1. Funding Opportunities/Pathways 2017 VACE Entrepreneurs’ Bootcamp
October 19, 2017

2. The Von Allmen Center for Entrepreneurship
Warren Nash (on campus – ASTeCC)
Executive Director, Von Allmen Center
Mariam Gorjian (on campus – ASTeCC)
Assistant Director, Von Allmen Center
Eric Hartman (downtown, Commerce Lexington Building)
Director, Office of the KY Innovation Network

3. Von Allmen Center for Entrepreneurship
Services
Clients
Business Planning
Assess IP/commercialization potential
Conduct market research & competitive analysis
Assist in business plan development and financial analysis
Connections
Provide ongoing management assistance
Refer clients to vetted service providers
Facilitate access to incubator space
Funding
Develop funding roadmap
Facilitate access to state and private funding resources
Guide investor presentation development
Faculty, clinicians & staff
Students
Community entrepreneurs
gatton.uky.edu/vace

4. Startup Company Funding
Creation
Pre-Revenue
Breakeven
Growth
“Valley of Death”
Idea
IP Protection
Prototype
Business Plan
Beta Customers
Sales/Marketing
Paying Customers
Growth Plan
1 – 10+ years

5. Funding Roadmap Creation Pre-Revenue Breakeven Growth
Friends/Family/Founders
SBIRs/STTRs & State Match
State Investment Funds
Crowdfunding
Angel Investors
Banks
Strategic Partners
Venture Capital
Customer Sales
“Valley of Death”
Tax Credits
Idea
IP Protection
Prototype
Business Plan
Beta Customers
Sales/Marketing
Paying Customers
Growth Plan

6. Types of Financing Federal & state agencies Foundations Banks
Grants
Loans/Debt
Investment/Equity
Revenue
Sources
Federal & state agencies
Foundations
Banks
Credit cards
Friends & family
Angel investors
Venture capital
State programs
Customer Sales
Pros
No payback
Non-dilutive
Keep control
Shared risk
“Smart” money
Nothing better
Cons
Lengthy process
Highly competitive
Usually technology based
Payback with interest
Security required
Dilutive
Give up some control
None

7. Early stage programs / options
Launch Programs
BGA Launch Grant / Launch Fund; Cherub Fund
Pitch Competitions – 5 Across, etc.
Incubators / Accelerators
UpTech, XLerate Health, Awesome Fellowship

8. Federal & state grants
Funding Opportunities

9. Federal SBIR/STTR Grants
Small Business innovation Research (SBIR)
Set-aside program for small business concerns to engage in federal R&D – with potential for commercialization
2.5% of the extramural research budget for all agencies with a budget greater than $100MM per year
Small Business Technology Transfer (STTR)
Set-aside program to facilitate cooperative R&D between small business concerns and U.S. research institutions – with potential for commercialization
0.3% of the extramural research budget for all agencies with a budget greater than $1B per year

10. SBIR/STTR Three-Phase Program
Phase I
Feasibility Study, Proof of Concept
Awards normally do not exceed $150,000 for 6 months
Phase II
Full Research and Development Effort
Awards normally do not exceed $1,000,000 for 2 years
Phase III
The SBIR/STTR program does not fund Phase III.
Commercialization Stage
External Funding [non-SBIR/STTR]
In some Federal Agencies Phase III may involve follow-on non-SBIR/STTR funded R&D or production contracts for products, processes or services intended for use by the U.S. Government.

