The Art of Startup Fundraising: A book review by Bob Morris

Posted on: July 8th, 2016 by bobmorris

9781119191834_p0_v3_s192x300The Art of Startup Fundraising: Pitching Investors, Negotiating the Deal, and Everything Else Entrepreneurs Need to Know
Alejandro Cremades
John Wiley & Sons (2016)

“You only have to do a very few things right in your life so long as you don’t do too many things wrong.” Warren Buffett

As I read this book the first time, I was inclined to view it as a “Here’s how to do it” book but that didn’t seem quite right so I re-read it and am now convinced that it is, rather, a “Here’s what to think about VERY CAREFULLY before you” book. Many people who read it will be well-prepared to make important “whether or not” decisions in terms of pitching investors (especially family members and friends), negotiating the given deal with one or more capital sources, and everything else entrepreneurs need to know before deciding whether or not to “go for it.”

Credit Barbara Corcoran with writing an uncommonly thoughtful and thought-provoking Foreword. Hers is an independent perspective on independent fundraising, in general and on Alejandro Cremades understanding of that evolving process, in particular.

He presents his material within 17 chapters that focus on a journey that began when he relocated from Spain in 2008 to the United States, earned a law degree at Fordham University, and founded his firm, Onevest; in the last chapter, he explains why recognizing key red flags “is as important as knowing what to do when it comes to raising capital quickly and effectively.” He briefly discusses 18. Ultimately, none of the red flags is a showstopper. “As a founder, what you need to do is put a correction wherever it needs to be placed to address potential concerns and have a good explanation behind it.”

These are among the dozens of passages of greatest interest and value to me, also listed to suggest the scope of Cremades’ coverage:

o Raising capital (Pages 5-23)
o Success plan (25-36)
o Pitches (37-45)
o Due diligence package (47-61)
o Sources of capital (65-80)
o Angel investors (74-76)
o Venture capital firms (78-80)
o Private capital vs. venture capital (86-87)
o Investment rounds (89-102)
o Investment accounts (103-106)
o Public relations (113-121)
o Investors (123-130)
o Closing deals (147-152)
o Value of relationships (153-154)
o Mistakes in fundraising (153-160)
o JOBS Act (161-165)
o Accredited investors (165-167)
o Tools for fundraising (177-185)
o Red flags for investors (187-192)

Here are Alejandro Cremades concluding observations: “Fundraising is without a doubt an art. As you have read throughout this book there are many things that need to be aligned in order to close the financing and have it available in the bank. However, if you are able to nail it on the suggestions and tips provided here, you are well on your way to making it happen. Keep your head up, be patient, and never accept no for an answer. You are the architect of your startup’s future, and with hard work and dedication anything is possible.”

Many years ago during dinner in San Francisco with one of the founders of a major venture capital firm, I asked him how he and his colleagues decided with which applicants to meet among the hundreds proposals for funds each week. His response remains true today. “We have three questions in mind as we work our way through a proposal. The first two are obvious enough. ‘Who are you?’ and ‘What do you do?’ The third question is less obvious, however, and the answer to it is decisive: ‘Why should I care?’ In most instances, we don’t.”

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