in return for your product or service)

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

b. Equity (money in return for ownership in your company)

  1. Angel investment
  2. Venture capital
  3. Equity crowdfunding
  4. Strategic partners

c. Debt (money in return for interest and pay-back)

  1. Basic debt
  2. Convertible debt
  3. Innovation loan (see Vroege Fase Financiering or Take-Off phase 2)

d. Grant (money when other sources are not available)

e. Other (e.g. ICO)

Investor types

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

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.

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.

Suggested topics & further reading:

An investor can provide you with more than just cash. Often they have experience as an entrepreneur themselves, have some valuable contacts or have links to talent that can help you expand your business. Using insight from the questions you asked yourself in the previous blocks, you can determine which aspects of building your business you could use some help with. A public investor might be able to help you come in contact with governments: if your business is focused on the public sector or if your product isn’t lawfully approved yet. A corporate partner or a university could, for example, help you develop your product further by leveraging their high-tech facilities and knowledge.

Just the way you did with your terms, think about your ideal investor and their ideal deal offer: What do they typically offer and ask for in return? Do the terms of that sort fit with the ones you’d like to offer? Think about ways to improve the alignment between your terms and your investor’s terms. Do not hesitate to be critical: It is fine to say no and explore other options if the terms of the deal don’t feel right.

Smart needs

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

What kind of role do you want this investor to play? 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. Do they want to advise, be actively involved or just want to be passive?

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?

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

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? 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.

oud:

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
  • Venture Capital Deal Terms
  • 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
Smart Funding canvas

StartupDelta and Golden Egg Check jointly created the Startup Funding Canvas to help entrepreneurs to think-through their funding strategy. This canvas – and related content – can be used free of charge by startups, incubators, accelerators, business advisors, investors etc.

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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