STARTUP FUNDING
Transcript: FOUNDER HAS AN IDEA!! Co-Founder Stage There is another group of people that really want you to IPO. The investment bankers, like Goldman Sachs and Morgan Stanley, to name the most famous ones. They will give you a call and ask to be your lead underwriter – the bank that prepares your IPO paperwork and calls up wealthy clients to sell them your stock. Why are the bankers so eager? Because they get 7% of all the money you raise in the IPO. The Angel Round Finds someone who can do half the work and gives 50% of the company Incubators, accelerators, and “excubators” – these places often provide cash, working space, and advisors Angels Some common stock is set for giving up to the family and friends who invested and also for future employees. STARTUP GO PUBLIC Funding from family and friends All of the people who have invested so far have Restricted Shares (not approved by the govt.) . Through an IPO this cash or unrestricted stock (liquidity) Funding cant be taken directly from people as the company is still not registered and hence would be illegal. So friends and family help out during that Lets say that the angel investor evaluated the company to be of $1Million. So he invests $200,000 So how much of the company will he get? $1,000,000 + $200,000= $1,200,000 post-money valuation Now divide the investment by the post-money valuation $200,000/$1,200,000=1/6= 16.7% The angel gets 16.7% of the company, or 1/6. Venture Capital Round Thank you! Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money. Future investors will want an option pool; That stock is safe from you and your co-founders doing anything with it Once a prototype is made VC is approached for further funding. Based on the prototype the VC will fund the startup heavily and takes a part of the shares with the same math as an Angel Investor