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Determine Funding Needs Stephen Lawrence and Frank Moyes Graduate School of Business University of Colorado Boulder, CO 80309-0419 Course Outline Course Outline – This Week How much money do we need? Review cash flow statements Find periods with negative cash balances

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determine funding needs

Determine Funding Needs

Stephen Lawrence and Frank Moyes

Graduate School of Business

University of Colorado

Boulder, CO 80309-0419

how much money do we need
How much money do we need?
  • Review cash flow statements
  • Find periods with negative cash balances
  • Schedule cash infusion(s) to eliminate negative balances
  • Add safety cushion (~10-25%)
  • Develop funding strategy
    • E.g., staged funding “tranches”
sources of funds
Sources of Funds
  • Equity funding
  • Debt
  • Non-traditional
equity funding
Equity Funding
  • Private Placement
    • Friends, family, and fools
    • Well to-do investors
  • Angels
    • “Professional” investors working alone
    • Colorado Capital Alliance (www.anglecapital.com)
  • Venture Capitalists
  • Most “expensive” form of financing
  • Advantages and disadvantages
vc s ideal of an entrepreneur
VC’s Ideal of an Entrepreneur
  • Qualified in “hot” area
  • Technically feasible and likely
  • Compelling story, presentable
  • Recognizes need for speed to IPO
  • Good reputation, references
  • Understands need for team
  • Diligent, but flexible
  • Gets along with investors
  • Understands and accepts VC deals
  • Is sought after by many VC’s
  • Realistic expectations
slide8
Debt
  • Credit cards
  • Bank loans
    • Typically want to make secured loans
    • Second mortgage on house or property
    • Can use equipment & facilities to secure loan
    • Revolving lines of credit
  • Investment banks
  • Less “expensive” than equity
  • Advantages and disadvantages
nontraditional funding sources
Customers

Development

Prepay

Co-invest

Vendors

Leasing

Factor receivables Other sources

Advantages & disadvantages

Nontraditional Funding Sources
financial plan
Statements (appendices)

Monthly Income (1 yr)

Monthly Cash Flow (1 yr)

Annual Income (5 yrs)

Annual Balance Sheet (5 yrs)

Annual Cash Flow (5 yrs)

Written Financial Plan

Introduction

Financial Summary

Financial Assumptions

Funding Requirements

Sources & Uses of Funds

Business Risks

Financial Plan
ratio analysis
Ratio Analysis
  • Compare to your industry
    • Financial ratios
    • Profitability
    • Returns
  • Understand differences
  • Adjust financials as necessary