Escolar Documentos
Profissional Documentos
Cultura Documentos
Equity
Debt
3
Non-Equity Financing Equity Financing
Angel Financing
Self Finance /
Venture Capital
Bootstrapping
Debt /
Private Equity
Bank Finance
Public
Stock Markets
Debt doesnt
Equity exceed 70%
Total
40
value
%
100
%
Debt
60
%
Can be obtained through savings or investors. Investors typically receive an ownership
interest in your company in return for their investment
8
Line of Credit used to cover short term expenses like
supplies, payroll and rent.
Credit Cards to cover and track small expenses or everyday
business expenses.
Suppliers Credit sometimes a very cheap source of
financing, do not overlook the value of this source.
Business Term Loan used to purchase long term assets
required to operate your business.
Leasing used to obtain assets to run your business, may
provide more flexible options than traditional loans.
Government Programs there are many government
programs to support Small Business. Investigate all options.
9
The 5 Cs:
Character: You must be trustworthy and have a strong credit
history (maintain a strong credit history personally
and as a Business)
Conditions: How do the current economic conditions impact your
business and industry?
Capital: How much do you have invested in your company?
Capacity: How will your company pay back the debt?
Collateral: What assets are available if your company cannot
repay?
10
The business is undercapitalized a business with too
much debt and a cash flow that doesnt support it
Business expansions that are poorly planned and not
appropriately financed
Poor management
The Business offers products and services that nobody wants or cannot
afford
Inability to adapt to a changing environment
Failing to control costs
Poor execution creating dissatisfied customers
Large Potential
Unique Product Passionate
Market
Or Concept Founding Team
Opportunity
Implications
Intense
Need to move
competition
rapidly
likely
VC funding supports
Rapid Product
Hiring Partnerships
Development
Angel Investors
(Venture
Capital)
Raise fund every 2-4 years
Pension funds, financial institutions and specialist fund of fund investors
Carry
~ 20-25%x (Total Return Total Amount Invested)
Unlike the VC the Angel invests their own money
The Angel approach is to invest small amounts at a very early stage / low
valuation
50-250k at valuations of 500k-4m
The key thing when selecting an Angel therefore is whether they can help you
raise VC finance
See which Angel investors have invested with which VCs
Advice and Strategy Internationalisation
Hiring Trusted service provider
Developers relationships
Country Managers
Search / recruiting
Sales
Branding / PR
CEO / CFO / COO
Finance, etc
Advisory Board
Partnerships Exit optimisation
Profile and PR Knowledge / contacts with
relevant buyers
Further access to capital
Experience with process
Team Technology Traction
No directly
Relevant
competitive
Portfolio
investments
Out of the blue email is a longshot
Try to build context
Analyse portfolio companies are there any links there ?
Analyse contact network and advisors
Analyse press coverage
Participate in blog conversations
Attend events and conferences
Relevant PR around product also helps
VCs spend their time looking for businesses with momentum
Pre - first meeting Pre - termsheet Post - termsheet
100 page business plan not Dialogue rather than Some additional reference
required documentation expect calls with partners /
20 page ppt which clearly lots of meetings customers
answers main questions is Calls with current / Personal reference calls
best bet prospective customers or Legal / accounting audit (if
Product partners relevant)
Market
Meeting broader team Drafting legal
Business Model
Team Brainstorming around documentation
Competition strategy
Product Roadmap Identifying key hires post
Technology Overview closing
Business Development
Formal presentation to VC
Financial Status
partnership
Convertible Loan
Sometimes used by both Angels and VCs
Typically when another financing is anticipated soon
Loan will convert (with a discount ~25%) into the next financing round
Sample phrasing is
[XXX fund] proposes to lead a Series A preferred share financing
of 5m at a 8m pre-money valuation. As part of the investment
process an employee option pool of 15% on a post money basis will
be put in place. Typical venture capital terms including
participating liquidation preference, etc. etc
Growth rate
Product development
Option grants
Relationship
With key individual(s); and
broader team