Invention to Venture Different Forms of Capital Not all $ is the same! Personal debt Equity Grants Debt Customer advances Licenses Cash flow
Invention to Venture Personal debt Max out credit cards Take a 2nd mortgage Borrow from whomever they can Loan their own savings to the company Most founder start ventures using their own money. They may:
Invention to Venture Equity An ownership position in the new venture, exchanged for money or services from: You Friends, Family and Fools (FF&F) Angels Venture capitalists (VCs) Strategic partners The public, through an IPO
Invention to Venture Grants Government grant programs –SBIR –STTR Private grants –Business Plan competitions –Foundations (e.g., NCIIA) State/local grants and resources No interest charged, no need to pay back, and no equity given up
Invention to Venture Debt A promise to repay funds along with a fixed or variable rate of interest Commercial banks Guarantee programs Massachusetts agencies Subordinated / mezzanine instruments Accounts receivable financing Purchase order financing
Invention to Venture Customer advances An often overlooked source of capital provided by customers who want your product or service badly. Can be up-front or milestone payments.
Invention to Venture Licenses Do not: –have to be repaid –require interest payments –require giving up equity Do require giving up some rights to the use of your technology
Invention to Venture Cash Flow Real revenues and profits are attractive to investors, bankers, and just about everyone else you can think of.