The webinar covered sources of financing for knowledge-based businesses, how to prepare for financing, and how Welch/Kelly Santini can help. Sources of financing included founders, incentives, customers, friends and family, banks, angels, venture capitalists, debt, and public offerings. Preparation involved developing a business plan, financial projections, intellectual property protection, and corporate structure. Welch/Kelly Santini offered accounting, tax, advisory, and contact services to support businesses in financing and operations.

1. Welcome to Today’s Webinar

2. Questions
• Attendees are in listen-only mode
• This webinar is being recorded for future on-demand playback
• Your participation represents acknowledgement that we are
recording
• Tweet questions & comments to: #WelchTech
Windows Mac Tablet
Ground Rules

3. Presenters
Bryan Haralovich, CPA, CA, CPA (Illinois)
Partner, Welch LLP
bharalovich@welchllp.com
www.welchllp.com
Twitter:@CAHaralovich
http://linkd.in/1ioTtbp
Robert Ford
Partner, Kelly Santini LLP
rford@kellysantini.com
www.kellysantini.com
http://www.linkedin.com/pub/robert-ford/0/2a7/350

4. What We Will Cover Today
• Where the money comes from:
– Types & sources of financing
• How to prepare for financing:
– Corporate Structure
– Business plan
– Cash flow projections
– Intellectual Property
– Valuation
– Other considerations
• How Welch/Kelly Santini can help

5. Where the Money Comes From

6. Types & Sources of Financing - Summary
So urce o f F inancing Impact o n C ash F lo ws
Cash Flows None
Founders/Employees Personal use of the funds is lost (e.g. lost interest income)
Incentives Initial outlay with potential for annual outlays depending on arrangement
Customer/Vendor/Supply Chain Potential for initial outlay or annual outlay depending on arrangement
Friends and Family Annual outlay in order to reimburse the funding provided
Banks Annual outlay for principal and interest
Angel Investors
Depends on nature - if debentures/preferred shares, then annual interest with
potential for principal repayment. If equity, potentially no outlay, but loss of
ownership
Venture Capitalists
Depends on nature - if debentures/preferred shares, then annual interest with
potential for principal repayment. If equity, potentially no outlay, but loss of
ownership
Subordinated Debt/M ezzanine
Hybrid debt facility with equity component, higher cost/yield, unsecured or
ranking behind other lenders
Private Equity Acquisition financing; later stage equity
Capital Pool Company No outlay, but loss of ownership
Initial Public Offering/Private Placement
Depends on nature - if debentures/preferred shares, then annual interest with
potential for principal repayment. If equity, potentially no outlay, but loss of
ownership

7. How to Fund a Knowledge-based
business in Today’s Environment
• Founders & employees
• Incentives
• Cash flows
• Customers/Vendors/Supply Chain
• Equipment
• Friends and Family (“Love Money”)
• Traditional Banks
• Angels
• Venture Capital
• Subordinated Debt/Mezzanine
• Private Equity
• Capital Pool Corporation/Reverse take-over
• Initial Public Offering

8. How to Prepare for Financing
• Get organized
• Get help
• Get a lead and leverage
their contacts
• Be prepared to pitch a lot
• Excellent communication
skills are essential – they
are investing in you
• Never stop fundraising…..

9. • Raising money is a process
– Prepare documents- Plan & Presentation
– Must pursue multiple simultaneous paths to finance
– Start looking before you need it – it’s a long process,
network is critical
• Identify right partners
– Industry focus
– Investment phase segment
– Product
• VCs (and most angels) don’t sign NDAs
• Valuation depends on “selling” the opportunity
Raising Money is as much of a
Strategy as the Business is

10. Corporate Structure
• Corporation, partnership, joint
venture, etc.
• Canadian or foreign ownership
• Stock option plan
• Ownership of IP
• Doing business in foreign
jurisdictions

11. How to Prepare for Financing
Business Plan/Financing document
• Critical document that will define your venture & help you raise capital
• Substance over form
• Size, content and level of information should be tailored to the audience
• Discuss the 4P’s and why you have an advantage in all of them (people,
product, placement, plan)
• Questions a business plan must answer:
– What is the Pain (i.e. market opportunity) & what is your product?
– Is the market validated? Is the Pain still big enough?
– Who is behind the company?
– What is your revenue model: does it work?
– What is your proof of concept?
– What have you done with money raised to date?

12. How to Prepare for Financing
Cash Flow Projections
• Integrate cash flows with business activities
– Link your day to day business activities to your cash flow
– Should segregate fixed & variable cash outflows and those
that are required for sustainment versus growth
• Horizon
– Generally from 3 to 5 years
• Timing
– Consider when service is received & when is payment due
– Consider flexibility in timing/ amounts and plan for
contingencies
• Monitor, keep forecasting on a rolling basis –
quarterly, annually

13. • Ensure that you are creating a clean
ownership record for your patents
• Assign the patents to the business
• Ensure that all
inventors/employees/contractors execute IP
assignments
• Use written employee agreements for
all employees.
• Use confidentiality agreements.
• Use written consulting agreements.
Intellectual Property

14. • Employment/Consulting Agreements
– Term, Compensation, Non-Compete
– Assignment of Intellectual
• Intellectual Property Strategy
– MAKE SURE YOU OWN IT! Investors
will insist the entity own the IP rights!
• Promises to Initial Investors
– Anti-dilution rights
– Percentage ownership promises
– Options
Additional Considerations

15. How We Can Help
• Regional firm with global resources to serve clients
– Business like in our approach
– 12 offices & 240 staff
– Cost structure aligned with entrepreneurs and their businesses
• Extensive experience providing assurance, tax, corporate finance
and advisory services
– Government Incentives – SRED, Digital Media, etc preparation/support
– Corporate Structure
– Accounting advice
– Personal tax planning
– Financial Statement Audits
– Business planning advice
– Cash flow management
– Operational improvements and efficiencies
– Access to contacts
– & much more

16. Q & A
Bryan Haralovich, CPA, CA, CPA (Illinois)
Partner, Welch LLP
bharalovich@welchllp.com
www.welchllp.com
Twitter:@CAHaralovich
http://linkd.in/1ioTtbp
Robert Ford
Partner, Kelly Santini LLP
rford@kellysantini.com
www.kellysantini.com
http://www.linkedin.com/pub/robert-ford/0/2a7/350