Benya beyond vc-jbnf'13

Benyamin Lichtenstein, Ph.D.

Prof. of Entrepreneurship and Management

University of Massachusetts, Boston

Jerusalem Business Network Forum – January, 2013

© Benyamin Lichtenstein – Please cite source, and do not reproduce without permission

Big Belly – case study

Solar Trash Compacting System

Big Belly – Start-up Funding

2003: Opportunity is huge

Self-fund + Biz Competitions

Field research Customer, order… Worked like crazy; shipped 1st product.

Year 2 funding – bootstrapping Parents @ $12,500;

Former internship boss @ $25,000

Biz Competitions $20,000

Funds 20 more units

Year 3 – Venture Capital

How are YOU funding your venture?

Goals for this presentation

1. Well-known funding approaches

2. Alternative funding approaches

3. Unique funding approaches to consider

4. Bootstrapping

5. Research on Venture Capital

6. Your perspectives, questions, etc.

Venture Capital

Benefits!

But Challenges….

0.1% of companies receive V.C. $

V.C. funded more likely to FAIL

Friends, Family & ‘Fools’

Think BROADLY about social networks

Self-Funding can include:

Salary from another job

Life insurance – cash value

Investments – low-interest margin loans

Retirement – borrow up to 50% in US, or short-term loans from IRA

Credit cards…

Angel Investors, Angel groups

Bank Loans? Private Equity?

2. Alternative Funding Methods

Usually for Established Businesses

Factoring – $$ for Accounts Payable

Equipment Sale-Leaseback

Venture Debt

Interest only, then principle

Equity only upon sale

Micro-Loans – up to $100,000

3. Unique Ideas to consider:

Crowdsourcing

Customer Capital

Strategic Partners

Crowdsourcing

e.g. Kickstarter.com

‘Crowd of Backers’

100% of goal, or nothing

Product + prizes

Successful tact ics

Video = increases 114%

Updates every five days

= 400% more $

Customer Capital

Customer/ Client as investor

Exchange resource for immediate use

Client as ‘incubator’

First customers as beta test sites

Relationships – trust, honesty

Feedback early and fast

Introductions to other target customers

Strategic Partnerships

Collaborations for mutual benefit

‘Spreadsheet benefits’

Expand business models by:

Strategic Partnerships

Expanding Markets

Marketing / Awareness / Information

More Targets through

○ e.g. Niche Mass Market

○ Local – National – International

○ B2B / B2C / Government? Institutions?

Community?

Strategic Partnerships

Increasing Strategic Benefits

Complementary services

Innovation resources, markets

Expertise opportunities

Strategic Partnerships

Reducing costs, Gaining revenues

Acquisition of resources, activities

Optimization, Economy of scale

Reduction of risk and uncertainty

4. Bootstrapping

Quick revenue

Sony

3M

Service-based first, then develop product

Allows time to match

customer needs

4. Bootstrapping

Cash Flow improvements

Customer – incentives to speed up payments

Suppliers – slow down payables, special terms

Resources – beg, borrow, share

Labor Costs

Temp workers

Defer salary

4. Bootstrapping

Gain Traction

Legitimize Business

to investors

5. Getting V.C. – Research

Increase likelihood and amount:

Market = bigger; Competition = less strong

Industry experience

Later stage: proven biz model & management

Bootstrapping: more = better

Media mentions: “sense-giving”

Easy to work with team (!)

5. Getting V.C. – Your Findings

Your experiences

Other examples

Comments / Questions

Thank you!

Benyamin Lichtenstein –

benyamin.bml@gmail.com