The Latitud Fundraising Playbook

Hey, founder. 👋

We don't need to tell you this: fundraising is a full-time job. And it's not 100% art 🧑‍🎨 nor 100% science 👩‍🔬.

Still, there are several best practices to take into account.
‍You’ll find some of ours here.

This Fundraising Playbook aims to scale part of the knowledge we accumulated over years of helping hundreds of founders and startups raise their Pre-seed, Seed, and Series A rounds at Latitud (Pomelo, BHub, Finkargo, Tapi, and maaany more).

Of course: portfolio companies get deeper strategic insights and feedback in each of these steps, access to group sessions (including pitch practices), plus intros and backchanneling with investors.

The final goal: accelerating their fundraising process so they can get back to executing, knowing that they raised the next best round possible.

Still, we believe and hope that this will be a great first step into your fundraising journey.

Let us know, kay? ;)

How to navigate this playbook:

1. It was conceived as a step-by-step guide in chronological order.
2. An index with all topics covered on your left (if on a desktop). You can skip ahead if you've already completed some steps or feel like you have a good grasp on XYZ. But we encourage you to have a quick look through just in case, smarty-pants.👖

1. Fundraising 101

Choosing your path

At Latitud, we like to talk about two main paths founders in LatAm can take in their early-stage fundraising:

Which one’s yours? Choosing your path depends on elements like you and your co-founders' previous experience with startups and fundraising; your risk/return profile; or your startup’s business model and thesis (if you’re building in infrastructure, your MVP could cost well beyond $500k).

Here are some general pros and cons to consider based on that:

Been there, done that? Now think about your startup’s current stage and its goals in amount to raise, expected dilution, capital goals, and more. Find yourself here:

There’s no one-size-fits-all recipe, but the tradeoffs and benchmarks above are common to all. If we have to pick sides though…

We encourage the vast majority of top founders to consider the advantages of taking the first path (regardless of whether they raise from Latitud or from other pre-seed investors). Here’s more on our rationale.

2. Planning

a) Round size and dilution

We're sorry to break it to you, but valuation is not set by founders. 🥲

It's set by market demand.

But… You can start by determining your capital needs, and that will help setting your baseline.

To define your round size:

• Look at your capital requirements: what’s your minimum, like reeeally minimum, number to execute for the next 18-24 months?
• Add a buffer and go with that as a base-case round size. NOT with your ideal, maximalist number, hear that?
• But why? To reduce risk and encourage momentum building. Start “smaller” and build up momentum, oversubscribing your round by design since scarcity drives demand. Then, finally increase the size of your round…
• And increase your valuation cap with it, as the final round size determines the valuation range.

How it works in real life:

If you say you're raising $3M but don't find momentum, you’ll be in a tough spot if you have to go back to the market and say, uuuh actually, I'm only raising $2M. Bridges will be burned and you'll send a weird signal to investors.

On the other hand, if you say you're raising $2M but end up with $3M on the table, they'll have more FOMO and be more inclined to invest.

In some cases, we've seen founders be able to negotiate a 15-30% increase in their market cap after being oversubscribed.

And btw, you can still reward early risk-takers by stacking SAFEs at incremental valuations “within each round”. If you respect the chronological order of your raise, no good funds will be offended about angels having checks at a lower cap, before these funds even joined the round.

📗 Read: How to avoid excessive equity dilution

b) Timing

There are 3 calendars you should consider:

• The company calendar: Fundraising is a full-time job, so make sure you're not taking focus from building or selling if that's more important.
• The investor calendar: Depending on the time of year, your targets may be ignoring their emails in Tahoe. Avoid the northern hemisphere's summer (June-August), Thanksgiving (Late November), LatAm's Carnaval (February-March), and other long holidays that can slow you down and kill your momentum. Either start your process after they're back or finish the round before they leave.
  
• The fundraising calendar: You want to match the two above with the amount of time it'll actually take you to raise until closing – hopefully not more than 8 weeks.

c) Insider round

In an insider round, exiting investors inject more capital into your startup. Insider rounds are particularly good if:

• The company is doing well,
• But it could use the money to accomplish more…
• And it doesn't want to dedicate too much time to raising a full round. Typically, these rounds can be closed in around 2 weeks.

You can initiate an insider round either by reaching out to specific investors in your cap table or sending an update to all investors with an opportunity to invest at a discount.

To have a successful insider round:

• Determine your goal. E.g. test strategy X, build feature Y.
• Explain why you believe in it.
• Define how much you're looking for (usually, between many tens of thousands to a couple hundred thousand in the early stages).

d) Pre-marketing

Similar to the insider round, this is where you tell funds in your cap table that you're about to raise.

