Excellent advice for tech entrepreneurs written in layman''s terms<
Trade Review
"The book should be an eye-opener for aspiring and new technology entrepreneurs and can help you navigate the dangerous waters known as venture capital. Even better, Shelters has over fifteen years of entrepreneurial experience as a founder, co-founder as well as an advisor to numerous United States-based and Asia-based startups." --YoungUpstarts.com
Table of Contents
Preface xiii
Acknowledgments xvii
CHAPTER 1 Finance for Start-Ups 101 1
Fundraising Stages 1
Prefunding Period 2
Seed Funding Stage 3
Series A Funding Stage 3
Series B Funding Stage 5
Risk/Return 5
Types of Funding 7
Private Equity 7
Debt Funding 8
Alternative Types of Funding 9
Public Funding 12
Incubator/Accelerator Programs 13
Capital Structure 13
Intellectual Property 17
Valuation 19
Asset-Based Valuation Models 20
Pro Forma-Based Valuation Models 20
Comparable-Based Valuation Models 21
Strategic-Based Valuation 22
Exit Strategy 23
Summary 24
CHAPTER 2 Know Your Investors 27
KYI #1: Their Primary Objective Is to Make Money 27
KYI #2: There Are Many Types of Investors, Each with Different Expectations and Capabilities 30
Types of Investors 30
Investment Criteria 35
KYI #3: Prospective Investors Are Looking for Success Traits 37
Skin in the Game 38
Innovation 39
Defined Target Market 39
Value Proposition 40
Commercial Viability 41
Risk Mitigation Factors 42
Burn Rates 43
Strength of Management 43
Use of Funds 44
Traction 45
KYI #4: Money Is Not Enough 47
Know the Space 48
Nonfinancial Advantages 49
Alignment of Interests 49
Issues of Control 51
Summary 56
CHAPTER 3 Business Planning from a Strategic Financial Perspective 57
Value of a Business Plan 57
Composition of a Business Plan 59
Executive Summary 60
Defined Problem and Solution 61
Product/Service 63
Value Proposition 63
Marketing Plan 65
Management Team 72
Strategic Partners 74
Operational and Expansion Plan 76
Company Objectives 78
Current Positioning and Traction 80
Risk Factors 81
Financials 84
Exit Strategy 90
Business Plan Customization 91
Marketing Plan 91
Operational and Expansion Plan 92
Company Objectives 92
Financials 93
Exit Strategy 93
Business Plan Rudiments 94
Summary 95
CHAPTER 4 Financial Planning for Maximizing Returns 97
Importance of Having a Financial Plan 98
Assistance in Overall Business Planning 99
Ensuring the Health and Integrity of Capital Structure 101
Determining Sufficient Funding Amounts 101
Securing Funding in a Timely Manner 102
Securing Funds on the Most Favorable Terms 104
Determining Appropriate Responses to New Challenges and Opportunities 104
Instilling Discipline and Maintain Focus 105
Maximizing ROI upon Execution of Exit Strategy 106
Formulating a Financial Strategy 106
Financial Objectives 108
FREE 108
FREE Measurement Tools 109
Financial Plan Composition 120
Rules of Thumb 121
Summary 122
CHAPTER 5 Successful Fundraising 125
Planning Funding Presentations 125
Prospectus Materials 127
Executive Summary 127
Business Plan 127
Funding Proposal 128
Private Placement Memorandum 129
Shareholder Letter 130
Technology Brief 131
Demonstrations 131
Market Trends and Research Report 131
Other Miscellaneous Prospectus Materials 132
Different Types of Presentations 133
Elevator Pitch 134
Lobby (PowerPoint) Pitch 135
Conference Room Pitch (Formal Presentation) 135
Summary 140
CHAPTER 6 Becoming a Formidable Negotiator 143
Prenegotiations 144
Letter of Intent 144
Nondisclosure Agreement 144
KYI Research and Inquiries 145
Leverage 146
Negotiating Capital 149
Due Diligence 149
Due Diligence Checklist 149
Due Diligence Response 149
Actual Negotiations 150
Term Sheet 150
Negotiation Approaches 150
Best Practices and Tactics 151
Points of Negotiation (Terms) 153
Have a Negotiating Plan 168
Concluding Negotiations 174
Successful Conclusion of Negotiations 174
Unsuccessful Conclusion to Negotiations 174
Negotiation Postmortem 175
Summary 175
CHAPTER 7 Establishing an Investment-Grade Organization 179
Corporate Governance 180
Attributes 180
Benefits of Good Corporate Governance 181
Corporate Governance Best Practices 182
Corporate Governance Structures 182
Ethical Behaviors 189
Stakeholder Relations 194
Summary 199
CHAPTER 8 Financial Decision Making for Optimal Performance 201
Financial Decision-Making Process 202
Practicing Sound Corporate Governance 202
Understanding Existing and Potential Decision-Making Dynamics 203
Managing Financial Expectations 206
Financial Decision-Making Structures 208
Establishing Appropriate Decision-Making Bodies and Procedures 209
Allocating Decision-Making Authority and Responsibilities 212
Placing Individual Decision Makers on Appropriate Decision-Making Bodies 216
Financial Decision Making in Practice 219
Strategic Financial Planning/Fundraising 219
Budgeting 221
Operational (Day-to-Day) Financial Decision Making 222
Financial Dealings with External Parties 224
Exiting 228
Summary 232
Afterword 235
APPENDIX A Sample Financial Plan 237
APPENDIX B Sample Funding Proposal 241
APPENDIX C Dictums of Entrepreneurial Finance 245
Glossary 251
About the Author 271
About the Website 273
Index 275
