Raising the Benjamins

"The initial capital that is required to start a business is usually provided the entrepreneur and his/her immediate family. Few families, however, have the resources to finance a growing business, so growth almost always requires outside capital" (Berk, 2015, p.956).

Or......maybe you are a DREAMER who needs initial CAPITAL to get started?????

Where do you go to get this money?

Show me the $

• Get a 2nd Job!
• Beg Friends & Family
• Max out your CREDIT!
• Take out loans
• Sell your precious toys!
• Or.........Open Your Accounting Book;)

Sources of Funding

• Angel Investors
• Venture Capitalists
• Institutional Investors
• Corporate Investors

Angel Investors:
"Individual investors who buy equity in small private firms" (Berk, 2015, p.956).

Venture Capital Firm:
"A limited partnership that specializes in raising money to invest in the private equity of young firms" (Berk, 2015, p. 956).

"After eight years on Shark Tank, Kevin O'Leary tells TheStreet's Scott Gamm that entrepreneurs are changing how they pitch their businesses. He went on to call the show the world's most successful venture capital firm. He partly credits that to the low cost of customer acquisition because of their 10 million strong audience" (Gamm, 2017).

Venture Capitalists:
"The general partners who work for and run a venture capital firm" (Berk, 2015, p. 957).

Corporate Investors:
"Many established corporations purchase equity in younger, private companies. A corporation that invests in private companies is referred to by many different names, including corporate investor, corporate partner, strategic partner, and strategic investor" (Berk, 2015, p. 958).

Securities & Valuations
"When a company founder decides to sell equity to outside investors for the first time, it is common practice for private companies to issue preferred stock rather than common stock to raise capital" (Berk, 2015, p. 958).

Preferred Stock:
"preferred stock issued by mature companies such as banks usually has a preferential dividend and seniority in any liquidation and sometimes special voting rights. Preferred stock issued by young companies has seniority in any liquidation but typically does not pay cash dividends and contains a right to convert to common stock" (Berk, 2015, p. 958).

Convertible Preferred Stock:
"A preferred stock that gives the owner an option to convert it into common stock on some future date" (Berk, 2015, p. 958).

Post-Money Valuation = Pre-Money Valuation + Amount Invested

Pre-Money Valuation:
"The value of a firm's prior shares outstanding at the price in the funding round" (Berk, 2015, p. 959).

Post-Money Valuation:
"the value of the whole firm (old plus new shares) at the price at which the new equity is sold" (Berk, 2015, p. 959).

How do you apply?

• Entry: Asking for investment....you are the Dreamer/Entrepreneur!
• Mid-Level: You are the Entrepreneur looking for growth capital.
• Executive: You are the "Shark" investor looking for opportunity!

Ethical Issue:
Evaluating your company....to tell the truth, or maybe pad the numbers just a "bit" to get the investment.

"These are the things you are to do: Speak the truth to each other, and render true and sound judgment in your courts;" (Zechariah 8:16, NIV)

"Then you will know the truth, and the truth will set you free" (John 8:32, NIV)

References:
Please see attachment with url:)
Thank you!