• Give them 1-2 weeks for them to decide whether they'll come in early, and possibly at a discount, before you go out to raise.

3. Investor hitlist

If you're convincing someone to climb the Aconcagua with you, who would you ask first? ⛰️

Almost certainly, your craziest friends.

In the VC world, these are the angels.

Angels exist in higher volume than institutional funds (yay!). But don’t base your fundraising only on higher chances of receiving a check.

The angels who are really worth of your startup:

• Are willing to take more risk early (and commit to it).
• Can help you spread the word.
• Provide a crucial signal for VCs.

Find these first climbers for your round, even before you go pitching VC funds:

• Start with low-hanging fruits (more advanced founders or mentors you know and know they understand about startup investing risks and commitments).
• Make sure they have experience in your vertical and/or business model – not only to add value as advisors and word-spreaders but also to provide a signal to VCs.

Then…

a) List and qualify the funds

• Thesis: Does the business fit the description of what they look for?
• Activity level: How long since they made an investment?
• Check size: Does it fit the round? As a lead or a follower?
• Fund size: How big do you need to go to be a fund returner for them?
• Partners: Are they people you'd be inspired to work with for 10+ years?
• Portfolio: Do they invest in any of your competitors or companies similar to yours but non-competing?
• Industry: Do they have preferences?
• Geo: If approaching a non-LatAm fund, do they invest in your markets?

b) Prioritize your approach

1. Define what's most important to you (you can develop a weight system).
2. Build a ranked “shortlist” of 50+ investors. You'd be aiming for a 90% rejection rate. (Yep 💔)
3. Start with your lead investor. Besides being the biggest check, they:
   ‍
   • Are the first signal to the market. The lead will anchor your reputation, round size, and valuation.
   • Play a role in the next round. E.g. they will champion you to raise a Series A.

4. Prepping

At this stage, you're simply doing the mise en place before things start cooking. 🥘

We cannot stress enough how important this is. Prepping will:

• Solidify your confidence,
• Guide all interactions you have moving forward,
• And add huge amounts of speed to your process.

a) Narrative

Your messaging and positioning are the 🏗️ foundation 🏗️ of your pitch.

To get you started, answer these 3 questions investors will be asking themselves:

• Is this a problem worth solving? Don't jump to the solution. Get them to empathize and understand the impacts and magnitude of the problem. What real numbers and cases can you provide to achieve that?
• Can this be a fund returner? No investor can justify a check to a startup whose goal is to exit at a $100M valuation 2 years from now. VC money relies on the outliers: the 0.1% that will generate a 100x return. As a founder, you need to show you have a vision to get there.
• How strong are your signals? What in your story shows that you were made to solve this problem? Which skills and accomplishments show that you're capable of doing so, and committed for the long term? What are you top 1% at that makes you unique? What early signs of traction do you have? What can you build a moat around?

b) Deck

If you have your fundamentals, you're ready to organize them into slides.

The goal is not to tell investors everything about your startup: it's to open the door.

Remember: investors have hundreds of those to go through every day. They skim more than they read, and you don't have much time to capture their attention.

For that reason, a good deck is clean, clear, and persuasive. It goes straight to the point but it also tells a story. You should use the classic deck structure not as titles to each slide, but rather as boxes to check. For example:

[ ] Problem

[ ] Solution

[ ] Product

[ ] Why now

[ ] Market size

[ ] Team

[ ] Traction

[ ] Competition

[ ] Fundraising ask and deployment

📺 Watch: Fundraising advice from VCs on each deck topic, by NFX

From your full deck, consider also building a teaser deck, boiling down must-knows and keeping the slide count to a minimum.

c) Blurbs

You're going to be asking for a lot of intros, so have some text ready to go:

• One paragraph on the founding team,
• One paragraph on the business (your one-liner!),
• Suggestions for a ‘subjective’ view: topics that your connectors can use or adapt to add some personal experience to their intro message.

5. Pitching

Here, your goal is not to chase.

It’s to be chased. 💅

a) Calendar density

An investor will always wait to place a bet until they think they have a good chance of winning. If they feel like they have time, they won't say yes (or no, for that matter) fast enough. To avoid that, you must make investors feel that things are happening all around them. FOMO is a key decision accelerator.

The solution? Create that for them and also make it easier for yourself to deal with rejections, you need to bundle your process. That's what we and our mentor Jason Yeh call calendar density.

