bootstraping and financing (founders institute - 16.8.16)
TRANSCRIPT
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TONIGHT’S TOPICS
➤ What are the various ways to capitalize your company in the very beginning?
➤ How do you ask friends and family for money to support you?
➤ What are the advantages and disadvantages of bootstrapping?
➤ What do local angel investors require before making an investment?
➤ How do you develop a target list of appropriate angel investors?
➤ What materials are required to raise angel investment?
➤ What milestones should you look to achieve next?
➤ How do you set your six month and twelve month objectives in the very beginning?
➤ How should you think about selling the business or exiting the business?
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BEGINNING BALANCE CASH FLOW
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MonthProduct
ReleasedNo. Products
Sold Profit MarginMonthly
ExpensesTotal Accrued
ExpensesMonthly Revenue
Total Accrued Revenue
Monthly Difference Total Difference Cash
1-Dec-15 No Product - 18 825$ 825$ 191$ 191$ (634)$ (5,634)$ 1-Jan-16 No Product - 18 334$ 1,159$ 635$ 826$ 301$ (5,333)$ 1-Feb-16 No Product - 18 1,230$ 2,389$ 1,258$ 2,084$ 28$ (5,306)$ 1-Mar-16 No Product - 18 2,783$ 5,172$ 131$ 2,215$ (2,652)$ (7,957)$ 7,500$ 1-Apr-16 No Product - 18 837$ 6,009$ 200$ 2,415$ (637)$ (8,594)$ 4,848$
1-May-16 No Product - 18 197$ 6,206$ 1,519$ 3,934$ 1,322$ (7,272)$ 4,212$ 1-Jun-16 No Product - 18 238$ 6,444$ -$ 3,934$ (238)$ (7,510)$ 5,533$ 1-Jul-16 No Product - 18 1,700$ 8,144$ -$ 3,934$ (1,700)$ (9,210)$ 5,295$
1-Aug-16 Product 1 20 18 1,700$ 9,844$ 360$ 4,294$ (1,340)$ (10,550)$ 3,595$ 1-Sep-16 Product 1 40 18 1,700$ 11,544$ 720$ 5,014$ (980)$ (11,530)$ 2,255$ 1-Oct-16 Product 1 60 19 1,700$ 13,244$ 1,140$ 6,154$ (560)$ (12,090)$ 1,275$ 1-Nov-16 Product 1 80 19 1,700$ 14,944$ 1,520$ 7,674$ (180)$ (12,270)$ 715$ 1-Dec-16 Product 1 100 20 1,800$ 16,744$ 2,000$ 9,674$ 200$ (12,070)$ 535$ 1-Jan-17 Product 1 100 20 1,800$ 18,544$ 2,000$ 11,674$ 200$ (11,870)$ 735$ 1-Feb-17 Product 1 100 20 1,800$ 20,344$ 2,000$ 13,674$ 200$ (11,670)$ 935$ 1-Mar-17 Product 1 120 20 1,800$ 22,144$ 2,400$ 16,074$ 600$ (11,070)$ 1,135$ 1-Apr-17 Product 2 120 20 1,800$ 23,944$ 2,400$ 18,474$ 600$ (10,470)$ 1,735$
1-May-17 Product 2 120 20 1,800$ 25,744$ 2,400$ 20,874$ 600$ (9,870)$ 2,335$ 1-Jun-17 Product 2 120 20 2,050$ 27,794$ 2,400$ 23,274$ 350$ (9,520)$ 2,935$ 1-Jul-17 Product 2 120 20 2,050$ 29,844$ 2,400$ 25,674$ 350$ (9,170)$ 3,285$
1-Aug-17 Product 2 130 20 2,050$ 31,894$ 2,600$ 28,274$ 550$ (8,620)$ 3,635$ 1-Sep-17 Product 2 130 20 2,050$ 33,944$ 2,600$ 30,874$ 550$ (8,070)$ 4,185$ 1-Oct-17 Product 2 130 20 2,050$ 35,994$ 2,600$ 33,474$ 550$ (7,520)$ 4,735$ 1-Nov-17 Product 3 150 20 2,063$ 38,057$ 3,000$ 36,474$ 938$ (6,583)$ 5,285$ 1-Dec-17 Product 3 150 20 2,063$ 40,119$ 3,000$ 39,474$ 938$ (5,645)$ 6,223$ 1-Jan-18 Product 3 150 20 2,063$ 42,182$ 3,000$ 42,474$ 938$ (4,708)$ 7,160$ 1-Feb-18 Product 3 150 20 2,063$ 44,244$ 3,000$ 45,474$ 938$ (3,770)$ 8,098$ 1-Mar-18 Product 3 170 20 2,063$ 46,307$ 3,400$ 48,874$ 1,338$ (2,433)$ 9,035$ 1-Apr-18 Product 3 170 20 2,063$ 48,369$ 3,400$ 52,274$ 1,338$ (1,095)$ 10,373$
1-May-18 Product 3 170 20 2,063$ 50,432$ 3,400$ 55,674$ 1,338$ 242$ 11,710$ 1-Jun-18 Product 4 200 20 2,063$ 52,494$ 4,000$ 59,674$ 1,938$ 2,180$ 13,048$ 1-Jul-18 Product 4 200 20 2,063$ 54,557$ 4,000$ 63,674$ 1,938$ 4,117$ 14,985$
1-Aug-18 Product 4 200 20 2,063$ 56,619$ 4,000$ 67,674$ 1,938$ 6,055$ 16,923$ 1-Sep-18 Product 4 200 20 2,063$ 58,682$ 4,000$ 71,674$ 1,938$ 7,992$ 18,860$ 1-Oct-18 Product 4 200 20 2,063$ 60,744$ 4,000$ 75,674$ 1,938$ 9,930$ 20,798$ 1-Nov-18 Product 4 200 20 2,063$ 62,807$ 4,000$ 79,674$ 1,938$ 11,867$ 22,735$
