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Funding Options

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The document discusses different types of funding options for companies based on their stage of growth and business model. It identifies the main categories as normal growth companies, high growth companies, extreme high growth companies, and social venture companies. Each category is best suited for different sources of funding, from friends and family for early stage, to angels, micro VCs, and larger VCs for later stages of high growth companies seeking larger investments. The types of funding include both equity-based options like stock, as well as non-dilutive options like debt, customers, and grants. The right funding source depends on balancing the size of investment needed with the level of risk at each stage of a company's development.

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Funding  Op*ons:     Find  Your  Path  to  Funding September  24,  2015  

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Today’s  Panel Jess  McLear:  Launchpad  Venture  Group   Pete  McDonald:  Silicon  Valley  Bank   Kathryn  Carlson:  Buca  Boot   Melissa  Withers:  BetaSpring   Eric  Ahlgren:  Bessemer  Venture  Partners   Christopher  Mirabile:  Launchpad  Venture  Group  

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What  Type  of  Company  Are  You?     Before  you  can  get  funded,     you  have  to  know     where  to  look     Before  you  know  where  to  look,     you  need  to  understand    what  you  are  

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What  Type  of  Company  Are  You? • The  type  of  company  you  have  will  shape  the  type   of  funding  available  to  you   •  Consumer  mobile  social  so8ware  company  vs   Chemistry-­‐based  life  science  technology  product  vs  Equipment  for   emergency  deployment  in  disaster  zones   • Changes  in  business  model  can  change  the  funding   required   •  IP  licensing  of  new  baFery  technology  to  exisHng  players  vs   build  a  baFery  distribuHon  company  with  outsource  manufacturing  or   build  a  manufacturing  company  with,  or  without  distribuHon  

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NORMAL  GROWTH   COMPANY   HIGH   GROWTH   COMPANY   EXTREME   HIGH  GROWTH   COMPANY   SOCIAL  VENTURE   COMPANY   •  Includes  all   service   businesses   •  ExploiLng  a  local   market  need   •  Team  has  ‘great   jobs’   •  Growth  by   adding   resources  one   by  one   •  Exit  will  be   based  on  value   of  cash  flow   (mature  biz.)   •  Growth profile ultra-scalable •  Team focus is exit •  Revenue $40M+ with lots of room for growth (5 yr.) •  Based on $20M+ investment •  Exit targeted to IPO or by ‘large’ M&A event •  Goal  is  to  fulfill   a  social  need   •  Has  mission   orientaLon   •  Team  needs  to   support  mission   •  Growth  profile   oWen  one   resource  at  a   Lme   •  Exit  …much   harder  to  find   fit     •  Company can grow fast (on-line) or has a scalable system •  Team often motivated by exit •  $7-10M revenue in 4-5 yrs & market size allows significant additional growth •  Capital efficient total investment $2-4M •  Exit by M&A What  Type  of  Company  Are  You?

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What  Kind  of  Funding NORMAL  GROWTH   COMPANY   HIGH   GROWTH   COMPANY   EXTREME   HIGH  GROWTH   COMPANY   SOCIAL  VENTURE   COMPANY   •  Friends, family, founders •  Debt, Bank, and other •  (Future) Crowd funding (portal style) Early on •  Accelerators •  Individual Angels •  Micro Cap VCs •  Seed from VC Later stages •  Venture Funds •  Strategic VCs •  Angel Syndication •  Friends family, founders •  Charity$$ •  Crowd funding (Kickstarter, etc) •  Impact Angels •  (Future) Crowd funding (portal style) •  Angels •  Angel Groups •  Angel Group Syndication •  Angel List •  Micro-cap Funds •  (Future) Crowd funding (portal style) •  Increasingly Strategic Corporate VCs

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Capital  Sources:  Size  &  Cost Investment  Size   TradiLonal  VC   Micro  VC   Equipment  Financing   Angel  Groups   Angels   Equity  Crowdfunding   Angel  List,  Circle  Up,  etc   Corporate  /  Strategic   Venture   Customers   Jobs  Bill  Portals     Vendors   Founder   Friends  &  Family   Crowdfunding:  etc.   Grants   Venture  Debt   Bank   Loans   Personal   Loans   Private  Equity   B’Plan  CompeLLon      Accelerators   Investment   “Cost”  

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Capital  Sources DiluLve   Non-­‐DiluLve     Equity     •  ConverLble  Note   •  Stock   •  Friends,  Family   Investors   •  Common  vs   Preferred     Revenue   Debt   •  Bank   •  Friends/Family   •  Non-­‐converLble  note     Customer/Vendor/Partner   •  Prepaid  product  purchases  from  customers   •  Pay  later  services  from  vendors   •  Non-­‐recoverable  engineering  costs  from   partners   Grants   •  SBIR   •  Business  compeLLons  

