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  • VCs are money managers. They obtain funds form institutions - pension funds, insurance companies, banks, and sometimes wealthy individuals Angels have created their wealth in the past - successful entrepreneurs or family wealth built up over the decades
  • First customers prove the revenue model Angel Networks: Prairie Angels www.chicagoangels.org eBlast Pete Georgi Net Fuel Ventures
  • Series A, B, C First institutional inevstors, next institutional investors, etc.
  • Series A, B, C First institutional inevstors, next institutional investors, etc.
  • Transcript

    • 1. Cover Life Cycle of Financing 8 South Michigan Suite 400 Chicago, IL 60603-3306 p (312) 853-3477 f (312) 853-0145 http://www.wbdc.org [email_address] Linda Darragh VP, Finance Program Phone: 312-853-3477, x.22 Email: [email_address] June 17 & 18, 2003 Business Matchmaking
    • 2. Types of Businesses
    • 3. Types of Businesses
      • Company A
      • Steady growth
      • Market = local, regional
      • Grow business over many years
      • Retain ownership
      • Company B
      • Start up = R&D, Technology development
      • Market = $25M+
      • Scales quickly
      • Sell business in 5-7 years
    • 4. Debt vs Equity
      • Debt Financing
      • ‘ Prove’ repayment - less risky
      • Need to begin repayment immediately
      • Some financial and management advice
      • Cheap capital: interest
      • Exit strategy: pay off loan, no change in ownership
      • Equity Financing
      • High risk
      • Patient capital
      • Investors add to management team
      • % ownership of the business, 35% ROI
      • Exit strategy: IPO, acquisition
    • 5. Types of Equity Investment
      • Friends, Family & Angels invest their own money
      • Venture Capitalists invest money they have raised from other financial institutions and/or wealthy individuals
    • 6. Types of Equity Investment
      • Angels
      • Part-time
      • Limited due diligence
      • Hard to find
      • Early stage
      • < $1 million
      • investment
      • Venture Capital
      • Full-time job
      • Professional resources for due diligence
      • Directories of VCs
      • Later stage
      • > $1 million investment
    • 7. Lifecycle of Financing
      • PHASE ONE:
      • Moving from an idea to proof of concept
      • Personal savings
      • Family and friends
      • Loans under certain circumstances
    • 8. Lifecycle of Financing
      • PHASE TWO:
      • Beta testing, first customers
      • Angels and Seed Money
        • Individual Angels
        • Angel networks
      • Loans, Lines of credit
      • Equipment Leasing
    • 9. Lifecycle of Financing
      • PHASE THREE:
      • Growth
      • Institutional Investors/ Venture Capital
        • Vary by:
          • stage of growth
          • industry preference
          • size of investment
        • Over $1 million
    • 10. Lifecycle of Financing
      • PHASE FOUR:
      • Exit
      • IPO: Initial Public Offering
      • Acquisition
    • 11. Current State of Equity Investment Early Stage financing/ Series A Series B - C IPO Angel Financing Friends & Family
    • 12. Center for Venture Research - University of New Hampshire Stage Early Later Seed/ Start - Up Source FDRS FFF Angels Venture Funds Demand $25K $100K $500K $2,000K Supply --------------------------------- --------------------------------- Funding Gap Equity Capital for Entrepreneurs Pre Seed
    • 13. Other Funding Resources
      • The Small Business Innovation Research (SBIR) program (www.sba.gov/sbir)
      • funds research and development (R&D) by individuals and small business.
      • grants or contracts that do not require repayment, but specific deliverables
      • 3-phase program
        • feasibility: $100,000 maximum
        • prototype development: $750,000
        • commercialization: not federally funded
      • 10 federal agencies develop research topic lists
    • 14. WBDC Venture Program
      • Services:
      • Business plan review
      • Counseling
      • Referrals
      • Venture Coaching
      • Training
      • First Thursday (monthly roundtable)
      • Springboard
    • 15. WBDC Loan Assistance
      • Financial Analysis
      • Microloan technical assistance
      • Preparation of pro-forma financial statements
      • Loan Packaging
      • Bank referrals
      • Referrals to business resources