Turn Ideas To Deals

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District Center Manager for Ohio SBDC at Columbus State since 2002 SBDC State Star for Ohio in 2007 Won the SBA Innovation and Service Center of the Year for Ohio and SBA Region Five in 2007 Striving to accelerate the growth of entrepreneurship and small business innovation. #RunNerds Marathoner. What's worth doing is worth doing for 26.2!

Ohio SBDC

An experienced & award winning team providing no-cost, one-on-one business management advice

with four centers to serve you at one location:

Specialty Centers

Ohio SBDC Manufacturing Center Ohio SBDC International Business Center

Ohio SBDC Latino Center

The Ohio SBDC at Columbus State

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Where is the Ohio SBDC at Columbus State

Advised 1,087 Small Businesses Conducted classes for over 1,500 attendees Facilitated $4,804,950 in loans / investment capital Assisted in the creation or retention of 617 jobs 51% of SBDC clients are women owned 36% of SBDC clients are minority owned

2012 SBDC Activity

Director Omar Diop Developing export strategies Preparing your product or service for export International legal considerations Shipping product; pricing, quotation and terms Methods of payment and Financing Export transactions Business travel abroad State of Ohio Export Grant Assistance

Ohio SBDC International Business Center

Director Brian Fox

Continuous Improvement & Modernization ~ Process improvements, workforce assessments & training, lean operations…

Inventions & Prototyping ~ Product design, modeling, prototyping, market assessment, Intellectual property, R&D grants…

Partnering & Commercialization ~ Licensing technologies, capital access, mfg partners, marketing channels, fulfillment strategies…

Ohio SBDC Manufacturing Center

Ohio SBDC Latino Center & Specialty Services

Director Ariana Ulloa-Olavarrieta

All SBDC Services Delivered in Spanish ~ No Charge

Certification Workshops ~ Using Diversity Bridge as the tool we provide assistance to businesses seeking to secure government contracts ~ No Charge

From Kitchen to Market ~ Specialized business advising to assist those developing food products and mobile food trucks ~ No Charge

Get “The Art of Pitching For Money” at Ideas2Deals.com

Getting Financing Is…

Financing All About Customers

“In preparing for battle I have always found that plans are

useless, but planning is indispensable.”

- Dwight D. Eisenhower

13

Who is out there to buy our Product? How do we get them to buy our product at YOUR price?

Can You Answer This?

Bootstrapping is building the business from internally generated funds.

• You need to establish a foundation for your

business. • Build credibility and show that your business has

customers and a product that people want to buy. • Focus on customers and cash flow. • Work hard and be creative in seeking ways to drive

revenue while holding expenses down.

Friends Family & Founder

Angel investors are high net worth individuals who are interested in investing in emerging businesses.

Two Types of Angel Investors Professional Strategic

Angel Investors

The underlying reason that they will invest is return on their investment.

They invest in spaces they know. They invest with people they know They invest based on referrals from

people they know. Invest based on due diligence. Will require professional terms. Looking for a big payout based on a

liquidity event.

Professional Investors

More interested in the product than the business.

Invest based on gut reaction. May take common stock May not look for a liquidity event. May be the friends in FFF (or referred

by FFF)

Strategic Investors

If you take someone else’s money you have a partner. They will want to have some influence on the company to protect their investment.

You will probably have to relinquish some level of control over the company.

If you are unwilling to share leadership of the company, investors are not the option for you.

Key Points About Investors

The only reason that they will invest is return on their investment.

They only invest in spaces they know. They only invest with people they know They only invest based on referrals from

people they know. Invest only based on due diligence. Will only require professional terms. They are only looking for a big payout based

on a liquidity event.

Institutional Venture Capital

What is it all Worth?

Valuation

Valuation of early-stage companies is a little short of random.

Valuation is negotiated, there are no hard numbers especially for early-stage companies.

Provide a good projection of future value at a potential, future liquidity date and discount back.

Know comparables…What other companies, similar to yours, have generated what multiples of sales at liquidity.

Build value as you build the company ~ Focus on “Value Inflection Points”.

Focus on dollars not percentage 10% of a $20 million company is worth more than

100% of a $1 million company.

Key Valuation Issues

Know what investors look for and expect. Make sure you and the investors are on the

same page. Good investors will want you to have a fair percentage of the company.

Know why these things are important to investors.

