Hitchhiker's Guide to Fundraising in the Celo Ecosystem.
The process of raising capital for your company is often opaque and intimidating especially for first time founders. It’s a skill that is acquired through practice and repetition. If you’re new to fundraising, you’ll find that you’re crafting a product to sell. You’re the seller. The product is your narrative around yourself, your team, company vision and upside potential. The investors are the buyer.
We created this guide to provide Celo Ecosystem builders an end-to-end resource on fundraising best practices as well as a map of Celo’s Investor Ecosystem. While our goal isn’t to reinvent the wheel and rather it’s to distill a few key takeaways from industry experts, we hope you can leverage this guide and included resources to help you navigate your journey. Web3 is an emerging category, but we trust that many of the battle tested methods that have shown success can be applicable in this category.
To get you started, here are a few comprehensive fundraising resources that we’ve found to be extremely helpful. This guide attempts to abstract and simplify important takeaways from these resources for entrepreneurs who are newer to fundraising.
- YCombinator’s Geoff Ralston - A Guide to Seed Fundraising
- Paul Graham’s - How to Raise Money
- NFX’s Gigi Levy-Weiss - The Non Obvious Guide to Fundraising
- Carta’s Paige Smith - When To Raise Money for A Startup
- Founder Collective’s - A Ridiculously Detailed Fundraising Guide
When should I start thinking about raising capital?
This is a tricky question that has no single right answer. The fact that the answer varies based on the entrepreneur and market shows why this process is opaque. In general, you should keep these factors in mind when considering the optimal time to start your fundraising process:
In some cases, founders may have no trouble raising capital with just an idea. Perhaps they may have warm relationships with the investors who can quantify the entrepreneurs’ track record. Frankly speaking, entrepreneurs in this category have more flexibility on when they can raise capital given the established relationships.
No Warm Relationships
In most situations where you’re a first time founder and may not have pre-existing relationships with investors, they’ll generally prefer that you have a vision, some form of a tangible product, attractive market size and early signs of product demand before engaging. Once you’ve achieved most of the latter, it may be a good time to start thinking about raising capital to accelerate your growth and capture more of your target market.
It’s also important to zoom out and consider the macroeconomic cycle and market timing of your potential fundraise. VC is an asset class that has been flooded with capital as investors continue to search for yield. https://pitchbook.com/news/articles/2021-us-vc-fundraising-exits-deal-flow-charts. Fundraising activity in Web3 is no exception and continues to hit all time highs https://www.cnbc.com/2022/02/02/crypto-start-ups-raised-huge-venture-funding-rounds-in-january.html. At certain points in the market cycle compared to others, it will be easier to raise capital given investors’ need to deploy the large funds they’ve raised from their limited partners and the chase for “hot sectors”. You may have an advantage and more options for capital if you fundraise during these “hot” market cycles. Additionally, it’s worth keeping track of investors on social media to understand what they’re interested in funding at the moment.
Ensure to time your fundraising process that aligns well when investors are actively investing and have the capacity to run full due diligence processes. As a rule of thumb, try your best not to start a fundraising process around major holiday seasons to reduce the risk of extending your timeline longer than you had originally planned.
What do I need to research before starting my fundraise?
While fundraising can take an unexpected amount of time, it’s important to optimize for efficiency to the best of your ability. The last thing you want to do is spend hours with potential investors who aren’t investing in your stage/sector of business. We’re aware of emerging fundraising models in Web3 (i.e. DAO-based funds), however our aim is to keep this guide confined to more traditional methods for simplicity.
- Find investors who fit your target investor profile! Using the following databases/resources listed below, you can easily identify the investors who are actively investing in your stage/sector/geography.
- Celo’s Ecosystem Investors Map
- Dove Metrics (https://www.dovemetrics.com/ is an excellent resource for Web3 market fundraising data)
Ensure that the investors you identify are actively investing. For example, try finding investors who have made 1-2 relevant investments within the last 2-4 months using the databases below.
