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Crack the Funding Code: How Investors Think and What They Need to Hear to Fund Your Startup
Crack the Funding Code demystifies the world of angel investing, venture capital, and corporate funding and lays out a strategic pathway for any entrepreneur to secure funding fast. Lack of funding is one of the biggest reasons small businesses fail. In 2016 in the United States alone, more than 31 percent of small business owners reported that they could not access adequate capital, and the lack of capital prevented them from growing the business/expanding operations, increasing inventory, or financing increased sales. Most business owners believe that their only feasible funding options are (1) savings or personal credit, (2) friends and family or (3) bank loans. They may have heard about venture capitalists or angel investors, but they don’t have enough information about what these investors do, what they can provide for a business, and on what terms. What’s worse, entrepreneurs often don’t know how to access the people who are looking to put their money into young companies with potential. Finally, business owners don’t have enough expertise to navigate the treacherous waters of outside funding. Many small companies don’t believe they are the type of company that gets funded. Even when business owners are brave enough to look for the right outside investors, they don’t know how to create the compelling pitches or how to structure the deals that will get them the funding to expand and grow. Crack the Funding Code will show readers how to find the money, create pitches that attract investors, and then structure fair, ethical deals that will bring them new sources of outside capital and invaluable professional advice. It will give readers the broader perspective—how funding works, how investors think, and what they need to hear to put their money where your mouth is. Every entrepreneur who reads this book will get easy-to-follow deal checklists, a roadmap of where and how to locate the best funding resources and top business mentors for their particular industry and/or geographical location, and a step-by-step process to create pitches that make their idea or business irresistible.
9 pages, Audio CD
Published February 26, 2019
83 people are currently reading
296 people want to read
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Displaying 1 - 16 of 16 reviews
October 13, 2020
Content-heavy book, full of practical advice.
My notes from the book:
"Show me a problem - and convince me nobody is solving it the way you are". Show the magical transformation that is visual, powerful. Use different funnels - their automatically lit toilet bulb had 12 sales funnels in the example, generating millions of sales without TV ads. It is important to have VC contents early on, because angels love hearing that so-and-so VC is planning to hop on board in a year or two if X criteria is reached; this gives angels a huge feeling of security. Look for the other book on the author, “How to be a power connector”. Number one source for funding for the founder is referrals who they like, know and trust. Most reasons angels and VC-s turn You down because a million reasons that have nothing to do with You or Your business; so You have to push stronger and better than other founders pitching Your business. The founder has to have a great passion - this shows to the investors he can attract talented people in the future. Your pitch has to be better than understandable - but intriguing. Investors analyze first the founder, then the team, and THEN only the business. Founder: character (commitment, grit, resistant), confidence and coachable. Is the founder smart, likeable, credible, a good leader, inspirational, competitive? While being confident and believing in Your enterprise, one must not be OVER confident and arrogant (by not listening etc). Angels want to be mentors, so be coachable - a “Learn it all”, not a “Know it all”. Never think of investor’s questions or notes as an assault - but think of them being interested (better than silent). Statistics: first time entrepreneur will get funded in 37 months, but repetitive founder at 22 months. Angels invest ca 38K, waiting 5 years for it to multiply 9x. Show angels You can learn and adapt - like pivoting Your business. Don’t ask for a lump sum of money, but fixed ideas: “I need X amount to achieve Z”. Don’t sell more than 10-20% of Your company at any moment. Your company shouldn’t NEED the money of an investor, but ask it to grow faster. Never pay old commitments with the new investment. First investors are important like first team members, they set the standard for future investors - more this type will tend to approach. Keep in contact with all surplus angels even if Your round is full and no investors needed, for You might need them in a year. Angels have a network and information about You will be forwarded. And vice