START UP FINANCE

LEARNING OBEJCTIVE Start up Introduction to start up Finance Basic Financing patterns Pitch Presentation Modes of Financing for Start ups Bootstrapping Angel Investors Venture Capital Funds Start up India

Start up

START UP Are you ready ? It’s a big commitment It needs Energy and Passion It needs lots of time It needs patience It needs financial sources It will need lot of friends and supporters It will need mentor who can keep our person positive Are you ready ? To guys before we go ahead with financing, its worth to stop and think are we ready . . . . . . .

START UP Objective Product Business

About our objective Why are we doing business – what do we want to achieve Money ? Fame ? Lifestyle ? Change ? How long are we ready to commit ? What level of risk are we ready to take ? Are we mentally and Physically prepared to deal with the stress of business are we ready . . . . . . .

Business and Product Can the idea be converted into a product Ideas done sell – product does Can the product be monetized Does the society is in need of the Product / Service How big can be the market Do we have it us to build the system that needs to make this product. What will be the level of competition are we ready . . . . . . .

START UP FINANCE Startup financing means some initial infusion of money needed to turn an idea (by starting a business) into reality. While starting out, big lenders like banks etc. are not interested in a startup business. The reason is that when you are just starting out, you're not at the point yet where a traditional lender or investor would be interested in you. So that leaves one with the option of selling some assets, borrowing against one’s home, asking loved ones i.e. family and friends for loans etc. But, that involves a lot of risk, including the risk of bankruptcy and strained relationships with friends and family. So, the pertinent question is how to keep loans from family and friends strictly businesslike. This is the hard part behind starting a business -- putting so much at risk. But doing so is essential. It's what sets entrepreneurs apart from people who collect regular salaries as employees. A good way to get success in the field of entrepreneurship is to speed up initial operations as quickly as possible to get to the point where outside investors can see and feel the business venture, as well as understand that a person has taken some risk reaching it to that level.

Financing Personal Financing Personal Credit Lines Family and Friends Micro Loans Crowd Funding Peer to Peer Lending Vendor Financing Purchase order Financing Factoring Accounts Receivable

PITCH PRESENTATION Pitch deck presentation is a short and brief presentation (not more than 20 minutes) to investors explaining about the prospects of the company and why they should invest into the startup business. So, pitch deck presentation is a brief presentation basically using PowerPoint to provide a quick overview of business plan and convincing the investors to put some money into the business. Pitch presentation can be made either during face to face meetings or online meetings with potential investors, customers, partners, and co-founders.

PITCH PRESENTATION https://pitchdeck.improvepresentation.com/best-pitch-decks

PITCH PRESENTATION Introduction Projections Team Competitions Problem Business Model Solution Financing Marketing / Sales

Financing For Start-ups Venture Capital Angel Investors Boot Strapping

Bootstrapping DOING MORE WITH LESS Technique for getting by on as few resources as possible and using other people’s resources whenever feasible Bootstrapping tips: Hire as few employees as possible Lease or share everything Use other people’s money

Yard Sale, Auction, On the Side Consulting Bootstrapping Modes of Finance Factoring Trade Credit Leasing and Mortgage Customer Credit Yard Sale, Auction, On the Side Consulting

Exposure to Alternatives Bootstrapping Advantages of Bootstrapping Bootstrapping Control Efficiency Involvement More time to Work More profit to you Exposure to Alternatives

Angel Investors Angel investors invest in small startups or entrepreneurs. Often, angel investors are among an entrepreneur's family and friends. Invest money in seed, startup and early stage companies Invest time in entrepreneurs and their companies Business acumen Mentoring and coaching Serve on boards Make business introductions

Angel Investors They are successful and often retired entrepreneurs or highly successful company executive They invest both – “Time and Money” Time – Because they act as a mentor and guide the company at each and every stage They use there contacts to get business going – like they get supplier and customers or various vendors.

Angel Investors Entrepreneur Money Time Mentor Deep Pockets Serve on Boards Entrepreneur Not much for profits Money Deep Pockets Time Business Acumen Mentor

Venture Capitalist Evolution 1970 – GOI set up a committee to tackle the issue of lack of funding to start ups 1988 – Controller of Capital Issue – Was very restrictive 1995 – Abolition of CCI – Foreign finance companies were allowed to invest in India 1996 – New set of guidelines were issued to counter the charge that it favoured foreign players and did not give any inventive to the domestic individuals 1997 – IT revolution got the venture capital of the hook – however dotcom bust left many crying and the surviving once started financing at much later stage – leaving risky see capital and start up financing to a few daring ones.

Venture Capitalist Definition Venture Capital is “Equity support to Fund a new concept that involve a higher risk and at the same time, have a high growth and profit. Venture Capital is “It broadly implies an investments of long term, equity finance in high risk projects with high rewards possibilities’’

Venture Capitalist Definition Venture Capital is “Equity support to Fund a new concept that involve a higher risk and at the same time, have a high growth and profit. Venture Capital is “It broadly implies an investments of long term, equity finance in high risk projects with high rewards possibilities’’

Venture Capitalist Features Long Term Horizon Lack of Liquidity High Risk High Tech Equity Participation Participation in Management

Venture Capitalist Structure General Partners Limited Partners (INVESTORS) (Public pension Funds, Corporate Pension Funds, Insurance Companies, High Net worth Individuals, Foundations, Endowments, Sovereign wealth funds VENTURE CAPITAL FUND (TRUST / COMPANY / LIMITED LIABILITY) Investments Investments Investments

Venture Capitalist Structure Offshore Structure Offshore Funds Unified Structure Domestic Funds Structured

Venture Capitalist Advantages Long Term Equity Finance Business Partners – shares the risk and the reward Advice and assistance Contacts Additional funding – to scale up the operations IPO’s Trade sale

Venture Capitalist Advantages Financial Stage Period (Funds locked in   Financial Stage Period (Funds locked in years) Risk Perception Activity to be financed Seed Money 7-10 Extreme For supporting a concept or idea or R&D for product development Start Up 5-9 Very High Initializing prototypes operations or developing 1st Stage 3-7 High Start commercials marketing production and 2nd Stage 3-5 Sufficiently high Expand market and growing working capital need 3rd Stage 1-3 Medium Market expansion, acquisition & product development for profit making company 4th stage Low Facilitating public issue

Venture Capitalist Advantages Deal Origination Screening Due Diligence Deal Structuring Post investment Activity Exit Plan

Start up - India Startup India scheme was initiated by the Government of India on 16th of January, 2016. The definition of startup was provided which is applicable only in case of Government Schemes. Startup means an entity, incorporated or registered in India:   Not prior to five years, With annual turnover not exceeding Rs 25 crore in any preceding financial year, and Working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

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