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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 …

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

Created for EnterpriseTO

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