Startup Financing Cycle
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Ways to Finance
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Funding Source Panel
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Entrepreneur Panel
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Startup
Self
Grants
SBIR
STTR
Friends/Family
Seed/Angel
Angels
Angel Groups
Seed Funds
VCs, Acquisitions/Mergers & Strategic Alliances
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IPO
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Leasing instead of Owning
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Customers
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Vendors
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SBIR Grants
Federally funded
Incubators
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Bartering
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Early Stage
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Later Stage
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1st Round
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2nd Round
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3rd Round
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3rd Round
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Mezzanine
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Treehouse
Healthcare
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Meghan Hormann
Wells Fargo
SBA Funding
$1.3 billion
Ryan Broshar
Confluence Capital
Tech startups
Equity investments
Convertible debt
Seed funding
Lead or follow rounds
How to Contact
SuRyan: Have a real vision and be able to explain what you are up to. Get to know at a personal level. Do we like them? Take it slow though
Meghan: Find people on banking institutions website. Via email. Include what are you looking for.
Executive Summary and What Are You Looking For?
Top Four Requirements
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Documents you are looking for
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Where should money go
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Typical Timeframe
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Followup
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Questions
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Ryan: Have a real vision and be able to explain what you are up to. Get to know at a personal level. Do we like them? Take it slow though
Meghan: Find people on banking institutions website. Via email. Include what are you looking for.
Executive Summary and What Are You Looking For?
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Web Technology Companies
SAS Model
Enterprise potential
Track Record
Were in the industry, left because of problem, and came back with solution
Team
Three people:
Technical Founder
Hustler
Designer
Invest in Companies, Not Salaries
Show commitment
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Ryan: Hasn't read a business plan. Maybe later stage. Executive Summary. Who are you? What are you doing? What are you looking for?
Meghan: Banking world does require a business plan. She personally reads executive summary and then flips to financials. Underwriters and others look at more. INCLUDE what you are asking for in your executive summary.
Resume, personal tax returns. Business projections. Personal financial documents.
Ryan:
Key Hires
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Final Product Development
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Branding
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Meghan:
Not Speculative
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Do Not Come Back for Money
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Meghan:
45-60 days from underwriting to funding.
Ryan:
Has done deals in two weeks, unique case.
More likely, one to two month cycle.
Ryan:
Later deals, less.
Early stage: usually serve on board.
Monthly meetings.
Meghan:
Banking won't do consulting really. SBA not forced to enforce financial covenants. Care about getting paid. If don't get paid, financial documents will probably be needed.
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SBA Rate
Depends on person and risk of that client.
Historically low rates.
Startups are usually variably rate.
Max rate: 6%
When do payments start for SBA loans?
First six months are interest only. After that interest and principle.
Role outside investing
Confluence Capital definitely interested in connecting individuals.
Kickstarter
Meghan: Does not count as personal equity. Great because it lowers loan amount. 25-30% of project needs come from personal finances.
Ryan: Loves Kickstarter. Customer skin in the game -> Market Validation.
Line of Credit
Wells Fargo doesn't do line of credit for startups.
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Meghan
Summary
Ryan
Summary
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Nick Beste
Man Cave
Changing World of Meat
Wade Gerten
8th Bridge
Software as a Service
Use software to create Pinterest-esque website
Christine Wheeler
Drazzle Foods
Herbal Tea for Kids that's ready to drink
Early Days: Determining How Much You Needed To Raise
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Pivots
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Evaluating Investors
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Angel Round
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Crowdfunding
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Time to Complete Process
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Valuations
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Mistakes and General Advice
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Questions
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Experience
Direct industry experience
Projected Cash Flows
Losses for the first few months: okay
Losses for the first few years: not bankable
Personal Credit
Leans, judgments, etc.
Collateral
Home, etc.
Outside revenue covering SOME personal
Wade:
Series A: Listed software requirements. Estimated the cost of building that and then quadrupled it.
Series B: Hiring Sales Team.
Nick:
Get every little detail on a spreadsheet. Then doubled it.
Christine:
Didn't get all the money they requested. Scaled down plan. Driven by milestones.
Takeaway: Add padding to financial needs projection.
Nick:
Moved from direct to consumer -> retail, direct to grocery.
Pivoted after the financing.
Christine:
Product was seeing success but not perfect and drinks need to be perfect. Pulled out and had to explain that decision.
Wade:
Selling direct from Facebook idea. Customer expectations were to go to the brand website rather than look at the Facebook company page. Facebook contacted them with beta API and switched to creating social experiences on brand pages.
Dumped sales and marketing teams. Doubled down on product development. Revenues dropped
Wade:
Series A: Quick. Knew the partner. Very favorable terms.
Series B: Took time to talk to biz dev people. Database of 30 firms prior to starting the round.
Nick:
Finding people who were patient and in their shoes before.
Christine:
Took anyone that would give them money at the seed stage.
Wade:
Former bosses (friends) put money in.
Christine:
Was on IndieGoGo. Single investor offered the entire amount as a private investment.
CircleUp
Interesting and good process.
Wade:
Series A: Fast.
Last round: Six Months.
Looked at averages for the industry.
Nick:
Enjoy the journey. Lots of ups and downs. Never give up. Having fun helps Nick be productive.
Wade:
The goal isn't to raise as much money as you can. It's to raise enough money to do what needs to be done to earn income.
Christine:
Talk to as many people as possible.
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How do you tie the money to the needed functions?
Have a milestone in mind that makes the company worth more.
What type of equity have you given up?
Nick: About half. Created non-voting shares.
Wade: Each round you give up 15-20%.
Christine: Given up a lot.
Exit Plan
Nick: Make enough money that it doesn't matter. Doesn't have a plan.
Wade: No comment.
Christine: Sell it to one of six or so companies.
More likely to sell the company than anything else.
How much has come from this region versus the coast.
Wade: Series A was all here. SplitRock.
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