OpenBETA deck on "Why do Startups Raise Money?." Join us at OpenBETA: www.meetup.com/gener8tor

1. WHY DO STARTUPS
RAISE MONEY?
Troy Vosseller

2. 2
#1 GOAL:
GROWTH
WHY DO STARTUPS RAISE MONEY?

3. 3
COMPETITIVE LANDSCAPE
INTELLECTUAL PROPERTY
CAC < LTV (SUBSCRIPTION/SAAS)
WHY DO STARTUPS RAISE MONEY?

4. 4
COMPETITIVE LANDSCAPE
WHY DO STARTUPS RAISE MONEY?

5. “”
5
Your margin is my
opportunity.
JEFF BEZOS

6. 6
INTELLECTUAL PROPERTY
WHY DO STARTUPS RAISE MONEY?

7. 7
CAC < LTV (SUBSCRIPTION/SAAS)
WHY DO STARTUPS RAISE MONEY?

8. http://www.forentrepreneurs.com/saastr/

9. http://www.forentrepreneurs.com/saastr/

10. http://www.forentrepreneurs.com/saastr/

11. http://www.forentrepreneurs.com/saastr/

12. 12
CAC*3 < LTV
CAC: Customer Acquisition Cost
LTV: Lifetime Value
WHY DO STARTUPS RAISE MONEY?

13. 13
PAYBACK PERIOD < 12 MONTHS
Payback Period: Length of time to recover CAC
WHY DO STARTUPS RAISE MONEY?

14. PITCHING 14
OFFER
I promise to give you a dollar in 12 months…
…IF you give me a quarter today.

15. 12 Months

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18. WHY DO STARTUPS RAISE MONEY? 18
SOURCES OF CAPITAL
Equity
Angels, Angels Networks, Seed Funds, VCs, Family
Offices, Corporate VCs, Crowdfunding
Pros: Available at pre-product/pre-revenue stage,
adding outside expertise
Cons: Giving up equity, loss of control

19. 19WHY DO STARTUPS RAISE MONEY?
Amazon
EQUITY

20. WHY DO STARTUPS RAISE MONEY? 20
SOURCES OF CAPITAL
Convertible Debt
Convertible Notes, SAFEs
Pros: Available at pre-product/pre-revenue stage,
low transaction fees
Cons: Giving up equity, loss of control, unclear dilution effects

21. 21
CONVERTIBLE DEBT
WHY DO STARTUPS RAISE MONEY?
• The Ultimate Guide to Understanding Convertible Debt
• The Truth About Convertible Debt at Startups and the Hidden Terms
You Didn't Understand
• Announcing the SAFE - A Replacement for Convertible Notes
• Convertible and SAFE Notes

22. WHY DO STARTUPS RAISE MONEY? 22
SOURCES OF CAPITAL
Traditional Loans
Banks, P2P Lending, Venture Debt, SBA Loans
Pros: No dilution
Cons: Require traction, liquidation preference, personal guarantee

23. 23
TRADITIONAL LOANS
WHY DO STARTUPS RAISE MONEY?
• Prosper
• Lending Club
• Kabbage
• SBA Loans
• Doyenne Group
• Venture Debt: Silicon Valley Bank, Wintrust, Square 1 Bank
• Community/Economic Development Organizations:
• Wisconsin Economic Development Corporation
• Madison Development Corporation
• Milwaukee Economic Development Corporation
• WWBIC

24. WHY DO STARTUPS RAISE MONEY? 24
SOURCES OF CAPITAL
Revenue-based Financing
Lighter Capital
Pros: No dilution
Cons: Require traction, liquidation preference

25. WHY DO STARTUPS RAISE MONEY? 25
SOURCES OF CAPITAL
PO Financing / Factoring
Turn your receivables into cash
Pros: No dilution
Cons: Require receivables, leaving money on the table

26. WHY DO STARTUPS RAISE MONEY? 26
SOURCES OF CAPITAL
Credit Cards / Student Loans
Using your personal credit
Pros: Availability
Cons: High interest, personal guarantee

27. WHY DO STARTUPS RAISE MONEY? 27
SOURCES OF CAPITAL
Grants / Prizes / Competitions
Pitch Contests, SBIR/STTR
Pros: No dilution
Cons: Lack of accountability

28. 28
GRANTS / PRIZES / COMPETITIONS
WHY DO STARTUPS RAISE MONEY?
• UW-Extension Center for Technology Commercialization
• Governor’s Business Plan Contest
• INSITE Entrepreneurship Guide (UW-Madison)
• Wisconsin School of Business Business Plan Competition
• UWM La Macchia New Venture Business Plan Competition
• UW-Whitewater Warhark Business Plan Competition
• Transcend Madison Competition
• UW-Madison Computer Sciences NEST Competition

29. WHY DO STARTUPS RAISE MONEY? 29
SOURCES OF CAPITAL
Cash Flow
Profit!
Pros: No dilution
Cons: May not be sufficient to fuel high growth

30. Troy Vosseller | troy@gener8tor.com | gener8tor.com