bootstraping and financing (founders institute - 16.8.16)
TRANSCRIPT
TONIGHT’S TOPICS
➤ What are the various ways to capitalize your company in the very beginning?
➤ How do you ask friends and family for money to support you?
➤ What are the advantages and disadvantages of bootstrapping?
➤ What do local angel investors require before making an investment?
➤ How do you develop a target list of appropriate angel investors?
➤ What materials are required to raise angel investment?
➤ What milestones should you look to achieve next?
➤ How do you set your six month and twelve month objectives in the very beginning?
➤ How should you think about selling the business or exiting the business?
BEGINNING BALANCE CASH FLOW
MonthProduct
ReleasedNo. Products
Sold Profit MarginMonthly
ExpensesTotal Accrued
ExpensesMonthly Revenue
Total Accrued Revenue
Monthly Difference Total Difference Cash
1-Dec-15 No Product - 18 825$ 825$ 191$ 191$ (634)$ (5,634)$ 1-Jan-16 No Product - 18 334$ 1,159$ 635$ 826$ 301$ (5,333)$ 1-Feb-16 No Product - 18 1,230$ 2,389$ 1,258$ 2,084$ 28$ (5,306)$ 1-Mar-16 No Product - 18 2,783$ 5,172$ 131$ 2,215$ (2,652)$ (7,957)$ 7,500$ 1-Apr-16 No Product - 18 837$ 6,009$ 200$ 2,415$ (637)$ (8,594)$ 4,848$
1-May-16 No Product - 18 197$ 6,206$ 1,519$ 3,934$ 1,322$ (7,272)$ 4,212$ 1-Jun-16 No Product - 18 238$ 6,444$ -$ 3,934$ (238)$ (7,510)$ 5,533$ 1-Jul-16 No Product - 18 1,700$ 8,144$ -$ 3,934$ (1,700)$ (9,210)$ 5,295$
1-Aug-16 Product 1 20 18 1,700$ 9,844$ 360$ 4,294$ (1,340)$ (10,550)$ 3,595$ 1-Sep-16 Product 1 40 18 1,700$ 11,544$ 720$ 5,014$ (980)$ (11,530)$ 2,255$ 1-Oct-16 Product 1 60 19 1,700$ 13,244$ 1,140$ 6,154$ (560)$ (12,090)$ 1,275$ 1-Nov-16 Product 1 80 19 1,700$ 14,944$ 1,520$ 7,674$ (180)$ (12,270)$ 715$ 1-Dec-16 Product 1 100 20 1,800$ 16,744$ 2,000$ 9,674$ 200$ (12,070)$ 535$ 1-Jan-17 Product 1 100 20 1,800$ 18,544$ 2,000$ 11,674$ 200$ (11,870)$ 735$ 1-Feb-17 Product 1 100 20 1,800$ 20,344$ 2,000$ 13,674$ 200$ (11,670)$ 935$ 1-Mar-17 Product 1 120 20 1,800$ 22,144$ 2,400$ 16,074$ 600$ (11,070)$ 1,135$ 1-Apr-17 Product 2 120 20 1,800$ 23,944$ 2,400$ 18,474$ 600$ (10,470)$ 1,735$
1-May-17 Product 2 120 20 1,800$ 25,744$ 2,400$ 20,874$ 600$ (9,870)$ 2,335$ 1-Jun-17 Product 2 120 20 2,050$ 27,794$ 2,400$ 23,274$ 350$ (9,520)$ 2,935$ 1-Jul-17 Product 2 120 20 2,050$ 29,844$ 2,400$ 25,674$ 350$ (9,170)$ 3,285$
1-Aug-17 Product 2 130 20 2,050$ 31,894$ 2,600$ 28,274$ 550$ (8,620)$ 3,635$ 1-Sep-17 Product 2 130 20 2,050$ 33,944$ 2,600$ 30,874$ 550$ (8,070)$ 4,185$ 1-Oct-17 Product 2 130 20 2,050$ 35,994$ 2,600$ 33,474$ 550$ (7,520)$ 4,735$ 1-Nov-17 Product 3 150 20 2,063$ 38,057$ 3,000$ 36,474$ 938$ (6,583)$ 5,285$ 1-Dec-17 Product 3 150 20 2,063$ 40,119$ 3,000$ 39,474$ 938$ (5,645)$ 6,223$ 1-Jan-18 Product 3 150 20 2,063$ 42,182$ 3,000$ 42,474$ 938$ (4,708)$ 7,160$ 1-Feb-18 Product 3 150 20 2,063$ 44,244$ 3,000$ 45,474$ 938$ (3,770)$ 8,098$ 1-Mar-18 Product 3 170 20 2,063$ 46,307$ 3,400$ 48,874$ 1,338$ (2,433)$ 9,035$ 1-Apr-18 Product 3 170 20 2,063$ 48,369$ 3,400$ 52,274$ 1,338$ (1,095)$ 10,373$
