1. Assessing the Cost of Capital
BioWednesday
October 7th 2010
Oscar Jazdowski

2. Agenda Silicon Valley Bank overview Available forms of capital
Sourcing equity
Sourcing other forms of capital
Route to capital
Closing remarks

3. Silicon Valley Bank overview

4. Available forms of capital
Equity:
Friends – Family – Fools
Business Angels
Government grants / Lottery funding / Princes Trust
Institutional Venture Capital
Other sources of capital:
Investments Partnerships/JVs/Distribution Agreements
Debt:
Venture debt
Working capital
Acquisition financing/Term Debt/Re-Caps

5. Sourcing equity
It is critical to understand what every level of capital expects as a return:
Friends and Family:
Not really in it for the money… or are they?
Are they prepared to be diluted away?
Return Expectations: 0% – 0%
Business Angels:
Individuals generally investing between £10,000 - £100,000 in earlier stage investments
Value add or trouble ahead?
Return Expectations: 5% – 20%   

6. Sourcing equity Institutional Venture Capital: Pros:
Expertise and experience
Network
Credibility
Higher return Expectations: 30% +
Cons:
Reduction of personal equity stake
Control issues
Increased reporting / targets   

7. Sourcing other forms of capital
Partnerships/JVs/Distribution Agreements:
Different investment criteria and return expectations
Debt: Stable or unstable
Return expectations - none to little dilution:
Venture Debt: 12% – 18%
Working Capital: 6% - 8%
Acquisition Finance: 10% - 18%   

8. Sourcing other forms of capital  

9. Route to capital Preferred access to capital:
Customers
Joint Ventures/Partnerships
Debt
Equity
Typical access to capital:

10. Closing remarks