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Financing Your Veteran-Owned Business
Mark L. Rockefeller CEO, StreetShares Inc.
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• Mark L. Rockefeller- 9 years Air Force- B.S. (finance), MBA, JD- Nation-building in Iraq- Microfinance advisor in Africa- (recovering) lawyer at Wall Street firm- Co-founded StreetShares.com in 2013
mrockefeller@streetshares.com
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Overview
1) The Threat to Veterans Entrepreneurship 2) Funding Options 3) Q & A/Discussion
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Post-WWII: Veterans return to start businesses fueled by
access to capital
131501320013250133001335013400134501350013550
1945 1950 1970
Number of Commercial Banks
Proprietary and Confidential
5
560058006000620064006600680070007200
2008 2010 2012
Number of Commercial Banks
Now: Veterans return to start businesses limited by access
to capital
Proprietary and Confidential
Why did they succeed?
Why are we at risk?
What’s the solution?
Use technology and look beyond the big banks
Then: Technology … and big banks
Libr. of Congress; public domain, no known restrictions
Now: Technology … and big banks
Brooklyn Trust Company, (cc) CC-BY-2.5
Technology has changed how we live
Take deposits
Cover Costs:OverheadBuildings
StaffRed tape
Make Profitable Loans
Then Now
Brooklyn Trust Company, (cc) CC-BY-2.5
But technology has not changed banking
Why are we still dependent on big banks?
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We’re not
And many, many more ….
Non-Profit/Micro-Lenders
What do they do? Lend small amounts to businesses that have a socially impactful mission.
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Short duration/very high rate lenders
What do they do? Give very fast, very high interest loans.
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Loan Matching Sites
What do they do? Online services that take your information and try to match you with multiple potential lenders
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Factoring/Merchant Cash Advance
Factoring: A business sells its accounts receivable to the lender
Merchant Cash Advance: A business agrees to give lender a percentage of future credit card sales for lump sum a payment.
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1) Donation-/Rewards-based Crowdfunding
2) Investment Crowdfunding
And many, many more…
Type 1 and Type 2 are subject to very different laws
Crowdfunding
Peer to Peer/Marketplace Lending
Online-based financing where groups of individuals can finance your loan request
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Debt or equity funding?
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- Must be paid back- May require collateral and/or guaranty
+ Control/Ownership+ Tax deductible+ Fixed payments+ Flexible
+ Less risk+ Equity investors may help you+ More cash to grow
- More expensive in the long run- Lose control- Limited availability- Difficult to obtain
+ No repayments+ Control/Ownership
- Time consuming- Tough competition- Strings attached
DEBT
Think credit cards - you ask for a loan & pay it back over time.
EQUITYIn exchange for funds, lenders get
a small piece of your business. As you succeed & prosper, so do they.
ALTERNATIVE
Early Stage Funding: 3 Basic Options
Friends, Family & Fools
Credit Cards Loan Sharks Banks Angel Investors Venture Capitalists Grants
Equity Crowdfunding
Friends, Family & Fools
These funding sources can be rewards based, requiring neither
interest nor shares of your business.
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Friends, Family & Fools
Peer lending
Crowdfunding
Early Stage Funding: Your Options
STAGE OF BUSINESS
EQUITY
CONCEPT LAUNCH EARLY GROWTH GROWTH
Idea & planning $0 in revenue
In business <1 year
<$25,000 in revenue
In business >1 year
>$25,000 in revenue
In business>2 years
>$100,000 in revenue
ALTERNATIVEGrants
DEBT
Angel Investors Venture CapitalistsAngel Investors Venture CapitalistsAngel Investors Venture Capitalists
GrantsGrants
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What are the options for taking out a loan?
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Bank loans MCA,Factoring, Short term
loans
Micro/Non-profitLenders
Social-lending
InterestRate 5%-20% 20%-300% Kiva: 0%
Accion: 9%-16% 5%-28%
Loan Size $100K-$5M Up to $250K Kiva: Up to $5KAccion: Up to $50K Up to $100K
Based on what? Numbers only Numbers only Whole picture Whole picture
Easy/Fast No Depends No Yes
How do I choose a lender?
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Source: Lending Club, Inc.
Lending Club has originated over $5B in consumer loans
2007 2014
“By 2025 . . . $1T in loans will be originated in this manner globally.”
Peer to Peer/Marketplace lending is booming
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Tell investors the whole picture
Investors compete to lend to you
Free to apply to post
Free to build pitch (takes about 15 minutes)
Loan offer after auction is complete
Don’t like loan offer, don’t accept it. No obligation.
No prepayment penalty
Spread the word about your business
Why not try social-lending
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Loan Amounts: $5,000 - $50,000 1, 3, or 5 year un-secured term loan Must have at least $25,000 in annual revenue Must be at least 1 year in business Reasonable personal credit Veterans get special treatment
About StreetShares Loans
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A few examples
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Which loan is best?
A business owner needs $1.3m to purchase a new building for his business doing light assembly of camera equipment for military vehicles.
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Which loan is best?
A business owner needs $1.3m to purchase a new building for his business doing light assembly of camera equipment for military vehicles.
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Potential Options: SBA loan, community banks
Which loan is best?
A defense manufacturer wants to borrow $45,000 to hire additional staff and increase marketing to pursue more contracts. He prefers to have the money within a week.
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Which loan is best?
A defense manufacturer wants to borrow $45,000 to hire additional staff and increase marketing to pursue more contracts. He prefers to have the money within a week.
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Best Option: Online Social Lending (StreetShares, LendingClub, Prosper)
Which financing is best?
A veteran has an idea for an innovative new product with commercial retail applications. It will cost $22,00 to develop and produce the first units.
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Which loan is best?
A veteran has an idea for an innovative new product with commercial retail applications. It will cost $22,00 to develop and produce the first units.
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Possible Options: Crowdfunding
Veteran Business is Back
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mrockefeller@streetshares.com
Twitter: @MarkRockefeller
LinkedIn: /markstreetshares
Visit us at Booth 724 to learn more and get a free “Veterans Business is Back” t-shirt
streetshares.com
Twitter: @StreetShares
Facebook: /StreetShares
LinkedIn: /StreetShares37
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