Today Funding your venture (45’) Work Session- Financing proposal, overall plan preparation (60’) Mon- 3/2 • Work Session- Preparation of Commercialization Plan Presentation (60’) • Paul Gulick “Lessons Learned from Serial Entrepreneur” (60’) Reminders: 1) Review your plan with mentor and inventor 2) Invite your mentor and inventor to class presentations- next Wed 3/5 What’s Next????
31
Embed
Today Funding your venture (45’) Work Session- Financing proposal, overall plan preparation (60’) Mon- 3/2 Work Session- Preparation of Commercialization.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Today
Funding your venture (45’)
Work Session- Financing proposal, overall plan preparation (60’)
Mon- 3/2
• Work Session- Preparation of Commercialization Plan Presentation (60’)
• Paul Gulick “Lessons Learned from Serial Entrepreneur” (60’)
Reminders: 1) Review your plan with mentor and inventor2) Invite your mentor and inventor to class presentations- next Wed 3/5
What’s Next????
The home stretch…
Wed- 3/4In class presentations of Commercialization Plans (~ 12 min each + questions)
Mentors and Inventors Invited
Mon- 3/9Work Session- Revision of Commercialization Plan based on Feedback
Wed- 3/11 (5:00-7:00 pm)Judged Competition- Portland Business Roundtable
Where do I find money?
You need to know where to look!
You need to pick the right source for your point in the funding life cycle.
Capital Sources for Formation and GrowthFrom Bill Newman, NTV
R&D
Gov’t, Industry, Academic
Ongoing Growth
Public Markets
Formation
The “3 F’s” (friends, family, & fools)
Angel Institutional
Angel Investors - “early and often” - Individuals, unorganized,
limited follow-on - 2003: $18.1 billion
invested, 42,000 deals
Venture Capital funds - Home run mentality - Significant investment $$;
governance and oversight - 2003: 915 funds, $18.2 billon
invested, 2,700 deals
“Private Equity”
Commercialization Grants - SBIR/STTR, SBA - OSU venture fund - NEC
NTV
Startup Capital Sources
• Government & Incentive – SBIR/STTR, OSU venture fund, ONAMI gap, etc
• The “3 F’s” (friends, family, & fools)
• Angel Investors– “early and often”– Individuals, unorganized, limited follow-on
• Venture Capital funds– Home run mentality– Significant investment $$; governance and oversight
Obvious
Often Overlooked Sources
NTV
• Organic growth (bootstrap)
• Consulting-based funding
• Customer deals (NRE)
• Strategic partner deals
Government: SBIR and STTR • The Small Business Innovative Research Grants (SBIR) and Small
Business Technology Transfer (STTR) can be good sources of start up funds
• SBIR created in 1982
• Requires 2.5% of all “extra-mural” research funds must be set aside for small business development ($2B in 2005)
• Many government agencies participate: DOD, NIH, NASA, DOE, NSF, DOC, DoAg, EPA, DOE, DOT. Each agency has structured their program differently
• There are some differences in SBIR and STTR with respect to required partnerships and percentage of total funds allocated
• This a grant, NOT a loan. The small business is not required to repay. Also, the company can allocate up to 7% of the grant to profit.
