Transcript Document 7153924

Creating a Winning E-Business
Second Edition
Getting Your E-Business
Off The Ground
Chapter 4
Learning Objectives
 Describe the financing issues associated with an
e-business startup
 Discuss the role of informal investors in an
e-business startup
 Identify issues important to venture capital
investors
Creating a Winning E-Business
Second Edition, Chapter 4
2
Learning Objectives
(continued)
 Pitch your e-business idea to investors
 Discuss the advantages and disadvantages of
business incubators
Creating a Winning E-Business
Second Edition, Chapter 4
3
 Starting a new e-business :
– building a Web site prototype,
– conducting market research,
– renting office space,
– buying or leasing equipment,
– hiring employees
—that require funds
Creating a Winning E-Business
Second Edition, Chapter 4
4
Startup Financing
 Bootstrapping
– Self-funding
– Sweat equity
• Invest your own time, effort, money, even re-mortgage and
personal loan
– Finding unique and inventive ways to acquire resources
without borrowing money
 Informal investors
– Friends
– Family members
– Angel investors
Creating a Winning E-Business
Second Edition, Chapter 4
5
Startup Financing (continued)
 Friends and family members
–
–
–
–
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
Creating a Winning E-Business
Second Edition, Chapter 4
6
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
Creating a Winning E-Business
Second Edition, Chapter 4
7
Startup Financing (continued)
Creating a Winning E-Business
Second Edition, Chapter 4
8
Creating a Winning E-Business
Second Edition, Chapter 4
9
Cast study
 Read the “Of Angels and E-Mail” case.
 How did Sendmail get its start?
 Do you think it was difficult or easy to get angel
investors to look at the Sendmail e-business
idea? Why?
 Why do you think the Sendmail e-business idea
was attractive to the members of Band of Angels
and the co-founders of Sun Microsystems?
Creating a Winning E-Business
Second Edition, Chapter 4
10
Startup Financing (continued)
Creating a Winning E-Business
Second Edition, Chapter 4
11
 人 们往往注意美国的纳斯达克市场、风险投资市场如何
发达，但却忽视了美国大量的商业天使的存在。
 著名的商业天使就有作为微软公司创始人之一的保·艾伦
（PaulAllen）等。
 据介绍，其实高风险与高收益总是孪生体，天使投资一般
投资具有高成长性的科技型项目，其收益率普遍在50倍以
上，超过万倍的回 报也不少见。
– 1992年，美国苹果公司刚创办时一笔9.1万美元的投资，6
年后实现了1.54亿美元的回报。
– 搜狐网站当初创办时，张朝阳身无分文，其导师 尼葛洛庞
帝和一位同学投资了22万美元，后来也实现了上百倍回报。
Creating a Winning E-Business
Second Edition, Chapter 4
12
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
Creating a Winning E-Business
Second Edition, Chapter 4
13
Start up financing
 Venture capital investors:
–
–
–
–
Have to give up a large equity stake (20-40%)
One or more seats on board of directors
Have experienced management team member
Offer knowledge and contact
Creating a Winning E-Business
Second Edition, Chapter 4
14
Startup Financing (continued)
 Venture capitalist investors (VCs) (continued)
– Take many forms
• Traditional partnerships
• Government-sponsored investment companies
• Corporate funding programs by high-tech
companies
Creating a Winning E-Business
Second Edition, Chapter 4
15
Startup Financing (continued)
Creating a Winning E-Business
Second Edition, Chapter 4
16
Startup Financing (continued)
Creating a Winning E-Business
Second Edition, Chapter 4
17
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
Creating a Winning E-Business
Second Edition, Chapter 4
18
Business Incubators
 Nurture startup businesses
– Offer development,
administrative, and support services
•
•
•
•
•
•
Office space
Telecommunication hookups
Reception and conference room facilities
Computer networks
Advisory services
Access to potential investors
Creating a Winning E-Business
Second Edition, Chapter 4
19
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
Creating a Winning E-Business
Second Edition, Chapter 4
20
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
Creating a Winning E-Business
Second Edition, Chapter 4
21
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)
Creating a Winning E-Business
Second Edition, Chapter 4
22
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
23
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
24
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
25
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
26
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
27
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
Creating a Winning E-Business
Second Edition, Chapter 4
28
Business Incubators
(continued)
Creating a Winning E-Business
Second Edition, Chapter 4
29
Business Incubators
(continued)
 Self-incubation
– Participating in a members-only group of
entrepreneurs
• Share practical experience
• Access to contacts
• Sell or barter products and services with members
– Example
• Starve Ups
Creating a Winning E-Business
Second Edition, Chapter 4
30
Sponsoring Entities






8% Academic Institutions
40% Government
28% Economic Development Organizations
4% For-Profit Entities (Corporations)
8% Hybrid
12% Not Applicable
Creating a Winning E-Business
Second Edition, Chapter 4
31
Pitching your e-business idea
 The first sales meeting with angel investors or
VCs
 To get potential investors excited and interested
in further discussion
 One hour brief presentation
 Hand out two to three pages based on Executive
Summery of your business plan
Creating a Winning E-Business
Second Edition, Chapter 4
32
Pitch presentation





Define your product or service
Highlight the market need
Explain how your e-business meets that need
Potential profits
How your e-business’s management team can
make it all happen
 Make your proposal presentation
Creating a Winning E-Business
Second Edition, Chapter 4
33
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
–
–
–
–
Business idea
Target market
Competitors
Critical marketplace issues
 Do not fake answers; if you don’t know, simply
say so and move on
Creating a Winning E-Business
Second Edition, Chapter 4
34
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
Creating a Winning E-Business
Second Edition, Chapter 4
35
How to be a good speaker







I will not waste your time.
I know who you are and I know why you came.
I am well organized.
I will deliver this speech in an interesting, conversational way.
I know my subject.
Here are my most important points.
I am finished.
From How to Give a Terrific Presentation by Karen Kalish
(AMACOM, 1996).
Creating a Winning E-Business
Second Edition, Chapter 4
36
Creating a Winning E-Business
Second Edition, Chapter 4
37
Creating a Winning E-Business
Second Edition, Chapter 4
38
Chapter Summary
 An entrepreneur should expect to invest
personal funds in a startup
 Informal investors include friends and family
members and angel investors
 Angel investor – A wealthy individual who enjoys
investing in startups
 Venture capitalist – A professional investor
Creating a Winning E-Business
Second Edition, Chapter 4
39
Chapter Summary
(continued)
 Meeting with investors
–
–
–
–
First meeting is a “pitch” or sales meeting
Use a carefully prepared pitch document
Anticipate questions
Be on time, be prepared, and be enthusiastic
 Pitch document – A brief sales document based
on the Executive Summary portion of the
business plan
Creating a Winning E-Business
Second Edition, Chapter 4
40
Chapter Summary
(continued)
 Non-profit and commercial business incubators
offer access to resources in exchange for fees
and an equity position
 Self-incubation offers access to some resources
without paying fees or giving up equity
Creating a Winning E-Business
Second Edition, Chapter 4
41