Crafting the Ideal Investor Structure during Fundraising

SDS 027: Structuring Fundraising Rounds

Hey! thank you for reading issue 027 of Startup Definition Sunday (SDS).

SDS is the newsletter for founders, bringing you clarity one actionable tip at a time.

SDS arrives every two weeks (you guessed it) on Sundays.

In every issue you can expect:

• 1 Definition of startup jargon

• 1 actionable tip you can implement right away

• 1 article you should read

• 1 gift for founders

Let's dive in:

(P.S. I'll never sell your information, ever)

Hello there!

Today is an exciting day for me. A year ago, I published the issue 001 of SDS to 31 subscribers.

I'm thrilled to share this 1 year anniverary issue with 960+ subscribers. Thank you for reading my newsletter issues every 2 weeks. In case you missed the most recent issue, you can find it here.

If you happen to be in Accra this upcoming Saturday, I would like to extend an invitation to Adotey Lomotey’s opening exhibition.

Adotey Lomotey is one of my favorite Ghanaian photographers, and I believe you'll find his work captivating

In a recent tweet, I shared something that resonated with many founders. To no surprise, I received replies and direct messages asking me to write an article on this topic.

In today's issue, we will explore three unique ways to build the ideal investor structure to support your startup's growth. Let's dive in:

What is a follow-on investor?

Follow-on investor: an investor who joins a startup's funding round after the lead investor has signed a term sheet.

3 Approaches to Build the Ideal Investor Structure

Expertise-driven investor structure: One effective way to build the ideal investor structure is by focusing on investors with expertise in your industry. Look for investors who possess relevant domain knowledge and can offer strategic guidance. These investors not only bring capital but also valuable insights, connections, and mentorship to accelerate your startup's growth. Surrounding yourself with experienced individuals who have successfully navigated challenges can provide wisdom and help you avoid common pitfalls.

Diversified capital structure: Another approach is to create a diversified capital base. Consider attracting investors from various backgrounds, including angel investors, venture capital firms, corporate investors, and strategic partners. This diverse mix of investors can bring different perspectives, networks, and resources, strengthening your startup's foundation. Additionally, having a diverse investor base enhances your credibility and makes it easier to attract future funding rounds.

Alignment of long-term vision: When building your ideal investor structure, seek investors who align with your long-term vision for the company. Look for investors who share your passion, understand your mission, and are committed to supporting your growth over the long run. These investors are not solely focused on short-term gains but are genuinely invested in your success. By aligning your interests and building strong relationships, you can create a supportive investor network that will stand by your side through the ups and downs of the startup journey.

In the world of early-stage startups raising venture capital, building the ideal investor structure is a strategic process that requires careful consideration. By leveraging these 3 unique approaches, founders can create an investor network that combines expertise and capital, setting the stage for sustained growth and success. Remember, the right investor structure goes beyond just securing capital – it provides the foundation for valuable guidance, diverse perspectives, and long-term partnerships that can propel your startup to new heights.

If you have learned something valuable today, consider joining SDS so you don't miss exclusive sections in future editions.

If you only read one thing this week, read this...

Confluence VC's must-read checklist guide: "74 Items Investors Will Expect in a Data Room".

Why is it worth your time? Any founder who has gone through a fundraising round knows how challenging the process can be. A well-organized data room can make the painful fundraising process easier to navigate. This guide provides an extensive list of items while sharing the nuances of the requirements based on the stage of your company.

Founder's Corner

As an investor, I know how challenging it can be for founders to get noticed by angel investors, especially without the right connections.

That's why I created an inbound form to allow founders to share their decks directly with me. It takes less than 5 minutes to complete. By breaking the mold and providing an alternative way for founders to connect with investors, I hope to help level the playing field.

That's all for today! As always, thank you for being a fantastic reader.

Until we meet again in two weeks, here's how we can stay in touch:

• 🐦 Find me on Twitter

• 💬 Hit me up on Linkedin

• 💌 Email me

• 🚀 Sponsor SDS (Reply to this email)

Let's chat again in two weeks,

Jasiel