Funding
Content
Current Products Current markets New Markets
New Products 1. Market – Penetration Strategy 3. market-development strategy 3. Product development strategy 4. (diversification Strategy)
Unit 4
Financing and Marketing Aspects of New Venture
Boot Strap: More than half of all funding for early and expansion stage companies is provided by company founders in the form of personal investment and foregone salary (sweat equity). Contributions by friends and family, coupled with earnings from operations are sufficient to support many companies through initial phases of development. Cash advances on purchases or development contracts from customers and strategic partners is another cheap substitute for equity financing, when available. Angels: Angels, or wealthy individuals, are another important source of financing. In many instances, angels have earned their money as successful entrepreneurs and business managers, and are capable of providing business counsel and advice in addition to capital. Angels have a reputation for making quick investment decisions but their resources are typically limited. Accordingly, angels are often less tolerant of losses and have a shorter investment horizon than most venture capitalists. Private Placement: Investment banks and agents raise equity capital for emerging companies by "placing" unregistered securities with accredited investors. Private placements usually result in less equity dilution for existing shareholders than venture financing. Fees and expenses are high relative to funding from venture or angel investors, and the timetable for completing a private placement is often long and uncertain. Private investors generally offer little or no business counsel, and tend to have minimal tolerance for losses and under-performance. Initial Public Offering: Few companies are able to access public equity markets. The public market is attractive for its high valuations, abundant capital supply and liquidity characteristics. Transaction costs are high, including ongoing legal expenses associated with public disclosure requirements. Companies often chose to fund long term strategic initiatives with venture funding instead of public equity to avoid legal exposure and the public market's focus on near term quarterly performance.
The following list applies equally to raising both equity and debt. 1. 2. 3. 4. 5. 6. 7. 8. 9. Regardless of your company's stage of development or capital needs, start developing relationships with potential investors as soon as practicable. Qualify potential investors based on their preferences and availability of capital - not all venture capital funds have moneys available for new investments. Prepare a concise business plan and update it regularly. Be realistic in financial projections. Unrealistic projections may impair credibility on a first impression. Do not be secretive or suspicious. Encourage all members of the management team to communicate freely and openly with potential investors. Develop an in-depth knowledge of your market and competition before seeking investors. Contact opinion leaders in your market before investors begin their due diligence. Encourage customer references early. Customers have already invested in your product and have a vested interest in your company's success. initial proposal. 11. Change your business plan or approach based on feedback if appropriate. 12. Don't be discouraged - perseverance is often a key ingredient to your success.
10. Travel to the investor's office to secure an initial meeting. Seek advice from venture capitalists even if they reject your
Factors which will be evaluated by prospective investors include the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. How compelling is the competitive advantage of the company's product or service? What investment level is required to sustain this advantage? How is the company's market positioning unique and differentiated? Is competition well established or entrenched and what is their philosophy.? Does your company have adequate access to existing distribution channels? Does the economic model generate sufficient operating leverage? Low does employee productivity, re-investment rate and capital intensity compare to similar companies? That is price and valuation relative to comparable private companies? Are existing customers satisfied and committed to your product or service? Is sales momentum building?
New Products 1. Market – Penetration Strategy 3. market-development strategy 3. Product development strategy 4. (diversification Strategy)
Unit 4
Financing and Marketing Aspects of New Venture
Boot Strap: More than half of all funding for early and expansion stage companies is provided by company founders in the form of personal investment and foregone salary (sweat equity). Contributions by friends and family, coupled with earnings from operations are sufficient to support many companies through initial phases of development. Cash advances on purchases or development contracts from customers and strategic partners is another cheap substitute for equity financing, when available. Angels: Angels, or wealthy individuals, are another important source of financing. In many instances, angels have earned their money as successful entrepreneurs and business managers, and are capable of providing business counsel and advice in addition to capital. Angels have a reputation for making quick investment decisions but their resources are typically limited. Accordingly, angels are often less tolerant of losses and have a shorter investment horizon than most venture capitalists. Private Placement: Investment banks and agents raise equity capital for emerging companies by "placing" unregistered securities with accredited investors. Private placements usually result in less equity dilution for existing shareholders than venture financing. Fees and expenses are high relative to funding from venture or angel investors, and the timetable for completing a private placement is often long and uncertain. Private investors generally offer little or no business counsel, and tend to have minimal tolerance for losses and under-performance. Initial Public Offering: Few companies are able to access public equity markets. The public market is attractive for its high valuations, abundant capital supply and liquidity characteristics. Transaction costs are high, including ongoing legal expenses associated with public disclosure requirements. Companies often chose to fund long term strategic initiatives with venture funding instead of public equity to avoid legal exposure and the public market's focus on near term quarterly performance.
The following list applies equally to raising both equity and debt. 1. 2. 3. 4. 5. 6. 7. 8. 9. Regardless of your company's stage of development or capital needs, start developing relationships with potential investors as soon as practicable. Qualify potential investors based on their preferences and availability of capital - not all venture capital funds have moneys available for new investments. Prepare a concise business plan and update it regularly. Be realistic in financial projections. Unrealistic projections may impair credibility on a first impression. Do not be secretive or suspicious. Encourage all members of the management team to communicate freely and openly with potential investors. Develop an in-depth knowledge of your market and competition before seeking investors. Contact opinion leaders in your market before investors begin their due diligence. Encourage customer references early. Customers have already invested in your product and have a vested interest in your company's success. initial proposal. 11. Change your business plan or approach based on feedback if appropriate. 12. Don't be discouraged - perseverance is often a key ingredient to your success.
10. Travel to the investor's office to secure an initial meeting. Seek advice from venture capitalists even if they reject your
Factors which will be evaluated by prospective investors include the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. How compelling is the competitive advantage of the company's product or service? What investment level is required to sustain this advantage? How is the company's market positioning unique and differentiated? Is competition well established or entrenched and what is their philosophy.? Does your company have adequate access to existing distribution channels? Does the economic model generate sufficient operating leverage? Low does employee productivity, re-investment rate and capital intensity compare to similar companies? That is price and valuation relative to comparable private companies? Are existing customers satisfied and committed to your product or service? Is sales momentum building?
