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What Funds

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You have idea & opporunity to start business .....what next .....! its money

You have idea & opporunity to start business .....what next .....! its money

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    What Funds What Funds Presentation Transcript

    • What Funds…….? I have opportunity what next……..! Ahh money By Dhanunjaya Gadiyaram
    • 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
    • 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
    • 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
    • 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?
    • Typical New Venture Funding Sources
      • Research Institutions
      • Self-financed
      • Angel Investors
      • Venture Capitalists
      • Private Equity
      • Public Equity
      • Banks
    • 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
    • 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
    • Self-financed
      • From where?
        • Family
        • Friends
        • The entrepreneur
      • What drives their investment decision?
        • Based on a belief in, or relationship with, the entrepreneur
    • 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)
    • 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
    • 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
    • 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.
    • 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
    • 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
    • Desirable Investment Opportunities
      • When owners want/need to:
        • raise capital for new investments
        • raise capital to restructure
    • 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
    • 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
    • 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.
    • 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
    • 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
    • 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
    • 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
    • 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
    • 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.
    • 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)
    • Banks
      • What do they expect to get?
        • Their original loan returned
        • Interest
      • Where does their money come from?
        • Depositors
    • 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