🎧 Listen: The Latitud Fundraising Playbook by Tomi Roggio, Latitud

1. Map your network:

1. You already have your investor hitlist. Now find out who you know that knows them - a.k.a. your connectors. A few ways to do that:
   ‍
   1. Search through your LinkedIn connections,
   2. Look through the VCs’ portfolio companies for friends of friends,
   3. Any other communities you may be part of. Including the Latitud Community! :)
2. Determine who amongst your contacts can offer the warmest intro or has the highest chances of making a strong signal (e.g. other VCs or porfolio companies vs. someone that might have pitched them once in 2017)
3. Organize them all on a spreadsheet. Feel free to add more than one contact for each investor. Having multiple people making intros to the same person is not necessarily bad, as long as they're strong and not all look the same.

2. Hunt your intros:

1. Ask for the connectors’ intro, reassuring them that you'll send them a blurb.
2. Make it easy for connectors to send the intro message. Once you have their ok, give them the full email text so that all they need to do is hit forward.
3. Choose a date for all connectors to send out their intro emails at the same time.
   
   P.S.: not all intros will be warm – cold is also part of your process. Send them on the same dates as the warm ones.

3. Schedule in bulk:

1. You've already lined up all your intros at the starting line. Now you wait for the investors’ opt-in and manage your calendar accordingly so that it's tightly packed.
2. If they agree to meet you, suggest a date and time in the span of the 2 weeks where you'll have all of your investor meetings, back to back.

b) First meeting

Hey, remember that deck we built? Looking good, huh?

Now throw it away. 👉🏻🗑️

Why? Because you don't want your first chat with investors to be a rehearsed presentation.

Of course you'll talk about the startup. And of course some structure will be welcome. But this is a conversation. You should prioritize connecting with the person on the other side.

Share your story and understand how they perceive the problem and the market. If needed, clarify their doubts and educate them. Keep them engaged by asking questions and getting them to become a part of your team. Hopefully, they'll have questions for you too. ;)

6. Closing

a) Term sheet

1. Negotiate terms

We have a full article below and a very comprehensive session by Dan Green (Gunderson Dettmer) on clauses to keep an eye on, if you want to dive deeper.

The TL;DR:

1. 1. Don't give everyone control clauses;
   2. Know good and bad liquidity clauses;
   3. Prepare to limit your investors' future rights.

📗 Read: Term sheet pitfalls: the most common tricky clauses

2. Close! 🎉🎉🎉

b) Round announcement

Time to tell the world, woohoo!

Everyone wants to congratulate you on fundraising, journalists included, so this is a great opportunity to make a splash and actually TALK ABOUT THE PRODUCT.

PR

1. Go back to your narrative and adapt it for the media. Your round will serve as a hook but your press pitch will rely on either 1. The founder story; 2. The product; or 3. The numbers. Keep in mind what matters to that outlet's readers or the journalists won't care either. You'll probably need a full press release and then a shorter 2-paragraph version to share on an email or direct message.
2. Define your strategy and which vehicles to target. Think about where your audience – prospective customers and future investors – might be and take it from there. You can either offer an exclusive interview to a big vehicle (cough cough, TechCrunch) or setting up an embargo so that many top vehicles share the news at once. You can also target podcasts and newsletters. Make sure you're giving bigger vehicles 3 weeks to work with, or at least 2 weeks for embargoed vehicles to confirm if they'll share the news and set up interviews.
3. Get back to pitching. Just like fundraising, warm is always better, though cold might work too. Use professional help for better results.
4. Create a surround sound effect. Once your PR dates are confirmed, make a list of everyone and their cousins that can help you spread the word. Send them messages with suggested blurbs they can share. Combine your PR efforts with social media, email, partner channels, and other content strategies to create a surround sound effect: the sensation that your company is the only thing everyone's talking about, and that it is impossible to ignore it.

A quick word about Latitud

Latitud is your partner from -1 to 0… and 0 to 1.

With our invite-only community, we gather super promising and early-stage founders across Latin America so they can work on their -1 to 0 (ideation). And as the leading pre-seed venture capital firm in Latin America, we become partners to top entrepreneurs inside and outside our fellowship so they can go from 0 to 1 (early product and traction).

Besides receiving their first institutional check, founders in our portfolio 1. become a part of our community of top founders and mentors, 2. get transformative guidance, especially in fundraising, and 3. form tight connections with downstream venture capital funds.

Latitud is led by Tomas Roggio and Brian Requarth. Through Fund I and II, we've already invested in 70+ amazing startups led by amazing founders (check them out).

Did this playbook help you or not?

Maybe it helped you so much that you feel ready to pitch yours truly, Latitud? 👀

We’d love to hear from you — so shoot up a message to one of our general partners!