11. SBIR/STTR Major Differences
PI Employment
SBIR – PI primary employment (51+%) must be with the small business
STTR – PI employment not specified; e.g., could be faculty
Research Partners
STTR – requires at least 30% work conducted by partnering research institution; e.g., university or federal lab
SBIR – university partnership permitted, but not required

12. SBIR/STTR Participating Agencies
Department of Agriculture
National Institute of Standards and Technology
National Oceanic and Atmospheric Administration
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Transportation
Environmental Protection Agency
National Aeronautics and Space Administration
National Science Foundation
Department of Defense
Department of Energy
Department of Health and Human Services
National Aeronautics & Space Administration
National Science Foundation

13. Kentucky SBIR/STTR Assistance Program
Phase Zero – $4,000 grant to assist Kentucky-based new and existing small businesses, and Kentucky's college and university faculty with the preparation of high-quality, competitive Phase I proposals for submission to participating federal SBIR and STTR programs.
Phase Double Zero – $4,000 grant to assist Kentucky-based new and existing small businesses with the preparation of high-quality, competitive Phase II proposals for submission to participating federal SBIR and STTR programs. The applicant must have previously received a Phase I Federal Grant to be eligible for a Phase Double Zero grant

14. Kentucky SBIR/STTR Matching Program
Today Kentucky is the only state to provide matching funds for both Phase I and Phase II federal SBIR/STTR grants. This program is undergoing some major changes.
Phase I
Match up to 100% but not to exceed $150,000
Phase II
Years 1 & 2 – match up to 100% but not to exceed $500,000
Year 2 – requires matching private funds

15. Research and Development Excellence Program
The Research and Development Excellence Program (RDE) targets achieving excellence in science and engineering in Kentucky, through innovation and technology development in existing and emerging areas of research, by making proactive investments through a peer-reviewed competitive selection process.
Solicitation is usually issued in the Fall.  
Awards are up to $50K per year.
Note that beginning Fall 2016, the Kentucky Commercialization Fund (COMM) was merged under KSEF's RDE Awards (there is no longer a be separate solicitation). 

16. Investment / equity
Funding Opportunities

17. What is Investment Funding?
Dilutive Capital
Sell Equity for Cash
Investors
Friends and Family
High net worth individuals, SEC Accredited
Investors Expectations
Return on Investment (Exit)
Influence / Mentor Relationship

18. Friends, Family, Fools Founders
57% of startups are funded by personal loans and credit
38% percent receive funding from family and friends
SOURCE: - “Where Startup Funding Really Comes From”

19. “Accredited” Investors
SEC restricts investments in private firms to the following:
a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person
a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000
a bank, insurance company, registered investment company, business development company, or small business investment company
a business in which all the equity owners are accredited investors
a trust with assets in excess of $5 million

20. Private Investors ** Angel groups have in common…VC
Stage
Seed / Early-stage
Early-revenue & growth
Investment (per deal)
$25K - $100K **
$2-5 million
Source of funds
Personal
Institutional & wealthy individuals
Investment decision
Individual
Professional managers
Investment type
Equity
Control
Limited
Active
** Angel groups have in common…
Larger investments as a group ($100K - $500K)
Shared due diligence
Diverse backgrounds of members
Sidecar funds mitigate risks

21. Angel Expectations Scalable business opportunity
Team that has the ability to execute
Differentiated product/service with…
Strong IP position and business model
and/or
Proven market traction – working prototype, early customers/revenue, sustainable business model
Potential for a 3x-10x return to investors within 2-7 year period

22. Valuation
The process of determining the current worth of an asset or company
For a public company…market capitalization; i.e., # of outstanding shares X share price
For a startup company…what the entrepreneur negotiates with investors
Pre-money: the value before investment
Post-money: value after investment (pre-money + investment)
Investor equity: investment ÷ post-money

23. Example Pre-money Valuation Investment Post-money Valuation
Investor Equity
Founders Equity
$1,000,000
$250,000
$1,250,000
20%
80%
Company gets:
Funding needed to start/grow business
Advice/mentoring from experienced investors
Investors get:
Opportunity to profit from company success
Company and investors share in success/risk of new business opportunity

24. Valuation Drivers - Value Creation is directly proportional to Risk Reduction
Non-Dilutive Funding
Revenue
Experienced Team
Intellectual Property
Global Market Opportunity
drive valuation up
Regulatory Process
Crowded Market
Time to Market
Sales Cycle
drive valuation down