Once you’ve identified a subset of investors who may be a fit for your sector/geography/stage, aggregate a list in your personal database to stay organized. Some popular tools include pre-built templates on Airtable or even creating your own tracker on Google Sheets. As your number of conversations grows, it’s important to keep track of the status of each conversation and to understand where you should be doubling efforts to increase your chances of success.
If one of your target investors is a venture capital fund, take some time to look through their website as well to look for a few things
- If they show their portfolio companies, take some time to review and see if they’ve invested in any competitors. There may be a conflict of interest even if they are a sector/stage/geographical fit for you and you want to cross out these investors quickly.
- Research the team and see who may be the right person to reach. Venture capital funds often have a broad team and there may be certain individuals who are focused on your sector vs. others at the firm. You want to be sure that you’re reaching out to the right person.
If one of your target investors is an angel investor, take some time to research their background and personal investment thesis. Do they have attractive experience that you could leverage to grow your company?
Frankly speaking and similar to sales, cold emails to investors have a low chance of success statistically speaking. For any investors who you identify to be a prospective fit, search through your social networks and see if you may have any mutual connections. People tend to trust others who they have some history with. If you find any mutual connections, try kindly reaching out to the individual and see if they’d be willing to forward along your company’s teaser materials to the prospective investor.
If you’ve found a great venture capital firm and/or angel investor but have no mutual connections to the team or individual, you can attempt a cold outreach. Remember, fundraising at the earliest stages will be a numbers game. However, you also want to be as thorough and thoughtful as possible when reaching out to the investors. In sales, unique approaches can attract a few eyeballs even if they hit the inbox cold. A few things to keep in mind
- Keep the outreach email as concise as possible. Investors receive a ton of inbound in this market so you’ll only have a minute if not a few seconds of their attention. You want to get straight to the point.
- Specify why you reached out to them and why they would be a great fit for your company. (I.E. Perhaps they’ve invested in other companies that are tangential to what you’re building or have written an article with a thesis that aligns with your company vision.
- Share a few points on your company taken from your teaser materials and include your investor presentation.
- What is the problem you’re solving for and is it a large market?
- Why is now the best time to tackle this opportunity?
- How are you solving this problem?
- Traction (if applicable and be transparent)
- How much are you raising?
- What’s special about your team and why are you the ones to solve this problem?
How much capital do I need to raise?
The rule of thumb here is to raise enough capital to give you 1 year of runway at minimum and best case 2 years of runway with the primary goal of reaching your next milestone. In other words, think through how much monthly operating capital you’ll need (across hires and other administrative budget items) and multiply that by the number of months you believe it’ll take to reach that milestone. This resulting figure can serve as a reference point but it’s often helpful to size up and down your potential round size to give yourself and investors a magnitude of what you could realistically achieve with different levels of capital. Finmark (https://finmark.com/) is an example of a helpful resource that can help build out your financial plan.
What are the different forms of capital I can raise?
While new forms of funding models emerge in Web3 and a comprehensive list will grow over time, below are a few common investment structures used by founders and investors today.
Grants - Many layer 1 protocols have recently set up ecosystem funds in order to incentivize and fund entrepreneurs who build on their technology stack. These grants generally come in the form of non-dilutive capital (meaning that the capital you take does not reduce your ownership of your company) that can help you build a minimum viable product and/or test your market hypothesis.
SAFE (Simple Agreement for Future Equity) - YCombinator’s SAFE document has become an industry standard used for early stage fundraising and for good reasons - they provide speed and flexibility for both investors and entrepreneurs. They’re a form of a convertible note however, unlike convertible debt, SAFEs remove the need for interest payments and repayment of the debt. The capital invested on a SAFE is generally expected to convert into shares of preferred equity in a priced equity round. YCombinator’s website https://www.ycombinator.com/documents/#about provides excellent best practices on SAFEs and templates as well.
3 SAFT (Simple Agreement for Future Tokens) - For a period of time during the boom of crypto fundraising, SAFTs were frequently used by companies to raise capital. While most investors expect financial upside on their equity in traditional companies, Web3 companies will often build and launch tokens which are eventually available to the public. Ideally, these tokens have sustainable utility and practical use cases and should therefore accrue value from greater market adoption. Mechanically speaking, SAFTs offer the investors the ability to exchange capital for a promise of discounted tokens from the project at a future point in time. However, SAFTs have largely fallen out of favor due to their legal risks, potential tax implications, and complications that other companies have faced.
