bootstraping and financing (founders institute - 16.8.16)

BOOTSTRAPPING AND FUNDRAISING

Matt Ruttermatt@kingdomparadigm.org

TONIGHT’S TOPICS

➤ What are the various ways to capitalize your company in the very beginning?

➤ How do you ask friends and family for money to support you?

➤ What are the advantages and disadvantages of bootstrapping?

➤ What do local angel investors require before making an investment?

➤ How do you develop a target list of appropriate angel investors?

➤ What materials are required to raise angel investment?

➤ What milestones should you look to achieve next?

➤ How do you set your six month and twelve month objectives in the very beginning?

➤ How should you think about selling the business or exiting the business?

BEGINNING BALANCE CASH FLOW

MonthProduct

ReleasedNo. Products

Sold Profit MarginMonthly

ExpensesTotal Accrued

ExpensesMonthly Revenue

Total Accrued Revenue

Monthly Difference Total Difference Cash

1-Dec-15 No Product - 18 825$ 825$ 191$ 191$ (634)$ (5,634)$ 1-Jan-16 No Product - 18 334$ 1,159$ 635$ 826$ 301$ (5,333)$ 1-Feb-16 No Product - 18 1,230$ 2,389$ 1,258$ 2,084$ 28$ (5,306)$ 1-Mar-16 No Product - 18 2,783$ 5,172$ 131$ 2,215$ (2,652)$ (7,957)$ 7,500$ 1-Apr-16 No Product - 18 837$ 6,009$ 200$ 2,415$ (637)$ (8,594)$ 4,848$

1-May-16 No Product - 18 197$ 6,206$ 1,519$ 3,934$ 1,322$ (7,272)$ 4,212$ 1-Jun-16 No Product - 18 238$ 6,444$ -$ 3,934$ (238)$ (7,510)$ 5,533$ 1-Jul-16 No Product - 18 1,700$ 8,144$ -$ 3,934$ (1,700)$ (9,210)$ 5,295$

1-Aug-16 Product 1 20 18 1,700$ 9,844$ 360$ 4,294$ (1,340)$ (10,550)$ 3,595$ 1-Sep-16 Product 1 40 18 1,700$ 11,544$ 720$ 5,014$ (980)$ (11,530)$ 2,255$ 1-Oct-16 Product 1 60 19 1,700$ 13,244$ 1,140$ 6,154$ (560)$ (12,090)$ 1,275$ 1-Nov-16 Product 1 80 19 1,700$ 14,944$ 1,520$ 7,674$ (180)$ (12,270)$ 715$ 1-Dec-16 Product 1 100 20 1,800$ 16,744$ 2,000$ 9,674$ 200$ (12,070)$ 535$ 1-Jan-17 Product 1 100 20 1,800$ 18,544$ 2,000$ 11,674$ 200$ (11,870)$ 735$ 1-Feb-17 Product 1 100 20 1,800$ 20,344$ 2,000$ 13,674$ 200$ (11,670)$ 935$ 1-Mar-17 Product 1 120 20 1,800$ 22,144$ 2,400$ 16,074$ 600$ (11,070)$ 1,135$ 1-Apr-17 Product 2 120 20 1,800$ 23,944$ 2,400$ 18,474$ 600$ (10,470)$ 1,735$

1-May-17 Product 2 120 20 1,800$ 25,744$ 2,400$ 20,874$ 600$ (9,870)$ 2,335$ 1-Jun-17 Product 2 120 20 2,050$ 27,794$ 2,400$ 23,274$ 350$ (9,520)$ 2,935$ 1-Jul-17 Product 2 120 20 2,050$ 29,844$ 2,400$ 25,674$ 350$ (9,170)$ 3,285$

1-Aug-17 Product 2 130 20 2,050$ 31,894$ 2,600$ 28,274$ 550$ (8,620)$ 3,635$ 1-Sep-17 Product 2 130 20 2,050$ 33,944$ 2,600$ 30,874$ 550$ (8,070)$ 4,185$ 1-Oct-17 Product 2 130 20 2,050$ 35,994$ 2,600$ 33,474$ 550$ (7,520)$ 4,735$ 1-Nov-17 Product 3 150 20 2,063$ 38,057$ 3,000$ 36,474$ 938$ (6,583)$ 5,285$ 1-Dec-17 Product 3 150 20 2,063$ 40,119$ 3,000$ 39,474$ 938$ (5,645)$ 6,223$ 1-Jan-18 Product 3 150 20 2,063$ 42,182$ 3,000$ 42,474$ 938$ (4,708)$ 7,160$ 1-Feb-18 Product 3 150 20 2,063$ 44,244$ 3,000$ 45,474$ 938$ (3,770)$ 8,098$ 1-Mar-18 Product 3 170 20 2,063$ 46,307$ 3,400$ 48,874$ 1,338$ (2,433)$ 9,035$ 1-Apr-18 Product 3 170 20 2,063$ 48,369$ 3,400$ 52,274$ 1,338$ (1,095)$ 10,373$