1-May-18 Product 3 170 20 2,063$ 50,432$ 3,400$ 55,674$ 1,338$ 242$ 11,710$ 1-Jun-18 Product 4 200 20 2,063$ 52,494$ 4,000$ 59,674$ 1,938$ 2,180$ 13,048$ 1-Jul-18 Product 4 200 20 2,063$ 54,557$ 4,000$ 63,674$ 1,938$ 4,117$ 14,985$
1-Aug-18 Product 4 200 20 2,063$ 56,619$ 4,000$ 67,674$ 1,938$ 6,055$ 16,923$ 1-Sep-18 Product 4 200 20 2,063$ 58,682$ 4,000$ 71,674$ 1,938$ 7,992$ 18,860$ 1-Oct-18 Product 4 200 20 2,063$ 60,744$ 4,000$ 75,674$ 1,938$ 9,930$ 20,798$ 1-Nov-18 Product 4 200 20 2,063$ 62,807$ 4,000$ 79,674$ 1,938$ 11,867$ 22,735$
WAYS TO CAPITALIZE YOUR BUSINESS
• Personal Capital • Debt-Based Investment • Equity-Based Investment
HOW TO APPROACH FRIENDS AND FAMILY FOR FUNDING
•Over 50% of entrepreneurs use “friends and family” funding
•“Yes” vs. Check
•Be Intentional
CHOOSE YOUR INVESTOR
•Knowledge and Experience
•Equal Expectations
•Connections
DEMONSTRATE PASSION AND DUE DILIGENCE
•Your Investment
•Customer Development Results
•MVP
•Business Plan or Model
•Professionalism
KNOW HOW MUCH YOU NEED
• Initial Capital
•Working Capital
•Home Capital
ASK FOR THE RIGHT MONEY
•Debt
•Equity
•Convertible Note
•Free Usage
•Donations
MAKE A PLAN
•Payment Plan • Grace Period
•Official Agreement
•“What If?”
•Don’t take more than they can afford to lose
BOOTSTRAP: IS THIS
REALLY A GOOD IDEA?
BOOTSTRAPPING ADVANTAGES
• Freedom • Ownership • Focus
BOOTSTRAPPING DISADVANTAGES
• Slow • Limited Opportunities • Personal Risk
WHAT DO ANGELS WANT TO SEE?
1. DEFINE A SPECIFIC TARGET CUSTOMER WITH A SPECIFIC PROBLEM
2. PROVE THE TARGET CUSTOMER IS WILLING TO PAY FOR YOUR SOLUTION
3. FORECAST A CLEAR ROI OR EXIT STRATEGY
HUMILITY
WHAT DO ANGELS WANT TO SEE?
•Honesty
•Definite target segment with specific problem
•Proof of willingness to pay for product/service
•Clear forecast for ROI or exit strategy
SELECT YOUR INVESTOR
Donors
Crowdfunding
Frien
ds and Fa
mily
Banks /
Micr
ofinan
ce
Impac
t Inve
stors
Angel Inve
stors
State /
Corpora
te Prog
rams
Venture
Capita
l
Intentions
Financial Expectations
Social Expectations
Risk
Ownership
Investment Stage
HOW MUCH MONEY DO YOU NEED?
HOW MUCH OWNERSHIP DO YOU KEEP?
HOW QUICKLY DO YOU WANT TO GROW?
HOW LONG WILL YOU BE INVOLVED?
HOW TO FIND AN ANGEL
•AngelLabs
•Startup Grind
•Make a Meeting Happen
MATERIALS TO PREPARE
•Pitch Deck (10-15 slides)
•Written Strategy
•Tangible and Tested MVP
•Proof of Market Validation
MILESTONES
•Cash Flow Positive
•Certification or Authorization
• IP Protection
•Customer Acquisition or Market Share
6-MONTH AND 12-MONTH OBJECTIVES
•Financial Needs
•Customer Validation Needs
•Technical Needs
•Legal Needs
•Publicity Needs
HOW BIG IS YOUR CALLING?
THINGS TO KNOW
• Every Investor Needs An Exit
• Know Your Calling
