powerpoint presentation€¦ · 03/05/2016 · individual angels formal angel groups act like...
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Navigating the Path to Funding
Two key axioms
Axiom 1:
Get the most MPS (tranching)
Stage: Pre-funding
Needs: $3,000,0000 in total Funding
Tranching Illustration
Founder: 100% ownership
1 Million shares
1 Million dollar valuation
Company raises $3,000,000 in one round at a $1,000,000 pre-money valuation (i.e., $1 per share)
Tranching Illustration
Founder:
25%
Investors:
75%
Stockholder Investment Price per
ShareShares Ownership
Founder 1,000,000 25%
Investors 3,000,000 $1 3,000,000 75%
Company raises $3,000,000 in two rounds
• $1,000,000 in the first round
• Uses first round to increase valuation to $4,000,000
• Company then raises the remaining $2,000,000
Tranching Illustration
Founder:
25%
Round 1 Investors:
33%
Round 2 Investors:
33%
Stockholder InvestmentPrice per
ShareShares Ownership
Founder 1,000,000 33.33%
Round One Investors $1,000,000 $1 1,000,000 33.33%
Round Two Investors $2,000,000 $2 1,000,000 33.33%
Axiom 2:
Don’t get caught in the “funding gap”
Angel Financing Process
The angel financing process depends on the audience:
• Entrepreneur controls terms and must stick to them
• Entrepreneur has one shot at the investor
• Entrepreneur gets better terms
Individual angels
Formal angel groups
Act like venture capital firms
Raising money from Individual angels is like selling your home
You need to put a price on your home
You generally can’t negotiate
with the investor
Entrepreneur Valuation
Investor Valuation
Unlike selling your home, it’s difficult to lower your valuation
How do you determine
Pre-Money Valuation
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Usage expanded beyond bridge financing
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