Financing Innovation                                               Michael Gold                                           ...
Obstacles   Entrepreneurs and innovators are key to economic growth and job   creation. But they often face obstacles in a...
Types of Finance   • Equity           – Own equity           – Retained earnings (accumulated profit)           – Partners...
Sources of Finance   • YOU!           – Savings, personal loans, housing loans   • The 3 F’s:           – Family          ...
Use of Funds   • Inputs, raw materials, supplies   • Packaging & graphics   • Components   • Finished/trade/commodity good...
Collateral/Security          – Purchase Orders or Contracts          – Working capital assets (inventory, accounts receiva...
Preparation for Finance   • Product or service   • Market and customers!   • Financial projections           – Monthly!   ...
Pointers   • Know your market, customers and competition   • Know your costs and breakeven point   • Be able to present yo...
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Financing Innovation

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Michael Gold
Managing Director/CEO
Crimson Capital Corp.
February 2012

Published in: Economy & Finance
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Financing Innovation

  1. 1. Financing Innovation Michael Gold Managing Director/CEO Crimson Capital Corp. February 2012Copyright © Crimson Capital Corp. 2012
  2. 2. Obstacles Entrepreneurs and innovators are key to economic growth and job creation. But they often face obstacles in accessing the financing they need to start and/or grow their businesses, including: • Financial Institutions and investors (FIs) view them as more risky • FIs view this finance as more costly • FIs often require high levels of collateral and/or guarantees • FIs usually require historical financial statements and a track record of profitability, and/or prior experience successfully starting and running a business • Finance for entrepreneurs and innovators is usually very expensive in interest rates or required returns on investment • Investors require involvement in the business if not control • Banks typically do not finance entrepreneurs and innovatorsCopyright © Crimson Capital Corp. 2012
  3. 3. Types of Finance • Equity – Own equity – Retained earnings (accumulated profit) – Partners/Shareholders • Quasi Equity – Convertible debt • Debt – Overdraft – Lines of credit – Term loans/installment loans – Purchase order finance, receivables finance, factoring • Leasing • GrantsCopyright © Crimson Capital Corp. 2012
  4. 4. Sources of Finance • YOU! – Savings, personal loans, housing loans • The 3 F’s: – Family – Friends – Fools • Donors/foundations • Government agencies • Banks • Commercial finance/leasing companies • Angel investors, private equity investors, venture capitalists • Suppliers/Customers/PartnersCopyright © Crimson Capital Corp. 2012
  5. 5. Use of Funds • Inputs, raw materials, supplies • Packaging & graphics • Components • Finished/trade/commodity goods for resale • Testing & inspection, shipping costs • Space, utilities, insurance • Personnel • Subcontractors • Services such as legal, accounting, advertising, PR, IP • EquipmentCopyright © Crimson Capital Corp. 2012
  6. 6. Collateral/Security – Purchase Orders or Contracts – Working capital assets (inventory, accounts receivable, etc.) – Letters of Credit – Cross checks/company blank checks/post-dated checks – Promissory note – Bills of exchange – Bank guarantees – Insurance (credit, export, etc.) – Personal and corporate guarantees – “Hard” assets (equipment, vehicles, fixtures, land, buildings) – Shares in business – Other SecuritiesCopyright © Crimson Capital Corp. 2012
  7. 7. Preparation for Finance • Product or service • Market and customers! • Financial projections – Monthly! • Concept brief/teaser • Business plan • Financing – Amount, Type, Tenor, Collateral/Security – Use of funds – Results of financing (prototype, certification, new contracts, increased profits) – Proposed repayment for loans or proposed exit/return for investmentsCopyright © Crimson Capital Corp. 2012
  8. 8. Pointers • Know your market, customers and competition • Know your costs and breakeven point • Be able to present your business in 30 seconds (“elevator pitch”) • Know how you will use the money from the financing • Know concretely how the business will benefit from the financing • Know how you will repay the loan or how the investor will exit their investment and get their money back plus a healthy return • Disclose everything • Accept active involvement of financier • Put in your own money and assets in addition to “sweat equity” • Accept that financing will be expensive in interest or % of businessCopyright © Crimson Capital Corp. 2012

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