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HOW TO FINANCE MY VENTURE? - SESSION 7

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MAIN TOPICS: …

MAIN TOPICS:
- Why do startups need money?
- What are the sources of finance?
- What are their pros and cons?
- How to choose?
- Overview of the financing sources
- One word on Entrepreneurial Ecosystems

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This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

Published in: Business, Economy & Finance

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  • 1. www.solvayentrepreneurs.be HOW TO FINANCE MY VENTURE? SESSION 7 (out of 10) ENTREPRENEURIAL FINANCE This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.
  • 2. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR •  Why do startups need money? •  What are the sources of finance? •  What are their pros and cons? •  How to choose •  Overview of the financing sources •  One word on Entrepreneurial Ecosystems •  Guide to VC 2 Desired Outcomes of the Session
  • 3. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR The Entrepreneurial Framework 3 ENTREPRENEUR OPPORTUNITY RESOURCES Conviction Creativity Communication CONTEXT Adaptation Fits & Gaps * Adapted from J. Timmons & A. Bidé
  • 4. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR OVERVIEW OF THE FINANCING SOURCES FOR NEW VENTURES #1 4
  • 5. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR •  Losses, i.e. Opex > Revenues •  Investments, i.e.: –  Hardware: infrastuctures (Capex) –  Software: IP/R&D, business development (NB: sometimes considered as opex) •  Working capital: Accounts receivables, inventories, Work in progress… •  Seasonal effects •  Security margins i.e. a plan without margins is not a plan 5 Typical Financial Requirements / Use of Funds
  • 6. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Typical Cash Curve 6 The happy days The promised land Death Valley Financial needs In doubt
  • 7. CIMITYM
  • 8. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR 1.  Self-financing / Bootstrapping 2.  Equity 3F: Family, Friends & Fools … or ‘love money’ Crowdfunding Business Angels (= individuals) Venture Capital (= professional investors, many types) Industrial partners Stock markets 3.  Debts (mainly from banks) Short term Long term 4.  Grants 8 Four Main Types of Financings
  • 9. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Risklevel Company maturity FFF / Crowdfunding BUSINESS ANGELS VENTURE CAPITAL STOCK MARKETS BANKS Financing the Entrepreneurial Venture 9 GRANTS Low Low High High
  • 10. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Losses à Equity Investment à Debts, leasing, renting (equity at early stage) Working capital à Debts and equity Seasonal effects à Credit lines R&D à Equity and grants Security margins à Equity and debts Growth preparation à Equity or self-financing 10 Not all financings have the same objectives.
  • 11. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Selection Criteria (Entrepreneur’s Perspective) 11 WHO? Timing+ Difficulty Deep Pockets @ t1, t2, t3… Expertise+ Network (Smart money) Cost (all types) / Expected return Accepted risk / Collaterals Hands On / Off Additional constrains: exit, location….
  • 12. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Rough comparison (many exceptions!) 12 3F BA VC Bank Grants Timing / Difficulty ++ - -- + - Cost ++ -/-- (Dilution) o ++ Collaterals ++ ? ++ ++ -- ++ Deep pocket -- o ++ ++ + Involvement in Management No ? Yes No No Constrains Atmos. Exit Low Location Expertize / Smart Money -- +/++ - --
  • 13. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR ONE WORD ON THE ENTREPRENEURIAL ECOSYSTEM #2
  • 14. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Supporting opportunity entrepreneurship 14 More new ventures, more gazelles … More entrepreneurs •  Role models, success stories •  Social norms, culture •  Education •  Social system More opportunities •  Research •  Regulation •  … More money •  Tax condition •  VC •  Stock market •  Grants •  Banks •  … More support •  Public leaders •  Incubators / infrastructures •  Skilled people •  Advisers •  Incentives •  …
  • 15. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR 15
  • 16. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR The Entrepreneurship Action Plan is a blueprint for decisive action to unleash Europe's entrepreneurial potential, to remove existing obstacles and to revolutionise the culture of entrepreneurship in Europe. Investments in changing the public perception of entrepreneurs, in entrepreneurship education and to support groups that are underrepresented among entrepreneurs are indispensable if we want to create enduring change. Only if a large number of Europeans recognise an entrepreneurial career as a rewarding and attractive option will entrepreneurial activity in Europe thrive in the long term. The Entrepreneurship 2020 Action Plan is built on three main pillars: 1.  Entrepreneurial education and training 2.  Creation of an environment where entrepreneurs can flourish and grow, and 3.  Developing role models and reaching out to specific groups whose entrepreneurial potential is not being tapped to its fullest extent or who are not reached by traditional outreach for business support. 16 Entrepreneurship 2020 Action Plan (2012)
  • 17. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR 17 NEVER STOP WONDERING & ASKING!
  • 18. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR A real passion for entrepreneurship education and entrepreneurs. •  Student entrepreneurs: 2x •  Full time entrepreneur: once, in a team of 5 •  Coach: 500+ projects over the last 20 years •  (Advisory) Board member in multiple new ventures •  Policy making: 2x •  Director of Solvay Entrepreneurs •  PhD in entrepreneurship in 2008 •  … never as an investor My wife (as Colombo), no kids, one dog (Vicky). 18 Olivier Witmeur (Belgian, 46)
  • 19. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Solvay entrepreneurs is the entrepreneurship center of the Université Libre de Bruxelles. We support entrepreneurs through the development of their venture, from an idea to a successful and sustainable business. 19 Solvay Entrepreneurs
  • 20. Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR Let’s keep in touch! 202014%©%Olivier%Witmeur FOLLOW US ON LinkedIn.com/company/ Solvay-Entrepreneurs in Facebook.com/ SolvayEntrepreneurs f Twitter.com/ SolvayStart t SolvayEntrepreneurs.be www YouTube.com/user/ SolvayEntrepreneurs Foursquare.com/ SolvayStart