Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
SlideShare a Scribd company logo

The Path

•Download as PPTX, PDF•
•

The document discusses the typical stages of growth for startup companies over their first 3-5 years: proof of concept, seed, startup, early, growth, and later stage to maturity. It notes that many startups fail to make it through the "Valley of Death" period when spending exceeds revenue. The document advises entrepreneurs to match their capital needs at each stage to the appropriate sources, such as founders, friends and family initially, then potentially banks, grants, bootstrapping, angels, and venture capital later on. It stresses developing a capital plan to only raise what is needed to hit business plan milestones.

1 of 8

1

The Path Taking your big idea from Proof-of-Concept to Growth

2

The Path: Critical Milestones Required to Succeed Every startup company that continues to progress will experience these stages of growth.

3

The Path: Critical Milestones Required to Succeed These stages typically span the first three to five years of a company’s life. • Proof of Concept: business concept developed • Seed: Product or service in early stage • Startup: Management team in place; business functions created; prototype developed • Early: Beta testing; approaching breakeven • Growth: Approaching revenue and profitable • Later Stage to Maturity: Product or service widely available; continued operation as private company, acquisition, or IPO

4

The Path: Match Sources of Capital to Milestones Successful Entrepreneurs target the right source of capital at the right stage.

5

The Path: The Valley of Death • The Valley of Death is the time in the life of the startup when the company is spending more money than it is taking in. • Capital is used for critical milestones—usually to build product and conduct market development. • The Valley of Death is so named because many companies don’t make it out of this stage.

6

The Path: Match Sources of Capital to Milestones Capital Requirements per Stage Proof of Concept: Funds incorporation, IP protection, limited prototype Seed: Capital to prove product feasibility and quantify market Startup: Funds pilot to market, verification of business plan economics Early: Funds product and market development Growth: Funds expansion and growth Later Stage to Maturity: Support expansion and growth, next generation product development, market expansion Sources of Capital • Founders, Friends, Family and “Fools”: Entrepreneur is first investor; individuals who trust the entrepreneur and have interest invest at the riskiest and most unpredictable stage. • Banks: Lines of credit, traditional borrowing, or convertible debt. The greater the entrepreneur’s personal resources, the more likely this source. • Grants: From public and private sector and not- for-profit foundations. Typically used for research. Do not require repayment. • Bootstrap: The most interesting and creative entrepreneurs figure out ways to pay as they go without outside capital. • Angel Investor: Private high net worth individuals who invest their own capital individually and in groups. • Venture Capital: Institutional investors with $2M threshold of $2M in exchange for equity.

7

The Path: Developing a Capital Plan • “Starting a business can take twice as long and costs twice as much as you think it will.” • There are lots of ways to progress through the early stages of building a business without raising large amounts of capital. • The entrepreneur always takes the first financial risk. • Never raise more capital than required to accomplish the milestones of the business plan. • Seek the advice and mentoring of business people, investors, and other entrepreneurs. • The SBA’s SBIR/STTR programs can be excellent sources of non-dilutive capital. • Stay tuned to state and local incentives for new company development. • Angel investors who syndicate produce larger, more efficient capital rounds. • Very little seed and startup capital comes from venture capitalists. • The investor controls the capital raising process.

8

The Path: Conclusion • Every company and entrepreneur is unique. • The milestones of the entrepreneur’s path are common to all. • Most startup companies do not survive the Valley of Death. • The best startup companies find ways to reduce their seed and early stage requirements for external capital. • Less than 2 percent of venture capital is invested in early stage firms. • Angel investors can be an entrepreneur’s best friends. • Matching achievable milestones with the appropriate capital source can simplify the raising capital.

More Related Content

The Path

  • 1. The Path Taking your big idea from Proof-of-Concept to Growth
  • 2. The Path: Critical Milestones Required to Succeed Every startup company that continues to progress will experience these stages of growth.
  • 3. The Path: Critical Milestones Required to Succeed These stages typically span the first three to five years of a company’s life. • Proof of Concept: business concept developed • Seed: Product or service in early stage • Startup: Management team in place; business functions created; prototype developed • Early: Beta testing; approaching breakeven • Growth: Approaching revenue and profitable • Later Stage to Maturity: Product or service widely available; continued operation as private company, acquisition, or IPO
  • 4. The Path: Match Sources of Capital to Milestones Successful Entrepreneurs target the right source of capital at the right stage.
  • 5. The Path: The Valley of Death • The Valley of Death is the time in the life of the startup when the company is spending more money than it is taking in. • Capital is used for critical milestones—usually to build product and conduct market development. • The Valley of Death is so named because many companies don’t make it out of this stage.
  • 6. The Path: Match Sources of Capital to Milestones Capital Requirements per Stage Proof of Concept: Funds incorporation, IP protection, limited prototype Seed: Capital to prove product feasibility and quantify market Startup: Funds pilot to market, verification of business plan economics Early: Funds product and market development Growth: Funds expansion and growth Later Stage to Maturity: Support expansion and growth, next generation product development, market expansion Sources of Capital • Founders, Friends, Family and “Fools”: Entrepreneur is first investor; individuals who trust the entrepreneur and have interest invest at the riskiest and most unpredictable stage. • Banks: Lines of credit, traditional borrowing, or convertible debt. The greater the entrepreneur’s personal resources, the more likely this source. • Grants: From public and private sector and not- for-profit foundations. Typically used for research. Do not require repayment. • Bootstrap: The most interesting and creative entrepreneurs figure out ways to pay as they go without outside capital. • Angel Investor: Private high net worth individuals who invest their own capital individually and in groups. • Venture Capital: Institutional investors with $2M threshold of $2M in exchange for equity.
  • 7. The Path: Developing a Capital Plan • “Starting a business can take twice as long and costs twice as much as you think it will.” • There are lots of ways to progress through the early stages of building a business without raising large amounts of capital. • The entrepreneur always takes the first financial risk. • Never raise more capital than required to accomplish the milestones of the business plan. • Seek the advice and mentoring of business people, investors, and other entrepreneurs. • The SBA’s SBIR/STTR programs can be excellent sources of non-dilutive capital. • Stay tuned to state and local incentives for new company development. • Angel investors who syndicate produce larger, more efficient capital rounds. • Very little seed and startup capital comes from venture capitalists. • The investor controls the capital raising process.
  • 8. The Path: Conclusion • Every company and entrepreneur is unique. • The milestones of the entrepreneur’s path are common to all. • Most startup companies do not survive the Valley of Death. • The best startup companies find ways to reduce their seed and early stage requirements for external capital. • Less than 2 percent of venture capital is invested in early stage firms. • Angel investors can be an entrepreneur’s best friends. • Matching achievable milestones with the appropriate capital source can simplify the raising capital.