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Dokumen - Tips Funding For Startups July 2014 by Prof Sabarinathan G
Dokumen - Tips Funding For Startups July 2014 by Prof Sabarinathan G
Presentation at Forstartups
Dr. G. Sabarinathan
August 2, 2014
Agenda
1. Disclaimers
2. Funding alternatives
3. Funding Hierarchy
4. How much funding do companies need to plan for?
5. Interiorisers – An Illustration
6. Attributes of funding sources
7. Planning for mobilising funds
8. Approaching funding choices
9. Equity as a funding instrument
10. Trouble with aphorisms
11. Closing thoughts
Funding 4 Startups - Dr. G. Sabarinathan
Disclaimers
• No canned solutions
• Pointers to think
• Questions to ask
Increasing Cost
– “Free” Money – eg., grants
– Tied resources – development kits
– Spontaneous Liabilities
– Debt
– Preferred Shares
– Equity
• Elements of Cost
– Financial Cost
– Control over enterprise
– Disclosure
• Tradeoff: Cost vs Added Value
Funding 4 Startups - Dr. G. Sabarinathan 5
How much funding?
• Too little funding
– Starves business of “energy”
– Delays establishing / consolidating market beachhead
– Affects early stage hiring
• Too much funding
– Distracts from focus: Penury Parsimony (often, at least)
– Reduces sense of urgency on revenue generation – and hence
customer validation of product / service
– Dilutes equity and so kills financial incentive for founders
• Extent and type of funding a function of
– Nature of business
– Founders’ priorities
– Availability
– Beware of “Vedic” pronouncements!
Funding 4 Startups - Dr. G. Sabarinathan 6
Attributes of Funding Sources
• Not all funding sources are the same
• Attributes to look for
– Flexibility
– Appropriateness for industry
– Reliability of release of funds
– Effort required to secure funding / ease of mobilisation
– Post funding obligations
– Respectability and certification value
– Other Added Value
– Motives :
• Financial return vs Others
• Quick vs patient return
• Attributes depend on source to a large extent
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Funding 4 Startups - Dr. G. Sabarinathan
Planning for funding
• It is only as good as your business forecast
• Focus on refining your business outlook as meticulously as you can.
– Meticulousness ≠Risk aversion
– Systematic Thought ≠ Rigidity
• Develop a range of possibilities from “Must Have” to “Absolute Luxury”
• Fill up the need using a funding hierarchy
• Revisit funding planning at least once a month
– Early stage fund raising can occupy several hours every month
• Specialist intermediaries can be helpful in raising professional money
– Identifying investors
– Providing “market intelligence”
– Modulating the investment pitch
– Fronting for the promoter in interaction, follow-up, negotiations