The Capital Raising Ladder

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Presentation based on Ben Holmes, Index Ventures Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual

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The Capital Raising Ladder

  1. The Capital Raising Ladder<br />David Crow<br />Cofounder, Influitive Corporation<br />Cofounder, StartupNorth.ca & DemoCamp<br />david@davidcrow.ca | david@influitive.com<br />http://twitter.com/davidcrow<br />
  2. When does 1 + 1 = 10x<br />
  3. Raising Money is Hard<br />Starting a business is a big commitment<br />Energy & Passion<br />Time & Effort<br />Financial Resources<br />Take a big breath<br />Inspired by Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  4. Why are you doing this?<br />Make money<br />Feed my kids<br />Change the world<br />How long do you want to commit?<br />What level of financial risk are you prepared to take?<br />Inspired by Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  5. # 1 Focus on the Business First<br />
  6. Top Tips<br />Have a great product/service<br />Focus predominately on growing the business, not fundraising<br />Evidence of execution ability is more exciting than 100 page business plan<br />
  7. Be honest<br />Do customers want the product/service?<br />Do you have the competence to build the product? The team?<br />Can you monetize the product or service?<br />How competitive is/will the space be?<br />How big can the overall market become?<br />Inspired by Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  8. Focus on your business first<br />Build the product<br />Get users/customers<br />Make money<br />Don’t spend it<br />Get to break-even<br />Scale like crazy<br />
  9. The Capital Raising Ladder<br />No cash, moonlighting, sweat<br />Credit card or savings (personal round)<br />Friends and family round<br />Incubators<br />Serious angels and small VCs<br />Classic VCs<br />Corporate VCs<br />Non-recourse working capital bank loans<br />IPO<br />Exit: Capital Realization<br />By Bernard Lunn http://www.readwriteweb.com/start/2009/06/the-capital-raising-ladder.php<br />
  10. Non-Equity Financing<br />Equity Financing<br />Angel Financing<br />Overview of financing<br />Bootstrapping/Self Financing<br />Venture Capital<br />Private Equity<br />Debt/Bank Finance<br />Public Markets<br />By Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  11. Bootstrapping<br /><ul><li>Based on previous cashflows and personal funds
  12. Needs to be a real business
  13. Most emerge from a service offering or consulting company</li></ul>Pros<br />Cons<br />More cash efficient<br />Close to customers<br />Excellent to understand problems and solutions<br />Resources for growth constrained by cashflows<br />May miss a big opportunity if other players raise a lot of cash<br />By Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  14. Debt/Bank Financing<br />Relatively limited funds when available<br />Banks lend to predictable business they understand<br />Great for business that are following a well trodden path<br />Not necessarily great for software, web, mobile businesses<br />By Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  15. Reasons to raise equity finance<br />Prerequisites<br />Unique Product or Concept<br />Passionate Founding Team<br />Large Potential Market<br />Implications<br />Intense Competition <br />Need to move rapidly<br />VC Funding Supports<br />Hiring<br />Rapid Product Development<br />Partnerships<br />Infrastructure<br />Internationalization<br />Commercialization<br />By Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  16. # 1 Reason to Raise Money<br />Market growth is accelerating<br />Add revenue generating units at a predictable profit<br />
  17. When NOT to raise money<br />Application is a feature not a product<br />Market size is too small<br />Motivation is not financial<br />The risk is that you waste time trying to unsuccessfully raise money<br />Real risk is that you succeed <br />Lose opportunity for small exit<br />Lose opportunity to run a lifestyle business<br />Get bound to 3+ years of crazy hard work<br />By Ben Holmes of Index Ventures http://www.slideshare.net/benholmes/venture-capital-an-entrepreneurs-manual<br />
  18. It’s All in the Sequence<br />Company Title Page<br />Business Overview<br />Management Team<br />Market<br />Product<br />Business Model<br />Customers<br />Strategic Relationships<br />Competition<br />Barriers to Entry<br />Financial Overview<br />Use of Proceeds<br />Capital & Valuation<br />Review<br />Contact Info/Next Steps<br />David S Rose: It’s All in the Sequence http://www.businessweek.com/magazine/content/05_38/b3951447.htm<br />
  19. It’s All in the Sequence (pt.2)<br />Company Title PageStart with the name and logo of the company, the name and title of your presenter, a one-line description or tagline about the company, and the dollar amount of the round you are raising.<br />Business OverviewBoil down your elevator pitch to one sentence. Tell us what you sell or do in very concrete language. This sets the context for the rest of your presentation.<br />Management TeamShow us your talent and experience, with one line of background (two lines max!) on each member.<br />MarketWhat’s the environment in which you operate, how big are the segments, what are the pain points?<br />ProductHow do you solve a customer’s pain? What exactly do you do? This can be illustrated with a clear product or screen shot, or a simple process diagram, but if we don’t know what you do, we won’t know why we should fund you. (But don’t spend too much time on this, since you’re pitching the company here, not the product.)<br />Business ModelWho pays whom, how much, for what and from where. What does this mean for annualized revenue streams?<br />CustomersWho are they, how many are there, how do you distribute to them, and how are they attracted and retained?<br />David S Rose: It’s All in the Sequence http://www.businessweek.com/magazine/content/05_38/b3951447.htm<br />
  20. It’s All in the Sequence (pt. 3)<br />Strategic RelationshipsIf you have any, make sure we know about them.<br />CompetitionWho and how threatening are they? What are the differentiation factors? Include both direct and indirect competitors. Remember that everyone has competition, even if it is just “the old way” of doing something.<br />Barriers to EntryHow will other potential competitors be kept at bay?<br />Financial OverviewShow us your top-line revenues and expenses, and EBITDA two years back and four years out.<br />Use of ProceedsWhere will our money take you?<br />Capital & ValuationHow much have you raised previously, who are your current investors, what are you looking for in this round, and how do you come to your suggested valuation?<br />ReviewProvide a brief summary of what you said, in this same order, narrowed to the five or six most important points.<br />Contact Info/Next StepsLead us into the next step, such as a follow-up meeting for due diligence…and include your contact info!<br />David S Rose: It’s All in the Sequence http://www.businessweek.com/magazine/content/05_38/b3951447.htm<br />
  21. Resources<br />David S Rose: It’s All in the Sequencehttp://www.businessweek.com/magazine/content/05_38/b3951447.htm<br />Business Model Generation by Alex Osterwalderhttp://businessmodelgeneration.com/<br />Fred Wilson http://avc.com/<br />Brad Feldhttp://feld.com/<br />Venture Hackshttp://venturehacks.com/<br />High-Tech Ventures by Gordon S. Bell<br />
  22. For the Gifted – Resources++<br />Paul Graham http://www.paulgraham.com/articles.html<br />Dave McClure AARRR: Pirate Metrics for Startups http://bit.ly/AARRR<br />David Skokhttp://forentrepreneurs.com/<br />Sean Ellishttp://startup-marketing.com/<br />Marc Andreessen http://bit.ly/PMarketFit<br />
  23. Thank you.<br />David Crow<br />david@davidcrow.ca & david@influitive.com<br />http://davidcrow.ca/<br />http://startupnorth.ca/<br />http://influitive.com/<br />Twitter: @davidcrow<br />Find me on Facebook, LinkedIn,etc.<br />

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