Module 5 Raising Capital

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Module 5Raising Capital
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Module 5Topics

• Review
• Making the Argument
• Valuation
• Case Study

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Review Sources of Capital

• Start-up Spouse
• Friends/Family
• Lending Institution
• Other
• Growth Angel Investors
• Venture Capitalists
• Business Profits
• Public Market Public Investors

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Raising Capital

• Making a Convincing Argument
• Match Argument with Funder
• http//edcorner.stanford.edu/authorMaterialInfo.ht
  ml?topicId6mid1373
• (3 minutes)

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Raising Capital

• Required Credibility and Reliable
• Good Business Plan
• Realistic Financial Statements
• Matching
• Perspective Equity Investors vs Lenders

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Life Cycle Financing

• Revenue
• Public Markets
• Private Placement Rapid
  Bridge Capital Growth
• Firm Venture Capital
• Angel Capital
• Personal Savings Slow
• Friends/Family Growth
• Financial Institutions Firm
• Time

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Cash Budget Example
Pre Start Month 1 Month 2 Month 3
Revenue 0 4000 6000 8000
Cost of Goods 1000 2000 3000 4000
Operating Profit (1000) 2000 3000 4000

Insurance 500
Wages 1000 1000 1000 1000
Equipment 10000
Computer 1500
Advertising 500 500 500 500
Legal 500
TOTAL 16000 1500 1500 1500
CHANGE (1700) 2500 2500 2500
BEGINNING CASH 17000 0 2500 5000
Ending Cash 0 2500 5000 7500
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Financial Forecasts

• Used for planning and funding requests
• Must be credible
• Ending cash cant be negative
• Scenarios
• Contingencies

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Additional Comments

• Cash is most important
• Positive cash flow happiness
• Cash sooner is preferred to cash later
• Entrepreneurs often lack financial skills
• Developing financial strategies critical

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Science and Art of Valuation

• What affects value?
• Cash flow
• Time
• Risk

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Science and Art of Valuation

• Liquidation Value
• Book Value
• Market Value
• Earnings

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Crafting the Argument

• Firm performance/accomplishments
• Risk Exposure
• Growth and return potential
• Stage of development
• Amount of capital needed
• Goals

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Case Study

• What do you recommend?