versa, You will be taken more seriously when recommended via the network (“warm” introduction). Angels think: If You can’t make a warm introduction, then You probably can’t get to clients either. Don’t underestimate Your own network, people You know might know other people just right for Your business. When cold-approaching somebody, start with a positive question (e.g. “What parts did You like about this event?”). When the subject will lead to Your own business, always in the end ask two questions: 1) Do You have any more ideas on that? 2) Who do You know that I should talk to about this? Recommends doing something prior to sending a cold-approach email. When You have a third referral, recommends the connecting person to send an email TO him and CC You, when You can later send Your own “follow up”. If engineers get equity, they might work at evenings and weekends, because they are highly motivated to see the company grow fast. Investors like it when You have all bets on the company and no safety net - this means You are highly motivated on seeing the business succeed. Mediocre people won't kill a big company, but a Mediocre hire in the first five will kill a startup. Before hiring, write down all the team’s positive traits and then think of all the factors missing - and hire new talent based on that. Hire slow, fire fast - the work culture must not be poisoned. Diverse culture is needed - not only optimists, but also a pessimistic team member. There ARE people who will take a pay cut to be in on a ground level exciting new adventure. People, who take pride in inventions. A founder is seldom the right person to take the company public, so VC board will be better. You must be as passionate building the team, as You are building Your product. Creating a business plan is less about perfect prediction and more about setting regular goals. The pitch should be a 10-15 page presentation with no or few bullet points. 20 minutes. Font size minimal 30. The goal of the pitch is to get on the “second date”, so You must not put all information in advance - stay intriguing. In the beginning it is wise to open with a story 90 seconds max. What ever time You are given, take less. If offered 20 minutes, take 15. To get the deal, you must have confidence. To get confidence, you must prepare, prepare, prepare. Super Hero pose for 2 minutes, remembering your past success stories. Own the space, fill the room with your energy. Speak slowly, then fast. Speak with emotion. Lean towards them, with comfort. "Power through" the pitch, don’t show weakness, play on Your natural strengths. Think of all the risks for the investor - is the correct time for Your business arrived or are You too early? On detailed questions You can hint to have in depth answers on “the second date”. We are looking for warmth in people. Most of the people You approach will not accept You with open arms - think of them as not being their type, and continue. Be ready to say no to investors. Ask for previews contacts (founders etc) and ask around - what is the history on this angel/VC? What value did he provide besides the money? There are many risks… Technological (prototype ready?), execution (quality management in place?), Marketing (relationships with client?), production (successful rollout?). If all risks are secure, it can be evaluated 500 000 USD for every dimension, meaning a startup valuation to be 2 000 000 USD in beginning. Mathematics: If a company with a valuation of 10 000 000 has 10 USD shares 1 000 000 and somebody invests 1 000 000, he should get 100 000 shares and other (previously 100%) now have shares worth less, 90% => share count goes up! “Term sheet” with an investor is exactly that = terms to negotiate, nothing yet is set to stone. But choose Your battles, don’t open more than 3 issues with it. If an investor is already picky in the start, they also will not be easy as a partner, so stay clear. If the investor doubts, they will not be a strong support in future as well. Pick those, who can’t wait to invest in You. To save Your energy, deal with the term sheet only once with a bigger angel, then set the same term sheet again for future smaller angels. When all things agreed, investors will investigate Your company, "due diligence" - uncomfortable like cavity search on a company. Look at the bright side - if investors find issues with Your company, You should be happy to know them. They want to be Your future partners and they want to help You find/solve all the issues in Your business. Be professional, cooperative. The assume to find many issues, but it is the way You handle the problems that sets the tone for future. Don’t try to hide anything, e.g. when You have a business relationship gone bad, they will probably find out anyway. If investors ask for data, be quick to answer and send - on this pattern they will estimate all future communications. In the end of the book - a Power Connector test, with recommendations to improve!