SBIR/STTR Funding
• Structured around a 3 phase process– Phase 1- feasibility ($50K-$100K, 6 mo)– Phase 2- prototype ($500K-$750K, 2 yr)– Phase 3- commercialization (not funded by
government directly)
• Can be either a grant or contract– Grant- no expectation of a product that funding
agency will buy– Contract- expectation that in Phase 3 that agency will
be a customer
SBIR/STTR Funding
• Success rates vary among agencies– NIH: Funds 1 out of 3 proposals– NSF: Funds 1 out of 13 proposals
• Most require a PI (principal investigator) with a good academic track record
• 41% of SBIR awardees are 2-9 employees
• 33% of SBIR awardees are new
• More information is available at the website: http://www.sbirworld.com,
• Investor funding typically occurs in “rounds” of increasing amount– First, second, mezzanine, etc– Subsequent rounds of funding can dilute the value of initial
investors
• Tie funding to specific milestones- – e.g. Prototype complete, beta testing complete– investors like to feel privy to new information to maximize their
benefit and minimize risk
NTV
NTV
Typical Investment and Valuation, by Stage
Stage Objective Revenue Valuation Investment
SeedProof of concept
0Below $5M
$1M or less
EarlyProduct
validation<$1M $5 – 10M $5M
GrowthBusiness validation
<$10M $10 – 15M $5 – 10M
Later Expansion $10M up $15M up $10M up
Raising Money From Angels• Characteristics of a Likely Angel
– High Net Worth– Recent Liquidity Event– Industry Knowledge– Relationship Oriented
• Lead Versus Followers– Target and Negotiate the Investment with a Few Lead Investors
• Angel Networks (OEN, WIN, WVN)
• Only Take Money from Accredited Investors
• Current Climate
Local Angel Networks
There are MANY local groups of investors and forums who would like to hear about your ideas…
• SWOT (monthly Corvallis group of business leaders)
• Willamette Valley Investors Network (WVIN)- May 14th conference ($150K+) at CH2M Hill Alumni center
• Oregon Entrepreneurs Network- March 15th Annual Meeting in Portland ($250K+)– http://www.oen.org/events_ao.aspx
companies, “some” high net worth individuals, corporations
• Venture Capital– Specialized: <2% of businesses formed (SBA)– Geographic concentration: 33% Silicon Valley, 50% California,
67% California and New England (role of research institution)– VC $$: metro=99.2%; non-metro=0.8%; rural=0% (infrastructure)– Home run mentality: 10% = 10x, 30-50% = write-off– Investment characteristics: high growth potential, capital efficiency,
exit potential– Significant investment $$; governance and oversight
Good and Bad Venture Deals• “faster, better, cheaper”
– if so, look for 10X; “move to the next curve”• “brave new world”
– not just new, but necessary• “are the dogs eating the dog food”
– do customers want your product?
• “science projects” (also known as ratholes)– is there a product and market in the foreseeable future?
• “putting lipstick on the pig”– no, really, this is a great deal!
NTV
Industry Structure MatrixB
arri
ers
to E
ntry High
Low
Switching CostsHigh Low
NTV
Industry Structure Matrix
-Monopoly / oligopoly-Excess profits-Operating systems, Jet Engines, Life Sciences
1. Our projections are conservative2. Our market is $$$ billion and we only need 0.00001%
of it to succeed3. We are in final negotiations with a large partner4. We will sell only common stock to investors5. We have no competition6. Our technology cannot be duplicated7. “XYZ Co.” (a Fortune 100) is too slow moving8. We are creating / changing the market and our
product will become the standard9. We have first mover advantage10. Our goal is to attain 2% market share
NTV
New Markets are Hard to Gauge
• "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is, inherently, of no value."– Western Union internal memo, 1876.
• "The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?"– RCA: David Sarnoff's associates in response to his
urgings for investment in the radio in the 1920s
NTV
New Markets are Hard to Gauge
• "I think there is a world market for, maybe, five computers."– Thomas Watson, chairman of IBM, 1943
• "There is no reason anyone would want a computer in their home."– Ken Olson, Digital Equipment Corp.,1977
• "640K ought to be enough memory for anybody."– Bill Gates, 1981
NTV
The Second Mouse Gets the Cheese
NTV
Selling is What It’s All About
“Don't worry about people stealing your ideas. If your ideas are any good, you'll
have to ram them down people's throats.”
Howard Aiken Computer Pioneer
OSU Ideas on their way…
• “Nuke in a box” (recently received VC investment- ‘06 MBA project)
• Nanobits, Inc (received 2007 ONAMI gap funding-evolved from ‘06 undergrad class)
• I5 Logic, Inc (recently received large VC investment- from ‘06 undergrad class)
• Printable electronics (received 2008 OSU Venture Grant- from ‘07 undergrad class)