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Capital  Sources Size  of  Capital   Raise:    High   Time   High  Risk   Low  Risk   Crystallize   Ideas   Demonstrate   Product   Early  Scaling   Growth   Sustained   Growth   Market  Entry     Size  of  Capital   Raise:Low   As  you  develop  your  company,  you   reduce  risk  for  your  financial  partners  

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Capital  Sources:  Equity 10   Stage   Crystallize  Idea   and  Early   DemonstraLon   Demonstrate   Product  &   Market  Interest   Market  Entry   and  Early   Growth   Early  Scaling   Growth   Repeatable   Growth   Capital   Source   Founders,   Friends,  Family,   Grants,   Kickstarter,  etc.   Accelerators,   Individual   Angels,  many   others  now   “exploring”   Angel  Groups,   Angel  Group   SyndicaLon,   Micro-­‐Cap   Funds   VCs,  Angel   Group   SyndicaLon,   Micro-­‐Cap   Funds   VCs   Investment   $25K  -­‐  $100K   $100K  -­‐  $500K   $500K  -­‐  $1M   $5M  –  as   needed   as  needed   These  2  need  sophisLcated   growth  plans     This  is  the  stage   where  advice   can  make  you   eligible  for   outside  funding   later   Accelerators   and  a  few   individual   angels  play   here  …  unless  it   is  a  big  idea     This  is  where   Angel   Groups  do   most  1st   investments… .    

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Equity:  VC  vs  Angel VC  Funds   •  Invest  other  people’s  money  (pension  funds,  …)   •  Have  mulL-­‐million  $  funds  they  need  to  put  to  work   •  Invest  big  and  must  get  big  returns  for  their  investors   •  7+  year  outlook  for  exit  returns  (10-­‐year  funds)     Angels   •  Invest  their  own  money     •  MoLvated  to  help  entrepreneurs,  stay  engaged   •  But  Return  on  Investment  is  sLll  the  controlling  metric   •  Likes  big  returns  but  will  oWen  be  happy  with  more  modest  returns  in  a   shorter  amount  of  Lme3-­‐5  year  outlook  on  investments  unless  VCs  get   involved  

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Equity:  VC  vs  Angel VCs   •  $48B  in  2014,~  4,000  investments   •  1/2  in  California  alone   Angels   •  $23B  in  2013,  300,000  investors,  ~  71,000  investments   •  Types  of  angels   •  Individuals   •  Organized:    Funds:  16%;    Network:  63%      (avg  10  deals  /  year)   •  AngelList   •  Informal  networks  &  one-­‐Lme-­‐investors   •  Family  offices   •  Mostly  invest  locally   Angel  Syndicates  (relaLvely  new)   •  Individual  angels,  or  several  angel  groups  invesLng  as  a  unit   •  AngelList  syndicates   •  VC-­‐backed  syndicates  

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Debt  Capital Debt  Capital   •  Funding  based  on  a  set  schedule  of  principal  and  interest  payments  that   provide  a  fixed  return  for  the  lender.   •  Availability  may  be  based  on  asset  value  or  cash  flow  or  personal  guarantee.   •  MUST  be  paid  back.  Not  “speculaLve”  cash.   Sources:   •  Personal  Loans  –  Friends/Family   •  Bank  Loans   •  SBA  Loans   •  Expect  debt  classes  from  Jobs  Bill  crowd  funding  portals   •  Credit  Cards   •  Venture  Debt  (usually  linked  to  equity  &  later  stage)  

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Alternate  Sources Crowd  Funding   •  Kickstarter,  Indiego-­‐go   •  Usually  associated  with  “product”  companies   •  Can  come  with  drawbacks   Accelerators   •  Many  incubators  across  the  country   •  May  focus  on  specific  types  eg.  LearnLaunch  for  EdTech   •  Many  different  models   •  Non-­‐profit,  equity  stake,  revenue,  loan   •  Can  be  very  helpful  but  be  wary  of  being  of  the  “accelerator  circuit”   too  long  

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Non-­‐Dilu*ve  Funding SBIR  +  STTR  =  3%  -­‐  3.6%  of  federal  R&D  Budget     Best  for  research  …  need  other  commercial  $$   Pros:     • It  is  a  contract/grant  –  non  diluLve   Cons:   • Long  SolicitaLon  Process   • March-­‐in  Rights     • Work  with  universiLes  for  experLse   • Best  to  incorporate  (but  more  acceptance  of  LLCs)   • AccounLng  systems  must  be  compliant  with  the   government   • Very  compeLLve  in  some  agencies    

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Conclusion •  Educate  yourself  about  all  of  your  funding  opLons   •  hups://www.sbir.gov     •  hup://nvca.org       •  hup://www.angelcapitalassociaLon.org     •  hup://www.thecapitalnetwork.org   •  Non-­‐diluLve  funding  is  always  great  but  not  always  the  easiest  to  get   •  It’s  all  about  the  numbers  for  equity  investors   •  Network,  Network,  Network   •  hup://www.greenhornconnect.com  

