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Funding for innovative startups - Part 1 of 5

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Practical funding masterclass: a series of 5 presentations by Benno Groosman.
Session 1: Introduction to funding language + business planning.
Session 2: Wednesday February 24, 18h: Determining funding need + milestone-based funding.
Session 3: Building your financial investment plan.
Session 4: Investor readiness.
Session 5: Advanced funding and wrap-up.

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Funding for innovative startups - Part 1 of 5

  1. 1. SESSION ONE: FUNDING TERMINOLOGY & BUSINESS PLAN Benno Groosman MScBA – www.groosman.info –Athens, February 17 – OrangeGrove
  2. 2. MASTERCLASS FUNDING FOR INNOVATIVE STARTUPS Benno Groosman MScBA – www.groosman.info –Athens, February 16 – OrangeGrove
  3. 3. MASTERCLASS SCHEDULE  Session 1: Introduction to funding language + business planning;  Session 2: Determining funding need + milestone-based funding;  Session 3: Building your financial investment plan;  Session 4: Investor readiness;  Session 5: Advanced funding and wrap-up. www.groosman.infoFUNDING MASTERCLASS
  4. 4. INTHIS PRESENTATION Definitions The players Misconceptions Funding stages Preparation Timing
  5. 5. DEFINITION: STARTUP “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” Eric Ries,The Lean Startup www.groosman.infoFUNDING MASTERCLASS
  6. 6. DEFINITION: INNOVATION Doing things different and in a better way to get better results by using technology, improved processes and/or new relationships. www.groosman.infoFUNDING MASTERCLASS
  7. 7. DEFINITION: FUNDING Providing financial resources to finance a startup, program, or project. www.groosman.infoFUNDING MASTERCLASS
  8. 8. WHAT FUNDING IS NOT… … a startup’s ultimate goal. www.groosman.infoFUNDING MASTERCLASS
  9. 9. WHAT FUNDING IS NOT… … a guarantee for success. www.groosman.infoFUNDING MASTERCLASS
  10. 10. WHAT FUNDING IS NOT… … replacing the need for customers and revenues. www.groosman.infoFUNDING MASTERCLASS
  11. 11. WHAT FUNDING IS NOT… … only business angels and venture capitalists. www.groosman.infoFUNDING MASTERCLASS
  12. 12. THE PLAYERS:THE ENTREPRENEUR Somebody with vision, leadership, energy and networking skills, who breaks the system, manages risks and combines resources to bring innovative solutions to the market. www.groosman.infoFUNDING MASTERCLASS
  13. 13. THE PLAYERS: BUSINESS ANGEL Individual with personal capital and experience in entrepreneurship or a certain branche available. Typically wants to use his money AND time for your company: “smart capital”. www.groosman.infoFUNDING MASTERCLASS
  14. 14. THE PLAYERS: BUSINESS ANGEL Indication of investment range: €10-100k. Can make syndicate with other (informal) investors to expand network and make bigger total investment. www.groosman.infoFUNDING MASTERCLASS
  15. 15. THE PLAYERS:VENTURE CAPITAL FUND Fund collects money from companies, governments, investors, pension funds, etc. Fund managers and investor managers are responsible for return on investment (ROI) on the fund capital. Investors in the fund want to monitor this, so there’s more paper work. www.groosman.infoFUNDING MASTERCLASS
  16. 16. THE PLAYERS:VENTURE CAPITAL FUND Funds typically have a 5-7 year investment range and do multiple investments in that time. €500k and (a lot) more per investment. www.groosman.infoFUNDING MASTERCLASS
  17. 17. THE PLAYERS:YOUR LAWYER Get a lawyer that has experience with startup funding and the big load of term sheets, participation contracts and legal implications that come with this. Your lawyer is also your partner in negotiations, so make sure you get one with a track record in the field of startups. www.groosman.infoFUNDING MASTERCLASS
