Considering how omnipresent the topic of fundraising is in the entrepreneurship media, it is entirely reasonable to dedicate a quarter or a semester to teaching how investors think.
Raising funding for startups is a low probability game. Fewer than 1% who try actually succeed.
Where startup ecosystems are immature, the probability gets even lower.
The bar to raise seed funding is getting higher and higher. Seed investors are mostly operating as growth investors, expecting that the entrepreneur will somehow manage to bridge the gap and bring a concept to realization. In fact, what these investors really want is to invest in businesses that have traction, not just validation.
In short, they want to come to the rescue of victory.
Entrepreneurship teachers should teach their students how to go from concept to traction and how to bridge the seed capital gap. Try to communicate the negative impact of trying to raise funding when a business is not validated and has weak fundamentals.
Stress on the importance of bootstrapping a business to validation before thinking about outside capital. Teach how investors at pre-seed, seed, and post-seed stages think and what level they expect a business to be at. This will help startups attain that elusive Holy Grail of investor-entrepreneur fit and improve the chances of success in raising funds. Guide student entrepreneurs on when is the right time to raise money and how much they should raise.
Help them understand the fundraising process and the early-stage investment ecosystem. It consists of friends and family financing, pre-seed, seed, post-seed, small Series A, and large Series A. We cover those stages in our Udemy courses one by one:
After a student goes through these three courses, assess them on their understanding of the early stage investment ecosystem. Offer case studies and scenarios and have students present how they would get such startups funded.
Unicorn is a startup with an estimated valuation of over $1 billion. More than 1000 unicorns exist as of 2021. More are being hatched every month.
Snowflake, Atlassian, ServiceNow are examples of startup unicorns. They’re massive, multi-billion dollar publicly traded companies now. Yet, they all started as an idea, took one step after another, grew in size, and so on.
That said, not every business idea can be scaled to a Unicorn. The billion-dollar question is what are the characteristics of the opportunities that have the potential to scale to a Unicorn startup?
We discussed the topic with a number of entrepreneurs who have succeeded in building their own Unicorns, and this course synthesizes those inspiring conversations.
A vast majority of venture capitalists are chasing Unicorns. It is important to understand the dynamics of what makes a Unicorn trajectory – 0 to $100M in revenue in 5 to 7 years – and how investors assess such potential.
Teach our Unicorn case studies with this Udemy course:
Funding Niche Businesses
I’ve interviewed hundreds of investors, especially micro-VCs and angels who are playing in the early stage game. As I expected, a large number of investors are still chasing Unicorns. However, I am pleased to report that I have spoken with a number of investors who recognize the niche opportunities; they are interested in investing small amounts and harvesting through smaller exits.
This is an important nuance to teach through our dedicated Udemy course:
Drive home the importance of Investor-Entrepreneur fit. The next semester will cover case studies specific to a domain or a region and the following courses cover the investor perspective on some of those.
And finally, VCs use specific questions in due diligence. This course goes over the questions they ask.
Using the case studies, create scenarios using dummy companies and financials. Test which path would the student take – VC funding or bootstrapping. If so, which investors would they approach?
Your course should be split into five parts, as outlined above.
Roughly speaking, students should dedicate 20 hours per part, including studying the online lectures and texts, in-class discussions, papers, and presentations.
At the end of your course, students should know that they need to be fundable before going out to raise money, and that not all businesses warrant venture financing. They should also have developed a keen sense of investor-entrepreneur fit.
This segment is a part in the series : How to Teach Technology Entrepreneurship Using the 1Mby1M Methodology and Case Studies