where to go when funders say no! final pdf

Prof. Sean Wise, www.SeanWise.com @seanwise Prof. Sean Wise, www.SeanWise.com @seanwise

Where to Go when:

Funders say no (and the dough don’t flow)

Prof. Sean Wise, www.SeanWise.com @seanwise

http://www.seanwise.com/




A bit about me



Disclaimer

The views and opinions expressed in this webinar are those of the

authors and do not necessarily reflect the official policy or position

of STARTUP AMERICA, Ryerson University, or any agency of the

U.S. government.

The information contained herein is for informational purposes only

and may not be relied upon as legal advice. It is subject to change

and no representations are made by expressing such.

The information contained herein may be subject to local laws,

regulations and policy. Viewers are encouraged to obtain

independent legal advice before proceeding.



Definitions



SME vs. Startup

SMEs

VS

Startups

Number of Employees

Low (25 or less) Low (25 or less)

Age Less than 5 years Less than 5 years

Goals Sustainable Employment Steady Growth

Change the World $100M or Bust

Indicia Family Owned The J curve

Service Innovation & IP

Local global

e.g. Dry Cleaner Mobile Data Application

*** This discussion only applies to Startups



Owner vs. Founder

Different Goals Different Mindset



VC vs. Angel

VCs

VS

Angels

Definition Professional Fund Managers who invest OPM on 5-7 year cycle

HNWI who invest their own money

Size Dependant on Fund Structure

Dependant on Mood

Often incorrectly considered

Proof of Concept Smart Money with a Halo Effect

Other than money…

Halo effect, Network, Standardization

Experience, Mentorship

Deal terms Bigger, more complicated based on

portfolio approach

Smaller, faster, more founder like



Why Funders say no!

About You • Not enough Proof of

Concept – Management Risk

are these the guys? – Magic Risk is it 10x

better? – Market Risk will

anyone care? • Hard to work with • Terms don’t fit

Not About You

• Doesn’t fit with last deal

• Doesn’t fit with declared approach

• Not hot space



Where to Go when: Funders say no

(and the dough don’t flow)



Changes in the Ecosystem

• Cost to Launch:

– 1998: $5,000,000

– 2008: $500,000

– 2012: $50,000

• Recession since 2008

• Two Decades of Growth in High Tech

• The Internet democratizes everything

• Funds now larger but fewer



Option #1 Funding from Future Clients

• Funding by Users, Clients, Advertisers

• Funding by Revenue

• Funding by Smart Money

• Often labelled Bootstrapping



Crowdfunding

• This week new law passed?



Option #2 Funding from Incubators

• 5-10 startups per cohort

• Mentorship

• Local / Resident

• $25,000 seed funds

• 6 months to DEMO day



Option #3 Funding from Friends & Family



Spectrum of Financing

High

Low

Seed Start-Up Early Growth Established

Founder, friends

and family

Business Angels

Venture Capitalists

Commercial banks

Equity Markets

Junior ================> Senior

Corporate VC

seed/early stage/mezz

Stage of

Business

Level of

Investment

Risk

Assumed

by Investor



Funding from Friends & Family

• Rollup individuals into a hold corp

• Use a Shareholders’ Agreement

• Maximize Tax Credits and Minimize Cap Gains

• Consider not setting Valuation



Other Options • Startup Weekend

• Grants & Tax Credits

• Economic Stimulus

• Sell Services : Build Products



Where to go when the Funders say no?

1. Future Customers and Crowdfunding

2. Accelerators & Incubators

3. Friends & Family



Great Resources



FRIDAYS @ 8



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Enter: PROFIT



Q and A

More Questions? email me:

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where to go when funders say no! final pdf

Economy & Finance