SAFE + Token Warrants - A combination of a SAFE and a token warrant has become increasingly popular for fundraising in Web3. Unlike SAFTs, these token warrants typically come in the form of an optional side letter and don’t guarantee the deployment of tokens - therefore avoiding the legal complications faced by its predecessor. As a result, companies are more commonly raising capital on SAFEs along with a token warrant that offers investors the right to tokens in the amount that can be proportional to their equity ownership of the company. In this manner, investors have exposure to both equity and potential tokens if the companies decide to launch one.
- The team at LiquiFi has written an excellent piece on the topic and provides a practical guidance for token allocation. https://medium.com/@liquifi_finance/crypto-web3-fundraising-with-token-side-letters-or-token-warrants-33dce66f375e.
- This resource from Cooopahtroopa and Lauren Stephanian is also a must read for entrepreneurs who need to understand historical and current benchmarks on tokenomics. https://lstephanian.mirror.xyz/kB9Jz_5joqbY0ePO8rU1NNDKhiqvzU6OWyYsbSA-Kcc.
Equity - Equity rounds allow companies to set an official valuation for the company and to issue shares to investors at a specific price. Over time, these rounds are generally reserved for Series A and later stage companies. Companies at the seed stage have raised priced rounds historically, although more of them are raising on SAFEs at the earlier stages for the speed of putting operating capital to work.
What should I have prepared for investor conversations?
In general, we recommend that you prepare as much digestible information ahead of time to make your investor meetings productive. Having the baseline items listed below will serve you well in requesting warm introductions to investors, cold email outreaches and investor preparation prior to an initial conversation.
- Brieflink Page (Using https://brieflink.com/)
- 1-2 Paragraph Teaser Summary
- Investor Presentation
- Product Demo (You can pre-record these on https://www.loom.com/. In Web3, it may even make sense to have an interactive demo.)
The other items listed below are useful to share with investors if they’ve expressed interest in pursuing additional due diligence.
- Capitalization Table
- Financial Projections
What do I need in my investor presentation?
While this guide isn’t meant to be 100% prescriptive, below are the core components of a comprehensive investor presentation. Remember, treat fundraising as if you were launching and selling a product. You want to craft a compelling enough narrative to make your company an easy choice for investors to fund. Your pitch and deck are always a work in progress and it’s important to continuously refine your story and materials based on feedback that you receive from others.
- Company Vision (In a concise and powerful statement, what is your company’s core value proposition and what key problem are you looking to solve?)
- Problem (Is this a real problem and is it critical to solve?)
- Market Size (What is your Total Addressable Market? It’s okay to think big here but be realistic with data)
- Traction (Are there currently any users? TVL? Growth rates for any relevant metrics?)
- Business Model (In traditional companies, investors want to understand how your unit economics and monetization plans? In Web3, the upside is likely more attributable the future value of a utility token or adoption of a platform)
- Solution (What are the features of your product? How does it ultimately solve the problem? What blockchain is it built on? While Web3 is nascent and can be complicated, you want a simple enough explanation so that investors can communicate to their internal stakeholders as well.)
- Product Roadmap (What other segments can your product expand into?)
- Competitive Landscape (Competitive market map and positioning on why your product is different)
- Distribution Strategy (Are there other players in the ecosystem that you can work with to acquire other users in a low cost way?)
- Team (What is your team’s background? Are you and your team the right market & team fit?)
- Fundraising Ask & Planned Use of Capital (How much capital are you looking to raise and how are you planning to allocate that capital? What milestones are you going to achieve with this capital?)
The team at NFX has put together a comprehensive sample pitch deck with relevant examples of slides of pitch decks from other companies.