1-May-18 Product 3 170 20 2,063$ 50,432$ 3,400$ 55,674$ 1,338$ 242$ 11,710$ 1-Jun-18 Product 4 200 20 2,063$ 52,494$ 4,000$ 59,674$ 1,938$ 2,180$ 13,048$ 1-Jul-18 Product 4 200 20 2,063$ 54,557$ 4,000$ 63,674$ 1,938$ 4,117$ 14,985$

1-Aug-18 Product 4 200 20 2,063$ 56,619$ 4,000$ 67,674$ 1,938$ 6,055$ 16,923$ 1-Sep-18 Product 4 200 20 2,063$ 58,682$ 4,000$ 71,674$ 1,938$ 7,992$ 18,860$ 1-Oct-18 Product 4 200 20 2,063$ 60,744$ 4,000$ 75,674$ 1,938$ 9,930$ 20,798$ 1-Nov-18 Product 4 200 20 2,063$ 62,807$ 4,000$ 79,674$ 1,938$ 11,867$ 22,735$

WAYS TO CAPITALIZE YOUR BUSINESS

• Personal Capital • Debt-Based Investment • Equity-Based Investment

HOW TO APPROACH FRIENDS AND FAMILY FOR FUNDING

•Over 50% of entrepreneurs use “friends and family” funding

•“Yes” vs. Check

•Be Intentional

CHOOSE YOUR INVESTOR

•Knowledge and Experience

•Equal Expectations

•Connections

DEMONSTRATE PASSION AND DUE DILIGENCE

•Your Investment

•Customer Development Results

•MVP

•Business Plan or Model

•Professionalism

KNOW HOW MUCH YOU NEED

• Initial Capital

•Working Capital

•Home Capital

ASK FOR THE RIGHT MONEY

•Debt

•Equity

•Convertible Note

•Free Usage

•Donations

MAKE A PLAN

•Payment Plan • Grace Period

•Official Agreement

•“What If?”

•Don’t take more than they can afford to lose

BOOTSTRAP: IS THIS

REALLY A GOOD IDEA?

BOOTSTRAPPING ADVANTAGES

• Freedom • Ownership • Focus

BOOTSTRAPPING DISADVANTAGES

• Slow • Limited Opportunities • Personal Risk

WHAT DO ANGELS WANT TO SEE?

1. DEFINE A SPECIFIC TARGET CUSTOMER WITH A SPECIFIC PROBLEM

2. PROVE THE TARGET CUSTOMER IS WILLING TO PAY FOR YOUR SOLUTION

3. FORECAST A CLEAR ROI OR EXIT STRATEGY

HUMILITY

WHAT DO ANGELS WANT TO SEE?

•Honesty

•Definite target segment with specific problem

•Proof of willingness to pay for product/service

•Clear forecast for ROI or exit strategy

SELECT YOUR INVESTOR

Donors

Crowdfunding

Frien

ds and Fa

mily

Banks /

Micr

ofinan

ce

Impac

t Inve

stors

Angel Inve

stors

State /

Corpora

te Prog

rams

Venture

Capita

l

Intentions

Financial Expectations

Social Expectations

Risk

Ownership

Investment Stage

HOW MUCH MONEY DO YOU NEED?

HOW MUCH OWNERSHIP DO YOU KEEP?

HOW QUICKLY DO YOU WANT TO GROW?

HOW LONG WILL YOU BE INVOLVED?

HOW TO FIND AN ANGEL

•AngelLabs

•Startup Grind

•Make a Meeting Happen

MATERIALS TO PREPARE

•Pitch Deck (10-15 slides)

•Written Strategy

•Tangible and Tested MVP

•Proof of Market Validation

MILESTONES

•Cash Flow Positive

•Certification or Authorization

• IP Protection

•Customer Acquisition or Market Share

6-MONTH AND 12-MONTH OBJECTIVES

•Financial Needs

•Customer Validation Needs

•Technical Needs

•Legal Needs

•Publicity Needs

HOW BIG IS YOUR CALLING?

THINGS TO KNOW

• Every Investor Needs An Exit

• Know Your Calling

Matt Rutter matt@kingdomparadigm.org

+(373) 60 735 102 Chișinău, Moldova

ASEM, str. Bănulescu-Bodoni 61