More Related Content

Funding Options

  • 1. Funding  Op*ons:     Find  Your  Path  to  Funding September  24,  2015  
  • 2. Today’s  Panel Jess  McLear:  Launchpad  Venture  Group   Pete  McDonald:  Silicon  Valley  Bank   Kathryn  Carlson:  Buca  Boot   Melissa  Withers:  BetaSpring   Eric  Ahlgren:  Bessemer  Venture  Partners   Christopher  Mirabile:  Launchpad  Venture  Group  
  • 3. What  Type  of  Company  Are  You?     Before  you  can  get  funded,     you  have  to  know     where  to  look     Before  you  know  where  to  look,     you  need  to  understand    what  you  are  
  • 4. What  Type  of  Company  Are  You? • The  type  of  company  you  have  will  shape  the  type   of  funding  available  to  you   •  Consumer  mobile  social  so8ware  company  vs   Chemistry-­‐based  life  science  technology  product  vs  Equipment  for   emergency  deployment  in  disaster  zones   • Changes  in  business  model  can  change  the  funding   required   •  IP  licensing  of  new  baFery  technology  to  exisHng  players  vs   build  a  baFery  distribuHon  company  with  outsource  manufacturing  or   build  a  manufacturing  company  with,  or  without  distribuHon  
  • 5. NORMAL  GROWTH   COMPANY   HIGH   GROWTH   COMPANY   EXTREME   HIGH  GROWTH   COMPANY   SOCIAL  VENTURE   COMPANY   •  Includes  all   service   businesses   •  ExploiLng  a  local   market  need   •  Team  has  ‘great   jobs’   •  Growth  by   adding   resources  one   by  one   •  Exit  will  be   based  on  value   of  cash  flow   (mature  biz.)   •  Growth profile ultra-scalable •  Team focus is exit •  Revenue $40M+ with lots of room for growth (5 yr.) •  Based on $20M+ investment •  Exit targeted to IPO or by ‘large’ M&A event •  Goal  is  to  fulfill   a  social  need   •  Has  mission   orientaLon   •  Team  needs  to   support  mission   •  Growth  profile   oWen  one   resource  at  a   Lme   •  Exit  …much   harder  to  find   fit     •  Company can grow fast (on-line) or has a scalable system •  Team often motivated by exit •  $7-10M revenue in 4-5 yrs & market size allows significant additional growth •  Capital efficient total investment $2-4M •  Exit by M&A What  Type  of  Company  Are  You?
  • 6. What  Kind  of  Funding NORMAL  GROWTH   COMPANY   HIGH   GROWTH   COMPANY   EXTREME   HIGH  GROWTH   COMPANY   SOCIAL  VENTURE   COMPANY   •  Friends, family, founders •  Debt, Bank, and other •  (Future) Crowd funding (portal style) Early on •  Accelerators •  Individual Angels •  Micro Cap VCs •  Seed from VC Later stages •  Venture Funds •  Strategic VCs •  Angel Syndication •  Friends family, founders •  Charity$$ •  Crowd funding (Kickstarter, etc) •  Impact Angels •  (Future) Crowd funding (portal style) •  Angels •  Angel Groups •  Angel Group Syndication •  Angel List •  Micro-cap Funds •  (Future) Crowd funding (portal style) •  Increasingly Strategic Corporate VCs
  • 7. Capital  Sources:  Size  &  Cost Investment  Size   TradiLonal  VC   Micro  VC   Equipment  Financing   Angel  Groups   Angels   Equity  Crowdfunding   Angel  List,  Circle  Up,  etc   Corporate  /  Strategic   Venture   Customers   Jobs  Bill  Portals     Vendors   Founder   Friends  &  Family   Crowdfunding:  etc.   Grants   Venture  Debt   Bank   Loans   Personal   Loans   Private  Equity   B’Plan  CompeLLon      Accelerators   Investment   “Cost”  
  • 8. Capital  Sources DiluLve   Non-­‐DiluLve     Equity     •  ConverLble  Note   •  Stock   •  Friends,  Family   Investors   •  Common  vs   Preferred     Revenue   Debt   •  Bank   •  Friends/Family   •  Non-­‐converLble  note     Customer/Vendor/Partner   •  Prepaid  product  purchases  from  customers   •  Pay  later  services  from  vendors   •  Non-­‐recoverable  engineering  costs  from   partners   Grants   •  SBIR   •  Business  compeLLons  
  • 9. Capital  Sources Size  of  Capital   Raise:    High   Time   High  Risk   Low  Risk   Crystallize   Ideas   Demonstrate   Product   Early  Scaling   Growth   Sustained   Growth   Market  Entry     Size  of  Capital   Raise:Low   As  you  develop  your  company,  you   reduce  risk  for  your  financial  partners  
