1. Raising Capital: $0 to $500k

2. To download the full eBook,Raising Capital: $0 to $100 Million,please visit :www.techcxo.com/RaisingCapital 3. TechCXO Technology Start-Up LifecycleRaising Money in the Concept stage: $0 to $500k 4. The TechCXO 6-Step Timeline:Capital Raising within the Concept company stageProgression 1. Evaluate2. Structure #3 Market#4 IP#5 Capital #6 Next CapitalSet up as simply FocusWith limited RequestRound of Needsas possible. Avoid inventingnumber ofSix Reasons andFunding Answer the 8Avoid spooking a new category.customers andRecommendati Next round is Big Questions investors with Solve arevenue, seekons forAngel or Seed for Raisingan unusual legal fundamentalIP protectionbootstrappingfunding ($500k- Capital. Match structure or problem notfor whatever when raising up$2 million). capital source equity split.addressed well you areto $500k.Understand to lifecycle. in the market. building. somerequirements.Development PhaseResearch Phase Raise CapitalMarketing Phase 5. Step #1: Solving the Money Mystery8 Big Questions1. Should raising money be one of your1. What are the most important criteria companys early objectives? for raising money...Cost of2. Are capital markets tight or does itcapital?...Retaining ownership? depend on track record and other 2. Whats the difference between angel variables?investors, early round VCs, late round3. When and should you seek capital at VCs and private equity? all? 3. Are strategic corporate investors4. Is a traditional bank loan the rightgood or bad for your business? source?4. Whats the best way to make a pitch to investors? 6. Step #1: Matching Capital to YourLifecycleIf you can match appropriate capital sources to1. your companys lifecycle stage,2. your objectives,3. the quality and proprietary value of your technology or service,4. and how you want to use funding, the process can be fairly straightforward. 7. Step #2: Nice, Simple Structure Be sure that from a legal entity structure you are setup as simply as possible. You want to attract investors based on your ideasand operational abilities (Investors) can get spooked if you have an unusual 8. Step #2: Legal Structure An LLC structure is typically best.Note: institutional investors wont put moneyinto an LLC -- you must be a C Corp.(Its an easy, $1k procedure to change an LLC to into a company.) 9. Step #2: Employees and Early Investors (Example)Yes:No:Handful of friends andYou have 25 investors atfamily and raised $2,000 a piece, the red$100,000. flags start to go up. * Also, if you have employees, have you implemented a bona fide stock option plan (recommended) or are there just handshake agreements? 10. Step #3: (Narrow) Market FocusFatal Error: Most start-ups try to do too manythings and wind up failing. It is especially importantto maintain focus with limited capital. Pick your best opportunity and go deep into it. Once youre a leader in that area, then you canexpand. If youre trying to build seven different tech 11. Step #3: (Narrow) Market FocusExploit a good market, dont build a new one.Better to have a good technology application in a receptive market than a great piece of technology looking to find a market. 12. Step #3 (Narrow) Market Focus Think "Medicine" before "Candy"Part of your narrow focus should be to solve a fundamentalproblem not addressed well in your market.Perhaps theres: an underserved or overlooked customer segment; painful inefficiencies no one can seem to solve.Much better to have a product that solves a problem thansomething that is really cool and sexy. 13. Step #4: IP Constantly seek "IP If you dont have a lot of customers or revenue, youcan still be a draw with Intellectual Property. Think in terms of IP protection for whatever you arebuilding. Youre IP may be intriguing enough to attract investors,even without a substantive customer base if youreaddressing a specific pain in an established industry.NOTE: it is much harder to defend a proprietary processthan a proprietary product. 14. Step #5: Capital RequestBenefits of Raising Capital from 3rd Party Investors A strategic lender, private equity firm or venture capital firmprovides both confirmation of your growth plans and new ways totake your company to the next level. Any third party youll talk to has likely "been there, done that" andwill have real insight on how to make you both successful. The capital raising process is also part of a natural progression for amaturing company. It is in many ways a litmus test for your successas a going and growing business. Finally, there are sales and marketing benefits. The capital raisingprocess forces you to really dig into your business and to articulateits differentiators, key messaging, pricing and customer insights,and future projections. It may be the healthiest strategic marketingand sales endeavor you enter. 15. However TechCXO typically recommends that up to the$500,000 level, owners try to raise the moneyon their own.Here are our 6 Reasons & Recommendationsfor bootstrapping 16. #1 Reason/Recommendation for Bootstrapping: VC $ Not a Best First OptionRaising venture money should not be a first option - Organicgrowth is always best. As you move toward market validationof your product or service - as well as later funding rounds -gaining traction in niches, winning new customers andcreating commercial viability will be big considerations inattracting investors.However, if your scenario dictates that time to market and technology obsolescence are incredibly pressing issues, youmay have to find capital quickly. Those instances are rare,though. Show you can gain some traction on your own. 17. #2 Reason/Recommendation forBootstrapping: Skin in the GameInvestors want to see owner skin in the game -- Angels, VCs,banks and private equity firms will want to see owners haveequity in their own company. Equity can be straight cash, money from friends and family or even "sweat equity" in the form of quitting a full-time job to pursue their dream. In short, they want to see commitment. Remember: friends and family is fine but keep it simple. A handful of friends and family contributing money is straightforward; however, a bunch of small contributors might spook institutional players. For example, 25 people contributing $5,000 a piece spells trouble. 18. #3 Reason/Recommendation forBootstrapping: The PitchCreate and Refine Your Pitch Focused on Two Areas Your innovation is going to have to pass the "Sniff Test." That is,does your concept or product make sense to people immediately,especially those people with no expertise in your market. Focus on something that eases pain in a specific market and createyour elevator pitch. Part two is to sell yourself as a credible CEO. By some estimates, 80% of the decision criteria for early investors isbetting on you as a horse that they want to ride and not necessarilybetting on the race they want to be in. 19. #5 Reason/Recommendation for Bootstrapping:Seeking MoneyWork in Concentric CirclesSeek money from your personal professional network first and then work in concentric circles of contacts to expand your reach.Approach your prospecting the same way LinkedIn builds connections. 20. #5 Reason/Recommendation forBootstrapping: Seeking MoneyClear the Technology Hurdle Youre going to have to demonstrate toprospects that your technology actuallyworks.It doesnt have to be a completed product butthere must be a lab demo that it works. 21. #5 Reason/Recommendation for Bootstrapping: Seeking MoneyEmbrace that Bootstrapping is the Best OptionAngel investors and early stage VCs used to dip deeper into start-ups. However, most want to see $1 million in revenue these days.There are still some adventuresome types but more likely than not, bootstrapping will be your best - and perhaps, only - option. Attack it with vigor. 22. Step #6: The Next RoundConsider your equityTypically, in the next stage (Angel/Seedinvestors) an entrepreneur is seeking$500,000 - $2 million, and - as a general rule --the entrepreneur or company should notsurrender more than 25% of their ownership.Make this part of your calculation when youare in the Concept stage 23. To download the full eBook,Raising Capital: $0 to $100 Million,please visit :www.techcxo.com/RaisingCapital 24. CONTACT USGET CONNECTED!ADDRESS :We have offices in Atlanta, Boston,Dallas, Northern Virginia/D.C., ResearchTriangle Park and San Francisco.ONLINE :http://www.TechCXO.comwww.Twitter.com/TechCXO