Venture funding, sizes, pro and cons at different enterprise development stages presented during an EMBA session at Stockholm School of Economics in February 2017

1. FUNDING AND FINTECH
VOODOO FOR YOUR
VENTURE
MICHAL GROMEK
RESEARCHER ON FINTECH & CROWDFUNDING
#SE.LINKEDIN.COM/IN/MGROMEK
EXECUTIVE MASTER OF BUSINESS ADMINISTRATION
SESSION ON FINTECH
STOCKHOLM, FEBRUARY 9TH, 2017

2. PICTURE:HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/
STOCKHOLM GRAB YOUR PHONES
PLEASE VOTE ON
menti.com
YOUR
CODE
60 99 70

3. PICTURE:HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/
PRESENTATION IS ONLINE ON
SLIDESHARE.COM/MICHALGROMEK
FOR TODAY
ROADMAP
EMBA SSE 9TH FEBRUARY
2017
9:15- 10:00 FUNDING A VENTURE (TRADITIONAL & FINTECH)
10:00-10:10 Q&A COMMUNICATION WITH INVESTORS
10:10 - 10:30 TEAM ASSIGNMENT (USAGE IN PRACTICE)
10:30 - 10:50 PRESENTATION AND DICUSSIONS
BREAK

4. Picture:https://flic.kr/p/drV3LQ
POTENTIAL QUESTIONS:
I HAVE AN VENTURE SO HOW DO I
RECEIVE FUNDING?
CAN I JUST UPLOAD MY BUSINESS
IDEA ONLINE?
HOW CAN THE STARTUP THAT I
WORK WITH RECEIVE FUNDING?
ROAD MAP FOR OUR 90 MIN TODAY:
DIFFERENT TYPES OF FUNDING SOURCES FOR
ENTREPRENEURS AND STARTUPS (FIRST 45) WITH A
FOCUS ON CROWDFUNDING (SECOND 45 MIN)
NO CANNED
SOLUTION :)

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STARTUP FINANCING CYCLE (MODEL)

6. CLICK HERE FOR VIDEO EXPLANATION
PRE-SEED FUNDING
FRIENDS, FAMILLY (AND "FOOLS"), BUSINESS ANGELS, PUBLIC FUNDING LIKE ALMI,
REWARDS BASED CROWDFUNDING, STING
PRE - SEED FUNDING - I HAVE AN IDEA
WHO IS PROVIDING PRE-SEED FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
EARLIEST STAGE, DESIGN OF THE PRODUCT, PROVISION OF MARKET FIT, CREATION
OF THE COMPANY.

7. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (STAGES OF FUNDING)
PRE-SEED FUNDING
SEED FUNDING
FOR MORE INFORMATION WATCH OUR PRESENTATION FROM LAST WEEK - LINK

8. CLICK HERE FOR VIDEO EXPLANATION
ABOUT SEED FUNDING
BUSINESS ANGELS, EQUITY CROWDFUNDING, REWARD CROWDFUNDING,
PUBLIC FUNDING
SEED FUNDING - I HAVE A COMPANY
WHO IS PROVING SEED FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
SIZE AROUND 230K EURO UP TO 2M EURO IN ORDER TO BRING THE PRODUCT TO
MARKET, SIGN FIRST BIG CONTRACTS, ADVERTISE TO THE PUBLIC

9. CLICK HERE FOR A VIDEO EXPLANATION
ABOUT STARTUP FUNDING
WE ARE NOW IN OUR C-SERIES SHARE ISSUE PROCESS AND CONSIDER 20M
INVESTMENT.
STAGES OF INVESTMENTS
WHAT DOES THE FOUNDER SAY TO YOU:
WHAT DOES THIS MEAN
THE COMPANY HAS AN SUCCESSFUL PROOF OF
CONCEPT, TEAM, EXPERIENCE IN RISING
FUNDING, SIGNIFICANT INVESTMENT AND
POTENTIAL SOME INT. EXPANSION

10. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (STAGES OF FUNDING)
PRE-SEED FUNDING
SEED FUNDING
SERIES A / SERIES B
FOR MORE INFORMATION WATCH OUR PRESENTATION FROM LAST WEEK - LINK

11. CLICK HERE FOR VIDEO EXPLANATION
ABOUT SERIES A FUNDING
BUSINESS ANGEL, EQUITY CROWDFUNDING, VENTURE CAPITAL (LATELY VC ARE
LESS LIKELY TO PROVIDE SERIES A FUNDING)
SERIES A - OPTIMISE PRODUCT & USER BASE
WHO IS PROVIDING SERIES A FUNDING
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
SCALING THE PRODUCT, EXPLORING THE TRUE MARKET FIT, INTRODUCTION OF
NEW FEATURES. IN THE PAST THE MEDIAN HAS BEEN AROUND 7M EURO. IT WENT
UP SIGNIFICANT IN RECENT YEARS TO 6.5 M-14M EURO
> INTERESTING CASE: AGGREGATE MEDIA - EQUITY FOR ADVERTISEMENT SPACE.

12. EXAMPLE OF AN VENTURE THAT RAISED SERIES B
VENTURE CAPITAL, (THAT SPECIALISE IN LATER STAGE FUNDING) INSTITUTIONAL
INVESTORS, HEDGE FUNDS FUND REPRESENTATIVES
SERIES B - "B" IS FOR BUILD
WHO IS PROVIDING SERIES B FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
THE STARTUP HAS A WORKING BUSINESS MODEL AND WOULD LIKE TO EXPEND ITS
REACH. IT RECEIVES SIGNIFICANT TRACTION AND HAS A TRACK OF RECORD. THE
COMPANY RAISES FUNDING FOR NEW TEAM MEMBERS, FURTHER EXPANSION.
SIZE: USUALLY 7M+ EURO

13. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (STAGES OF FUNDING)
PRE-SEED FUNDING
SEED FUNDING
SERIES A / SERIES B
SERIES C
FOR MORE INFORMATION WATCH OUR PRESENTATION FROM LAST WEEK - LINK

14. EXAMPLE OF AN VENTURE THAT RAISED SERIES C
200M USD
VENTURE CAPITAL, INSTITUTIONAL INVESTORS, HEDGE FUNDS
FUND REPRESENTATIVES
SERIES C (D, E, F... )
HOW IS PROVIDING SEED FUNDING
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
ACCELERATION BEYOND SERIES B, ACQUISITION OF COMPETITORS
OR PARTNERS, INTERNATIONALISATION. INVESTOR INJECT MONEY INTO
SUCCESSFUL BUSINESSES WITH THE
GOAL TO AT LEAST RECEIVE THE DOUBLE AMOUNT BACK.
KEYWORDS:
COMPETETIVE ADVANTAGE, MERGER
AND SYNERGISTIC PARTNERSHIP

15. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (STAGES OF FUNDING)
PRE-SEED FUNDING
SEED FUNDING
SERIES A / SERIES B
SERIES C
FOR MORE INFORMATION WATCH OUR PRESENTATION FROM LAST WEEK - LINK

16. WATCH A VIDEO ON MEZANINE FUNDING
IS A TERM WHEN A COMPANY DECIDES TO "GO PUBLIC" AND TO OFFER
THEIR SHARE ON A STOCK EXCHANGE- CLICK HERE FOR A VIDEO
EXPLANATION.
POSSIBLE SCENARIOS FOR YOUR STARTUP
PROJECT (BUT LESS LIKELY:))
IPO - INITIAL PUBLIC OFFERING
MEZANINE FUNDING
FUNDER IS OBTAINING A LOAN WITHOUT A COLLATERAL (AN
MOVABLE OR NONE MOVABLE ASSET THAT BACKS UP THE LOAN.
IN CASE OF A DEFAULT THE LENDER CONVERTS HIS DEBT INTO
SHARES. - CLICK HERE FOR A VIDEO EXPLANATION.
USUALLY USED WITH A TRACK RECORD AND REPUTATION USED
OFTEN TO PERFORM AN IPO. TYPICAL INTREST IS SOMEWHERE
BETWEEN 10% AND 22%