  • 10. Capital  Sources:  Equity 10   Stage   Crystallize  Idea   and  Early   DemonstraLon   Demonstrate   Product  &   Market  Interest   Market  Entry   and  Early   Growth   Early  Scaling   Growth   Repeatable   Growth   Capital   Source   Founders,   Friends,  Family,   Grants,   Kickstarter,  etc.   Accelerators,   Individual   Angels,  many   others  now   “exploring”   Angel  Groups,   Angel  Group   SyndicaLon,   Micro-­‐Cap   Funds   VCs,  Angel   Group   SyndicaLon,   Micro-­‐Cap   Funds   VCs   Investment   $25K  -­‐  $100K   $100K  -­‐  $500K   $500K  -­‐  $1M   $5M  –  as   needed   as  needed   These  2  need  sophisLcated   growth  plans     This  is  the  stage   where  advice   can  make  you   eligible  for   outside  funding   later   Accelerators   and  a  few   individual   angels  play   here  …  unless  it   is  a  big  idea     This  is  where   Angel   Groups  do   most  1st   investments… .    
  • 11. Equity:  VC  vs  Angel VC  Funds   •  Invest  other  people’s  money  (pension  funds,  …)   •  Have  mulL-­‐million  $  funds  they  need  to  put  to  work   •  Invest  big  and  must  get  big  returns  for  their  investors   •  7+  year  outlook  for  exit  returns  (10-­‐year  funds)     Angels   •  Invest  their  own  money     •  MoLvated  to  help  entrepreneurs,  stay  engaged   •  But  Return  on  Investment  is  sLll  the  controlling  metric   •  Likes  big  returns  but  will  oWen  be  happy  with  more  modest  returns  in  a   shorter  amount  of  Lme3-­‐5  year  outlook  on  investments  unless  VCs  get   involved  
  • 12. Equity:  VC  vs  Angel VCs   •  $48B  in  2014,~  4,000  investments   •  1/2  in  California  alone   Angels   •  $23B  in  2013,  300,000  investors,  ~  71,000  investments   •  Types  of  angels   •  Individuals   •  Organized:    Funds:  16%;    Network:  63%      (avg  10  deals  /  year)   •  AngelList   •  Informal  networks  &  one-­‐Lme-­‐investors   •  Family  offices   •  Mostly  invest  locally   Angel  Syndicates  (relaLvely  new)   •  Individual  angels,  or  several  angel  groups  invesLng  as  a  unit   •  AngelList  syndicates   •  VC-­‐backed  syndicates  
  • 13. Debt  Capital Debt  Capital   •  Funding  based  on  a  set  schedule  of  principal  and  interest  payments  that   provide  a  fixed  return  for  the  lender.   •  Availability  may  be  based  on  asset  value  or  cash  flow  or  personal  guarantee.   •  MUST  be  paid  back.  Not  “speculaLve”  cash.   Sources:   •  Personal  Loans  –  Friends/Family   •  Bank  Loans   •  SBA  Loans   •  Expect  debt  classes  from  Jobs  Bill  crowd  funding  portals   •  Credit  Cards   •  Venture  Debt  (usually  linked  to  equity  &  later  stage)  
  • 14. Alternate  Sources Crowd  Funding   •  Kickstarter,  Indiego-­‐go   •  Usually  associated  with  “product”  companies   •  Can  come  with  drawbacks   Accelerators   •  Many  incubators  across  the  country   •  May  focus  on  specific  types  eg.  LearnLaunch  for  EdTech   •  Many  different  models   •  Non-­‐profit,  equity  stake,  revenue,  loan   •  Can  be  very  helpful  but  be  wary  of  being  of  the  “accelerator  circuit”   too  long  
  • 15. Non-­‐Dilu*ve  Funding SBIR  +  STTR  =  3%  -­‐  3.6%  of  federal  R&D  Budget     Best  for  research  …  need  other  commercial  $$   Pros:     • It  is  a  contract/grant  –  non  diluLve   Cons:   • Long  SolicitaLon  Process   • March-­‐in  Rights     • Work  with  universiLes  for  experLse   • Best  to  incorporate  (but  more  acceptance  of  LLCs)   • AccounLng  systems  must  be  compliant  with  the   government   • Very  compeLLve  in  some  agencies    
  • 16. Conclusion •  Educate  yourself  about  all  of  your  funding  opLons   •  hups://www.sbir.gov     •  hup://nvca.org       •  hup://www.angelcapitalassociaLon.org     •  hup://www.thecapitalnetwork.org   •  Non-­‐diluLve  funding  is  always  great  but  not  always  the  easiest  to  get   •  It’s  all  about  the  numbers  for  equity  investors   •  Network,  Network,  Network   •  hup://www.greenhornconnect.com