Startups raise money primarily for growth. They use funds to address competitive threats, protect intellectual property, and achieve a positive customer acquisition cost to lifetime value ratio, especially for subscription-based businesses. Money is raised through various sources like equity, convertible debt, traditional loans, revenue-based financing, grants and competitions, though each option has pros and cons related to dilution and control. The goal is to select options that fuel growth without an unacceptable loss of ownership.

1. WHY DO STARTUPS
RAISE MONEY?
Troy Vosseller

2. 2
#1 GOAL:
GROWTH
WHY DO STARTUPS RAISE MONEY?

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COMPETITIVE LANDSCAPE
INTELLECTUAL PROPERTY
CAC < LTV (SUBSCRIPTION/SAAS)
WHY DO STARTUPS RAISE MONEY?

4. 4
COMPETITIVE LANDSCAPE
WHY DO STARTUPS RAISE MONEY?

5. “”
5
Your margin is my
opportunity.
JEFF BEZOS

6. 6
INTELLECTUAL PROPERTY
WHY DO STARTUPS RAISE MONEY?

7. 7
CAC < LTV (SUBSCRIPTION/SAAS)
WHY DO STARTUPS RAISE MONEY?

8. http://www.forentrepreneurs.com/saastr/

9. http://www.forentrepreneurs.com/saastr/

10. http://www.forentrepreneurs.com/saastr/

11. http://www.forentrepreneurs.com/saastr/

12. 12
CAC*3 < LTV
CAC: Customer Acquisition Cost
LTV: Lifetime Value
WHY DO STARTUPS RAISE MONEY?

13. 13
PAYBACK PERIOD < 12 MONTHS
Payback Period: Length of time to recover CAC
WHY DO STARTUPS RAISE MONEY?

14. PITCHING 14
OFFER
I promise to give you a dollar in 12 months…
…IF you give me a quarter today.

15. 12 Months

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18. WHY DO STARTUPS RAISE MONEY? 18
SOURCES OF CAPITAL
Equity
Angels, Angels Networks, Seed Funds, VCs, Family
Offices, Corporate VCs, Crowdfunding
Pros: Available at pre-product/pre-revenue stage,
adding outside expertise
Cons: Giving up equity, loss of control

19. 19WHY DO STARTUPS RAISE MONEY?
Amazon
EQUITY

20. WHY DO STARTUPS RAISE MONEY? 20
SOURCES OF CAPITAL
Convertible Debt
Convertible Notes, SAFEs
Pros: Available at pre-product/pre-revenue stage,
low transaction fees
Cons: Giving up equity, loss of control, unclear dilution effects

21. 21
CONVERTIBLE DEBT
WHY DO STARTUPS RAISE MONEY?
• The Ultimate Guide to Understanding Convertible Debt
• The Truth About Convertible Debt at Startups and the Hidden Terms
You Didn't Understand
• Announcing the SAFE - A Replacement for Convertible Notes
• Convertible and SAFE Notes

22. WHY DO STARTUPS RAISE MONEY? 22
SOURCES OF CAPITAL
Traditional Loans
Banks, P2P Lending, Venture Debt, SBA Loans
Pros: No dilution
Cons: Require traction, liquidation preference, personal guarantee

23. 23
TRADITIONAL LOANS
WHY DO STARTUPS RAISE MONEY?
• Prosper
• Lending Club
• Kabbage
• SBA Loans
• Doyenne Group
• Venture Debt: Silicon Valley Bank, Wintrust, Square 1 Bank
• Community/Economic Development Organizations:
• Wisconsin Economic Development Corporation
• Madison Development Corporation
• Milwaukee Economic Development Corporation
• WWBIC

24. WHY DO STARTUPS RAISE MONEY? 24
SOURCES OF CAPITAL
Revenue-based Financing
Lighter Capital
Pros: No dilution
Cons: Require traction, liquidation preference

25. WHY DO STARTUPS RAISE MONEY? 25
SOURCES OF CAPITAL
PO Financing / Factoring
Turn your receivables into cash
Pros: No dilution
Cons: Require receivables, leaving money on the table

26. WHY DO STARTUPS RAISE MONEY? 26
SOURCES OF CAPITAL
Credit Cards / Student Loans
Using your personal credit
Pros: Availability
Cons: High interest, personal guarantee

27. WHY DO STARTUPS RAISE MONEY? 27
SOURCES OF CAPITAL
Grants / Prizes / Competitions
Pitch Contests, SBIR/STTR
Pros: No dilution
Cons: Lack of accountability

28. 28
GRANTS / PRIZES / COMPETITIONS
WHY DO STARTUPS RAISE MONEY?
• UW-Extension Center for Technology Commercialization
• Governor’s Business Plan Contest
• INSITE Entrepreneurship Guide (UW-Madison)
• Wisconsin School of Business Business Plan Competition
• UWM La Macchia New Venture Business Plan Competition
• UW-Whitewater Warhark Business Plan Competition
• Transcend Madison Competition
• UW-Madison Computer Sciences NEST Competition

29. WHY DO STARTUPS RAISE MONEY? 29
SOURCES OF CAPITAL
Cash Flow
Profit!
Pros: No dilution
Cons: May not be sufficient to fuel high growth

30. Troy Vosseller | troy@gener8tor.com | gener8tor.com