Your Tour Guide. District Center Manager for Ohio SBDC at Columbus State since SBDC State Star for Ohio in 2007

Transcription

1 Turn Ideas To Deals

2 Your Tour Guide District Center Manager for Ohio SBDC at Columbus State since 2002 SBDC State Star for Ohio in 2007 Won the SBA Innovation and Service Center of the Year for Ohio and SBA Region Five in 2007 Striving to accelerate the growth of entrepreneurship and small business innovation. #RunNerds Marathoner. What's worth doing is worth doing for 26.2!

3 The Ohio SBDC at Columbus State Ohio SBDC An experienced & award winning team providing no-cost, one-on-one business management advice with four centers to serve you at one location: Specialty Centers Ohio SBDC Manufacturing Center Ohio SBDC International Business Center Ohio SBDC Latino Center

4 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Where is the Ohio SBDC at Columbus State

5 2012 SBDC Activity Advised 1,087 Small Businesses Conducted classes for over 1,500 attendees Facilitated $4,804,950 in loans / investment capital Assisted in the creation or retention of 617 jobs 51% of SBDC clients are women owned 36% of SBDC clients are minority owned

6 Ohio SBDC International Business Center Director Omar Diop Developing export strategies Preparing your product or service for export International legal considerations Shipping product; pricing, quotation and terms Methods of payment and Financing Export transactions Business travel abroad State of Ohio Export Grant Assistance

7 Ohio SBDC Manufacturing Center Director Brian Fox Continuous Improvement & Modernization ~ Process improvements, workforce assessments & training, lean operations Inventions & Prototyping ~ Product design, modeling, prototyping, market assessment, Intellectual property, R&D grants Partnering & Commercialization ~ Licensing technologies, capital access, mfg partners, marketing channels, fulfillment strategies

8 Ohio SBDC Latino Center & Specialty Services Director Ariana Ulloa-Olavarrieta All SBDC Services Delivered in Spanish ~ No Charge Certification Workshops ~ Using Diversity Bridge as the tool we provide assistance to businesses seeking to secure government contracts ~ No Charge From Kitchen to Market ~ Specialized business advising to assist those developing food products and mobile food trucks ~ No Charge

9 Get The Art of Pitching For Money at Ideas2Deals.com

10 Getting Financing Is

11 Financing All About Customers

12 In preparing for battle I have always found that plans are useless, but planning is indispensable. - Dwight D. Eisenhower

13 Can You Answer This? Who is out there to buy our Product? How do we get them to buy our product at YOUR price? 13

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15 Friends Family & Founder Bootstrapping is building the business from internally generated funds. You need to establish a foundation for your business. Build credibility and show that your business has customers and a product that people want to buy. Focus on customers and cash flow. Work hard and be creative in seeking ways to drive revenue while holding expenses down.

16 Angel Investors Angel investors are high net worth individuals who are interested in investing in emerging businesses. Two Types of Angel Investors Professional Strategic

17 Professional Investors The underlying reason that they will invest is return on their investment. They invest in spaces they know. They invest with people they know They invest based on referrals from people they know. Invest based on due diligence. Will require professional terms. Looking for a big payout based on a liquidity event.

18 Strategic Investors More interested in the product than the business. Invest based on gut reaction. May take common stock May not look for a liquidity event. May be the friends in FFF (or referred by FFF)

19 Key Points About Investors If you take someone else s money you have a partner. They will want to have some influence on the company to protect their investment. You will probably have to relinquish some level of control over the company. If you are unwilling to share leadership of the company, investors are not the option for you.

20 Institutional Venture Capital The only reason that they will invest is return on their investment. They only invest in spaces they know. They only invest with people they know They only invest based on referrals from people they know. Invest only based on due diligence. Will only require professional terms. They are only looking for a big payout based on a liquidity event.

21 Valuation What is it all Worth?

22 Key Valuation Issues Valuation of early-stage companies is a little short of random. Valuation is negotiated, there are no hard numbers especially for early-stage companies. Provide a good projection of future value at a potential, future liquidity date and discount back. Know comparables What other companies, similar to yours, have generated what multiples of sales at liquidity. Build value as you build the company ~ Focus on Value Inflection Points. Focus on dollars not percentage 10% of a $20 million company is worth more than 100% of a $1 million company.

