A Fundraising Template Every Entrepreneur Can Use

Raising massive rounds these days is so commonplace that most of us tune out fundraising newsaltogether. The fundraising environment has changed so dramatically over the past four years, it'salmost incomprehensible to those of us who lived through it.

A lot has been made of how ridiculous late-stage rounds have gotten, as well. Bill Gurley penned oneof the best pieces I've read on the subject recently; to raise late-stage rounds, startups go throughfar less diligence and scrutiny than they would if they decide to go public. As a result, a lot of late-stage startups lack the operational discipline necessary to go public. I would argue that trendtrickles down all the way to the earliest stages of venture-backed companies and really starts there.

Early-stage CEOs are practically taught to not even put a financial model in any of their fundraisingdecks until they get to their Series B. It's all about building product in the early stages right? Youdon't need to worry about figuring out a business since it's all about growth in the early stages,right? Wrong.

Every CEO needs to fully understand the cost of doing business before deciding to raise any outsidecapital. You don't want your burn rate to get ridiculous in the early days, so force yourself to putsomething basic together, even if it's out of your comfort zone.

For those of you short on time, I decided to put something together very basic for you, which will atleast give you a start in understanding how much you need to raise to get to your next milestone. Iused Gumroad to share the link - you don't need to pay anything to download the model - just donate"$0." A few notes about my template are below.

This is not a one-size-fits-all solution. Think about customizing this in the context of your business.

As an example, some companies may want to get a lot more granular about sales expenses to see if itmakes sense to build an enterprise sales team. In order to analyze those costs, you will need to, asan addendum to this, add a lot of details on the quotas of individual salespeople, seasonality, ramptime, and numerous other factors. My model, simplistically looks at the fully loaded cost ofsalespeople if they hit their quota.

Include all of your recurring expenses, however small. The little things add up and you will discoverthat you are spending way more than you should on services you don't use. Once you write down allof the little expenses, you'll realize you're burning a big hole in your wallet.

Write down everything as small as a domain that you bought from GoDaddy for a $19.95/year; youneed to be frugal in the early days in order to be disciplined. Unanticipated, or unaccounted-forexpenses will kill your startup faster than a bullet.

You should eventually take the time to build a marketing funnel. As you mature as a company, themarketing tab should be more granular and based on a real-life cost per acquisition number. Forexample, if you know that it costs you $200 to acquire a customer, and you know what yourconversion rate by channel is (Facebook, Google, email, etc.), you should build an addendum to thisthat gets granular about which channels you intend to spend on.

Really sophisticated companies (generally at the growth stages) can get fancy with this and knowexactly how many leads they are going to "buy" with their new funding, how many will convert tosales-qualified leads, and how many will eventually turn into paying customers (and know theLTV). This helps companies understand how quickly they can grow in the context of their funding.

You will spend more on vendors than you think, so cushion that substantially. The one that alwaysgets people is "recruiting expenses." The market is hyper-competitive right now for talent, and youmay think for a while that you can do it yourself. The reality is, you will hire a contingency recruiterat some point in your company's life cycle, and when you do, you will get a $25,000 surprise bill. Irecommend third-party services to hire engineers; it takes the risk out of this type of expensebecause you only pay if the employee works out for a prolonged period of time.

"Fringe" is much higher than you think. The cost of hiring a salaried, full-time employee in the SanFrancisco Bay Area is expensive. It's not limited to salary itself - you have to burden the employee'scost to account for things like healthcare, 401k (if you're going to have one), payroll tax and so on.To hire a $100k full-time employee in San Francisco in reality costs substantially more than $100k.

Office space prices are getting ridiculous. I often joke with my other founder friends that the reasoncompanies have to raise so much is to pay their leases. Depending on the neighborhood, you willspend up to $97 per square foot in San Francisco. Not only that, but it's rare to find a propertymanagement company that will take you in these days for lease terms less than three years. Kiss afew hundred k of your new shiny money behind to office space.

The bottom line is the money goes extremely fast depending on where you're based. Bay Areasalaries and office space are out of control (but the talent pool and access to capital are amazing),

and if you are building a company here you will need more capital. With that being said, do not raisea dollar more than you need to - otherwise you may end up like Javeed from "Silicon Valley."

I encourage every early-stage entrepreneur to use this, or something like this when considering howmuch to raise.

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