Fundraising for Startups 101

This article is written by Jeremiah Uke, a Contributor Author at Startup Istanbul.

Huw Thomas has a strong background in Innovation in the Energy Industry, his efforts contributed to driving the change in the United Kingdom to renewable energy. He launched several startups in the Energy and Sustainable Food industries as well. Most recently, he raised $3M funding in San Francisco. He has an MBA from the University of Oxford in Entrepreneurship and Venture Capital. He is also a startup coach and offers mentorship to a lot of startups across different programs.

Huw Thomas delivered a live webinar focused on raising funds for startups. He spread his session to cover 4 major points, which were:

  1. Equity, Ownership, and Dilution
  2. Investment and Incubators
  3. What are Incubators Looking out for?
  4. How to appeal to Incubators

Equity, Ownership & Dilution

Companies are normally translated into shares; the total number of shares make 100% of the company so when you start your company you may have 100 or 1000 shares and you own half of them while your co-founder owns the other half. When you add them together, you get the market value of the company. When you get investment, you give people shares.

So, at the beginning, you and your co-founder own all of the company. You can go through different kinds of funding rounds including Seed Funding, Angel Investors, Series A, Series B, Series C, or IPO rounds. It’s an order and the higher you go, the lesser amount of the company shares you own. Also, the higher you go, the more money you have to invest in your business. In short, Equity means bits of your business that you can sell for money to make your business worth more.

Huw used and example of Google. The founders of Google currently own a very small number of shares. While at the moment, you can buy one share from Google at $1091. While the who company is currently valued at $750 billion. Today, 687 million units of Google has been purchased.

Investment & Incubators

There are several kinds of investors that can fund your startup and it all depends on the stage you are in. At the seed stage, funding can come from:

  1. Founders, family, friends
  2. Individual Angel Investors
  3. Crowdfunding
  4. Accelerators and Incubators
  5. Technology Transfer funding
  6. Social Impact Investors
  7. Government grants and tax incentives

At the Early stage, funding can come from:

  1. Individual Angel Investors
  2. Crowdfunding
  3. Accelerators and Incubators
  4. Technology Transfer funding
  5. Social Impact Investors
  6. Government grants and tax incentives
  7. Angel Groups
  8. Govt matching funds
  9. Venture capital
  10. Corporate Investors

At the late stage, funding can come from:

  1. Social Impact Investors
  2. Government grants and tax incentives
  3. Govt matching funds
  4. Venture capital
  5. Corporate Investors
  6. Banks

Incubators are the closest you can get to a VC, their main job is to help you grow from being an idea to getting some funding. While showing some of the world’s leading incubators, Thomas stated that when choosing an incubator, you have to be clear on what you want, you could choose between having a big platform (YCombinator) or having specialised support (Indie Bio).

─ May 31, 2020