The Quest for Capital! Lesson 13 Slide 13A

What Does That Mean? TermDefinition financial capitalmoney used by entrepreneurs and businesses to buy what they need to produce their products or to provide their services. seed moneyfinancial capital given by family or friends to an entrepreneur to start a business or fund the very early stages of product development. angel capitalmoney that fills the gap between seed funding and formal venture capital. crowdfundingfunding a project or venture by raising small amounts of money from many people via an online service. Slide 13B

What Does That Mean? TermDefinition venture capitalVC; money provided by investors to startup firms with long- term growth potential. private equityequity (ownership) in a company that is not publicly traded on a stock exchange. private company a company whose ownership is private; its shares are not publically traded. public companya company which has issued stock that is traded on a stock exchange. Slide 13C

What Does That Mean? Slide 13D TermDefinition exit strategy the planned method by which a venture capitalist intends to recoup the money they invested in a company. revenueincome from the sale of goods or services. initial public offering IPO; the first sale of stock by a company to the general public; the process by which a private company converts to a publicly traded company. pitch deck slide presentation given to a venture capital firm with the goal of obtaining capital.

Reminder Slide 13E  Remember to visit ards/ ards/ to access the online flashcards!

Lesson 13 Objectives  Define financial capital.  List four sources of capital to fund a startup.  Explain how an investor recovers their investment in a startup.  Create a pitch deck for presentation to venture capitalists.  Write a basic 4P marketing plan for a product. Slide 13F

Question Q: What happens to an innovation if there is no money available to complete product development and launch the business? Slide 13G a. the innovator cannot complete the project and is forced to give up b. the business has a weak start and fails c. another innovator with a similar product or service and beats them to the market d. any of the above

Slide 13H Capital = $  Seed money  Crowdfunding (i.e.. Indiegogo, Kickstarter)  Angel capital (angels and superangels, investing agendas)

Slide 13I Venture Capital  “VC” is essential to 21 st century innovation  Direct investment in a startup company  Venture capitalists take equity interest and often some level of managerial control  Venture Capital vs. Private Equity

Exit Strategies  sets out terms of how the investor will recoup their investment in the startup + profit  strategies include cashing out on sale to or merger of startup with another company  IPO (Initial Public Offering) Slide 13J

The Big Picture Slide 13K Availability of capital is critical for innovation and the growth of commerce. Types and sources of capital are crowdfunding, angel capital, SBA guaranteed business loans, venture capital, and IPOs. Venture capitalists are startup investors who have an interest or expertise in a particular industry. Private equity firms work with established companies to raise money and improve performance through a merger with or acquisition of another company. Angels, venture capitalists, and private equity firms take an equity interest (shares) in a company. They accept the risk of loss, but hope to be rewarded with a high return on their investment (ROI). An IPO is the process by which a privately held company converts to a company whose shares are publicly traded on a stock exchange. An IPO raises a lot of capital for the growth of the company, and often a high ROI for investors.

Ponder and Predict  You hear the words “Wall Street” pretty often – in the news, or in movies and TV shows. What is Wall Street? Is it a real street? Where is it, and what’s that wall about? Slide 13L