(c) 2021 Davender Gupta All rights reserved Principles about raising investment capital in the Quebec and Canadian context.

1. Raising Capital:
Fueling Your Growth
Davender Gupta, MS, MBA
TheScaleupProject.com
April 2021
©2021 Davender Gupta. All rights reserved. davender@davender.com

2. Why Raise Capital?
• Money for Execution
• Need to initially invest before revenue from operations is sufficient
• Leverage other people’s money (OPM)
• Dilute risk among investment partners
• Get commitment from key partners and lead customers
• Access expertise
• Give the venture credibility
• Attract the Key Resources
2
©2021 Davender Gupta. All rights reserved.

3. Types of
capital
Non-dilutive (Liability)
• Loans (personal guarantees,
guaranteed by inventory)
• Government grants and contributions
• Tax Credits
Dilutive (Equity)
• « Family and Friends »
• Convertible Notes
• Business Angels
• Venture Capital
• Family Office
©2021 Davender Gupta. All rights reserved.

4. Stages of
Raising
Capital
Pre-Seed
Developing and validating the idea
Seed
Develop MVP, test the market
Pre-Series A
Initial commercialization to first level
of breakeven
Series A
Commercialization
Series B
Growth
©2021 Davender Gupta. All rights reserved.

5. SCALING
Are you the go-to
leader in your market?
EFFICIENCY
Are you organized to
deliver your solution
effectively and
profitably?
EXECUTION
MATURITY
VALIDATION
Does the market want
your offer?
PRODUCT-MARKET FIT
DEFINITION
What important problem
do you solve?
PROBLEM-SOLUTION FIT
IDEA
What is your idea?
IDEA GENERATION
Stages of Growth
5
Davender
Gupta
©2021 Davender Gupta. All rights reserved.

6. Financing Chain
DEFINITION VALIDATION EFFICIENCY SCALING A B C BEYOND
PRE-SEED MEZZANINE
REVENUE FROM OPERATIONS
SELF-FINANCING
FRIENDS AND FAMILY
BUSINESS ANGELS (CONVERTIBLE NOTES)
PRIVATE PARTNERS
PERSONALLY-SECURED BANK LOAN
GRANTS AND CONTRIBUTIONS (PUBLIC)
VENTURE CAPITAL (PRIVATE)
ADVANCES FROM FUTURE CLIENTS (PRE-SALES)
CROWDFUNDING (PRODUCT PRE-SALES)
EQUITY CROWDFUNDING
INSTITUTIONAL DEBT (BANKS)
TAX CREDITS (SR&ED, MEDIA)
ACCELERATION GROWTH MATURITY
Revenue Streams $
+
-
SERIES
SEED PRE-SERIES A
IDEATION
©2021 Davender Gupta. All rights reserved.

7. Raising
Equity
Canada – Governed by the Securities
Authority of each province
• Québec: Autorité des marchés financiers (AMF)
US – Governed by the Securities and
Exchange Commission (SEC)
• Federal authority
Requirement to file a Prospectus before
approaching investors
• Detailed business plan, full disclosure of
financials, risk statements
©2021 Davender Gupta. All rights reserved.

8. Prospectus Exemptions
• Rule 45-106
• Personal connection (family or close friend, business associates)
• Accredited Investor
• Crowdfunding
• “Private Issuer” (less than 50 investors)
If one of these categories, then file an “offering memorandum” (simplified
prospectus)
• All investors are declared to authorities
• Autorité des marches financiers
• Registre des entreprises
©2021 Davender Gupta. All rights reserved.

9. Qualified or Accredited Investor
To qualify as an eligible investor, you must have:
• Net income before taxes of more than $200,000 in each of the two most recent calendar
years and expected net income of more than $200,000 in the current calendar year.
• Net income before taxes combined with a spouse of more than $300,000 in each of the two
most recent calendar years and expected combined net income of more than $300,000 in the
current calendar year.
• Financial assets, alone or with a spouse, of at least $1 million before taxes but net of
related liabilities. Financial assets include cash and bank deposits but not the value of a
house.
• Net assets, alone or with a spouse of at least $5 million. Net assets generally include all of
your assets after subtracting your debt.
©2021 Davender Gupta. All rights reserved.

10. Crowdfunding
The crowdfunding prospectus exemption allows
Canadian companies, particularly start-ups and
businesses in early stages of development, to sell
securities online though a single portal that is
registered with the Autorité des marches financiers.
Anyone can buy securities under this exemption but
there are limits:
• Anyone can invest up to $2,500 per investment but
not more than $10,000 in total for all investments
under the crowdfunding exemption in a calendar
year.
• An accredited investor can invest up to $25,000 per
investment but not more than $50,000 in total in a
calendar year.
• Certain very large investors, such as banks and
governments, can invest any amount.
©2021 Davender Gupta. All rights reserved.

11. Consequences
of Raising
Capital
« Smaller slice of larger pie »
Dilution
Need to create a Board of Directors
Control
Dilutes your share of the exit sale
Founders usually get paid last
Exit Strategy
©2021 Davender Gupta. All rights reserved.

12. Exit Strategy
How will you return the
investment to the investors?
• Raise a larger round
• Sell the business
• Continue to grow and
generate dividends for
investors
• Go IPO (Public company)
©2021 Davender Gupta. All rights reserved.

13. Should you raise capital?
• Raising capital is an important
validation
• Raising capital is not a substitute for
customer revenue
• Consider the person before the money
• Have a long-term plan
• Be honest and transparent
• It always takes longer than you plan
• Prepare for lots of “no”
©2021 Davender Gupta. All rights reserved.

14. There's nothing wrong with raising
venture capital. Many startups are
ambitious and are able to deploy large
amounts of capital. What
differentiates them is their
disciplined approach to determining
when to spend money: after the
fundamental elements of the business
model have been empirically
validated.
- Eric Ries
©2021 Davender Gupta. All rights reserved.

15. 15
Davender Gupta, MS, MBA
Venture Strategist
linkedin.com/in/coachdavender
slideshare.net/coachdavender
twitter.com/coachdavender
davender@davender.com
+1-514-448-1894
©2021 Davender Gupta. All rights reserved.