6 Takeaways from #LATechWeek Panel: diligence Bootcamp

November 2024

I mentor 50+ start-ups every year at different accelerators – and evaluate 100s for different VCs and accelerators. Most early-stage start-ups are unprepared for fundraising; they think that they’ll make a pitch and get a check! Unfortunately, there’s so much more to closing the round than that!

In this blog post, I’ve covered why fundraising may take a long time.

At LATechWeek, I co-organized a panel with Ilona Limonta-Volkova to dive deeper into diligence on October 16, 2024. We heard from:

Adriana Saman, Managing Director at Clocktower Ventures
Ilona Limonta-Volkova, Investor at from Bright Ventures (moderating)
Irina Kukuyeva, Ph.D. (she/her) Kukuyeva on AI diligence
Katie Vander Ark, Founder of LendTech
Naseem Sayani, Operating Advisor and Venture Partner, How Women Invest.

We got a shout-out of thanks from Naseem and one of the attendees; thank you!

We didn’t record the panel and used the Chatham House Rule to encourage a safe space and candid discussions: attendees could use the information but were asked not to share who said what.

Without further ado, here are some key takeaways from the event for early-stage founders.

#1: (Pre)seed term sheets should not have liquidation preferences!

I’ll host a term sheet panel in early January 2025; stay tuned!
Brad Feld has a few great resources on term sheets, including his book Venture Deals and this blog post.
You need a lawyer to help you navigate what will ultimately be a legal contract with 100s of pages.

#2: Make it easy to write a Deal Memo about you!

Consider writing one yourself to help you better understand what your pitch deck should cover.
Bessemer Venture Partners has publicly shared some of its Deal Memos.

#3: Consider a Notion Data Room!

Is your Data Room organized and telling a story? Many are not…
At a minimum, it should include:
- - Detailed cap table of who owns what
  - P&L statement(s)
  - Delaware incorporation documents
  - Anything else you promised – or the VC required

#4: Will your start-up return the fund?

Is there a large enough market for your solution? Is it venture-scalable?
If a VC invests 10M into your company for 10%, that 100M exit is a break-even point – and actually a loss when adjusted for inflation. Here’s more advice on how to think about your market and VC math.

#5: Technical diligence includes product testing!

Be ready for others to try the product, see how it solves a common customer pain point end-to-end, and talk to your customers!
For more advice on preparing for AI diligence, please see this blog post.

#6: Build relationships with VCs before you’re fundraising!

Don’t wait until you’re fundraising to do so!
Don’t forget to thank the person who made the introduction.
Consider hosting events for VCs, such as LATechWeek. If you don’t have a network, here's advice on where to meet investors.