Founders' Hut - Smart Financing

Smart-Financing

© Copyright © 2015 Founders' Hut. All rights reserved. 1February 12, 2015

Timing is everything

• What do we aim to achieve on the short term?• Can we achieve these goals on our own?• Which way is the right way to go – money or partnership? • What is the valuation we expect to receive?

“Chase the vision, not the money; the money will end up following you.”

Tony Hsieh, Zappos CEO

2© Copyright © 2015 Founders' Hut. All rights reserved.February 12, 2015

The right investment

The right amount of money from the right investor:•Objectives: where do we want to be (R&D, Market Penetration, etc.)? •Market analysis: how much will we need to achieve these objectives? •Valuation: how much are we willing to let go of?•The right pocket: investors’ due diligence - personality, involvement, next financing?

•Preparation: financing round buildup


Objectives and Market Analysis

• Define our next milestone; could be commercial, R&D related, etc.• Analyze our needs – how can we reach there successfully? • A third party contractor?• Hire professional CEO/CTO?• What is the market price for the services and products we need?

• Prepare clear and readable tools which to showcase our problems and solutions using the investors’ money (business plan, financial model, market research, presentation, etc.)


Valuation

• Dilution – each investment dilutes our share in the company • Market standards - research:• Our company’s stage of development• Common practice for similar companies operating in our domain

• Think (way) ahead: • We need to keep our investors engaged • We should think on where we will be in the feature, holdings-wise


The right pocketFFF Funding

• Less efforts• Small amounts of money• Very high risk• Usually, high sensibility and low tolerance to sustain loss• High incentive to prove ourselfs • Emotional investment


The right pocketPrivate Investors (Angels)

• A lot of efforts• Small amounts of money• Usually professional investors, but not always (money seeking

investment)• Sometimes - low tolerance to loss• No commitment for future investments• Short period for making decisionsIf you do – use one representative for all Angels


The right pocketVenture Capital Firms (VCs)

• Significant amount of money• Professional investors• High tolerance to loss• Usually committed to future investments• Long period for making decisions (~6 months)• Complicated transactions (due diligence)

If you do – try to divide among several VCs, high stakes


The right pocketStrategic Investors

• Very similar to VCs• With even gather financial capabilities • Interested in the technology of the company• Want ‘stay close’ to the company• Usually not RoI oriented

If you do - limit their access and information rights

- limit their rights in the event of an M&A


The right pocketVenture Lending

• Companies with revenues

• Mixture of loan with interest and equity (usually warrants)

• Collateral (usually IP) dependent

• Limitations on the conduct of the company’s business

• Sometimes – ask for a right to invest

Used as/for:

• Capital growth: round replacements, M&A activity, working capital

• Borrowings against accounts receivable item on the balance sheet

• Equipment financing


The right pocketCrowd funding • Usually no equity• Laws - WIP• Usually small amounts

OCS

• Governmental

• IP restrictions

• Usually joins an investment

Incubators• Usually OCS backed

• Financial investment and access to facilities

• Not always committed to future rounds

• Sometimes located at the suborns

Investment based Accelerators

• Small amount of money• 10%-20% of equity• Connections & mentors • Facilities


Founders' Hut - Smart Financing

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