Class 7
Doris Holt lecturer
How to get money via debt or equity
1. Friends and family
borrowing
giving a share of future profits
2. Self funded
employment
2nd mortgage
do it before you become self employed
credit cards-most common
3. Sweat equity
4. Angels and arch-angles
good for 5-50 thousand dollars
they want to see an outline of your business plan
5. Venture capitalists
take ownership of a business
currently-a lot of venture capital available
Timing – vc’s want to come in after friends and family and angels
Vc’s want 35-45% return
Vc's want out in 3-5 years
Need an exit strategy-to go public
Vc’s are looking for high risk ventures
Vc's want you to be indebted to them so you will be motivated to perform
Vc's want - 45-80% in ownership
6. Banks
don't care about return
must be low risk business
early stage loan not likely
hard to obtain without collateral
sba has loans-still must be guaranteed
7. Customers may finance you
8. Strategic alliance with successful company-like Microsoft
Executive summary
needs financial data
cash flows for 5 years forward
cash receipts - grants, sales, investments, loans
expenses
cash balances
financial projections should be realistic
monthly for first year
every 6 months for next year
annually after that
Do not show investors what they want to see
Instead show best, worst, most likely projections and expected values
3. Show letters of intent for potential sales (very convincing)
Example:
IF “a” happens = 10,000 10% likelihood of a happening
IF “b” happens = 500,000 50% likelihood of b happening
IF “c” happens = -100,000 40% likelihood of c happening
Expected value=.1*10000+.5*500000-.4*100000=211,000
Most likely and best case values=500,000
Worst case=-100,000
Stockholders agreement
can draw up any agreement for a piece of the company
HHHF CLASS PREPARATION CHECKLIST LOGISTICS DETERMINE
KNOW THE CLASSIFICATION SCHEME FOR MATTER RECALL FROM
LICEO SCIENTIFICO LEONARDO DA VINCI LICEO CLASSICO
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