1. Cover Life Cycle of Financing 8 South Michigan Suite 400 Chicago, IL 60603-3306 p (312) 853-3477 f (312) 853-0145 http://www.wbdc.org wbdc@wdbc.org Linda Darragh VP, Finance Program Phone: 312-853-3477, x.22 Email: ldarragh@wbdc.org June 17 & 18, 2003 Business Matchmaking

2. Types of Businesses

3. Company A Steady growth Market = local, regional Grow business over many years Retain ownership Company B Start up = R&D, Technology development Market = $25M+ Scales quickly Sell business in 5-7 years

4. Debt vs Equity Debt Financing ‘Prove’ repayment - less risky Need to begin repayment immediately Some financial and management advice Cheap capital: interest Exit strategy: pay off loan, no change in ownership Equity Financing High risk Patient capital Investors add to management team % ownership of the business, 35% ROI Exit strategy: IPO, acquisition

5. Types of Equity Investment Friends, Family & Angels invest their own money Venture Capitalists invest money they have raised from other financial institutions and/or wealthy individuals

6. Types of Equity Investment Angels Part-time Limited due diligence Hard to find Early stage < $1 million investment Venture Capital  Full-time job  Professional resources for due diligence  Directories of VCs  Later stage  > $1 million investment

7. Lifecycle of Financing PHASE ONE: Moving from an idea to proof of concept Personal savings Family and friends Loans under certain circumstances

8. Lifecycle of Financing PHASE TWO: Beta testing, first customers Angels and Seed Money Individual Angels Angel networks Loans, Lines of credit Equipment Leasing

9. Lifecycle of Financing PHASE THREE: Growth Institutional Investors/ Venture Capital Vary by: stage of growth industry preference size of investment Over $1 million

10. Lifecycle of Financing PHASE FOUR: Exit IPO: Initial Public Offering Acquisition

11. Current State of Equity Investment Early Stage financing/ Series A Series B - C IPO Angel Financing Friends & Family

12. Center for Venture Research-University of New Hampshire Stage EarlyLaterSeed/ Start-Up Source FDRSFFF AngelsVenture Funds Demand $25K$100K $500K $2,000K Supply --------------------------------- FundingGap Equity Capital for Entrepreneurs Pre Seed

13. Other Funding Resources The Small Business Innovation Research (SBIR) program (www.sba.gov/sbir) funds research and development (R&D) by individuals and small business. grants or contracts that do not require repayment, but specific deliverables 3-phase program feasibility: $100,000 maximum prototype development: $750,000 commercialization: not federally funded 10 federal agencies develop research topic lists

14. WBDC Venture Program Services: Business plan review Counseling Referrals Venture Coaching Training First Thursday (monthly roundtable) Springboard

15. WBDC Loan Assistance Financial Analysis Microloan technical assistance Preparation of pro-forma financial statements Loan Packaging Bank referrals Referrals to business resources