17. COMPREHENSIVE VIDEO EXPLENATIONAL
OF CONVIRTABLE LOAN
A COMPANY ISSUES A LOAN TO LENDERS AND AT A SPECIFIC DATE THE
INVESTORS CAN DECIDE IF THEY WOULD LIKE TO RECEIVE THEIR DEBT
REPAID OR CONVERT IT TO OWNERSHIP IN THE COMPANY.
LENDERS USUALLY RECEIVES A DISCOUNT RATE TO CONVERT INTO
VALUATION AT A LATER STAGE.
POSSIBLE SCENARIOS FOR YOUR STARTUP
PROJECT (BUT LESS LIKELY:))
COVERTABLE LOANS: (DEBT)
BRIDGE FINANCING (FORM OF CONVERTABLE DEBT)
IS A LOAN THAT CONVERTS TO EQUITY
THE INVESTOR CAN DECIDE ON THE TRIGGER POINT IF THE
LOAN WITH THE DISCOUNT SHOULD BE CONVERTED
ACCORDING TO AN OLD POST MONEY VALUE OR A NEW
PREMONEY VALUATION FOR NEXT ROUND.
WATCH A VIDEO ON BRIDGE FINANCING

18. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (WHAT DO YOU PITCH)
TEAM
VISION
MISSION
TRIGGER EMOTIONS
REPUTATION
INSTITUTIONAL FUNDING
HEDGE FUNDS
PUBLIC FUNDING
REWARD BASED
CROWDFUNDING

19. Picture:https://flic.kr/p/drV3LQ
STARTUP FINANCING CYCLE (WHAT DO YOU PITCH)
TRACK RECORD
PATENT APPLICATION
TRACTION
RETENTION
DATA, DATA, DATA
INSTITUTIONAL FUNDING
HEDGE FUNDS
PUBLIC FUNDING
PUBLIC FUNDING

20. FRIENDS FAMILLY FOOLS
THEY JUST FUNDING, DON'T HOPE FOR STRATEGY TIPS
CAN BE A NIGHTMARE TO DEAL WITH THEM - SO FAR LITTLE
BUSINESS S EXPERIENCE (IT WAS FOR ME)
IN CASE BUSINESS FAILS THEY CAN TAKE IT PERSONALLY
DOWNSIDES
COMMUNICATE RISK CLEARLY
HAVE A SHAREHOLDER AGREEMENT
DON'T ASK FOR MONEY THAT THEY CAN NEED
TIPS:
UPSIGHTS
USE YOUR REPUTATION
DON'T CHECK CREDIBILITY
LESS BURACRATIC

21. BUSINESS ANGELS
BUSINESS ANGEL CAN BE STRONG INDIVIDUALS, AND SOME GOT
WEALTHY BECAUSE OF LUCK AND NOT NECESSARY EXPERIENCE.
SOME BUSINESS ANGELS LIKE TO HAVE MORE CONTROL THAN
WHAT FOUNDER ARE WILLING TO GIVE.
DOWNSIDES
SPEAK TO FOUNDERS OF COMPANIES WHERE BA'S
HAS INVESTED INTO. REVIEW THE BA'S
PERFORMANCE IN YOUR SECTOR
TIPS:
UPSIGHTS
INVEST ON EARLY STAGE, LIKE TO TAKE RISK
CAN OPEN DOORS WITH THEIR INFORMAL NETWORK
MONEY IS NOT A LOAN (USUALLY)
BUSINESSES OPERATE LONGER AND HAVE A HIGHER RATE OF RETURN
LINK TO HOW TO RAISE MONEY FROM ANGEL INVESTORS (PLEASE SKIP FIRST 12 MINUTES)

