How to Create a Global Phenomenon - David Rose

SBIR = Small Business Innovation Research

SMTT = Small Business Innovation Research

Phase I: up to $100,000

1 in 4 receive this

Phase II: up to $750,000

Phase III -->  you have to get it yourself

1. Bootstrapping is the best way to finance a company!
2. Banks aren't in the business of funding startups -->  they don't want to take the risk.
3. Startups can't get loans!!  -->  only if you personally promse to pay back  (can't get an unsecured loan).
4. Raising equity: selling part of your company and gaining a partner --> this is really risky, close to selling your soul.
5. YOU will be your first investor...
6. Friends, and family should be second...
7. Angel investors should be third...
8. Venture capitalists are next

Venture capitalists -->  professional money managers who invest large pools of other people's money for an economic return.

LP  ==>  Limited Partners  (losses limited only to the extent of the money they lose)

GP ==>  General Partner (responsible for any debt incurred by the firm)

Angel Investors  --> Rich(ish) people who invest their own money for economic and other reasons (but not billionaires typically)

VC's get 2% of the committed funds for running the fund for fancy dinners, etc  plus 20% of the upside in returns

After the dot-com crash,  tons of LPs lost money and talked to the VC fund.. where's my money! don't lose my money!  then VCs stopped leading money,  thus there was almost NO VC money available after the dot-com crash.

Early, Late  --->   Angels  55,000 deals mostly early-stage

Idea --->  Plan --->  Prototype --->  Beta --->  Sales --->  Profitability

Friends, Family & Fools  $100k     -->  Idea, Plan

Angel Investors   $300k  to $500k  -->  Idea, Plan, Prototype, Beta

SBIR/STTR Grants   -->  $100k to $750k

Angel Groups  $500k  to $1-$3 million

Strategic Partners  --> corporate partners,  deals between companies, etc (google buying admob, etc)

Venture Capital -->  $3 - $4,  $10 million  (show me sales, profitability)

Banks  --> only once you are profitable  from $0 to tens of millions

IPO ->  $50M  to $100M

20 - 40% is given up after each round of financing

US Early Stage Financing

Govt Grants $2 b

Angel investing $20 B

Venture Capital $25 B

600,000 companies started this year, here's the break down:

350,000 founders

200,000 friends and family

50,000 angels

1,000 venture capital

Profile of an Angel:  age 57

masters degree

15 year entrepreneur

2.7 ventures founded

9 years investing

10 investing

2 exits/closures so far

10% of wealth in angel investments

"Accredited Investor"

$1 million in assets (not including home) or

$200,000 annual income in past two years

Secret Economics of the Angels

Well managed angel funds return 25- 30%

$1 million for angel investments distributed over 10 deals

1.25 ^ 6 = 3.8 x ROI - Return on Investment

5 will go no where                =    0  x  1/10  x 5 x 0 = 0.0

2 will get my money back    =    1  x  1/10  x 2 x 1 = 0.2

2 will get me 3x my money  =    3  x  1/10  x 2 x 3 = 0.6

1 your deal must return 30x =  30  x  1/10 x  

Execution is a multiplier of an idea

How good of an idea?

Awful = -1

Weak= 1

So-So= 5

Good= 10

Great = 15

Brilliant= 20

Execution

None  =                      $1

Weak  =             $1,000

So-So  =          $10,000

Good  =         $100,000

Great  =      $1,000,000

Brilliant  = $10,000,000

brilliant Idea x So-so execution   = $200,000

So-so Idea x Brilliant Execution  = $50,000,000

Business Plan

Executive Summary

One Pager -->  Angel soft creates this.  140 characters?

Create an email pitch.

You must network to get cash for your idea.

Create a presentation

Create a video

What is your elevator pitch

The elevator pitch

what's exciting

what you do

who you are

keep it simple

aim for 30 seconds

have it down cold!