Transcript Creating a Winning E-Business

Creating a Winning E-Business
Second Edition
Getting Your E-Business
Off The Ground
Chapter 4
Startup Financing
 Bootstrapping
– Self-funding
– Finding unique and inventive ways to acquire
resources without borrowing money
 Informal investors
– Friends
– Family members (Amazon’s Jeff Bezos –
Parents)
– Angel investors (Apple)
Startup Financing (continued)
 Friends and family members
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Know and trust entrepreneur
Stand by during tough times
Invest in entrepreneur rather than business idea
Downside is potential risk to relationships
• Business misunderstandings
• Business failure
Startup Financing (continued)
 Angel investors
– Individuals with money and time who enjoy the
excitement of early-stage investing
– Not averse to taking risks
– Primarily interested in business idea
– Angel investment club members
• Accredited investors with minimum net worth of
$1M or annual income of $200,000 or household
income of $300,000 over the last two years
Startup Financing (continued)
 Venture capitalist investors (VCs)
– Professional investment company
– Provide funds for startup businesses in exchange
for equity position
– Raise funds from endowments, insurance
companies, and pension funds
Startup Financing (continued)
 Venture capitalist investors (VCs) (continued)
– Take many forms
• Traditional partnerships
• Government-sponsored investment companies
• Corporate funding programs by high-tech
companies
Startup Financing (continued)
Startup Financing (continued)
 Venture capitalist investors (VCs) (continued)
– E-business startup VC funding examples
• Draper Fisher Jurvetson (DFJ) and Hotmail
• Kleiner Perkins Caufield & Byers and Google
• Small Business Investment Companies (SBIC)
and America Online
Pitching Your E-Business
To Investors
 First meeting with investors is a sales meeting
 Bring a pitch document
– Short marketing document based on Executive
Summary portion of business plan
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Highlights market need
Shows how startup meets that need
Indicates potential profits
Shows how management team can make it
happen
Pitching Your E-Business
To Investors (continued)
 Learn as much as possible about potential
investors before the pitch meeting
 Be prepared for investor questions about
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Business idea
Target market
Competitors
Critical marketplace issues
 Do not fake answers; if you don’t know, simply
say so and move on
Pitching Your E-Business
To Investors (continued)
 During the pitch meeting
– Be on time
– Be prepared
– Be enthusiastic
– Bring all necessary equipment and
documents
– Differentiate yourself and management team
from your competitors
– Create the feeling that your e-business idea is
a viable, exciting investor opportunity
Business Incubators
 Nurture startup businesses
– Offer development,
administrative, and support services
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Office space
Telecommunication hookups
Reception and conference room facilities
Computer networks
Advisory services
Access to potential investors
Business Incubators
(continued)
 Non-profit organizations or commercial
businesses
– Offer a quick “leg up” for entrepreneurs needing
administrative and support services
– Provide access to knowledgeable professionals,
advisors, potential investors
– Cost to entrepreneur
• Fees for services
• Loss of equity
Business Incubators
(continued)
 Advantages
– “One-stop solution” for many startup problems
– Easy access to professional advice
– Venue for interacting with other startups
 Disadvantages
– May be hefty fees for services
– Giving up share of ownership equity to others
Business Incubators
(continued)
 Non-profit business incubators
– Generally cooperative venture between a
university and local community
– Examples
• Austin Technology Incubator (ATI)
• Advanced Technology Development Center
(ATDC)
• Houston Technology Center
• Illinois Technology Enterprise Center (ITEC)
• Women’s Technology Cluster (WTC)
Business Incubators (continued)
 Commercial business incubators
– Businesses that provide incubation
services for a fee and usually a large
equity position
– Examples
• Batavia Industrial Center (BIC)
• Idealab
• eCompanies