Determine Funding Needs Stephen Lawrence and Frank Moyes Graduate School of Business University of Colorado Boulder, CO

Course Outline

Course Outline – This Week

How much money do we need? Review cash flow statements Find periods with negative cash balances Schedule cash infusion(s) to eliminate negative balances Add safety cushion (~10-25%) Develop funding strategy E.g., staged funding “tranches”

Sources of Funds Equity funding Debt Non-traditional

Equity Funding Private Placement Friends, family, and fools Well to-do investors Angels “Professional” investors working alone Colorado Capital Alliance ( Venture Capitalists Most “expensive” form of financing Advantages and disadvantages

VC’s Ideal of an Entrepreneur Qualified in “hot” area Technically feasible and likely Compelling story, presentable Recognizes need for speed to IPO Good reputation, references Understands need for team Diligent, but flexible Gets along with investors Understands and accepts VC deals Is sought after by many VC’s Realistic expectations

Debt Credit cards Bank loans Typically want to make secured loans Second mortgage on house or property Can use equipment & facilities to secure loan Revolving lines of credit Investment banks Less “expensive” than equity Advantages and disadvantages

Nontraditional Funding Sources Customers Development Prepay Co-invest Vendors Leasing Factor receivables Other sources Advantages & disadvantages

Financial Plan Statements (appendices) Monthly Income (1 yr) Monthly Cash Flow (1 yr) Annual Income (5 yrs) Annual Balance Sheet (5 yrs) Annual Cash Flow (5 yrs) Written Financial Plan Introduction Financial Summary Financial Assumptions Funding Requirements Sources & Uses of Funds Business Risks

Ratio Analysis Compare to your industry Financial ratios Profitability Returns Understand differences Adjust financials as necessary