Get funded Expert Advice from the People Who Know

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When it comes to startups, SVB has been around the block. Many times. They've helped countless founders and CEOs negotiate the ups and downs of startup financing.
Confused about the how to choose the right funding strategy? Don't be.
On November 12th, SVB’s Dan Allred and Smith Anderson will break it down for you. They'll introduce five of the most important and popular avenues for startup funding:
Bootstrapping
Crowdfunding
Angel Investors
Venture Capital
Debt

Published in: Economy & Finance, Business
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Get funded Expert Advice from the People Who Know

  1. 1. presents Get Funded: Expert Advice From the People Who Know Dan Allred Smith Anderson
  2. 2. Get Funded: Financing your Startup November 12th, 2013 Dan Allred Silicon Valley Bank (617) 796-6904 dallred@svb.com Twitter: @dgallred http://danallred.tumblr.com Smith Anderson Silicon Valley Bank (617) 796-6958 Smanderson@svb.com Twitter: @SmithTown561
  3. 3. The  Ringers Jason Jacobs   RunKeeper CEO and Founder Brent Grinna   Evertrue   Founder and CEO Aman  Advani   Ministry  of  Supply   Co-­‐Founder  
  4. 4. Why We’re Here Sources of Financing Overview Bootstrapping: Making it last
  5. 5. Financing partners take risk together
  6. 6. Bootstrapping   • Vendor  financing
    Trade  credit
    Stretching  payables   • Customer  financing
    Prepayments,  deferred  revenue   • Self  financing
    Working  without  pay
    Getting  others  to  do  the  same
    Personal  credit,  credit  cards,  etc.
  7. 7. Bootstrapping   • Amount  of  capital
    Relatively  small  amounts   • Use  of  capital
    Working  capital  (brings  future  cash  inflow
    forward  OR  delays  current  cash  outflow)     • Stage  of  company
    Useful  at  all  stages,  especially  startup.   • Who  bears  the  risk  &  what  type
    Personal  risk  early,  bankruptcy  risk  later
    Working  capital  risk  (risk  of  insolvency)
  8. 8. Crowdfunding: The Basics
  9. 9. Crowdfunding:  Today  and  Beyond • • Product/Project   Currently  thriving   – Pledgie  (2006)   – Sellaband  (2006)   – IndieGoGo  (2008)   – GiveForward  (2008)   – Kickstarter  (2009)   – RocketHub  (2009)   – Fundly  (2009)   – GoFundMe  (2010)   – Appsplit  (2010)     – Microventures  (2010)   – Fundageek  (2011)   – Dragon  Innovation  (2013)   Incredibly  powerful  momentum  in  the   last  few  years.     • • •   Equity     Not  legal…yet   JOBS  Act  passed  July  10th   Accredited  vs.  non-­‐accredited.      
  10. 10. Crowdfunding
 MoS:  A  story  of  Shirt,  socks  and  the  power  of  a  crowd.   • Not  a  new  concept.   To  CrowdFund?   Not  to  Crowdfund? • Demand/market  validation   done  before  you  go  to   market.       • Almost  zero  risk    market     • Marketing  story  done  for   you.   • Almost  immediate  access  to   cash ➢ No  secrets  to  hide  from   competition.     ➢ Price  point   ➢ Go  to  Market  Strategy     ➢ Runway     ➢ Timing   ➢ Funding  Commitments  
  11. 11. Is  it  right  for  you? Probably   • Hardware  with  a  specific   cost  for  prototype.   • Consumer  facing  projects   • Micro-­‐market  products   • Market  unknown  products.     • One-­‐off  garage  projects   • Artists   • Philanthropists Probably  Not   • Large  companies   • Complex  products  with   intricate  sales  cycles   • Infrastructure  or  enterprise   products  that  are  unlikely  to   touch  consumers.
  12. 12. Angel Investors
  13. 13. The  funding  Lines  are  getting  blurry Traditional   VC  Funds Seed   Funds Super   Angels Angels
  14. 14. Angels • Class  of  capital
    Equity  (ownership  in  company)   • Structure/organization
    High  net  worth  (HNW)  individuals
    Some  groups  and  clubs
    Some  “super  angel”  funds   • Motivation/incentives
    Upside  –  stock  appreciation
    Most  look  for  an  “exit”  (i.e.  liquidity  event
  15. 15. Angels • Amount  of  capital
    $100k  to  $2mm   • Use  of  capital
    Growth  capital  (i.e.  new  cash  for  growth)   • Stage  of  company
    Early-­‐stage,  product/market  development   • Who  bears  the  risk  &  what  type
    Angel  investor  bears  risk
    Product/market  risk,  execution  risk
  16. 16. Angels • Structure  of  investment
    Purchase  of  common  or  preferred  stock
    Sometimes  convertible  debt  initially   • Price  of  investment
    25-­‐50%  of  company’s  stock
    Convertible  debt  ~25%  min  ownership   • Monitoring  the  investment
    Reporting
    Some  angels  (or  groups)  want  BOD  seat   • Value  add
    $$$,  industry  expertise,  connections
  17. 17. Venture Capital
  18. 18. Venture  Capital   • Class  of  capital
    Equity  (ownership  in  company)   • Structure/organization
    Limited  partnership
    10  year  funds  (invest,  grow  &  harvest)   • Motivation/incentives
    Upside  (30%  IRR  and  3x  overall  for  fund)
    Looking  for  an  “exit”  (i.e.  liquidity  event)
  19. 19. Venture  Capital • Amount  of  capital
    $1mm-­‐20mm  
    Some  seed  activity  as  well   • Use  of  capital
    Extreme  growth  capital   • Stage  of  company
    Early-­‐stage  and  growth  stage   • Who  bears  the  risk  &  what  type
    Limited  partners  and  general  partners
    Product,  market,  tech  &  execution  risk
  20. 20. Venture  Capital • Structure  of  investment
    Purchase  of  preferred  stock
    Sometimes  convertible  debt  initially   • Price  of  investment
    20-­‐40%  of  company’s  stock   • Monitoring  the  investment
    Reporting
    BOD  seats
    Redemption  rights,  registration  rights   • Value  add
    $$$,  industry  expertise,  capital  markets
  21. 21. Debt
  22. 22. Debt • Class  of  capital
    Debt  (senior  debt  as  discussed  here)   • Structure/organization
    Banks  (regulated  to  accept  deposits)
    Finance  companies  (corporations)
    Debt  funds  (limited  partnerships)   • Motivation/incentives
    Banks  –  interest  &  fee  income
    Finance  companies,  funds  –  interest
    Venture  debt  –  warrant  income
  23. 23. Debt • Amount  of  capital
    $1mm-­‐100mm   • Use  of  capital
    Working  capital
    Growth  capital
    Acquisition  capital   • Stage  of  company
    All  stages   • Who  bears  the  risk  &  what  type
    The  lender
  24. 24. Debt • Structure  of  investment
    Senior  secured  credit   • Price  of  investment
    Interest  and  fees  for  established  co’s
    Plus  warrants  for  pre-­‐profit  co’s   • Monitoring  the  investment
    Reporting
    Financial  covenants
    Affirmative  &  negative  covenants   • Value  add
    $$$,  connections,  pattern  recognition
  25. 25. Questions?
  26. 26. The  Ringers Jason Jacobs   RunKeeper CEO and Founder Brent Grinna   Evertrue   Founder and CEO Aman  Advani   Ministry  of  Supply   COO  and  Co-­‐Founder  
  27. 27. Q & A Panel of Experts
  28. 28. Course Title Course Title INSTRUCTOR NAME

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