  18. 18. THE PLAYERS: … AND MANY MORE Investing pension funds; Corporate venture capital; Government seed and growth capital; Equity funds (€10M and up); Banks; Customers! www.groosman.infoFUNDING MASTERCLASS
  19. 19. THE FUNDING STAGES www.groosman.infoFUNDING MASTERCLASS
  20. 20. THE FUNDING STAGES www.groosman.infoFUNDING MASTERCLASS
  21. 21. THE FUNDING STAGES Do you know which stage your startup is in? www.groosman.infoFUNDING MASTERCLASS
  22. 22. SORRY,YOU’RE PROBABLY NOT READY… Many startup founders have the wrong perception about qualifying for funding. An idea or website is not enough! You need to validate and deliver evidence for your assumptions. The next slide shows Steve Blank’s investment readiness levels, taken from http://www.theinnovativemanager.com/wp- content/uploads/2015/03/Steve-Blank-Investment-Readiness-Levels.png?a4c06d www.groosman.infoFUNDING MASTERCLASS
  23. 23. SORRY,YOU’RE PROBABLY NOT READY… www.groosman.infoFUNDING MASTERCLASS
  24. 24. www.groosman.infoFUNDING MASTERCLASS
  25. 25. DOYOU REALLYWANTTO RAISE MONEY? First, get money from:  Selling your test product;  Make customers pay in advance (or sell MVP);  Use government subsidies and grants;  Consultancy (but don’t loose your focus!);  (Ask to) pay your suppliers later. ...TO BE ABLETO MAKE A BETTER DEAL. www.groosman.infoFUNDING MASTERCLASS
  26. 26. DOYOU REALLYWANTTO RAISE MONEY? Think now about your alternative (financial) sources.
  27. 27. WHATYOU HAVETO PREPARE Elevator pitch Pitch deck Business plan Go to market strategy Exit strategy What do you want to give in return for the funding? www.groosman.infoFUNDING MASTERCLASS
  28. 28. WHATYOU HAVETO PREPARE Start with the business plan and then make a pitch deck out of that. If the other party gets interested by your pitch deck, you will have to send a business plan almost directly. 98% of the startups need a business plan to raise money. www.groosman.infoFUNDING MASTERCLASS
  29. 29. WHATYOU HAVETO PREPARE Reserve time to finish your business plan, make it a priority!
  30. 30. HAVEYOUR HOMEWORK READY My presentation on the contents of a business plan you can find here: http://www.slideshare.net/benno_groosman/ writing-an-effective-business-plan-49179966 And aWord template you can find here: http://www.groosman.info/#!funding/cbvu www.groosman.infoFUNDING MASTERCLASS
  31. 31. WHENTO START SEARCHING FOR FUNDING? Best position to negotiate is when you don’t really need the money yet. Investors (or you!) can delay the dealmaking, so make sure you have a financial buffer. Investment lead time: Informal investors / business angels: 3 months. VC funds: 6 to 12 months. + time you need to get to get them in your network! www.groosman.infoFUNDING MASTERCLASS
  32. 32. NEXT SESSION Defining milestones; Determining funding need; Making an investment table. www.groosman.infoFUNDING MASTERCLASS
  33. 33. SNEAK PREVIEW NEXT SESSION Ask the money that you really need, not too little, and about 10-20% extra for unforeseen expenses. www.groosman.infoFUNDING MASTERCLASS
  34. 34. SNEAK PREVIEW NEXT SESSION Informal investors don’t like to pay for marketing, big office space and high salaries.They want to build the business by investing in prototypes, production, sales, patents, strategic positions etc. Use the funding to increase the valuation of your venture. www.groosman.infoFUNDING MASTERCLASS
  35. 35. SNEAK PREVIEW OTHER SESSIONS Valuation of startups is not just a numbers game. It’s more about expectations, feelings, investment limits etc. But, start to quantify your valuation by: Real option pricing; Discounted cash flow; Comparing to other startups. www.groosman.infoFUNDING MASTERCLASS
  36. 36. FOLLOW ME Benno Groosman MScBA Experienced startup entrepreneur www.groosman.info www.groosman.infoFUNDING MASTERCLASS

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