Funding  Op*ons:    Find  Your  Path  to  Funding

September  24,  2015  

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  

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  

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  

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?

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

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  Investmen

t  “Cost”  

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  

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  

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….    

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  

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  

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)  

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  

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  

 

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