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New 4 financingstartup_mgmt 402 march 12

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financing startup / startup nakit akısı ve finansal çalışma

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New 4 financingstartup_mgmt 402 march 12

  1. 1. On Financing a Start-Up Ziya G. Boyacigiller This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com
  2. 2. Ziya G. Boyacigiller On Financing A Startup Sabanci University BA, MBA and EXEC MBA 2004 through 2013
  3. 3. SubT for ZB • Startup Financing Life Cycle
  4. 4. Start up Financing Life Cycle • Bootstrapping • Debt • Alternatives – Angels Investors – Seed Fund – Venture Capital – Private Equity
  5. 5. Available Mechanisms Startup Phase 0 – 500K TL Early Stage 500K – 5M TL Growth Phase 5M + TL Public Private LOAN GRANTS INVESTMENTS LOAN INVESTMENT International Mechanisms Individuals Institutional ECOSYSTEM KOSGEB TOBB TKB İGEME NMCP İKV TOSYÖV TTGV MPM
  6. 6. Conventional Funding Mechanisms • Financing – Halk Bankası – Eximbank – TKB – Dünya Bankası – Kredi Garanti Fonu • Investment – Hazine Müsteşarlığı – TOBB – KOSGEB – Halk Bankası – TKB – TSKB • Low risk tolerance •Returns are pre-calculated • Risk minimization tools are different • Standardized, repeatable processes • Increased red-tape proportional to size • Use area and conditions well defined • Not ideal for new product or service development and launch • Technology commercialization requires more flexibility
  7. 7. Banks’ Perspective
  8. 8. Problems for SMEs in working with Convention 34% 21% 13% 12% 9% 8% 3% Collateral Uncertainty Financials Success Rate Maxed out Credit Financial Informing Low Credit Score Kaynak: SME Development Survey 2006
  9. 9. RISK
  10. 10. ALTERNATIVE FINANCING MECHANISMS • Compared to conventional mechanisms: – Higher risk tolerance – Uncertain return – Flexible procedures, processes – Welcoming framework for the development of new technologies and ideas – Different risk minimization tools and tactics
  11. 11. EXPECTATIONS RISK REVENUE Bank Loan Export Loan Venture Capital Private Equity Institutional Investors Angel Investors Side Loan - Interest - Foreseable payment timeline - Risk Control: Collateral, Mortgage, Credit Score - Unknown payment terms and timeline - Risk management: Term sheet, shareholders agreement, protective provisions.
  12. 12. Startup Financing Life Cycle
  13. 13. Alternative Financing Mechanisms • Angel Investors • Venture Capital
  14. 14. Angel Investors • High networth individuals started in 1920s • Startup or early stage investments around 0 to 500K • Small scale, flexible • Investing their own capital • High return expectations – 5x , 10x • Investing as a group • 2008 – In the US 57,000 companies, totalling$30B in investments, average investment $450K • 260,000 registered angel investors in the US
  15. 15. Venture Capital • SBA Regulation provided the trigger in 1950s • Managing funds that are created by pooling funds from individuals and institutions • Early and growth stage, exponential growth markets • Higher returns – 20X – 25X – IRR focus • New projects welcome but reject rate is 98% • Risk management: Due diligence, agreements etc. • 2008 in the US $29B – 2600 investments • Return: IPO, M&A
  16. 16. What do they look for? • Idea • Novel, innovative, disruptive • High growth markets • Scalability • Team > passion, track record, chemistry • Execution > profitable business model as well as well thought strategic plan
  17. 17. Operating Model • Introduction > Networking • Elevator Pitch > 2 minute summary • Executive Summary & Business Plan • Due Diligence > 2 weeks to 6 months... • Term Sheet • Negotiations • Agreement • Portfolio Management • Exit
  18. 18. Differences Between C & A • Process • Acceptable Risk • Risk control and minimization • Shareholder vs. Debt • Return expectations • Exit
  19. 19. I just created ice cream that never melts!
  20. 20. I really need to find a good investment for all this money.
  21. 21. My ice cream is better then others because it never melts. I love ice cream. This could be big! I need money to build an ice cream plant.
  22. 22. That’s a deal! We’ll give you $5M for 50% of your company.
  23. 23. $$$ Schechter Ice Cream
  24. 24. 1 Year Later…
  25. 25. We are selling 10 million ice creams a day. We need more money to keep growing. Why don’t I introduce you to someone who can help.
  26. 26. This is great but maybe we should just buy the company.
  27. 27. Sweet. We just made 20 times our original investment. I’m buying my parents a new house and donating millions to Schechter.
  28. 28. Who knew ice cream could be worth so much money. Where should I invest next?

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