how to finance my venture? - session 7

www.solvayentrepreneurs.be

HOW TO FINANCE MY VENTURE? SESSION 7 (out of 10)

ENTREPRENEURIAL FINANCE

This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

Entrepreneurship Course – Session 7 - 2014 © Olivier WITMEUR

•  Why do startups need money?

•  What are the sources of finance?

•  What are their pros and cons?

•  How to choose

•  Overview of the financing sources

•  One word on Entrepreneurial Ecosystems

•  Guide to VC

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Desired Outcomes of the Session


The Entrepreneurial Framework

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ENTREPRENEUR

OPPORTUNITY

RESOURCES

Conviction

Creativity

Communication

CONTEXT

Adaptation

Fits & Gaps

* Adapted from J. Timmons & A. Bidé


OVERVIEW OF THE FINANCING SOURCES FOR NEW VENTURES

#1

4


•  Losses, i.e. Opex > Revenues

•  Investments, i.e.:

–  Hardware: infrastuctures (Capex)

–  Software: IP/R&D, business development (NB: sometimes considered as opex)

•  Working capital: Accounts receivables, inventories, Work in progress…

•  Seasonal effects

•  Security margins i.e. a plan without margins is not a plan

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Typical Financial Requirements / Use of Funds


Typical Cash Curve

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The happy days

The promised land

Death Valley Financial needs

In doubt

CIMITYM


1.  Self-financing / Bootstrapping

2.  Equity

3F: Family, Friends & Fools … or ‘love money’

Crowdfunding

Business Angels (= individuals)

Venture Capital (= professional investors, many types)

Industrial partners

Stock markets

3.  Debts (mainly from banks)

Short term

Long term

4.  Grants

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Four Main Types of Financings


Risk

leve

l

Company maturity

FFF / Crowdfunding

BUSINESS ANGELS

VENTURE CAPITAL

STOCK MARKETS

BANKS

Financing the Entrepreneurial Venture

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GRANTS

Low Low High

High


Losses à Equity

Investment à Debts, leasing, renting (equity at early stage)

Working capital à Debts and equity

Seasonal effects à Credit lines

R&D à Equity and grants

Security margins à Equity and debts

Growth preparation à Equity or self-financing

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Not all financings have the same objectives.


Selection Criteria (Entrepreneur’s Perspective)

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WHO?

Timing+ Difficulty

Deep Pockets @ t1, t2, t3…

Expertise+ Network (Smart money)

Cost (all types) / Expected return

Accepted risk / Collaterals

Hands On / Off

Additional constrains: exit, location….


Rough comparison (many exceptions!)

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3F BA VC Bank Grants

Timing / Difficulty ++ - -- + -

Cost ++ -/-- (Dilution) o ++

Collaterals ++ ? ++ ++ -- ++

Deep pocket -- o ++ ++ +

Involvement in Management No ? Yes No No

Constrains Atmos. Exit Low Location

Expertize / Smart Money -- +/++ - --


ONE WORD ON THE ENTREPRENEURIAL ECOSYSTEM

#2


Supporting opportunity entrepreneurship

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More new ventures, more gazelles …

More entrepreneurs •  Role models, success

stories •  Social norms, culture •  Education •  Social system

More opportunities •  Research •  Regulation •  …

More money •  Tax condition •  VC •  Stock market •  Grants •  Banks •  …

More support •  Public leaders •  Incubators /

infrastructures •  Skilled people •  Advisers •  Incentives •  …


The Entrepreneurship Action Plan is a blueprint for decisive action to unleash Europe's entrepreneurial

potential, to remove existing obstacles and to revolutionise the culture of entrepreneurship in Europe.

Investments in changing the public perception of entrepreneurs, in entrepreneurship education and to

support groups that are underrepresented among entrepreneurs are indispensable if we want to create

enduring change.

Only if a large number of Europeans recognise an entrepreneurial career as a rewarding and attractive option

will entrepreneurial activity in Europe thrive in the long term.

The Entrepreneurship 2020 Action Plan is built on three main pillars:

1.  Entrepreneurial education and training

2.  Creation of an environment where entrepreneurs can flourish and grow, and

3.  Developing role models and reaching out to specific groups whose entrepreneurial potential is not

being tapped to its fullest extent or who are not reached by traditional outreach for business support.

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Entrepreneurship 2020 Action Plan (2012)


A real passion for entrepreneurship education and entrepreneurs.

•  Student entrepreneurs: 2x

•  Full time entrepreneur: once, in a team of 5

•  Coach: 500+ projects over the last 20 years

•  (Advisory) Board member in multiple new ventures

•  Policy making: 2x

•  Director of Solvay Entrepreneurs

•  PhD in entrepreneurship in 2008

•  … never as an investor

My wife (as Colombo), no kids, one dog (Vicky).

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Olivier Witmeur (Belgian, 46)


Solvay entrepreneurs is the entrepreneurship center of the Université Libre de Bruxelles. We support entrepreneurs through the development of their venture, from an idea to a successful and sustainable business.

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Solvay Entrepreneurs


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20 2014%©%Olivier%Witmeur

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