Reid’s Rituals of Great Boards: the 8 strategic tools used by top companies
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Reid’s Rituals of Great Boards: The 8 strategic tools used by top companies

Fundraising

Inspired by LinkedIn: Keep the board on the same page during a fundraise.
Most companies consider a fundraise when they find themselves in one of three scenarios:
You’re fine on cash, but you’ve got an
inbound inquiry
from a potential investor.
You’re fine on cash, but
shifting
market dynamics
prompt you to consider taking money.
You’re short on cash
and you’re within a window in which you need to raise money (e.g. 6-12 months of runway).

Note: There are other times where it’s important to consider fundraising offensively or defensively — such as competitive circumstances, but generally these principles will still apply.

Each of these 3 scenarios requires a different strategy, and the board can help a company decide the best path forward. The board members can be a collective radar to answer key questions related to fundraising like, “What are the circumstances in which you should consider an unsolicited inquiry? Should you raise more capital than you need?” And there are scenarios where you should
and doubling-down, even when you have a lot of capital in the bank.

Scenario #1: Inbound inquiry

Companies may get unsolicited inbound inquiries for investment. Regardless of your cash situation, it’s important to collaborate with your board on next steps.

In most cases, there are two decisions to make with each inbound inquiry:
Should you take it or not?
Should you evaluate that inquiry alone or go after more?

Your board can help you decide how to handle inbound inquiries and define the scenarios where you should consider an unsolicited inquiry.

Scenario #2: Market dynamics

Another common scenario that often leads to fundraising is shifting market dynamics. Similar to scenario #1, you might have plenty of cash in the bank but the world is rapidly changing and you want to strike while the iron is hot. This could be influenced by a combination of factors:
The market is hot — lots of growth and investment in your space.
You think the market will get worse in the near future.
You accomplished something important and want to capitalize on the progress.

This was the case when LinkedIn raised its Series D round. In June 2008 we raised $53 million led by Bain Capital Ventures. Then, just 4 months later as part of the same process, we extended the Series D by an additional $23 million from a new set of investors. At the time, LinkedIn was cash-flow positive, so we weren’t running out of money. So why did we do such a quick follow-on raise?

In October 2008 the world was on the verge of a massive global recession. We believed that the investment market was in serious risk because David Sze came to us with a significant warning. Greylock’s partnership had an internal discussion in early 2008 and then shared with all portfolio companies: the market was at risk and that future fundraising might be significantly more challenging. And if a crash happened, it was unclear how quickly the market would recover. LinkedIn was also ready to blitzscale — we were adding 1M users every 25 days, and we had yet to scale our sales and marketing resources.

Raising the additional money ended up being the right decision. Despite the recession, the additional funds and strategic partnerships from the Series D propelled LinkedIn into a later IPO at 4x the valuation.

Scenario #3: Need cash

The third circumstance that leads to raising funds is the most obvious: when your company is low on cash. This typically happens when you have 6-12 months of runway left. In this case, you’ll want to run a more proactive process. As with all fundraising, there are many considerations, strategies, and tactics outside this focused post. However, it is essential to organize a coordinated approach with your board.


A fundraising ritual for your board

So your company is ready to raise money! Hopefully it’s the good kind of fundraising (everything’s up-and-to-the-right!), but regardless, fundraising can be an intense process.

This is a simple ritual. It offers a way to (a) set your ideal investor criteria, (b) crowdsource firms to consider, (c) get your board to raise their hands for introductions to each firm, and (d) nail the investment pitch. There’s a little piece at the bottom for evaluating offers as well.
Clear example data

Step 1: Set your ideal investor criteria

Work with your board to identify the set of criteria for the type of partners who would be the right fit, and why.
Criteria
Why
Author
Upvote
1
Strong track record
This will be a key...
JB
4
2
Extensive network
As we scale marketing...
JD
2
3
History of fair dealings
...
PR
1
4
Previous investor
...
MJ
There are no rows in this table

Step 2: Identify potential firms

List the firms you’d like to consider and ask your board to make introductions. Now you can prioritize — which people should we reach out to first? Which later?

Firm
Partner
Criteria they meet
Priority
Notes
I can make an intro
1
Green-Plus
Daniela Dewitt
Strong track record
History of fair dealings
Extensive network
They typically invest in later-stage companies
PR
MM
2
Zoomit
Kate Morrison
Extensive network
Strong track record
Kate is fantastic, we should definitely consider Zoomit
FM
3
Groovestreet
Lana Steiner
Previous investor
...
4
Bioplex
Kayley Dwyer
Previous investor
...
BD
There are no rows in this table


Step 3: Nail the pitch

Ask your board for feedback on your pitch deck. I recommend using a
to build the pitch, capture comments and sentiment, and discuss the most important topics live:

Instructions
: Take a few minutes to go through the pitch deck below. Then, click that you’ve read the slides and add questions or ideas to the table below.


I’ve read through the slides →
MJ
BD
PR

Add a topic or question
Question or idea
Author
Upvote
Downvote
1
What product challenges do you have in the next quarter?
JD
7
2
How do you think about total addressable market?
JB
4
2
3
How’s hiring going?
PR
3
4
There are no rows in this table


Step 4: Evaluate offers

Finally, as you receive offers, do a standard evaluation of their various pros and cons. Let your board weigh in on which offers to accept.

Firm
Pros
Cons
Letter of intent
Amount ($millions)
% of shares
Implied valuation ($millions)
Vote to accept
Vote to reject
1
Bioplex
Strategic partnership
Firm has a history of unfair dealings
Sample LOI.pdf
$15.0
6.0%
$250.0
4
1
2
Groovestreet
Experienced board member.
Term sheet is complicated.
Business-Investment-Letter-of-Intent.pdf
$25.0
9.0%
$277.8
2
3
There are no rows in this table




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