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WAYS TO CAPITALIZE YOUR BUSINESS
• Personal Capital • Debt-Based Investment • Equity-Based Investment
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HOW TO APPROACH FRIENDS AND FAMILY FOR FUNDING
•Over 50% of entrepreneurs use “friends and family” funding
•“Yes” vs. Check
•Be Intentional
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CHOOSE YOUR INVESTOR
•Knowledge and Experience
•Equal Expectations
•Connections
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DEMONSTRATE PASSION AND DUE DILIGENCE
•Your Investment
•Customer Development Results
•MVP
•Business Plan or Model
•Professionalism
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KNOW HOW MUCH YOU NEED
• Initial Capital
•Working Capital
•Home Capital
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ASK FOR THE RIGHT MONEY
•Debt
•Equity
•Convertible Note
•Free Usage
•Donations
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MAKE A PLAN
•Payment Plan • Grace Period
•Official Agreement
•“What If?”
•Don’t take more than they can afford to lose
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BOOTSTRAP: IS THIS
REALLY A GOOD IDEA?
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BOOTSTRAPPING ADVANTAGES
• Freedom • Ownership • Focus
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BOOTSTRAPPING DISADVANTAGES
• Slow • Limited Opportunities • Personal Risk
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WHAT DO ANGELS WANT TO SEE?
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1. DEFINE A SPECIFIC TARGET CUSTOMER WITH A SPECIFIC PROBLEM
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2. PROVE THE TARGET CUSTOMER IS WILLING TO PAY FOR YOUR SOLUTION
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3. FORECAST A CLEAR ROI OR EXIT STRATEGY
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HUMILITY
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WHAT DO ANGELS WANT TO SEE?
•Honesty
•Definite target segment with specific problem
•Proof of willingness to pay for product/service
•Clear forecast for ROI or exit strategy
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SELECT YOUR INVESTOR
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Donors
Crowdfunding
Frien
ds and Fa
mily
Banks /
Micr
ofinan
ce
Impac
t Inve
stors
Angel Inve
stors
State /
Corpora
te Prog
rams
Venture
Capita
l
Intentions
Financial Expectations
Social Expectations
Risk
Ownership
Investment Stage
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HOW MUCH MONEY DO YOU NEED?
HOW MUCH OWNERSHIP DO YOU KEEP?
HOW QUICKLY DO YOU WANT TO GROW?
HOW LONG WILL YOU BE INVOLVED?
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HOW TO FIND AN ANGEL
•AngelLabs
•Startup Grind
•Make a Meeting Happen
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MATERIALS TO PREPARE
•Pitch Deck (10-15 slides)
•Written Strategy
•Tangible and Tested MVP
•Proof of Market Validation
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MILESTONES
•Cash Flow Positive
•Certification or Authorization
• IP Protection
•Customer Acquisition or Market Share
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6-MONTH AND 12-MONTH OBJECTIVES
•Financial Needs
•Customer Validation Needs
•Technical Needs
•Legal Needs
•Publicity Needs
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HOW BIG IS YOUR CALLING?
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THINGS TO KNOW
• Every Investor Needs An Exit
• Know Your Calling