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Chapter 10

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beth carroll

on 22 March 2016

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Transcript of Chapter 10




Shop around for your start-up funding.






Trust your gut and choose the funding option that works best for you

SCORE
http://www.score.org/

Find a Mentor
Susan B. Davis-Director

SBDC Greater Lafayette

2nd floor Burton D. Morgan Center

sdavis@isbdc.org
You can begin establishing good credit


RIGHT NOW!
Small banks for small business

http://coatchex.com/
Elevator pitch

http://www.youtube.com/watch?v=Tq0tan49rmc
Preparing to Raise Funds

10-*
HATWORLD
Friends, Family and Fools
Why start-ups need funding
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
Size and Types of Loans
Almost all small businesses are eligible to apply for an SBA guaranteed loan.

The SBA can guarantee as much as 85% on loans up to $150,000 and 75% on loans over $150,000.
SBA Guaranteed Loans
The SBA Guaranteed Loan Program

Approximately 50% of the 9,000 banks in the U.S. participate in the SBA Guaranteed Loan Program.

The loans are for small businesses that are not able to obtain credit elsewhere.
SBA Guaranteed Loans
10-*
SBA Guaranteed Loans
Commercial Banks
Sources of Debt Financing
10-*
Initial Public Offering
An initial public offering (IPO) is a company’s first sale of stock to the public. When a company goes public, its stock is traded on one of the major stock exchanges.

Typically, a firm is not able to go public until it has demonstrated that it is viable and has a bright future.

Anyone who owns your stock
owns a piece of your business.
Initial Public Offering

10-*
Venture Capital (continued)

Venture capitalists invest money in start-ups in “stages,” meaning that not all the money that is invested is disbursed at the same time.

Some venture capitalists also specialize in certain “stages” of funding.
Venture Capital
10-*
Venture Capital
Is money that is invested by
venture-capital firms
in start-ups and small businesses with exceptional growth potential.

Venture-capital firms are limited partnerships of money managers who raise money in “funds” to invest in start-ups and growing firms.

The funds, or pool of money, are raised from wealthy individuals, pension plans, university endowments, foreign investors, and similar sources.

A typical fund is $75 million to $200 million and invests in 20 to 30 companies over a three- to five-year period.

Venture Capital
10-*
Are individuals who invest their
personal capital directly in start-ups.

The prototypical business angel is about 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and is interested in the startup process.

The number of angel investors in the U.S. has increased dramatically over the past decade.
10-*
Initial Public Offerings
Business Angels
Venture Capital
Sources of Equity Funding
10-*
Two Most Common Alternatives
Preparing to Raise Debt or Equity Financing
Is getting a loan on which you pay interest.
Means exchanging partial ownership in a firm, usually in the form of stock, for funding.
Debt Financing
Equity Funding
11-*
Bootstrapping

Bootstrapping is finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting, or any means necessary.

Many entrepreneurs bootstrap out of necessity.


Sources of Personal Financing

10-*

Commercial banks are no longer viewed as a practical source of financing for start-up firms.

Banks are risk adverse, and financing start-ups is a risky business.


Commercial Banks
10-*
Personal Funds
The vast majority of founders contribute personal funds, along with sweat equity, to their ventures.
Sweat equity represents the value of the time and effort that a founder puts into a new venture.

Friends and Family
Friends and family are the second source of funds for many new ventures.
Sources of Personal Financing
10-*
http://www.youtube.com/watch?v=oG421tiEbjY
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
Getting Funding or Financing
Bruce R. Barringer
R. Duane Ireland
Chapter 10
Peer to Peer lending:
An elevator pitch is a brief,
carefully constructed statement
that outlines the merits of a
business opportunity.
There are many occasions when a
carefully constructed elevator
speech might come in handy.
Most elevator pitches are 45
seconds to 2 minutes long.
Purpose
Preparing An Elevator Speech
1 of 2
10-*
Hiring interns.
Sharing office space or
employees with other
Businesses.

Buying items cheaply but
prudently via options
such as eBay.
Minimizing personal
expenses.
Obtaining payments in
advance from
customers.
Leasing equipment
instead of buying.
Coordinate purchases
with other businesses.
Buying used instead of
new equipment.
Examples of Bootstrapping Methods
Business Angels
sold for $165M in less than 10 years
Crowd funding:


Stages of Funding


http://matchboxstudio.org/

"if someone comes to me asking for a loan for their business, I look at their personal credit history. If they can't manage their personal finances, they most certainly won't be able to manage a business"
Jerry Brand
Local Investor
Full transcript