FINANCING FOR YOUR START-UP BUSINESS

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(No Transcript)
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FINANCING FOR YOUR START-UP BUSINESS

• SABS Idea to Product Seminar
• Alexandra Fraser - June 2010

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CONTENTS

1. What is entrepreneurship?
2. What stage is my business at?
3. What kind of funding is available?
4. How does early stage funding work?
5. What do funders want?
6. What will I get in return?
7. Where can I get support?
8. Where can I get more information?
9. Questions?

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GREAT INVENTORS OR ENTREPRENEURS?
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GREAT INVENTORS OR ENTREPRENEURS?
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GREAT INVENTORS OR ENTREPRENEURS?
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WHAT IS ENTREPRENEURSHIP?
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1. ENTREPRENEURSHIP

• Being an entrepreneur is substantially different
  from being an inventor

Invention something which has never been made
before, or the process of creating something
which has never been made before Cambridge
Dictionary
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1. ENTREPRENEURSHIP

• Entrepreneurship
• Entrepreneurship is the act of being an
  entrepreneur, a French word meaning one who
  undertakes an endeavor.

Entrepreneur someone who starts their own
business, especially when this involves seeing a
new opportunity to economic goods Cambridge
Dictionary
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Entrepreneurs assemble resources including
innovations, finance and business acumen in an
effort to transform innovations into viable
businesses.
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WHAT STAGE IS MY BUSINESS AT?
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2. BUSINESS START-UP PHASES
Pure Research No market testing little dev -
University or Research Organisation
Licensing Executive Society of
South Africa
Development, Industrialisation
Commercialisation Process Seed Stage Business
Research
Market Ready Start-Up Business
Positive Cash Flow
Development
Application Testing
Pilot Project
Negative Cash Flow
Commercialisation
Market Entry of Product
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2. BUSINESS START-UP PHASES
Growth
Funding Sources (relatively large investment
amounts) Commercial Banks Capital Markets,
Later Stage VC Private Equity

Available sources of Funding
Risk
Funding Sources (relatively small investment
amounts) Private Individuals/ Angel Investors
Seed Funding Early Stage VC Government Grants
Time
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WHAT IS KIND OF FUNDING IS AVAILABLE?
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3. FUNDING SOURCES
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3. FUNDING SOURCES ANGEL INVESTORS
Angel investor usually an affluent individual
who provides capital for a business start-up,
usually in exchange for convertible debt or
equity. - Friends, Fools Family
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3. FUNDING SOURCES GOVERNMENT
Government Grants Can be debt or equity based.
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3. FUNDING SOURCES SEED FUNDING
Seed Funding Funding for research, evaluation
and development of a concept post proof of concept
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3. FUNDING SOURCES VENTURE CAPITAL
Venture Capital Equity financing for often high
risk businesses in different growth stages.
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3. FUNDING SOURCES VENTURE CAPITAL

• Funding (predominantly equity funding) of
  high growth potential businesses, whose growth
  potential is typically achieved through radical
  global scaling, and which normally have
  technological or other innovative concepts at
  their core.
• South African Venture Capital Association
  (SAVCA), 2008

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3. FUNDING SOURCES PRIVATE EQUITY
Private Equity Equity financing for growth and
development, buy-out, buy-in or replacement
capital
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3. FUNDING SOURCES BANKS
Commercial Banks Provide debt financing, often
secured against capital equipment or other
tangible assets.
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3. FUNDING SOURCES CAPITAL MARKETS
Capital Markets Funding is raised through an IPO
(Initial Public Offering) on stock markets in
exchange for equity shares.
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HOW DOES EARLY STAGE FUNDING WORK?
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4. EARLY STAGE FUNDING

• Investments are typically
• High Risk
• Uncertain future
• Information asymmetry
• Soft Assets

Exit
Incubation, Growth Maturation
Investment in Start-up
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4. EARLY STAGE FUNDING

• Milestone based investment
• Significant minority shareholding 26-49 of
  equity often required
• Potential of significant return on investment (
  to compensate for the high risk)

YES/NO
YES/NO
YES/NO
YES/NO
YES/NO
Funding on meeting milestones Business Support
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WHAT DO FUNDERS WANT?
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5. REQUIREMENTS
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5. REQUIREMENTS

• Introduction
• Proof that your idea works find a way to
  bootstrap your business idea
• Check Criteria - Does your idea fit their
  investment plan?
• Experienced entrepreneur Past Experience
• A unique offering
• Actionable Business Plan - Focus
• Identify Risks
• Know your metrics Be real!

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WHAT DO I GET IN RETURN?
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6. THE PARTNERSHIP

• Money
• Strategic Advice
• Networks Market Entry
• Focus Support
• Credibility
• Management Expertise
• Attracting Additional Investment
• Financial Advice Controls
• Governance

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WHERE DO I GET SUPPORT?
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7. SUPPORT

• Business Incubators
• People with Complementary Skills
• Industry Experts or Mentors
• Local Provincial Government
• Parastatals
• Internet
• Entrepreneurial Networks

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WHERE DO I GET MORE INFORMATION?
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8. LINKS

• Associations
• South African Venture Capital Association (SAVCA)
  (www.savca.co.za)
• Silicon Cape (www.siliconcape.com)
• Entrepreneur.co.za (www.entrepreneur.co.za)
• 60 Seconds (www.60secs.biz)
• South African Investor Network (www.investmentnetw
  ork.co.za)
• Crowd Funding (www.crowdfunding.co.za)
• Department of Science Technology (DST)
  (www.dst.gov.za )
• Department of Trade Industry (DTI)
  (www.dti.gov.za)
• Innovation Fund (www.innovationfund.ac.za)
• Business Partners (www.businesspartners.co.za)
• SEDA (www.seda.org.za)
• Blue Catalyst (www.bluecatalyst.co.za)

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8. LINKS

• Intellectual Property Information Assistance
• My Patent (www.mypatent.co.za)
• Companies Intellectual Property Registration
  Office (www.cipro.gov.za)
• Patent Incentive Fund (www.innovationfund.ac.za)
• Government Grants
• NRF (www.nrf.ac.za)
• SPII (www.spii.co.za )
• Thrip (www.nrf.ac.za/thrip/ )
• Innovation Fund (www.innovationfund.ac.za)
• Technology Innovation Agency (www.tia.org.za)

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QUESTIONS?
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Crazy Ideas can still make it big!

• Top 10 most unlikely business ideas which made it
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• SantaMail
• Doggles
• Online Bookshop
• LaserMonks
• FitDeck
• PositiveDating.com
• Lucky Wishbone Co.
• Silly Putty