22. VENTURE CAPITAL
LONG DUE DILLENGENCE PROCESS
TENDENCY 95% DISCOUNTED VALUATION METHOD
STRONG PERSONALITIES
SINCE 2009 > USUALLY LATE STAGE FINANCE (SERIES A+)
DOWNSIDES
UNDERSTAND HOW VC WORKS (PRESENTATION BELOW)
REVIEW WHEN THEY HAVE BEEN RAISING MONEY
AND IS THERE OWN PERFORMANCE
TIPS:
UPSIGHTS
MAYBE SMART MONEY
STRONG NETWORK
LONGTERM PARTNER 4.2% OF VC
EMPLOYEES ARE
FEMALE*
*SOURCE: http://fortune.com/2015/01/30/women-are-not-making-progress-in-male-
dominated-vc-world-data-shows/ (ACCESSED 20th OF JANUARY)
LINK TO HARVARD INNOVATION LAB ON HOW VC MAKE DECISION

23. TO MUCH OF THE FUNDING
DECREASES THE SENSE OF
URGENCY AND FOCUS ON SALES
"WE DIDNT FEEL THE URGENCY TO
FOCUS ON SALES" - CEO FIKABOX
PLANNING FOR FUNDING
IS ONLY AS GOOD AS THE QUALITY OF YOUR BUSINESS FORECAST
TO SMALL FUNDING ROUND
(PERMANENT FOCUS ON
FUNDING -
"IT TOOK ME AROUND 70% OF
MY TIME TO FOCUS ON FINANCE"
- CEO TIMESULIN

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Crowdfunding is the
accumulation of small
investments in individual
projects by
a large number of individuals
(“the “crowd”) with the help
of the internet or social
networks (De Buyer et al.,
2012)
DEFINITION:

25. CURRENT TYPES OF CROWDFUNDING
DONATION BASED
CROWDFUNDING
REWARD BASED
CROWDFUNDING
LENDING BASED
CROWDFUNDING
REAL ESTATE
CROWDFUNDING
C2B / B2B LENDING
CROWDFUNDING
EQUITY BASED
CROWDFUNDING

26. CURRENT TYPES OF CROWDFUNDING
YOU BACK UP
PROJECT AND
EXPECT NOTHING
IN RETURN.
DONATION REAL ESTATE
COLLECTS
FUNDING FOR
CONSTRUCTION
OF A REAL ESTATE
EQUITY
PARTIES ARE
BUYING SHARES
FROM A LTD.
(AB IN SWEDEN)
CROWD BACKS
UP A PROJECT
AND EXPECTS
A REWARD IN
RETURN.
PLATFORM
FACILITATES
LENDING BETWEEN
DIFFERENT
PARTIES
PARTIES ARE
SEEKING
FUNDING USING
THE
PLATFORM
REWARD LENDING C2C / C2B / B2B LENDING

27. CURRENT TYPES OF CROWDFUNDING
YOU BACK UP
PROJECT AND
EXPECT NOTHING
IN RETURN.
DONATION REAL ESTATE
COLLECTS
FUNDING FOR
CONSTRUCTION
OF A REAL ESTATE
EQUITY
PARTIES ARE
BUYING SHARES
FROM A LTD.
(AB IN SWEDEN)
CROWD BACKS
UP A PROJECT
AND EXPECTS
A REWARD IN
RETURN.
PLATFORM
FACILITATES
LENDING BETWEEN
DIFFERENT
PARTIES
PARTIES ARE
SEEKING
FUNDING USING
THE
PLATFORM
REWARD LENDING C2B / C2B / B2B LENDING

28. REWARD BASED CROWDFUNDING
REWARD
IDEA
THERE IS A
CONNECTION TO
THE CROWD
THE
ENTREPRENEUR
S TEAMS TRUST
AVERAGE FUNDING ROUND: LESS THAN 9.5K EURO

29. REWARD BASED CROWDFUNDING
C2B / C2B / B2B LENDING
Source: https://www.fundedbyme.com/en/campaign/1061/flippin­burgers/?p=v2 (Accessed 5th of February 2017)

30. REWARD BASED CROWDFUNDING
C2B / C2B / B2B LENDING
Source: https://www.fundedbyme.com/en/campaign/1061/flippin­burgers/?p=v2 (Accessed 5th of February 2017)

