Truth About Funding Hosted by Dave Lavinsky In this training, you re going to learn how to find money for your company This training is a supplement to the Truth About Funding guide Please read the guide! What You re About to Learn Introduction to Funding Step 1: Developing Your Business Plan Step 2: Figuring Out the LEAST Amount of Money You Need To Achieve Milestones Step 3: Perfecting Your Pitch Step 4: Getting Involved in Your Affinity Network Step 5: Getting Advisors Step 6: Figuring Out MULTIPLE Forms of Money To Raise 1
Introduction to Funding The #1 Myth About Raising Money There is no magical list of investors out there You will have to go out and find them Don t worry, I ll show you how Why Most Companies FAIL To Raise Money They go after the hardest to raise money sources first Rather, generally you should start with the easier sources and move up 2
GROWTHINK S FUNDING PYRAMID Hard To Raise Easy To Raise The Six Steps To Raising Money 1. Develop your business plan 2. Figure out the least amount of money you need to achieve milestones 3. Perfect your pitch 4. Get involved in your affinity network 5. Get advisors 6. Figure out MULTIPLE forms of money to raise STEP 1: Developing Your Business Plan 3
Keys to a Great Business Plan Realize it is a marketing document Clearly state who your company is Identify your unique success factors Make sure you ve identified your competitors Create a realistic financial model See guide for details on 10 business plan sections STEP 2: Figuring Out the LEAST Amount of Money You Need To Achieve Milestones Why Risk Management is Important Investors (particularly venture capitalists) are professional risk managers Minimize risk of failure and maximize your ability to raise more money Restaurant example Finding location Getting the permits and licenses Building out the restaurant Hiring and training the staff Opening the restaurant Reaching $20,000 in monthly sales Reaching $50,000 in monthly sales 4
Why Risk Management is Important You generally do NOT raise ALL the money you need for your venture upfront You merely raise enough money to achieve your initial milestones Then, you raise more money later to accomplish more milestones To do: create your milestone chart and funding requirements to reach each milestone STEP 3: Perfecting Your Pitch The Importance of Your Pitch A great pitch Allows your audience to quickly understand what you do Shows why you are unique Gets them excited Allows them to precisely convey your message to others Same marketing principle as selling toothpaste 5
The High Concept Pitch Distills company s vision into a single sentence Hollywood: It s Jaws in space! [Aliens] Business: Netflix for books [Bookswim] Go through exercise questions in guide The PTS Pitch (Problem Then Solution Pitch) Do you know how {insert problem here}, what I do is {insert solution here} Example: Do you know how it's hard to stay on a diet; what I do is help people stay on their diets by automatically sending them email reminders twice/day Example: Do you know how in commercial and military communications you can t communicate at different frequencies with the same devices? What XCom Wireless does is allow single devices to communicate at multiple frequencies using our proprietary RF MEMS technology The Traditional Elevator Pitch Describes business in 30-60 seconds What you do; who you serve; what benefits you offer; why you are unique; your sector Example: Rick s Bridal sells high-end wedding gowns and accessories to brides in New York City. For twenty years, Rick s has served over 25,000 satisfied brides through our six locations. 6
STEP 4: Getting Involved in Your Affinity Network What is an Affinity Network Your affinity network is the group of people who have or will have an affinity for or natural interest and/or liking for your venture Mostly your customers. Examples: Your venture targets the bird market, form relationships with bird lovers Your venture targets accounting firms, form relationships with accountants How to Form Relationships In person events Online forums Blog commenting Meeting on LinkedIn, Facebook, etc. Join the conversation; become a trusted member of community; later they can support you: Funding, promotions, distribution, purchasing 7
STEP 5: Getting Advisors Why You Need Advisors Practice Connections to capital Credibility Operational success Action Plan to Get Advisors 1. Create list of prospects: Who do you know from work that you respect? Who do you know that might be in an organization with you that you respect? Who does your lawyer or accountant know? Who does your family know? Who do you know in your online LinkedIn.com and Facebook.com accounts and/or who have you met in your Affinity Networks? Who do you respect in your industry? Who has achieved what you want to achieve? SCORE Google search on retired [company] executive 8
Action Plan to Get Advisors 2. Contact them See email template in guide Basic structure of email/conversation I am founder of XYZ Company I respect what you have accomplished Could we meet briefly so I can get your thoughts on my venture If fit, ask them to join Board of Advisors Action Plan to Get Advisors 3. Once you get them Monthly or quarterly Board meetings Ask for strategic advice Ask for connections to capital STEP 6: Figuring Out MULTIPLE Forms of Money To Raise 9
Google Raise MULTIPLE Forms of Money Credit cards Bank loans Angel investors Venture capital Next: Understand 3 core types of capital Go through the Funding Pyramid and 40 sources of funding 3 Core Types of Capital Type of Capital Term for person or institution who provides capital Capital provider gets equity/ shares of company Company accepting must repay loan Company accepting capital must often put up collateral Debt Lender Equity Investor Creative/ Alternative Financing Depends Sometimes (but rarely) Sometimes (but rarely) Sometimes (but rarely) GROWTHINK S FUNDING PYRAMID Hard To Raise Easy To Raise Start from the bottom of the pyramid and raise the easier money first! 10
Credit Cards Charge Cards 1. Quick Loaners 2. Crowdfunding Rewards-based donations E.g., Kickstarter.com, RocketHub.com, etc. Except for non-profits which are straight donations Sweet spot $10K - $25K Have seen it up to $1 million 3. Creative Funding 1. Competitions and Awards 2. Donations 3. Partner Buy-In 4. Consulting 5. Pre-Sales 6. Seller Financing 7. Buying a Business Out of Bankruptcy 8. Selling Assets 11
3. Creative Funding 9. Leasing Equipment 10. Using A Second Job 11. Buying Real Estate 12. Landlord Financing 13. Sub-Leasing Your Space 14. Buying Equipment & Supplies with Equity 15. Sponsors/Advertisers 16. Bartering 4. Social Lending Social or Peer-to-peer (P2P) lending is when one individual lends money to another individual without an intermediary such as a bank Up to $50,000 today Prosper.com LendingClub.com 5. Financial Maneuvering Factoring Money in Your 401K, IRA, or Life Insurance Policy Reverse Mergers Direct Public Offering (DPO) Investment Clubs Employee Stock Ownership Plans (ESOPs) 12
6. Bank Lines & Loans Home Equity Loans Lines of Credit Bank Loans SBA Loans 7. Strategic Financing Customer Financing Vendor Financing Franchising Your Business Licensing Rights to Your Product or Service 8. Grants Primary source of grants is the federal, state and local government, but many foundations also provide grants Mostly for non-profits and project-based http://www.grants.gov/ https://www.cfda.gov/ 13
9. Individual Equity Friends and Family Angel Investors See guide for detailed action plans for raising individual equity 10. Institutional Equity Generally looking for 10X returns within 5-7 years (mostly technology companies) Angel Investor Networks Venture Capital Firms Strategic/Corporate Investors Private Equity Firms See guide for detailed action plans for raising institutional equity Summary You CAN raise all the money you need It s extremely rare that someone is going to hand you a very large check before you prove yourself (risk mitigating milestones) Start raising the easier forms of funding and achieving milestones, and the larger/harder sources of funding WILL present themselves And get creative! 14