23 Suggestions For CEO s Know what investors look for and expect. Make sure you and the investors are on the same page. Good investors will want you to have a fair percentage of the company. Know why these things are important to investors. Understand the factors that influence value Anticipate investor questions. Look at competitive deals. Learn from the process ~ Listen well

24 Cap Table Pre Investment Unit Holders Issued Valuation Pre-investment Post-investment John Doe 500k $500k 25% 19% Bill Smith 400k $400k 20% 15% Jane Brown 800k $800k 40% 31% ESO Pool 300k $300k 15% 15% Note ESO does not dilute Total Issued 2 mil $2 mil 100% 80% Post Investment Investors 500k $500k 0% 20% Total Issued 2.5 mil $2.5 mil 25% 100%

25 Seeking Investors Investors invest in people and teams that can execute. A teams with B markets will generally beat B teams with A markets.

26 Investor Summary Format Summary should be concise Summary should provide a clear description of the problem you solve. How you solve it. Your business model. The underlying magic of your product. Defensibility of your product. Summary should be no more than four-pages.

27 Tips For Pitching You are either selling people on doing business with you or you are selling them doing business with someone else.

28 Tips For Pitching Explain what you do in the first minute. Clearly explain what you do in the first minute. Articulate the problem in the market and what you do to solve it. Purpose of a pitch is to stimulate interest not to close the deal. Keep it tight. 10 slides, 20 minutes, 30 point font. Speak to the audience s interest.

29 Presentation Deck Title Slide: This is where you tell what you do and give a simple to understand example. Problem: Describe the pain you are alleviating for your customers. Solution: Show how you solve the pain. Business model: Explain how you make money. The advantage you have: Why are you different than everyone else? Marketing and Sales: "Clearly" tell what your sales strategy is. Do not forget to discuss your pricing.

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31 Pitching Question: How can you tell if an entrepreneur is pitching their business? Answer: Their lips are moving.

32 Investor s Interest How are you going to make money? How are you going to generate my return? Are you capable of executing?

33 Presentation Tips Don t try to BS the investor because they see through it. Get your value proposition across early in case you don t get to the end of the presentation. Don t get bogged down on the mechanics of the product. Early on the investor will assume it works as you say it will.

34 Presentation Tips Don t ask for an NDA at initial meetings!!! Real investors are not in the business of stealing ideas and trying to develop them. You control what is in the summary and initial pitch. You don t need to disclose the secret sauce at this point. Investors will sign an NDA prior to due diligence. Get over it You re not that special

35 Creative Financing options

36 Peer To Peer Lending These are direct loans between a business and investors. They are typically facilitated by a third party intermediary that collects information on loan amount, purpose, the credit and business strength (financial statements, bank accounts, etc.). Investors are able to look at the opportunities and select what they are interested in funding. What attracts investors to participate is return. Typically rates will be above 10% depending on the strength of the borrower.

37 Factoring ~ Accounts Receivable Financing Business sells its accounts receivables/invoices to a third party at a discount. The "Factor" provides a cash advance, often 70-85% of the value of the accounts. When the customer pays the bill the check is typically sent to Lock Box in the name of the business and the factor. Upon collection of the receivable the factor takes their principle and their accumulated fee with the remainder going to the business. The fee is typically based on a percentage rate to be paid to the factor based on the number of days the receivable is outstanding. This can get expensive if the receivable drags on and is not paid in a timely manner. With factoring the strength of the vendor paying the invoice is just as important as the strength of you as the business owner (actually the strength of the vendor is probably more important).

38 Merchant Financing If you are accepting of credit cards in the course of your business this may work for you. You need to be able to show your historic card activity and that you have a reoccurring volume of credit card purchases to secure cash advances from your merchant services provider. You are getting a loan based on what you have done in credit cards in the past. Repayment/fee is deducted from your merchant account as you do business and generate credit card sales.

39 Vendor Financing Sometimes what you deliver is so important to your customers that they will help finance your growth capital needs. Look at who your customers are and if they may be willing to fund some of your working capital needs. When preparing to approach your customers for funding you need to consider if they are strong enough financially and have a strong cash position that will enable them to provide support. In the ask you should connect how your business growth will help their business grow.

40 CrowdFunding Crowdfunding is exactly what the name implies: Raising small chunks of capital raised from a large number of people that will eventually total to the amount you need. This type of funding is a numbers game. You need to reach a large number of prospective funders so it is well suited to use social networking and internet funding portals like Kickstarter, Indiegogo and Fundable. Currently, crowdfunding is based on a rewards model where if someone contributes they get a reward such as a t-shirt or an early release of the product instead of repayment. Eventually you will be able to seek investors and sell equity on crowdfunding sites.

41 Everything is always impossible before it works. That is what entrepreneurs are all about doing what people have told them is impossible.

42 For Information on SBDC Activities The Ohio SBDC at Columbus State p