Secrets of Funding

1. Secrets of Funding Richard M. Sneider, Ph.D. Launch Technology, Inc. Concord, MA SEED Presentation January 28, 2013

2. Outline Introduction Entrepreneurial Background Company Stages 10 Keys to Funding Sources of Funding Time to Reposition Summary Discussion

3. Introduction • Your name • Briefly describe your existing or planned startup, if any • Reason for attending

4. Entrepreneurial Background Sneider & Associates, LTD - Health Care Technology Boston University, School of Management - Assistant Professor Next Generation Systems - Text to Speech Applications Launch Technology, Inc. - Seed Investing and Consulting InterUnity Group - Technology Consulting Garage Technology Ventures – Identification and Due Diligence CommonAngels- Member, Due Diligence Committee Babson University - Executive in Residence

5. Stage Definitions • Seed Stage - The initial stage. • Early Stage - The company has a product or service in testing or pilot production. • Expansion Stage - Product or service is in production and commercially available. • Later Stage - Product or service is widely available. Source: PWC Moneytree

6. Seed Stage vs Early Stage • The primary difference between a raw startup (or seed-stage company) and an early-stage company is evidence of business progress. • Early-stage companies can be characterized by the following attributes: • Corporate organization in place • May have received one or more prior rounds of funding from company founders, friends or family members. • May have filed patent applications. • May have tested a product or service prototype. • May have launched a website labeled “beta.” • May be generating revenues. • May have some impressive evidence that there are highly interested first adopters or customers in place for the company’s technologies, products or services • May have a clearly defined commercialization and sales strategy in place. Source: Inside Entrepreneurship: 'Early stage' can mean different things to VCs By SUSAN SCHRETER, SPECIAL TO THE P-I Updated 10:00 pm, Thursday, January 17, 2008

7. VC Deal Count by Stage

8. Funding Table

9. Types of Funding • Friends and Family • Barter • Loans – Personal, credit card, governmental, bank • Royalty Payments • Factoring • Strategic Partnerships • Equity Investment http://www.theawl.com/2010/01/guest-op-ed-do-you-think-wimpy-was-just-asking-for-any-kind-of-hamburger

10. 10 Keys to Funding • Problem Solved by Company • Need to havevsNice to have • Current needvs Future need • Growth Potential • How Big • How Fast • Current Revenue

11. 10 Keys to Funding • Barriers to Entry • Patents • Proprietary Technology • Trade Secrets • Exclusivity • Capital Investment • Pitch • Succinct • Covers Keys to Funding • WOW Factor

12. 10 Keys to Funding • Surface Validity of Business Plan • Reasonableness • Internal Consistency • Scalable Business Model • Complete • Professional • Team • Experience in market • Experience in product space • Entrepreneurial experience • Fundability

13. 10 Keys to Funding • Market Analysis • Bottom Up • Named potential customers • Letters of interest • Letters of intent • Competitive Analysis • Existing Competitors • Potential Competitors • Competitive Advantages

14. 10 Keys to Funding • Team Commitment • Full Time • “Skin in the Game” • Stage of Company • Realistic Valuation • Investor Risk • Investor Return • Future Investment Potential

15. Traditional Business - Funding • Examples heard at Sandbox • Landscaping Company • Roller Rink • Beauty Shop • Personal Trainer • Common Sources of Funding • Friends and family • Credit cards • Personal loans • Advance customer payments • Public job creation organizations • Private civic groups

16. Growth Companies - Funding Meeting and Forums Reality TV Shows Contests Portals Incubators and Accelerators Crowd Funding Angel Investor Groups Early Stage Venture Funds

17. Meetings and Forums

18. Reality TV Shows Canada United Kingdom Ireland

19. Contests

20. Crowd Funding

21. Crowd Funding Arrangements • Money for goods • All or Nothing (AoN) - Pledged money is only collected from the contributors if the fundraising goal is met. • Keep it All (KiA) - No matter whether the project goal is met or not, all of the funds collected (minus commission) are handed over to the entrepreneur. • Loans and equity • Equity- Investors take equity in the company . • Loan - Lenders' money is loaned to the entrepreneur who has to repay it (typically, with interest) later. • Other - There are a number of other schemes in use which are generally unique to particular services. Source: en.wikipedia.org/wiki/Comparison_of_crowd_funding_services

22. Public

23. Portals and Other Peer to Peer Lending Micro loans

24. Incubators & Accelerators Harvard i-lab innovationlab

25. Incubators & Accelerators Public Private University Based VC Based Venture Incubator - Full-service organization that provides everything a venture could need, including office infrastructure, access to a network of contacts, technology resources, human resources, operational expertise, legal, accounting, etc. Venture Accelerators - Services firms that accelerate the process of starting a new venture. They provide consulting services to bolster the business plan, reposition, validate, bring to market, provide due diligence for a venture capital firm or other investor, and make available other for-hire services specific to a new venture. Source: Incubators in the New Economy, MIT, 2000.

26. Angel Investor Groups Aertsen Ventures 8 Wings Ventures, LLC River Valley Investors http://www.emergingenterprisecenter.com/Resources/FundingandIndustryDirectories/AngelInvestors.aspx

27. Early Stage Venture Funds

28. Timeto Reposition • 3 pitches and no success • General next steps suggested – VCs are polite • Difficulty recruiting a team • Inability to identify 5 target customers by name • Exorbitant debt • Deteriorating personal life

29. Summary • Money is plentiful • Smart money is the worth the effort • Persistence is often necessary • Learn from failures • Select the right funding source • Know when to reposition

30. Discussion • Questions?