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What is the typical age range of a prototypical business angel?
What is the typical investment range of a business angel in a single company?
What motivates many business angels beyond financial returns?
How do entrepreneurs typically find business angels?
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What is the estimated number of angel investors in the United States?
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What is a characteristic of business angels?
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What type of funding is provided by business angels?
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What is the growth potential that business angels look for in companies?
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What is the primary goal of crowdfunding?
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What is the main difference between rewards-based crowdfunding and equity-based crowdfunding?
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What is the primary advantage of leasing for a company?
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What is the purpose of the SBIR and STTR grant programs?
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What is the minimum amount of down payment required for leasing?
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What is the name of the act that was passed in 2012, which catalyzed the advent of equity-based crowdfunding?
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What is the total amount of money invested through MicroVentures since 2009?
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What are the two most common types of leases that entrepreneurial ventures undertake?
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What type of financing is suitable for a business with a high return, unique business idea, high growth, and proven management?
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What is an elevator speech, and how long does it typically last?
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What is the suitable financing option for a business with weak cash flow, high risk, and unproven management?
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What is the primary characteristic of a business that makes debt financing a suitable option?
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What is the main purpose of an elevator speech?
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What type of financing involves exchanging partial ownership in a firm for funding?
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What is the primary characteristic of a business that makes equity financing a suitable option?
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What is the purpose of Table 10.2 in the provided text?
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Study Notes
Creative Sources of Financing or Funding
- Crowdfunding: a practice of funding a project or new venture by raising monetary contributions from a large number of people (the "crowd") typically via the Internet.
- Leasing: a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments.
- SBIR and STTR Grant Programs:
- Small Business Innovation Research (SBIR)
- Small Business Technology Transfer (STTR)
- Other Grant Programs
- Strategic Partners
Crowdfunding
- Two types of crowdfunding programs:
- Rewards-based crowdfunding: allows entrepreneurs to raise money in exchange for some type of amenity or reward.
- Equity-based crowdfunding: helps businesses raise money by tapping individuals and investors who provide funding in exchange for equity in the business.
- Popular rewards-based crowdfunding sites: Kickstarter and Indiegogo.
- Popular equity-based crowdfunding sites: MicroVentures, Fundable, Crowdfunder, and CircleUp.
- Over $85 million has been invested through MicroVentures since 2009.
Leasing
- The major advantage of leasing is that it enables a company to acquire the use of assets with very little or no down payment.
- Two most common types of leases that entrepreneurial ventures undertake: leases for facilities and leases for equipment.
Sources of Equity Funding
- Business Angels: individuals who invest their personal capital directly in start-ups.
- Venture Capital
- Initial Public Offerings (IPOs)
Business Angels
- Prototypical business angel: about 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and invests in companies that are in the region where he or she lives.
- Angel investors generally invest between $10,000 and $500,000 in a single company and are looking for companies that have the potential to grow 30 to 40 percent per year before they are acquired or go public.
- Many well-known companies, including Apple and Google, received their initial investment from one or more angel investors.
- The number of angel investors in the United States is estimated to be around 304,900, and has increased dramatically over the past decade.
Preparing to Raise Debt or Equity Financing
- Equity Funding: means exchanging partial ownership in a firm, usually in the form of stock, for funding.
- Debt Financing: getting a loan.
- Table 10.2 outlines the characteristics of a venture and the appropriate form of financing or funding:
- High-risk venture with uncertain return: personal funds, friends, family, and other forms of bootstrapping.
- Low-risk venture with predictable return: debt financing.
- High-return venture: equity.
Preparing an Elevator Speech
- An elevator speech is a brief, carefully constructed statement that outlines the merits of a business opportunity.
- Most elevator speeches are around 60 seconds long.
- Guidelines for preparing an elevator speech:
- Step 1: Describe the opportunity or problem that needs to be solved. (20 seconds)
- Step 2: Describe how your product meets the opportunity or solves the problem.
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