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  • 1. What Funds…….? I have opportunity what next……..! Ahh money By Dhanunjaya Gadiyaram
  • 2. How to Approach Investors
    • Research potential investors
    • Only approach appropriate investors
    • Prepare a very good Business Plan
    • Prepare and rehearse a very good presentation (no set standard: 30 seconds / 40-45 mins)
    • Be clear about what you need (how much, when, what for) and have some idea about what you’re prepared to offer (% of equity)
    • Progress your venture as much as you can on your own before approaching investors
  • 3. How to Approach Investors
    • Ask potential investors about their investment style and expectations
    • Spend time with investor’s other investee partners / companies
    • Negotiate hard
    • Ensure your interests are aligned with those of your investor. Agree a written business plan
    • Hire professional help
  • 4. Investment Opportunity
    • Investors looking at all stages and sizes of companies
    • Deals are few and far between
      • problems with investors capabilities (e.g., access / protection)
      • problems with investee capabilities (e.g., accountability / transparency)
    • Everything takes a (very) long time
    • Exits unclear
  • 5. Typical New Venture Funding Sources
    • Who are they?
    • What drives their investment decision?
    • What do they expect to get?
    • Where does their money come from?
  • 6. Typical New Venture Funding Sources
    • Research Institutions
    • Self-financed
    • Angel Investors
    • Venture Capitalists
    • Private Equity
    • Public Equity
    • Banks
  • 7. Research Institutions
    • Who are they?
      • Universities
      • Private laboratories
      • Government agencies
    • What drives their investment decision?
      • The desire to enhance the body of knowledge in a specific area of interest through research
  • 8. Research Institutions
    • What do they expect to get?
      • The intellectual property that results from the research
        • Patents
        • Rights in property or process, even if not patented
    • Where does their money come from?
      • Endowments (sometimes with spending conditions)
      • Grants
      • General funding from government
      • Student tuition
  • 9. Self-financed
    • From where?
      • Family
      • Friends
      • The entrepreneur
    • What drives their investment decision?
      • Based on a belief in, or relationship with, the entrepreneur
  • 10. Self-financed
    • What do they expect to get?
      • Their original investment returned
      • Maybe interest
      • Less often equity
    • Where does their money come from?
      • Usually funded from personal savings or new borrowings (mortgage on real estate)
  • 11. Angel Investors
    • Who are they?
      • Wealthy individuals
      • Often successful entrepreneurs
    • What drives their investment decision?
      • A belief that the entrepreneur has done the homework
      • A belief that the idea holds great upside potential
  • 12. Angel Investors
    • What do they expect to get?
      • Equity
      • A large return on their investment (> 30% )
    • Where does their money come from?
      • Usually funded from personal savings
  • 13. Professional Investors
    • They Include: Venture Capitalists, Private Equity, Public Equity, Banks
    • What are they looking for (maturity):
        • Significant shareholder value growth (“$”) for expansion capital or reliable cash earnings
        • Consideration of: transparency, honesty, creativity, responsibility, accountability, teamwork, etc.
        • Appropriate industry, investment size, stage of company development – can vary depending on risk tolerance and desired ROI.
  • 14. Desirable Investment Opportunities
    • Demonstrable need for business, product, service and defensible market position
    • Track record of execution capability
    • Clearly defined business plan
    • Appropriate equity participation
    • Board representation, perhaps appointment of CFO
    • Visible exit strategy
  • 15. Desirable Investment Opportunities
    • When companies want to:
      • purchase new plant and equipment to expand capacity
      • purchase new plant and equipment to enter new business line
      • acquire competitor, customer or supplier
      • raise new working capital
  • 16. Desirable Investment Opportunities
    • When owners want/need to:
      • raise capital for new investments
      • raise capital to restructure
  • 17. Venture Capital Investors
    • Who are they?
      • Professionally managed investment vehicles
      • Usually in the form of a limited partnership
    • What drives their investment decision?
      • A belief that the entrepreneur is very capable
        • Management team
        • Business model
      • A belief that the idea and market conditions allow for significant revenue and profit growth
  • 18. Venture Capital Investors
    • What do they expect to get?
      • Equity
      • Significant return on investment (~ 30% CAR)
      • A clearly pre-defined exit for 5 – 7 years later
    • Where does their money come from?
      • Pension funds
      • Wealthy individuals
  • 19. What is a Venture Capitalist?
    • Investment fund for private equity
      • Such as large pension funds that have long-term investment horizons
      • Typically a VC fund lasts 10-12 years, before it is closed out
    • Looking for larger returns than offered by world-wide stock and bond markets
      • Require fast growth
      • Require large market opportunities
      • Rewards must outweigh risks
      • VCs may reject 99% of all proposals.
  • 20. Think Big – Venture Capital
    • Why do VC’s look for big opportunities to offset large risk.
      • 40% will fail.
      • 30% will become “living dead.”
      • 30% will become successes.
      • Most important: The failures almost always happen more quickly than the success!
    • VC determine their exit strategy before they invest:
      • Public offering
      • Sale to a strategic partner
  • 21. What Do VCs Offer?
    • Investment money from pension funds or university endowments
    • Suitable management or technical expertise
    • Help finding strategic partners or customers
    • Strategy planning
    • In return: a large percentage of ownership, plus seats on the board
  • 22. Private Equity Investors
    • Who are they?
      • Professionally managed investment vehicles
      • Can be in the form of a limited partnership, also mutual funds
    • What drives their investment decision?
      • Track record of the business
      • A belief that market conditions allow for expansion of the business
  • 23. Private Equity Investors
    • What do they expect to get?
      • Equity
      • Significant return on investment (up to 30% CAR)
      • May or may not seek a pre-defined exit
    • Where does their money come from?
      • Pension funds
      • Insurance companies
      • Mutual funds
      • University endowment funds
  • 24. Public Equity Investors
    • Who are they?
      • Retail investors
        • Individuals
      • Institutional investors
        • Pension funds, mutual funds, corporations
    • What drives their investment decision?
      • Retail investors
        • Emotion, hot tips, their own analysis
      • Institutional investors
        • Investment policy
  • 25. Public Equity Investors
    • What do they expect to get?
      • Shares
        • Usually no role in management of the business
      • Return on investment
    • Where does their money come from?
      • Retail investors
        • Personal savings or borrowings (mortgage on real estate, or margin on brokerage account)
      • Institutional investors
        • Pension contributions, insurance premiums, etc.
  • 26. Banks
    • Who are they?
      • Lending institutions
    • What drives their investment decision?
      • The creditworthiness of the borrower
        • Ability of the business to service the loan (make payments of interest & principal)
        • Collateral (can be supplied by a third party)
  • 27. Banks
    • What do they expect to get?
      • Their original loan returned
      • Interest
    • Where does their money come from?
      • Depositors
  • 28. Funds often are applied to different purposes Source Purpose Research Institutions Basic research, inventions Self-Financed Initial start-up funds Angel Investors Initial start-up funds Venture Capitalists Just after start-up Private Equity Longer-term growth of an established company Public Equity Capital investment requirements of an established company, exit for VCs Banks Financing for most operating needs