These were the presentation slides for the Got Startup Meetup on April 23, 2015 in Palo Alto, California.

1. FUNDING YOUR
STARTUP ‐ 2015
got startup?

2. Where’s the Money?
• Tapping your resources
• Friends & family
• Crowdfunding
• Angel Investors
• Venture Capital
• Institutional Investors
• Government Resources
• Self Directed IRAs

3. Tapping Your Resources
• Savings
• Liquidate Assets
• Steve Jobs sold his Volkswagen van and Steve Wozniak
sold his programmable calculator to start Apple
Computers
• Credit cards
• Try to get zero percent transfer credit cards
• Transfer again before rate hike (3‐4% fee)
• Kevin Plank, CEO of Under Armor, started his company
with $20K in cash and $40K in credit card debt
• Commercial Banks
• Loans
• Lines of Credit

4. Friends & Family
• Probably the most common funding
method for young entrepreneurs
• Walmart was started with $5K saved
from Sam Walton’s military service and
$20K from his father‐in‐law
• Risk – can complicate personal
relationships
• Is limited by people you know

5. Crowdfunding
• Different Types
• Rewards based
• Debt based
• Donation based
• Equity offering platforms

6. Reward Based Crowdfunding
• Currently the most popular
• Venture will offer reward tiers
for different amounts of money
pledged
• Some Ventures will utilize
capped reward tiers, pushing
funders to donate early in order
to get their reward of choice

7. Reward Based Crowdfunding
Coolest Cooler Raised over $13M
Kickstarter

8. Reward Based Crowdfunding
Indiegogo
SolarRoadways has raised over $2M

9. Debt Based Crowdfunding
• P2P Loans
• Lending Club
• Over $5B in loans issued
• Sliding scales based upon risk
(about 8‐25%)
• Micro financing

10. Donation Based Crowdfunding
• For charitable/non‐profit
organizations
• Sometimes used by individuals
• GoFundMe
• Raised over $120M
• Platform takes 5%

11. Equity Offering Platforms
Regulation D
• Investors must be accredited
• Tends to be much faster than
Angel financing

12. Venture Capitalists
• Venture Capitalists are usually large firms
that invest in early Startups (Ventures) with
their considerable resources (Capital)
• VC’s do not make money until the Venture
has an IPO or is sold to another company
• The Pentagon is planning on opening a
Silicon Valley based VC later this year
• Venture Capitalists trade capital for
ownership equity, in the hopes of creating
a lucrative return

13. What do Venture Capitalists Do?
• Own a percentage of the Venture
• Are typically more involved in day to day
activities than other funding options, with
the possible exception of Angel Investors
• VC’s are influenced by risk factors, so it is
generally better to approach them later in
your funding cycles, particularly if you
have an influential Angel Investor backing
you.

14. So you want to find a Venture Capitalist
• Sand Hill Road in Menlo Park is home to
many of the largest Venture Capitalists
• Research Venture Capitalists who have
invested in your market area. (i.e. Apps,
Biomedical, Consumer Goods, Services)
• VCs tend to have market focuses, be sure
to find the correct one for you
• Research the people who work at that VC
• Perfect your pitch

15. Angel Investors
• Angel Investors are private investors
• Essentially a one person Venture Capitalist
• Individuals – often entrepreneurs, although
some band together (e.g. Keiretsu Forum)
• Reality TV shows ‘Shark Tank’ and ‘Dragon’s
Den’ are about Angel Investors
• Provide Capital for a Startup in exchange
for convertible debt or ownership equity
• Some have organized themselves into
Angel Groups or Angel Networks to share
research and pool capital

16. Institutional Investors
• A more ‘classical’ option in funding
• Banks
• Insurance Companies
• Pension Funds/Hedge Funds/Mutual Funds
• These groups invest their pooled funds into
securities, property, and other assets.
• Companies also have investment funds

17. Government Resources
• SBA, see www.sba.gov
• Federal Grants, see www.federalgrants.com

18. Self Directed IRAs
• 401(k) – Some plans allow for loans against your
retirement savings
• IRAs – but probably not your own
• Self Directed IRAs
• Should get professional assistance in setting
this up
• Conventional IRAs
• Roth IRAs
• This was used by Max Levchin of Yelp! And
Paypal to create a ROTH IRA that may be
worth >$100M
• Put investments with the highest growth
potential into a Roth IRA

19. So When do you Ask?
When should you look for funding?
Image from https://en.wikipedia.org/wiki/Startup_company#/media/File:Startup_financing_cycle.svg

20. 5 stages of Funding
When should you look for funding?
Image from https://en.wikipedia.org/wiki/Startup_company#/media/File:Startup_financing_cycle.svg

21. 5 stages of Funding
• The market has defined 5 stages of
funding.
• These stages are reached as the startup
grows and begins to succeed
• Earlier stage investors expect a larger
percentage of the startup’s equity.
• Some investors (such as VCs) are very
involved in the evolution and success of
the Venture.

22. 5 stages of Funding
The Seed Stage
• The “Idea” stage – Prototype stage
• Many Investors will conduct a
Feasibility Study to investigate ideas.
• HIGHEST RISK STAGE
Best sources for Seed Funding:
• Angel Investors
• Friends and Family
• Government Funding
• CrowdFunding
Risk of Loss
66.2%

23. 5 stages of Funding
The Startup Stage
• Venture has passed the feasibility test
• Company starts putting together the
management/founding team
• Market Research is conducted
Best sources for Startup Funding:
• Angel Investors
• Venture Capitalists
• Government Funding
• CrowdFunding
Risk of Loss
53.0%

24. 5 stages of Funding
The Second Stage
• Encounters of the Marketing Kind
• Product is now being introduced to market
• Sales are beginning to happen.
• Venture has not yet broken even
Best sources for Second Stage Funding:
• Venture Capitalists
• Government Funding
• CrowdFunding Risk of Loss
33.7%

25. 5 stages of Funding
The Third Stage
• Expansion phase
• Venture expands market share
• Marketing becomes very important
• Attempt to cut down costs or restructure
• Look into follow up products
Best sources for Third Stage Funding:
• Venture Capitalists
• Government Funding
• CrowdFunding
Risk of Loss
20.1%

26. 5 stages of Funding
The Bridge/Pre IPO Stage
• Last stage of funding process
• Venture has achieved a certain amount of
market share
• Venture may be bought out in a merger
Best sources for Third Stage Funding:
• Venture Capitalists
Risk of Loss
20.9%