We can’t forget to mention beyond having these components to a pitch deck, it’s important to think through the visual representation of your pitch deck as well. Most of you will have an investor presentation on screen while meeting investors and it’s important to remember that the engagement is both audio and visual. We’ve found that https://www.beautiful.ai/ is a great place to start if you’re looking to create a visually compelling pitch deck as well.
Below are a few best practices and things to consider when preparing for your investor pitches. This isn’t all inclusive and your mileage will likely vary depending on your circumstances.
- Do your diligence on the investors prior to pitching in order to:
- Understand focus areas so that you can curate your pitch accordingly
- Uncover any red flags and or concerns about the investor that you can address during your meeting. Remember, as much as investors are evaluating you/your company, you’re also in the position to evaluate them as a potential partner. Capital is a commodity and true value-add is very rare. A good way to do this is to reach out to founders in their portfolio or a broader entrepreneurial community for honest feedback on the investor
- Be concise about what you do
- Be concise about the problem
- Clearly articulate why this is the right market timing
- Confidently explain why you have the right team
- In Web3 specifically, it’s more important now than ever to be able to articulate where the upside for investors will come from
- Let investors guide the conversation so that you can tackle the points that they truly care about. Pitches can generally take 15 minutes. You can leave the rest of the meeting time for an interactive conversation. The best investors will come prepared and ask insightful questions. If they don’t, just know that they will likely serve only as a source of capital vs. a source of strategic help
- Be a human! Much of the remote nature of what we do today can feel transactional. It’s important to build a genuine relationship with investors as they can be your biggest champion.
- Fundraising is a numbers game. You’ll receive many more rejections than you will genuine interest. It’s just a part of the process. Cast a wide net (as efficiently as possible), collect and then select.
- Know that investors will ghost you even if they’ve appeared to express interest during your meeting. They’re paid to meet founders, so don’t take it personally. Just move on to others!
- Follow up promptly with any requested materials. This indicates your level of responsiveness with future investors
- Be transparent about your process. Investors respect that and will align their process accordingly if they’re genuinely interested in working with you
After raising capital from investors, it’s important to keep a periodic cadence with your investors for a few reasons. Firstly, it helps keep you accountable to the milestones that you’ve set for your team and mitigates the need for investors to ask you ad-hoc questions - which can generally distract you as you’re busy building your company. Secondly, it’s a great open forum to request assistance from your investors. You can also gamify your updates by making special mentions of investors who have been the most helpful to you so far. Founder Collective has put together a detailed template for thorough and actionable investor updates. https://visible.vc/templates/founder-collective-fill-in-the-blank-investor-update/
Celo Ecosystem Investors
Who should I go to within the Celo Ecosystem?
If you’re building on Celo and looking for fundraising, start with our Celo Ecosystem Investors! The Celo Foundation has partnered with a number of dedicated individuals and institutional investors who look to invest in companies building on Celo. Below you’ll find a list of different investor groups who are actively investing in Celo’s Ecosystem and additional details on their areas of focus.
Celo Camp: Celo Camp is an independent initiative managed by our partners at Upright. For founders who have an idea and would like to surround themselves with a community to build with, Celo Camp is a great program to help you get your idea off the ground. Towards the end of the program, investors in Celo’s Ecosystem will attend and you’ll have the opportunity to pitch them for a potential investment. To learn more about the program and the application process, please visit this link - https://www.celocamp.com/
Celo Web3 Studio (via Bld.ai): Bld.ai is a Web3 studio that is committed to helping the best entrepreneurs bring to fruition some of their largest ideas on Celo. They work closely with you and your team to assess a market opportunity and provide resources and funding to help you build a product. To learn more about Bld.ai - please visit this link - https://www.bld.ai/
Celo Community Fund: Celo Community Fund I (CCF I) is the first community approved spend proposal from the on-chain Community Fund (explorer). Community members seeking funding can apply to CCF I, which is managed by three community stewards, or they can submit their own governance spend proposal to be voted on by CELO owners. Focus areas include on/off ramps, community tools, research and education. To learn more about the Celo Community Fund, please visit this link - https://celocommunityfund.org/#grants-process
Celo Foundation Grant Program: The Celo Foundation Grants Program is an open program that supports projects that are committed to Celo’s mission of building a financial system that creates the conditions for prosperity for all. Applicants to the Celo Foundation Grant program are expected to have a viable product or offering for the community. Admitted applicants will be provided capital and mentorship. To learn more about the program and the application process, please visit this link - https://celo.org/experience/grants#purpose.
