Funding for innovative startups - Part 1 of 5

SESSION ONE: FUNDING
TERMINOLOGY & BUSINESS PLAN
Benno Groosman MScBA – www.groosman.info –Athens, February 17 – OrangeGrove

MASTERCLASS FUNDING FOR
INNOVATIVE STARTUPS
Benno Groosman MScBA – www.groosman.info –Athens, February 16 – OrangeGrove

MASTERCLASS SCHEDULE
 Session 1: Introduction to funding language + business
planning;
 Session 2: Determining funding need + milestone-based
funding;
 Session 3: Building your financial investment plan;
 Session 4: Investor readiness;
 Session 5: Advanced funding and wrap-up.
www.groosman.infoFUNDING MASTERCLASS

INTHIS PRESENTATION
Definitions
The players
Misconceptions
Funding stages
Preparation
Timing

DEFINITION: STARTUP
“A startup is a human institution designed to
create a new product or service under
conditions of extreme uncertainty.”
Eric Ries,The Lean Startup

DEFINITION: INNOVATION
Doing things different and in a better way
to get better results
by using technology, improved processes
and/or new relationships.

DEFINITION: FUNDING
Providing financial resources
to finance a startup,
program, or project.

WHAT FUNDING IS NOT…
… a startup’s ultimate goal.

… a guarantee for success.

… replacing the need for customers
and revenues.

… only business angels and venture
capitalists.

THE PLAYERS:THE ENTREPRENEUR
Somebody with vision, leadership, energy
and networking skills, who breaks the system,
manages risks and combines resources
to bring innovative solutions to the market.

THE PLAYERS: BUSINESS ANGEL
Individual with personal capital and
experience in entrepreneurship or a certain
branche available.
Typically wants to use his money AND time
for your company: “smart capital”.

THE PLAYERS: BUSINESS ANGEL
Indication of investment range: €10-100k.
Can make syndicate with other (informal)
investors to expand network and make bigger
total investment.

THE PLAYERS:VENTURE CAPITAL FUND
Fund collects money from companies,
governments, investors, pension funds, etc.
Fund managers and investor managers are
responsible for return on investment (ROI) on
the fund capital. Investors in the fund want to
monitor this, so there’s more paper work.

THE PLAYERS:VENTURE CAPITAL FUND
Funds typically have a 5-7 year investment
range and do multiple investments in that
time.
€500k and (a lot) more per investment.

THE PLAYERS:YOUR LAWYER
Get a lawyer that has experience with startup
funding and the big load of term sheets,
participation contracts and legal implications that
come with this.
Your lawyer is also your partner in negotiations, so
make sure you get one with a track record in the
field of startups.

THE PLAYERS: … AND MANY MORE
Investing pension funds;
Corporate venture capital;
Government seed and growth capital;
Equity funds (€10M and up);
Banks;
Customers!

THE FUNDING STAGES

THE FUNDING STAGES
Do you know which
stage your
startup is in?

SORRY,YOU’RE PROBABLY NOT READY…
Many startup founders have the wrong perception about
qualifying for funding. An idea or website is not enough!
You need to validate and deliver evidence for your
assumptions.
The next slide shows Steve Blank’s investment readiness
levels, taken from http://www.theinnovativemanager.com/wp-
content/uploads/2015/03/Steve-Blank-Investment-Readiness-Levels.png?a4c06d

SORRY,YOU’RE PROBABLY NOT READY…

DOYOU REALLYWANTTO RAISE MONEY?
First, get money from:
 Selling your test product;
 Make customers pay in advance (or sell MVP);
 Use government subsidies and grants;
 Consultancy (but don’t loose your focus!);
 (Ask to) pay your suppliers later.
...TO BE ABLETO MAKE A BETTER DEAL.

DOYOU REALLYWANTTO RAISE MONEY?
Think now about
your alternative
(financial) sources.

WHATYOU HAVETO PREPARE
Elevator pitch
Pitch deck
Business plan
Go to market strategy
Exit strategy
What do you want to give in return for the funding?

Start with the business plan and then make a pitch deck
out of that.
If the other party gets interested by your pitch deck, you
will have to send a business plan almost directly.
98% of the startups need a business plan to raise money.

Reserve time to finish
your business plan,
make it a priority!

HAVEYOUR HOMEWORK READY
My presentation on the contents of a business
plan you can find here:
http://www.slideshare.net/benno_groosman/
writing-an-effective-business-plan-49179966
And aWord template you can find here:
http://www.groosman.info/#!funding/cbvu

WHENTO START SEARCHING FOR FUNDING?
Best position to negotiate is when you don’t really need
the money yet. Investors (or you!) can delay the
dealmaking, so make sure you have a financial buffer.
Investment lead time:
Informal investors / business angels: 3 months.
VC funds: 6 to 12 months.
+ time you need to get to get them in your network!

NEXT SESSION
Defining milestones;
Determining funding need;
Making an investment table.

SNEAK PREVIEW NEXT SESSION
Ask the money that you really need,
not too little,
and about 10-20% extra for unforeseen expenses.

SNEAK PREVIEW NEXT SESSION
Informal investors don’t like to pay for marketing,
big office space and high salaries.They want to
build the business by investing in prototypes,
production, sales, patents, strategic positions etc.
Use the funding to increase the valuation of your
venture.

SNEAK PREVIEW OTHER SESSIONS
Valuation of startups is not just a numbers game. It’s
more about expectations, feelings, investment limits
etc.
But, start to quantify your valuation by:
Real option pricing;
Discounted cash flow;
Comparing to other startups.

FOLLOW ME
Benno Groosman MScBA
Experienced startup entrepreneur
www.groosman.info

Funding for innovative startups - Part 1 of 5

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Funding for innovative startups - Part 1 of 5