My notes from the book:
"Show me a problem - and convince me nobody is solving it the way you are". Show the magical transformation that is visual, powerful. Use different funnels - their automatically lit toilet bulb had 12 sales funnels in the example, generating millions of sales without TV ads. It is important to have VC contents early on, because angels love hearing that so-and-so VC is planning to hop on board in a year or two if X criteria is reached; this gives angels a huge feeling of security. Look for the other book on the author, “How to be a power connector”. Number one source for funding for the founder is referrals who they like, know and trust. Most reasons angels and VC-s turn You down because a million reasons that have nothing to do with You or Your business; so You have to push stronger and better than other founders pitching Your business. The founder has to have a great passion - this shows to the investors he can attract talented people in the future. Your pitch has to be better than understandable - but intriguing. Investors analyze first the founder, then the team, and THEN only the business. Founder: character (commitment, grit, resistant), confidence and coachable. Is the founder smart, likeable, credible, a good leader, inspirational, competitive? While being confident and believing in Your enterprise, one must not be OVER confident and arrogant (by not listening etc). Angels want to be mentors, so be coachable - a “Learn it all”, not a “Know it all”. Never think of investor’s questions or notes as an assault - but think of them being interested (better than silent). Statistics: first time entrepreneur will get funded in 37 months, but repetitive founder at 22 months. Angels invest ca 38K, waiting 5 years for it to multiply 9x. Show angels You can learn and adapt - like pivoting Your business. Don’t ask for a lump sum of money, but fixed ideas: “I need X amount to achieve Z”. Don’t sell more than 10-20% of Your company at any moment. Your company shouldn’t NEED the money of an investor, but ask it to grow faster. Never pay old commitments with the new investment. First investors are important like first team members, they set the standard for future investors - more this type will tend to approach. Keep in contact with all surplus angels even if Your round is full and no investors needed, for You might need them in a year. Angels have a network and information about You will be forwarded. And vice versa, You will be taken more seriously when recommended via the network (“warm” introduction). Angels think: If You can’t make a warm introduction, then You probably can’t get to clients either. Don’t underestimate Your own network, people You know might know other people just right for Your business. When cold-approaching somebody, start with a positive question (e.g. “What parts did You like about this event?”). When the subject will lead to Your own business, always in the end ask two questions: 1) Do You have any more ideas on that? 2) Who do You know that I should talk to about this? Recommends doing something prior to sending a cold-approach email. When You have a third referral, recommends the connecting person to send an email TO him and CC You, when You can later send Your own “follow up”. If engineers get equity, they might work at evenings and weekends, because they are highly motivated to see the company grow fast. Investors like it when You have all bets on the company and no safety net - this means You are highly motivated on seeing the business succeed. Mediocre people won't kill a big company, but a Mediocre hire in the first five will kill a startup. Before hiring, write down all the team’s positive traits and then think of all the factors missing - and hire new talent based on that. Hire slow, fire fast - the work culture must not be poisoned. Diverse culture is needed - not only optimists, but also a pessimistic team member. There ARE people who will take a pay cut to be in on a ground level exciting new adventure. People, who take pride in inventions. A founder is seldom the right person to take the company public, so VC board will be better. You must be as passionate building the team, as You are building Your product. Creating a business plan is less about perfect prediction and more about setting regular goals. The pitch should be a 10-15 page presentation with no or few bullet points. 20 minutes. Font size minimal 30. The goal of the pitch is to get on the “second date”, so You must not put all information in advance - stay intriguing. In the beginning it is wise to open with a story 90 seconds max. What ever time You are given, take less. If offered 20 minutes, take 15. To get the deal, you must have confidence. To get confidence, you must prepare, prepare, prepare. Super Hero pose for 2 minutes, remembering your past success stories. Own the space, fill the room with your energy. Speak slowly, then fast. Speak with emotion. Lean towards them, with comfort. "Power through" the pitch, don’t show weakness, play on Your natural strengths. Think of all the risks for the investor - is the correct time for Your business arrived or are You too early? On detailed questions You can hint to have in depth answers on “the second date”. We are looking for warmth in people. Most of the people You approach will not accept You with open arms - think of them as not being their type, and continue. Be ready to say no to investors. Ask for previews contacts (founders etc) and ask around - what is the history on this angel/VC? What value did he provide besides the money? There are many risks… Technological (prototype ready?), execution (quality management in place?), Marketing (relationships with client?), production (successful rollout?). If all risks are secure, it can be evaluated 500 000 USD for every dimension, meaning a startup valuation to be 2 000 000 USD in beginning. Mathematics: If a company with a valuation of 10 000 000 has 10 USD shares 1 000 000 and somebody invests 1 000 000, he should get 100 000 shares and other (previously 100%) now have shares worth less, 90% => share count goes up! “Term sheet” with an investor is exactly that = terms to negotiate, nothing yet is set to stone. But choose Your battles, don’t open more than 3 issues with it. If an investor is already picky in the start, they also will not be easy as a partner, so stay clear. If the investor doubts, they will not be a strong support in future as well. Pick those, who can’t wait to invest in You. To save Your energy, deal with the term sheet only once with a bigger angel, then set the same term sheet again for future smaller angels. When all things agreed, investors will investigate Your company, "due diligence" - uncomfortable like cavity search on a company. Look at the bright side - if investors find issues with Your company, You should be happy to know them. They want to be Your future partners and they want to help You find/solve all the issues in Your business. Be professional, cooperative. The assume to find many issues, but it is the way You handle the problems that sets the tone for future. Don’t try to hide anything, e.g. when You have a business relationship gone bad, they will probably find out anyway. If investors ask for data, be quick to answer and send - on this pattern they will estimate all future communications. In the end of the book - a Power Connector test, with recommendations to improve!