Celo Scout Investors: Celo Scouts are individual investors who are hand selected by the Celo Foundation to invest in mission-aligned founders building on Celo. These investors tend to focus on early stage companies who may be looking for angel/pre-seed like funding and write check sizes between 25-50K cUSD on average.
Dedicated Institutional Celo Ecosystem Funds: Celo Ecosystem Funds are firms that the Celo Foundation has partnered with to evaluate larger private equity and/or token investments into companies building on Celo.
Flori Ventures is a seed stage venture fund already partnered with many projects built with Celo’s technology. Their aim is to work with the financial innovators that help foster an inclusive financial system and are closely working with the Celo Foundation to achieve this goal. Co-Founder and Managing Partner, Maria Alegre, was the former Co-Founder and CEO of Chartboost (acquired by Zynga) and raised $21M in funding from Sequoia Capital and other stellar investors. Co-Founder and General Partner, Tomer Bariach, has a long history as an expert in token economics and is well versed in economically impactful technologies.
- Stage Focus: Pre-Seed & Seed
- Geography Focus: Global
- Sector Focus: Companies that bring crypto to real world use cases & enable prosperity for all
- Average Check Size: $100K
Unicorn Growth Fund
Unicorn Growth Capital is a Seed & Series A venture fund focused on partnering exclusively with founders innovating financial services in Africa. They’re particularly excited about FinTech infrastructure, embedded finance products and broad digital financial services that can foster an inclusive financial ecosystem.
- Stage Focus: Seed & Series A
- Geography Focus: Africa
- Sector Focus: FinTech Infrastructure, Embedded Finance, Financial Services
- Average Check Size: $500K for Seed and >$2.5M for Series A
Lightshift Capital is an early stage fund focused on partnering with groundbreaking companies building infrastructure layers, DeFi protocols and emerging tools expanding use cases for Web3. They currently work with a community of over 50 investors, builders and ecosystems including individuals from Andreessen Horowitz, Digital Currency Group, Celo, Kraken and many others. They have a hands-on approach to working with founders at the earliest stages while leveraging support from their in-house technical and business teams to add value.
- Stage Focus: Pre-Seed & Seed
- Geography Focus: Europe, U.S. and Asia
- Sector Focus: Financial Services, DeFi, Infrastructure and Scalability
- Average Check Size: $250K - 500K
TKX Digital Group
TKX is an Asia focused crypto investment bank that utilizes both active and passive strategies for primary and secondary markets of blockchain technology and cryptocurrency. They provide a full service stack including investment to advisory services to blockchain startups.
- Stage Focus: Pre-Seed & Seed
- Geography Focus: Europe, North & South America
- Sector Focus: GameFi - Infrastructure - Defi - NFT - MPC
- Average Check Size: $50K-$500K
Polychain Capital is a global early stage venture fund focused on investing in protocol layers and cryptocurrency companies. They separately manage the Celo Ecosystem Venture Fund that aims to foster Celo’s mission of creating a more accessible financial system by making strategic, seed-stage deployments into tools and services which will leverage Celo’s protocol to build new financial infrastructure.
- Stage Focus: Seed & Series A+
- Geography Focus: Global
- Sector Focus: DeFi, Cross-chain Interoperability, Intersection of crypto & gaming
- Average Check Size: $500K - $5M
Other Prominent Celo Ecosystem Investors:
The groups below have also invested in companies in the Celo Ecosystem and may be worth considering if you’re looking to raise a larger round of institutional capital. If you’re an investor that has invested in Celo’s Ecosystem and would like to be included in the list, please reach out to email@example.com.
How do I get in touch with these investors?
Please reach out to firstname.lastname@example.org with your investor presentation and a short description of the company, and your round details and we can help get you connected with interested investors in Celo’s Investor Ecosystem.