Charlotte Early Stage Funding
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The document discusses different types of investors that provide funding to companies at various stages, including friends and family, individual angels, angel groups, strategic investors, venture capital, and private equity. It provides details on the typical investment size, source of funds, reasons for investing, preferred investment stage, level of due diligence conducted, standard investment structures, and length of investment process for each type.
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Charlotte Early Stage Funding
- 1. PROCESS, DUE DILIGENCE, DEAL STRUCTURES
- 3. What is Valuation? Example Company attracts $200,000 investment, with investor receiving 10% of company’s shares in return Post Transaction Equity Split Founders = 90% Investor = 10% Pre-Money Valuation $1,800,000 (if 10% is worth $200,000, the 90% has been valued at $1,800,000) Post-Money Valuation $2,000,000 (Post-money = pre-money + capital raised)
- 5. Friends and Family Description An individual who knows one of the key team members Typical Investment Size $5,000 - ??? Source of Capital Personal funds Why they Invest Investing in an individual more than investing in the business When will they Invest? Any stage Due Diligence? Minimal to none Typical Structure Convertible note or common stock Length of process Can be as short as one conversation Examples Parent, sibling, neighbor, co-worker, friend
- 7. Individual Angel Description High net worth individual who invests but not as their profession. Typical Investment Size $25,000 - $100,000 Source of Capital Personal Funds Why they Invest 1) Opportunity for significant return on investment. 2) Intellectual interest, 3) Opportunity to provide value-add as an investor When will they Invest? Anywhere from start-up to profitability Due Diligence? Mild Typical Structure Convertible note or preferred stock Length of process 30-90 days, informal process
- 8. ANGEL GROUP
- 9. Angel Group Description Aggregation of high net worth individuals who invest but not as their profession Typical Investment Size $50,000 - $250,000 Source of Capital Aggregation of personal funds Why they Invest 1)Opportunity for significant return on investment 2) Intellectual interest 3) Opportunity to provide value-add as an investor When will they Invest? Typically want to see some customer traction Due Diligence? Medium Typical Structure Convertible note or preferred stock Length of process 90-180 days, somewhat more formal process of screening, presentation to group, due diligence Examples Charlotte Angel Fund, PAN, IMAF Funds, TAP
- 11. Strategic Investor Description Business which stands to benefit in some way if the investee company succeeds Typical Investment Size $50,000 - $1,000,000 Source of Capital Corporate funds Why they Invest Primary interest is technology access or revenue benefit. Return on invested capital is secondary. When will they Invest? Any stage, but tend towards later stages Due Diligence? Mild Typical Structure Convertible note or preferred stock Length of process 120+ days. Complex internal decision process. Examples Distribution partner, supplier
- 12. VENTURE CAPITAL
- 13. Venture Capital Description Professionally managed pool of individual and institutional funds Typical Investment Size $500,000 - $5,000,000 Source of Capital High net worth individuals, college endowments, financial institutions Why they Invest Return on investment When will they Invest? Once product/market fit is established Due Diligence? Extensive Typical Structure Preferred Stock Length of process 3-24 months from initial meeting to close Examples Idea Fund Partners, Sunbridge, Real Ventures, Grotech Ventures
- 14. PRIVATE EQUITY
- 15. Private Equity Description Professionally managed pool of individual and institutional funds Typical Investment Size $5,000,000 - $20,000,000 Source of Capital High net worth individuals, college endowments, financial institutions Why they Invest Return on investment When will they Invest? Profits in excess of $1M – they are cash flow investors Due Diligence? Extensive Typical Structure Preferred stock + Mezzanine Debt Length of process 3-24 months from initial meeting to close Examples Falfurrias Capital, Frontier Capital