25. Established in 2004
50+ accredited investors
Provides early stage equity capital to start-up and/or expanding companies
Helps commercialize research conducted at Kentucky universities
Promotes and enhances entrepreneurship in the Kentucky business community
Helps create economic growth and jobs in the Bluegrass
Provides members with an attractive financial return

26. State Co-Investment Programs
Kentucky has two state investment funds that co-invest with private investors in early-stage companies based in the Commonwealth. These funds typically follow the terms negotiated with private investors.
Kentucky Enterprise Fund (KEF) is a state-sponsored, venture capital-like fund that invests in Kentucky-based seed and early stage technology companies. Initial investment many times is in the form of convertible debt.
Commonwealth Seed Capital, LLC, (CSC) is an independent fund that makes debt or equity investments in early-stage Kentucky business entities to facilitate the commercialization of innovative ideas and technologies.

27. Regional Angel Groups & VCs
Angel Groups & Early-Stage Investors
Bluegrass Angels & Funds, Lexington
Commonwealth Seed Capital
Kentucky Enterprise Fund
Kentucky Angel Investor Network
Connetic Fund, Northern Kentucky
Enterprise Angels & Fund, Louisville
Lincoln Trail Venture Group, Elizabethtown
Marshall Fund, Owensboro
Sequel Fund, Southern Indiana/Louisville
Tri-State Angels, Ashland
Queen City Angels, Cincinnati
Yearling Fund, Louisville
M25 Ventures, Chicago
Venture Capital Funds
Allos Ventures, Indianapolis/Cincinnati
Blue Chip Ventures, Cincinnati
Chrysalis Ventures, Louisville
Kentucky Highlands Investment, London
River Cities Capital Funds, Cincinnati
Triathlon Medical Ventures, Cincinnati
Lewis & Clark Ventures, St. Louis

28. Kentucky Angel Investors’ Network
The Kentucky Angel Investors’ Network (KYAN), funded by KCED, is a virtual network currently comprised of 93 accredited angel investors from across the Commonwealth and the region.
KYAN meets the last Tuesday of every month via the Go To Meeting online platform to hear company presentations.
To date 36 company presentations from across the state since January Three companies have presented two different rounds of funding.
All of these companies have received follow-up interest from Network investors, with approximately 33% of these companies have received additional investment of close to approximately $1M.
17 company referrals were made to the KYIN Offices/SBDC/KCED.
One regional angel fund M25 Group (based in Chicago) presented to the Network in May
In October SPARK/KYAN Investors and Entrepreneurs Summit was organized and held in Lexington with 113 attendees.
Presentations featuring KYAN were made in Lewis County and Mayfield, Kentucky.
KYAN was prominently featured in both the March and June issues of the Lane Report -
Article titled - A Value Proposition for Venture Capital
Article about KYIN client Hippo Software Manger titled – Entrepreneurship: Kentucky’s Venture Capital Trail

29. crowdfunding
Funding Opportunities

30. Crowdfunding – Donation Based
Donation-based crowdfunding gives people and creative projects the opportunity to raise money via online donations or pre-purchasing of products or experiences
Kickstarter
Projects must fit within certain categories - personal interests & charities are not allowed
All-or-nothing funding policy
Kickstarter takes 5% fee for successfully funded projects
Indiegogo
Looser guidelines – almost any type of project
Flexible funding allows creators to keep the funds they have raised
Indiegogo takes 4% fee for successfully funded projects

31. Funding Roadmap Creation Pre-Revenue Breakeven Growth
Friends/Family/Founders
SBIRs/STTRs & State Match
State Investment Funds
Crowdfunding
Angel Investors
Banks
Strategic Partners
Venture Capital
Customer Sales
“Valley of Death”
Tax Credits
Idea
IP Protection
Prototype
Business Plan
Beta Customers
Sales/Marketing
Paying Customers
Growth Plan