presents
Get Funded: Expert Advice From the People Who Know Dan Allred Smith Anderson
Get Funded: Financing your Startup November 12th, 2013
Smith Anderson Silicon Valley Bank
(617) 796-6958 [email protected]
Twitter: @SmithTown561
Dan Allred Silicon Valley Bank
(617) 796-6904 [email protected] Twitter: @dgallred
http://danallred.tumblr.com
Jason Jacobs
RunKeeper CEO and Founder
Brent Grinna
Evertrue
Founder and CEO
Aman Advani Ministry of Supply
Co-‐Founder
The Ringers
Why We’re HereSources of Financing Overview Bootstrapping: Making it last
Financing partners take risk together
Bootstrapping • Vendor financing Trade credit Stretching payables
• Customer financing Prepayments, deferred revenue
• Self financing Working without pay Getting others to do the same Personal credit, credit cards, etc.
Bootstrapping • Amount of capital Relatively small amounts
• Use of capital Working capital (brings future cash inflow forward OR delays current cash outflow)
• Stage of company Useful at all stages, especially startup.
• Who bears the risk & what type Personal risk early, bankruptcy risk later Working capital risk (risk of insolvency)
Crowdfunding: The Basics
Crowdfunding: Today and BeyondProduct/Project
• Currently thriving – Pledgie (2006) – Sellaband (2006) – IndieGoGo (2008) – GiveForward (2008) – Kickstarter (2009) – RocketHub (2009) – Fundly (2009) – GoFundMe (2010) – Appsplit (2010) – Microventures (2010) – Fundageek (2011) – Dragon Innovation (2013)
• Incredibly powerful momentum in the last few years.
Equity • Not legal…yet • JOBS Act passed July 10th • Accredited vs. non-‐accredited.
Crowdfunding MoS: A story of Shirt, socks and the power of a crowd.
To CrowdFund?
• Demand/market validation done before you go to market.
• Almost zero risk market • Marketing story done for
you. • Almost immediate access to
cash
Not to Crowdfund?
➢ No secrets to hide from competition. ➢ Price point ➢ Go to Market Strategy ➢ Runway ➢ Timing ➢ Funding Commitments
• Not a new concept.
Is it right for you?
Probably • Hardware with a specific
cost for prototype. • Consumer facing projects • Micro-‐market products • Market unknown products. • One-‐off garage projects • Artists • Philanthropists
Probably Not • Large companies • Complex products with
intricate sales cycles • Infrastructure or enterprise
products that are unlikely to touch consumers.
Angel Investors
The funding Lines are getting blurry
Traditional VC Funds
Seed Funds
Super Angels
Angels
Angels• Class of capital Equity (ownership in company)
• Structure/organization High net worth (HNW) individuals Some groups and clubs Some “super angel” funds
• Motivation/incentives Upside – stock appreciation Most look for an “exit” (i.e. liquidity event
Angels• Amount of capital $100k to $2mm
• Use of capital Growth capital (i.e. new cash for growth)
• Stage of company Early-‐stage, product/market development
• Who bears the risk & what type Angel investor bears risk Product/market risk, execution risk
Angels• Structure of investment Purchase of common or preferred stock Sometimes convertible debt initially
• Price of investment 25-‐50% of company’s stock Convertible debt ~25% min ownership
• Monitoring the investment Reporting Some angels (or groups) want BOD seat
• Value add $$$, industry expertise, connections
Venture Capital
Venture Capital • Class of capital Equity (ownership in company)
• Structure/organization Limited partnership 10 year funds (invest, grow & harvest)
• Motivation/incentives Upside (30% IRR and 3x overall for fund) Looking for an “exit” (i.e. liquidity event)
Venture Capital• Amount of capital $1mm-‐20mm Some seed activity as well
• Use of capital Extreme growth capital
• Stage of company Early-‐stage and growth stage
• Who bears the risk & what type Limited partners and general partners Product, market, tech & execution risk
Venture Capital• Structure of investment Purchase of preferred stock Sometimes convertible debt initially
• Price of investment 20-‐40% of company’s stock
• Monitoring the investment Reporting BOD seats Redemption rights, registration rights
• Value add $$$, industry expertise, capital markets
Debt
Debt• Class of capital Debt (senior debt as discussed here)
• Structure/organization Banks (regulated to accept deposits) Finance companies (corporations) Debt funds (limited partnerships)
• Motivation/incentives Banks – interest & fee income Finance companies, funds – interest Venture debt – warrant income
Debt• Amount of capital $1mm-‐100mm
• Use of capital Working capital Growth capital Acquisition capital
• Stage of company All stages
• Who bears the risk & what type The lender
Debt• Structure of investment Senior secured credit
• Price of investment Interest and fees for established co’s Plus warrants for pre-‐profit co’s
• Monitoring the investment Reporting Financial covenants Affirmative & negative covenants
• Value add $$$, connections, pattern recognition
Questions?
Jason Jacobs
RunKeeper CEO and Founder
Brent Grinna
Evertrue
Founder and CEO Aman Advani
Ministry of Supply COO and Co-‐Founder
The Ringers
Q & A Panel of Experts
