The current state of venture capital

By almost any objective metric, the venture capital market is strong to quite strong. VC firms in the US doled out $134 billion in 2018, and are on track to do the same in 2019 (projecting $130+ billion). And despite deal flow softening by 9-10% since 2015, the overall funding value has skyrocketed, up 60% over that same time period, and up 400% since the stock market bottom in 2009.

Fundraising by round

In any given quarter, angel-seed (in blue) and early stage (in green; A/B rounds) make up about 40% of VC dollars. This article is geared for founders in this strike zone. The other 60% is comprised of late stage (C/D/E+) and private equity rounds.

Now that we’ve perused the insane deal flow happening right now (Y-Combinator invested in 6 deals per week last year), let’s explore how you can leverage the IOU$ framework for your fundraising efforts.

The IOU$ framework for fundraising

Over the years I’ve reviewed hundreds of fundraising decks and partnered with founders to hone their pitch (they’ve since gone on to raise $109m). Given early stage investors almost unanimously cite “team” as their primary decision criteria, I’ve distilled the hundreds of fundraising decks into a framework that is best suited to highlight the team’s capabilities via the IOU$ framework:

  • I - Insight: describe the unique insights your team discovered. What is your big idea? What insight or belief is compelling you forward? What are other people missing?

  • O - Opportunity: attempt to quantify the size of the perceived opportunity. As Jason Stoffer at Maveron reminds us: “Remember, it’s not the size of the market that matters, it’s the size of the PROBLEM.” Don’t just show those generic concentric circles (TAM, etc.) . . . reveal your methodology, and highlight your early research on product-market fit.

  • U - Unfair advantage: describe your team’s unfair advantage. How are you, your co-founder, and your team uniquely equipped to execute on this opportunity? How is your technology different? Sure, put up those mug shots with job titles and impressive school/employer logos, but make sure to tell a story about your team’s unfair advantage and how that translates into business results.

  • $ - Money: talk about what you expect and what you need, financially. What are your conservative estimates for revenue? What will the fundraising will allow you do? What are you raising this specific amount? Who else has committed to the round?

While nothing groundbreaking, hopefully this mnemonic device—“I owe you money!”—will help you refine and simplify your fundraising pitch to the most essential elements and increase your probability of success.