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by: Earnest Jast


Earnest Jast
GPA 3.68


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About this Document

Class Notes
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This 8 page Class Notes was uploaded by Earnest Jast on Thursday October 22, 2015. The Class Notes belongs to MUS 191 at University of California Santa Barbara taught by Staff in Fall. Since its upload, it has received 17 views. For similar materials see /class/226842/mus-191-university-of-california-santa-barbara in Music at University of California Santa Barbara.




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Date Created: 10/22/15
Engineering 191291 Financing of New Ventures Presented by Susa A Block E BLOCK BOWMAN amp A ASSOClATES LLC Market Validation Process gt Industry gt Market and Competition t Pro t Potential gt Go o Go Decision t IfGo etnen de ne competitive advantage Feasib ity Market Analysis Outcome t is lt a VlabiE opportunitye Marketvalidatiun t Magnitude uftne putantlal 1 gt Business mouei uptluns gt What Wlii ll rust and ilkEilHDDd or success Viability Analysis Outcome Go No Goquot decision t Marketneed t Compeoave advantage t Financially feasible can pruduce and sell at a most in ya 593mm Continuum of Feasible Opportunities where your idea fits in this continuum will set the stage for t The amount of capital you need 1 t Huwyuu fund your business gt Your options toian emt Magnitude of Opportunity t Esnmatemarketputennal Sueafvvemlltnxgetmrkzt Assume you mom penztntmnandthzngmw h t RevenueAppmx Pnceper Umt Number of Umts om oftotat s markEt t pro tsAppiox Net income Finannal Statement Analysis Opportunity Continuum Black 39 amuse 1 Aswcin in Funding Options Capital Sources Determined by gt Amount ofcapital needed gt The magnitude ofthe opportunity gt Stage omne rm 4 Seed are Revenue Frudunng Pro table Mature Black 37Wme AsmchEs in Funding onee there 15 revenue add banks and manual insrimuons to eaeh Amount of Capital Needed Estimate from nancial projections later Tough Balance Selffund aleong as can vs Opportunity cost of being underfunded Black 37Wme AsmchEs in Capital Sources gt Fnends and Farnuy gt Angels gt Venture Capitalists gt cerpurauuns L gt Asset Based tenders 7 Banks and Other Frnanerai cruuns gt Bridge Luans and Mezzanine Financing r Guva nmmt Black amuse 1 Aswcin in Friends and Family gt Amount usually lt 1 million gt Not a huge potential prospect u gt Seed or very early stage unless it is a big potential and then may get interest from Angels and VC s Black 37Wme AsmchEs in Angels V Usually lt 2 to 4 million t Angel Groups 7 Tech Coast Angels LARTA Venture Eorum etc E aim 39 amquot 1 AsmchS it Angels and Individuals gt Generally the least sophisticated but not always gt Often stick to their domfort area gt Can be a pain to deal with D aim am Asmcwzs it What Angels are Looking For gt Return on investment gt An opportunity that they believe will then attract VC s L gt Management or founder that they believe in gt Exit potential Venture Capitalists gt Looking for ahome run gt Potential huge gt Active investors 4 t Huge value added gt Need barriers to entry aim am Asmcwzs it Venture Capital amp Magnitude of Opportunity gt VC s Five times their original investment within 57 years gt Minimum annual rate ofreturn of3040 gt Large market potential gt Initial investment gtl million lOmill Ownership Required to Support a 30 Return Estimated Future Market Value of a Company in 6 Years WWIinns l 8 60 100 Amt 20M 40M M 80M M 2M 4800 2400 1600 1200 1 000 4 9600 4800 3200 2400 1900 NA 7200 4800 3600 2900 NA 9600 6400 4800 3800 NA NA 4800 AliWally than the mvememmqumeit Asmcwzs it Venture Capital Extensive Due Diligence Business Thoroughly Researched and Validated gt Industry reports gt Published analystLreports gt Government demographics gt Govemment published statistics gt Conservative assumptions aim 39 amquot 1 AsmchS he Ideal Venture Opportunity gt Introduction or growth phase of the industry lifecycle gt Has proprietary position defensible gt Technology gt Patents 4 gt Learning curveknowledge r Exclusive agreements gt Huge potential market gt Clear exit amp Founders have same vision of exit aim am Asmcwzs In Venture Investors amp Industry Life Cycle I II III IV Intro Growth Mature Decline Tailoring to Specific Venture Capitalists Do Your Research gt Areas of specialty gt Other portfolio companies 7 Addon synergistic gt Their investment strategy risk pro le gt Minimum investment size Asmcwzs In VC Specialties gt Industries technology gt They have a