Understand the factors that influence value Anticipate investor questions. Look at competitive deals. Learn from the process ~ Listen well

Suggestions For CEO’s

Pre Investment Unit Holders Issued Valuation Pre-investment Post-investment John Doe 500k $500k 25% 19% Bill Smith 400k $400k 20% 15% Jane Brown 800k $800k 40% 31% ESO Pool 300k $300k 15% 15% Note…ESO does not dilute Total Issued 2 mil $2 mil 100% 80%

Post Investment

Investors 500k $500k 0% 20% Total Issued 2.5 mil $2.5 mil 25% 100%

Cap Table

Investors invest in people and teams that can execute.

“A” teams with “B” markets will generally beat “B” teams with “A” markets.

Seeking Investors

Summary should be “concise” Summary should provide a clear description of

the problem you solve. How you solve it. Your business model. The underlying magic of your product. Defensibility of your product. Summary should be no more than “four-pages”.

Investor Summary Format

Tips For Pitching

You are either selling people on doing business with you or

you are selling them doing business with someone else.

Explain what you do in the first minute. “Clearly” explain what you do in the first minute. Articulate the problem in the market and what

you do to solve it. Purpose of a pitch is to “stimulate interest” not

to close the deal. Keep it tight. 10 slides, 20 minutes, 30 point

font. Speak to the audience’s interest.

Tips For Pitching

Title Slide: This is where you tell what you do and give a

simple to understand example. Problem: Describe the pain you are alleviating for your

customers. Solution: Show how you solve the pain. Business model: Explain how you make money. The advantage you have: Why are you different than

everyone else? Marketing and Sales: "Clearly" tell what your sales strategy

is. Do not forget to discuss your pricing.

Presentation Deck

Question: How can you tell if an entrepreneur is pitching their business?

Answer: Their lips are moving.

Pitching

How are you going to make money? How are you going to generate my

return? Are you capable of “executing”?

Investor’s Interest

Don’t try to BS the investor because they see through it.

Get your value proposition across early in case you don’t get to the end of the presentation.

Don’t get bogged down on the mechanics of the product. Early on the investor will assume it works as you say it will.

Presentation Tips

Don’t ask for an NDA at initial meetings!!! Real investors are not in the business of

stealing ideas and trying to develop them. You control what is in the summary and

initial pitch. You don’t need to disclose the “secret sauce” at this point.

Investors will sign an NDA prior to due diligence.

Get over it…You’re not that special

Presentation Tips

Creative Financing options

These are direct loans between a business and investors. They are typically facilitated by a third party intermediary that collects information on loan amount, purpose, the credit and business strength (financial statements, bank accounts, etc.). Investors are able to look at the opportunities and select what they are interested in funding. What attracts investors to participate is return. Typically rates will be above 10% depending on the strength of the borrower.

Peer To Peer Lending

Factoring ~ Accounts Receivable Financing

Business sells its accounts receivables/invoices to a third party at a discount. The "Factor" provides a cash advance, often 70-85% of the value of the accounts. When the customer pays the bill the check is typically sent to “Lock Box” in the name of the business and the factor. Upon collection of the receivable the factor takes their principle and their accumulated fee with the remainder going to the business. The fee is typically based on a percentage rate to be paid to the factor based on the number of days the receivable is outstanding. This can get expensive if the receivable drags on and is not paid in a timely manner. With factoring the strength of the vendor paying the invoice is just as important as the strength of you as the business owner (actually the strength of the vendor is probably more important).

Merchant Financing

If you are accepting of credit cards in the course of your business this may work for you.

You need to be able to show your historic card activity and that you have a reoccurring volume of credit card purchases to secure cash advances from your merchant services provider.

You are getting a loan based on what you have done in credit cards in the past. Repayment/fee is deducted from your merchant account as you do business and generate credit card sales.

Vendor Financing

Sometimes what you deliver is so important to your customers that they will help finance your growth capital needs.

Look at who your customers are and if they may be willing to fund some of your working capital needs.

When preparing to approach your customers for funding you need to consider if they are strong enough financially and have a strong cash position that will enable them to provide support. In the ask you should connect how your business growth will help their business grow.

CrowdFunding

Crowdfunding is exactly what the name implies:

Raising small chunks of capital raised from a large number of people that will eventually total to the amount you need. This type of funding is a numbers game. You need to reach a large number of prospective funders so it is well suited to use social networking and internet funding portals like Kickstarter, Indiegogo and Fundable.

Currently, crowdfunding is based on a rewards model where if someone contributes they get a reward such as a t-shirt or an early release of the product instead of repayment . Eventually you will be able to seek investors and sell equity on crowdfunding sites.

Everything is always impossible before it works. That is what entrepreneurs are all about – doing what people have told them is impossible.

The Ohio SBDC at Columbus State

p. 614-287-5294

www.SBDCcolumbus.com

For Information on SBDC Activities