31. EQUITY BASED CROWDFUNDING
REWARD
EQUITY
THERE IS A LTD
COMPANY
THERE IS A
VALUATION
TRUST /
REPUTATION
WHAT IS THE EXIT
STRATEGY?
AVERAGE FUNDING ROUND ON ONE OF SE PLATFORMS - 65K EURO
SOURCE:https://www.fundedbyme.com/(accessed5.2.2017,note:justasindicatorasnotallofthecompanieshavebeenequitycampaigns)

32. EQUITY BASED CROWDFUNDING
C2B / C2B / B2B LENDING
Source: https://www.fundedbyme.com/en/campaign/1061/flippin­burgers/?p=v2 (Accessed 5th of February 2017)
Source: https://www.fundedbyme.com/en/campaign/7707/the-fox/?type=e&p=v2 (ACCESSED 05.02.2017)

33. CROWDLENDING (C2B / P2P LENDING)
REWARD
EQUITY
LENDING
COMPANY
EXISTS FOR AT
LEAST 18
MONTHS
TRACK RECORD
COLLATERALS
AVERAGE LOAN SIZE (UK) 170K EURO, INVESTORS PORTFOLIO 20K EURO
SOURCE:HTTPS://WWW.FUNDINGCIRCLE.S/BLOG/PRESS/(ACCESSED05.02.2017)

34. CROWDLENDING
C2B / C2B / B2B LENDING
Source:https://toborrow.se/sv/projekt/respice­sweden­ab­2/ (Accessed 5th of February 2017)

35. WHAT MOTIVATES USERS
SOURCE: PROF KARIM LAKHANI, OPEN INNOVATION HOW CAN I USE THE CROWD, ESBRI 26.02.106
PICTURE: HTTP://BLOG.CROWDS.IO/WP-CONTENT/UPLOADS/2015/07/CROWDSOURCING-COMMUNITY-750X410.JPG
3.
PHILANTROPHYEXTERNAL
2.
(EXTRINSIC)
1.
INTRISTIC
(INTERNAL)

36. CAPITAL C - NOT ONLY FUNDING
AMBASSADORS
DOOR OPENERS
FREE PR
FANS
INFORMAL
NETWORK
TEST GROUP

37. SHORT SUMMARY
VENTURE FUNDING IS NOT ONLY ABOUT
FUNDING BY PRIMARY ABOUT ADDITIONAL
NON-FINANCIAL BENEFITS:
CANNED SOLUTIONS DON'T EXIST AS EACH
VENTURE HAS DIFFERENT CHELLANGES,
REFLECT ON YOUR NEEDS AND MATCH
INVESTOR TYPE.
CROWDFUNDING IS AN OLD PHENOMENON.
DIFFERENT TYPES OF CROWDFUNDING MATCH
DIFFERENT DEVELOPMENT STAGES. IT
PROVIDES A RANGE OF NON-
FINANCIAL BENEFITS TO COMPANIES.

38. PICTURE:HTTPS://WWW.FLICKR.COM/PHOTOS/DICK-SIJTSMA/
FINTECH IN PRACTICE
EVALUATE ALL FORMS OF
FUNDING PRESENTED TODAY.
PRESENT TO THE CLASS THE
MOST SUITABLE TYPE FOR
YOUR "PROJECT VENTURE"
WORK IN YOUR PROJECT GROUPS.
PRESENTATION PER GROUP 80 SEC - PREPARATION TIME 10 MINUTES

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10MINUTES

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5MINUTES

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2MINUTES

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1MINUTES

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GROUP 7
FUNDING
FINTECH DAY

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GROUP 1
FUNDING
FINTECH DAY

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GROUP 8
FUNDING
FINTECH DAY

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GROUP 5
FUNDING
FINTECH DAY

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GROUP 6
FUNDING
FINTECH DAY

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GROUP 4
FUNDING
FINTECH DAY

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GROUP 2
FUNDING
FINTECH DAY

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GROUP 3
FUNDING
FINTECH DAY