Secrets of FundingRichard M. Sneider, Ph.D.Launch Technology, Inc.Concord, MA

SEED PresentationJanuary 28, 2013

IntroductionEntrepreneurial BackgroundCompany Stages10 Keys to FundingSources of FundingTime to RepositionSummaryDiscussion

Outline

Your name Briefly describe your existing or

planned startup, if any Reason for attending

Introduction

Entrepreneurial Background Sneider & Associates, LTD - Health Care Technology

Boston University, School of Management - Assistant Professor

Next Generation Systems - Text to Speech Applications

Launch Technology, Inc. - Seed Investing and Consulting

InterUnity Group - Technology Consulting

Garage Technology Ventures – Identification and Due Diligence

CommonAngels - Member, Due Diligence Committee

Babson University - Executive in Residence

Stage Definitions Seed Stage - The initial stage. Early Stage - The company has a product or

service in testing or pilot production. Expansion Stage - Product or service is in

production and commercially available. Later Stage - Product or service is widely

available. Source: PWC Moneytree

Seed Stage vs Early StageThe primary difference between a raw startup (or seed-stage company) and an early-stage company is evidence of business progress.

Early-stage companies can be characterized by the following attributes: Corporate organization in place May have received one or more prior rounds of funding from company

founders, friends or family members. May have filed patent applications. May have tested a product or service prototype. May have launched a website labeled “beta.” May be generating revenues. May have some impressive evidence that there are highly interested first

adopters or customers in place for the company’s technologies, products or services

May have a clearly defined commercialization and sales strategy in place.Source: Inside Entrepreneurship: 'Early stage' can mean different things to VCs By SUSAN SCHRETER, SPECIAL TO THE P-I Updated 10:00 pm, Thursday, January 17, 2008

VC Deal Count by Stage

Funding Table

Friends and Family Barter Loans – Personal, credit card,

governmental, bank Royalty Payments Factoring Strategic Partnerships Equity Investment

Types of Funding

http://www.theawl.com/2010/01/guest-op-ed-do-you-think-wimpy-was-just-asking-for-any-kind-of-hamburger

1. Problem Solved by Company◦ Need to have vs Nice to have◦ Current need vs Future need

2. Growth Potential◦ How Big◦ How Fast◦ Current Revenue

10 Keys to Funding

3. Barriers to Entry◦ Patents◦ Proprietary Technology◦ Trade Secrets◦ Exclusivity◦ Capital Investment

4. Pitch◦ Succinct◦ Covers Keys to Funding◦ WOW Factor

10 Keys to Funding

5. Surface Validity of Business Plan◦ Reasonableness◦ Internal Consistency◦ Scalable Business Model◦ Complete◦ Professional

6. Team◦ Experience in market◦ Experience in product space◦ Entrepreneurial experience◦ Fundability

10 Keys to Funding

7. Market Analysis◦ Bottom Up◦ Named potential

customers◦ Letters of interest◦ Letters of intent

8. Competitive Analysis◦ Existing Competitors◦ Potential Competitors◦ Competitive Advantages

10 Keys to Funding

9. Team Commitment◦ Full Time◦ “Skin in the Game”

10. Stage of Company◦ Realistic Valuation◦ Investor Risk◦ Investor Return◦ Future Investment Potential

10 Keys to Funding

Examples heard at Sandbox◦ Landscaping Company◦ Roller Rink◦ Beauty Shop◦ Personal Trainer

Common Sources of Funding◦ Friends and family◦ Credit cards◦ Personal loans◦ Advance customer payments◦ Public job creation organizations◦ Private civic groups

Traditional Business - Funding

Growth Companies - FundingMeeting and ForumsReality TV ShowsContestsPortalsIncubators and AcceleratorsCrowd FundingAngel Investor GroupsEarly Stage Venture Funds

Meetings and Forums

Reality TV Shows

United Kingdom

Ireland

Canada

Contests

Crowd Funding

Money for goods◦ All or Nothing (AoN) - Pledged money is only collected from the contributors if the

fundraising goal is met.◦ Keep it All (KiA) - No matter whether the project goal is met or not, all of the funds

collected (minus commission) are handed over to the entrepreneur.

Loans and equity◦ Equity - Investors take equity in the company .◦ Loan - Lenders' money is loaned to the entrepreneur who has to repay it (typically,

with interest) later.◦ Other - There are a number of other schemes in use which are generally unique to

particular services.

Crowd Funding Arrangements

Source: en.wikipedia.org/wiki/Comparison_of_crowd_funding_services

Public

Portals and Other

Micro loans

Peer to Peer Lending

Incubators & Accelerators

Harvard i-labinnovationlab

Incubators & AcceleratorsPublic Private University Based

VC BasedVenture Incubator - Full-service organization that provides everything a venture could need, including office infrastructure, access to a network of contacts, technology resources, human resources, operational expertise, legal, accounting, etc.

Venture Accelerators - Services firms that accelerate the process of starting a new venture. They provide consulting services to bolster the business plan, reposition, validate, bring to market, provide due diligence for a venture capital firm or other investor, and make available other for-hire services specific to a new venture.

Source: Incubators in the New Economy, MIT, 2000.

Angel Investor Groups

River Valley Investors

8 Wings Ventures, LLC

Aertsen Ventures

http://www.emergingenterprisecenter.com/Resources/FundingandIndustryDirectories/AngelInvestors.aspx

Early Stage Venture Funds

3 pitches and no success General next steps suggested – VCs are

polite Difficulty recruiting a team Inability to identify 5 target customers by

name Exorbitant debt Deteriorating personal life

Time to Reposition

Money is plentiful Smart money is the worth the effort Persistence is often necessary Learn from failures Select the right funding source Know when to reposition

Summary

Questions?

Discussion