June 25, 2022
It’s good. Definitely slanted to be pro investor and less pro founder. So take the advice as such.
That said. Valuable perspective, and a thorough examination of the fundraising process.
That said. Valuable perspective, and a thorough examination of the fundraising process.
November 7, 2024
Depending on your level of understanding of the funding game, this book might be helpful.
I was able to listen to the audiobook at 1.7x speed which should tell you the depth of the content.
If you are a new entrepreneur a good and fast read as a starting point to understand funding and other key concepts around it
I was able to listen to the audiobook at 1.7x speed which should tell you the depth of the content.
If you are a new entrepreneur a good and fast read as a starting point to understand funding and other key concepts around it
August 5, 2021
An essential book for any new startup CEO
May 6, 2020
Definitely one of the best funding books out there, and best I've read to date. Judy Robinett is accomplished in the field and knows it's ins and outs, includes valuable content from many other notable people.
My main takeaway (of which there are many) is that networking is the most important aspect to get in the door, and for the deal to go forward need to be very well organized with all the business plans and related information. Making presentation tailored to answer the investors likely questions, and present as a story.
This is one of those books that is good to have for reference, as will have to go back to it multiple times to apply everything in it.
My main takeaway (of which there are many) is that networking is the most important aspect to get in the door, and for the deal to go forward need to be very well organized with all the business plans and related information. Making presentation tailored to answer the investors likely questions, and present as a story.
This is one of those books that is good to have for reference, as will have to go back to it multiple times to apply everything in it.
November 1, 2020
Didn't really have big expectations when I started reading this book, but I was positively surprised. The book does not come across as a "self-help" type, or as a book to promote the author, but rather the author presents herself so that we can know she has "clout" and we can know that she speaks from experience.
One of those books you need to read if you intend to become a start-up founder.
One of those books you need to read if you intend to become a start-up founder.
August 17, 2020
The book gave an amazing insight on how the funding world works !!
January 8, 2021
Perfect, right-to-point book. A good complement to the "Venture Deals" book.
February 19, 2021
Has some useful points but most of it is quite basic. I am slightly more wiser and it is not too long so I don’t regret reading it.
March 31, 2021
Good read, especially the part advocating a shorter business plan model.
July 13, 2021
Very eye opening
Great book, really takes you through the do's and don's of fundraising. Also very insightful outlook on new ways to raise funds
Great book, really takes you through the do's and don's of fundraising. Also very insightful outlook on new ways to raise funds
November 30, 2021
Amazing information and perspective, if you are in a position where you are building a company or just curious about the ecosystem this is a great ressource.
June 5, 2024
Good information, not the best narration. I'd recommend reading Venture Deals first.
November 21, 2024
Has some good tips, but it feels more like a motivational book than a real how-to guide.
February 27, 2019
Judy Robinett and her co-contributors have written an exception guide for startups/entrepreneurs. It is clearly organized and guides startups/entrepreneurs through the various stages of the funding process. This book provides detail on how to find the right investors, what these investors are looking for and how to close deals. It also outlines pitfalls startups /entrepreneurs encounter along the way and how to avoid them. I found Chapter 3, Who’s Got the Money, particularly useful as it presents alternate funding sources. The Appendices are packed with additional detail around Judy’s previous exceptional work on Power Connecting and networking, a successful pitch deck example and due diligence resources. I highly recommend this book.
April 30, 2022
Brilliant for 1st time founders who are looking to raise funds.
Displaying 1 - 16 of 16 reviews