funding for innovative startups - part 1 of 5
TRANSCRIPT
SESSION ONE: FUNDING TERMINOLOGY & BUSINESS PLAN
Benno Groosman MScBA – www.groosman.info – Athens, February 17 – Orange Grove
MASTERCLASS FUNDING FOR INNOVATIVE STARTUPSBenno Groosman MScBA – www.groosman.info – Athens, February 16 – Orange Grove
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.
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FUNDING MASTERCLASS
IN THIS PRESENTATION
DefinitionsThe playersMisconceptionsFunding stagesPreparationTiming
DEFINITION: STARTUP
“A startup is a human institution designed to
create a new product or service underconditions of extreme uncertainty.”
Eric Ries, The Lean Startup
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DEFINITION: INNOVATION
Doing things different and in a better way
to get better resultsby using technology, improved
processes and/or new relationships.www.groosman.info
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DEFINITION: FUNDING
Providing financial resources to finance a startup, program, or project.
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WHAT FUNDING IS NOT…
… a startup’s ultimate goal.
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WHAT FUNDING IS NOT…
… a guarantee for success.
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WHAT FUNDING IS NOT…
… replacing the need for customers and revenues.
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WHAT FUNDING IS NOT…
… only business angels and venture capitalists.
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THE PLAYERS: THE ENTREPRENEUR
Somebody with vision, leadership, energy and networking skills, who breaks the system, manages risks
and combines resourcesto bring innovative solutions to the
market.www.groosman.info
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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”.
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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.
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THE PLAYERS: VENTURE CAPITAL FUNDFund 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.
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THE PLAYERS: VENTURE CAPITAL FUNDFunds typically have a 5-7 year investment range and do multiple investments in that time. €500k and (a lot) more per investment.
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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.i
nfo
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THE PLAYERS: … AND MANY MORE
Investing pension funds;Corporate venture capital;Government seed and growth capital;Equity funds (€10M and up);Banks;Customers!
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THE FUNDING STAGES
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THE FUNDING STAGES
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THE FUNDING STAGES
Do you know which stage your startup is in?
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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
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SORRY, YOU’RE PROBABLY NOT READY…
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DO YOU REALLY WANT TO 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 ABLE TO MAKE A BETTER DEAL.www.groosman.info
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DO YOU REALLY WANT TO RAISE MONEY?
Think now about your alternative (financial) sources.
WHAT YOU HAVE TO PREPARE
Elevator pitchPitch deckBusiness planGo to market strategyExit strategyWhat do you want to give in return for the funding?
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WHAT YOU HAVE TO 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.
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WHAT YOU HAVE TO PREPARE
Reserve time to finish your business plan, make it a priority!
HAVE YOUR 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-49179966And a Word template you can find here:http://www.groosman.info/#!funding/cbvu
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WHEN TO 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!
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NEXT SESSION
Defining milestones;Determining funding need;Making an investment table.
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SNEAK PREVIEW NEXT SESSION
Ask the money that you really need, not too little,and about 10-20% extra for unforeseen expenses.
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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.
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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.
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FOLLOW ME
Benno Groosman MScBAExperienced startup entrepreneurwww.groosman.info
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