competitive edge gt Greater valueadded for the rm as Well gt Stage of rm 7 seed early stage second round gt Followon vs lead Rollups addons Venture Capitalists gt Looking for a home run gt Potential huge gt Active investors gt Huge value added gt Need barriers to entry aim am Asmcwzs In Corporations gt Some have venture groups gt Licensing agreements gt Stmtegic alliances gt Distribution agreements E Bra2K 39 amquot a AsmchS in Corporations gt Some have venture groups gt Licensing agreements l gt Strategic alliances gt Distribution agreements Ii Bra2K 57wan Asmcwzs in Corporate Investors gt Focus more strategic gt Cutting edge technology gt Product innovation gt Broaden product line gt Entry into new markets gt Use of existing distribution channels Corporate Investors continued gt Less emphasis on gt Standalone projections gt Standalone returnion investment gt No emphasis on exit Bra2K 57wan Asmcwzs in Customizing to Corporation gt Research the corporation and its strategy gt Need to be careful how much you divulge gt Reduce technology discussion to a teaser gt Be vague but compelling gt Sell how it will bene t the person you are talking to E gt lglaarketing production product development Customizing to Corporation continued gt Research the corporation and its strategy gt Be careful how much you divulge gt Reduce technology discussion to a teaser gt Be vague but compelling gt Sell how it will bene t the person you are talking to gt Marketing production product development gt Be prepared for exclusivity discussion Ii Bra2K 57wan Asmcwzs in Corporate Sales Pitch V Emphasize market and applications V Tailored to their strategygoals and markets V Why a good strategic investmentalliance V Same distribution channels V Addresses changing marketplace V Diversi es theirtechnology or products V Provides them with an exclusive competitive advantage or Synergies V Good investment even Without synergies aim 39 Bwuum 1 essocms tic Financial Institutions V Banks and Asset Based imore mature firms with assets and revenue r Usually interest not equity r Mezzanine nancing or bridge loans aim 37Wan essocurrs nc Factoring and LOC Financing V AR Factoring V Letter of Credit Financing V Working Capital Line of Credit Banks and Financial Institutions gt Later stage 7 you need revenues and pro tability r Important relationship to have gt Not interested in exit V More interested in ability to remain cash ow positive gt Interested in collateral AR assets etc r Riskaverse 7 looking for stability predictability track record aim 37Wan essocurrs nc Banks and Financial Institutions V Projections 7 conservative V Management stability and continuity V Historical nancialsL V An industry that they understand V Ideally not too cyclical aim Bwuum 1 essocms tic Government Grants and Funding Programs V SBIR V DARPA V ATP V SBA aim 37Wan essocurrs nc How to raise Capital gt Business Plan 7 Marketing Tool gt Business Plan 7 planning tool gt Network 7 lawyerstaccts gt Organized Angel Groups 7 Tech Coast Angels aim 39 awnquot 1 AsmciaYS in What do Investors Look for gt Management Team gt Market Potential gt Proprietary 7 patents etc gt Customers and current revenue a lus gt Competitive Advantage am am eeenems in Strong Management Team gt For most investors management team is the most important indicator of success V Experience gt Diversity V Synergy gt Ideally includes a success il entrepreneur that has done this before L gt Reduces risk Importance Of Executive Summary gt Executive Summary the most important part of the business plan gt VC s receive 1000 s ofplans b lt 5 of those plans are ever reviewed past Executive Summary gt Typical VC invests in lt1 of business plans they review gt Guidelines Should be 13 pages in length and Written LAST aim am eeenems in IPO Initial Public Offering gt Not for early stage or even midstage gt Market dependent r Risky r Timing is everything IPO Guidelines gt Too soon you lose gt Established mid or uppertier investment 4 gt Investment bank that specializes in your industry am am eeenems in Private Placements r A structured capital raising ocess gt Need to look at SEgregulanons r Term Sheet 3g e Structuring Capital Raising r Diffamt Rounds ofCapital gt Rasmg s z mum lemma gt Nut cluseuntllmundis gnua cumplete r Differmt Classes ofsrmk gt Vuung gt Nuanutmg gt Cunvemble Preferred Structure of the Firm r CCorp r SCorp gtLLc 1 Rounds of Financing a g 553 Thank You usan A Biock biockbiockbowm an corn 805 563 9123 in BLOCK a s BOWMAN amp ASSOCiATES LLC Bow 5 Assocmas LLC


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