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
- Bootstrapping is the best way to finance a company!
- Banks aren't in the business of funding startups --> they don't want to take the risk.
- Startups can't get loans!! --> only if you personally promse to pay back (can't get an unsecured loan).
- Raising equity: selling part of your company and gaining a partner --> this is really risky, close to selling your soul.
- YOU will be your first investor...
- Friends, and family should be second...
- Angel investors should be third...
- 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!
No comments:
Post a Comment