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Financing High Growth Ventures. ETP 3700. Courage: Risk and the Dimensions of Work. Life Cycle of a Business Venture. Bootstrapping. Self, Friends and Family. Equity Financing. Stages of High Growth Business Funding. Initial stage (usually angels and angel networks)

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Financing High Growth Ventures

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Courage: Risk and the Dimensions of Work

Life Cycle of a Business Venture


Self, Friends and Family

Equity Financing

stages of high growth business funding
Stages of High Growth Business Funding
  • Initial stage (usually angels and angel networks)
  • First round financing (angels and some venture capitalists)
  • Second round financing (usually venture capitalists)
  • Late round financing
  • Liquidation Event
initial stage funding
Initial Stage Funding
  • File for incorporation
  • Write business plan
  • Find office and development space
  • Completion of initial design
  • Hire key development personnel
  • Complete prototype unit
  • Complete prototype testing
first round financing series a
First Round Financing(Series A)
  • Secure key vendors
  • Hire key service or manufacturing personnel
  • Rent or build manufacturing facility
  • Purchase manufacturing equipment
  • Market testing
  • First sales contract
  • Production of first manufactured unit
  • First 100, 1000, 10000 units, etc.
second round financing series b
Second Round Financing(Series B)
  • Break-even level of sales
  • Development of next generation of product
venture capital financing
Venture Capital Financing
  • Looking for larger deals
  • Expectations of 70-100% annualized returns (want to average 30% for their investors)
  • 3-5 year pay-off
  • Don’t want control, but will take control if dissatisfied with management
venture capital financing8
Venture Capital Financing
  • Most prefer providing second or even third stage financing, with plans for liquidation event
  • Tend to specialize
  • Fund about 1% or less of plans they review
  • Local Venture Capital Firms
initial contact with a venture capitalist
Initial Contact with a Venture Capitalist
  • Funding amount
  • Duration
  • Summary of the project
  • Use of funding
  • Confirm how the transaction will be liquidated
  • Existing investment in the project
  • Names of bankers, lawyers, accountants and consultants
  • Unusual or sensitive information
venture capital term sheet
Venture Capital Term Sheet
  • Amount the venture capitalist wishes to invest.
  • Percentage of ownership to the venture capitalist.
  • The nature of the investment such as loan, stock, warrants, etc.
  • Governance rights of the venture capitalist.
  • Right to eventually register shares for a public offering.
  • Remaining conditions to be met by the entrepreneur such as periodic reports, financial statements, etc.
  • An estimate of valuation of the company.
  • Specific requirements on what the money is to be used for or specific assets that must be purchased with the funds.
liquidation event
Liquidation Event
  • Sale of business
  • Initial public offering
advantages of initial public offering
Advantages of Initial Public Offering
  • Diversification and liquidity
  • Ability to raise new cash
  • Valuation
  • Future business deals
  • Publicity
disadvantages of initial public offering
Disadvantages of Initial Public Offering
  • Requirements of Sarbanes-Oxley
  • Reporting costs
  • Disclosure of information
  • Maintenance of control
  • Culture will likely change
  • Control is greatly reduced
process of the ipo
Process of the IPO
  • Selecting an investment banking firm
  • The decision to underwrite or not underwrite
  • Getting the paperwork in order and certifying the price of the offering
  • The road show
  • Determine the size of the book
  • The first day of trading