18.891 investors out there, 50 most relevant to you, Hack Funding 103

Chapter 3, Putting the pieces together - The game

Acknowledgements

Hackfunding is all about “Keeping It Simple, Stupid”. My goal is to empower each founder, even one that have no technical competency, to explore her funding options. Of course there is a multitude of shortcuts to extract and manipulate these kind of data -from crunchbase API access to Macros. However, that was what my first version of this kind of research looked like. In Marathon VC we are building a more sophisticated version of Hackfunding for our portfolio companies.
This third Hackfunding instalment was published a year after the first two. In the meantime I implemented this research in seven cases, from seed stage rounds all the way up to Series B. The results suprised us all; some of them found investors, others landed a number of clients, finally in one case the company got acquired by a competitor highlighted in our competition map. Most importantly, all of them booked a meeting with several of their shortlisted VCs.
In the past twelve months a number of iterations were made in the core model. The end goal was to publish a template. An interactive tool that would require only the first sheet as input. Nonetheless, I came to understand that a good amount of value of Hackfunding is hidden in the process itself. Fundraising is a very high-touch sales process. Raw prospecting or email spamming will not get you far, let alone bring on board the right investor. Fundraising is all about the details and tedious work of aligning interests. Trust me, in the past twelve months a fund was raised at a great extent following similar processes, too! ;)

By now, we have been through the first two chapters describing:

1) What tools we are going to use for Hack Funding.

2) How to identify the Exact Vertical and Business Model of your startup.

It is now time to get to the process itself. The goal is to filter a list of 18k potential investors to 50, identifying the most relevant to your startup.

In this chapter you can find my approach on how to:

1) Create a competition map in your spreadsheet.
2) Find who are the backers of each competing startup.
3) Discover VCs that have a precedent (display a pattern) in backing startups with the same mission as yours.
4) Create a list of the most relevant VC investors to your startup.

To simplify the procedure, I will share a sample research based on a US startup called sprig.com. Sprig has now ceased operations so we can safely explore the whole picture. Sprig in their words: “provides an on-demand meal service that allows users to choose, through their mobile device, from three ready to eat meal options to be delivered in 15 minutes”. In this example research I will simulate Hack Funding for a Series A funding round.

Note: In this phase we are going to use the tools and methods that were thoroughly described in the previous chapters. If you haven’t visited the two previous posts, you may want to take a look beforehand.

1) Create a competition map in your spreadsheet.

From the chapter 102 you have a list of direct and indirect competitors.

Here, we are going to use the whole list without direct-indirect distinction.

First, you have to define startups operating in the same vertical as you do. In this part choose a generic Vertical; In the sprig.com example, I picked Food & Beverages as a vertical.

Second, you have to split the picked vertical into more specific sub-verticals. In this instance I divide Food & beverages in: Premium-Healthy food delivery (in 30' or less), Premium DIY Meals, Subscription Boxes, Delivery aggregators and Social/Food related- platforms.

Third, you may repeat the above step again if you see fit.

Fourth, open a spreadsheet and in the first sheet insert the verticals horizontally as you see above. (Use merge cells button)

Fifth, go to Mattermark/search/companies and choose as your verticals and business model. For the above verticals I chose the following:

Sixth, from the list on Mattermark, start adding startups in the respective column, under the respective vertical. You will end up with a list like this:

Note:In this seven column list, you can notice a hot to cold relation as you move from left to right.

Seventh, mark those that have got funded in green, those that have exited in blue and those that have failed in red. At the end you should have a list like this:

Eight, name this sheet “competitive landscape”.


2) Find the backers of each competing startup.

Create a new sheet:

First, pick up every colored cell (startup) from your “competitive landscape” sheet go to column A and list them vertically.

Second, in the first row insert, Seed, A round, B round, C round, Late round.

Fourth, place each entry of the A column to Mattermark research bar. This will give you a full profile of each startup. Locate their investors section and list each investor under the respective funding round.

Fifth, repeat the process for each sub vertical. By the end your sheet will look like this:

Sixth, go to your spreadsheet and select “mark doubles”. Thus, you will identify which investors have invested twice or more in these verticals.

Seventh, name this sheet “Backers”.

3) Discover which among the VCs have a precedent (display a pattern) in backing suchlike startups.

Create a fresh sheet:

Note: In this sheet we are going to filter out the findings from the “backers” sheet. It looks like a repetitive task but it is crucial before the final listing.

First, pick each colored entry (venture capitals) from the “backers “ sheet and list them vertically.

Second, copy and paste the sub verticals from “competitive landscape” sheet.

Third follow the reverse process and list each startup next to the VC that has been backed of, under the respective vertical. Based in the data from “backers” sheet.

Fourth (optional) go to CBInsights and in the search bar enter a VC name, then click on momentum and in the search bar type your vertical. Here Food & beverages. Then you will find a list of investments in your vertical from this specific VC.

That way you can enrich your findings.

By now you have your record ready but it is time to create a usable list of your results.

4) Create a list of the most relevant VC investors to your startup.

First, open a fresh sheet create a table and in the first row enter horizontally the following information:

Second, in VC firm column register all the VCs from the “VC investing pattern” sheet. Next to them in column B enter their web pages.

Third, in columns C,D,E register the most relevant sub-verticals, as many as you see fit. Fill this column according to your findings in “VC investing pattern sheet”. Also, in column F enter the sum of the investments per vertical

Fourth, Stage. Go to Mattermark and in the search bar enter each VC name you will find how many investments each VC made in each stage. S= seed, A= A round….L= late.

Fifth, in location (column H) you may register either the HQ of each VC or the closest office to your location.

Sixth, create a custom score (column I) based on the relevance of their investments. My custom score rewards each investment in the closest sub-vertical with 3 points, in the second with 2 and in the third with one.

Seventh, (optional)make a distinction between PVC (Private Venture Capital) and CVC (Corporate Venture Capital). In some cases CVCs spectrum can differ greatly from VCs.

Eight, visit each VCs website and find the General Partner that is assigned to your vertical. Crunchbase VC profiles have a relative segment as well.

Ninth, try to contact your target GPs directly, services like hunter.io can be of help in finding their emails.

Note: In several scenarios it would be useful to visit each GP LinkedIn profile in order to determine who is the perfect match for you. Check their board seats etc.

Tenth, last but not least, try to locate any shared connections between yourself and your potential VCs.

Now you have 50+ VCs that present a proven pattern of investing in your vertical.

Verifying the results

In the beginning of this post, I said that with sprig we can see the whole picture and such a case can indeed help us verify our results. Visiting sprig crunchbase Series A investors we can clearly see that all three of their institutional investors are present in our shortlist. Namely, Greylock Partners, Battery Ventures and Accel Partners. Coincidence? Luck? Numbers!

Bellow you can find the whole spreadsheet both in Embed and duplicable version. I hope it will be of help. I am very receptive to feedback and I would be glad to read of your use cases.

Hackfunding 2.0? Probably sometime in the near future.

Now you have the blueprints of a bow.

Till next time,

Happy Hunting!