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Funding Options for Technology startups Slide 1 Funding Options for Technology startups Slide 2 Funding Options for Technology startups Slide 3 Funding Options for Technology startups Slide 4 Funding Options for Technology startups Slide 5 Funding Options for Technology startups Slide 6 Funding Options for Technology startups Slide 7 Funding Options for Technology startups Slide 8 Funding Options for Technology startups Slide 9 Funding Options for Technology startups Slide 10 Funding Options for Technology startups Slide 11 Funding Options for Technology startups Slide 12 Funding Options for Technology startups Slide 13 Funding Options for Technology startups Slide 14
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Funding Options for Technology startups

Presentation delivered at the Seminar on Entrepreneurship held at SCOPE Auditorium, Lodi Road, New Delhi, 18/11/06

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Funding Options for Technology startups

  1. 1. Funding Options for Tech Startups Seminar on Entrepreneurship SCOPE Auditorium, Lodi Road New Delhi, 18/11/06
  2. 2. What is this presentation about? <ul><li>Early stage funding options </li></ul><ul><li>For tech startups </li></ul><ul><li>Focused on internet/software segment </li></ul><ul><li>Experience sharing </li></ul><ul><li>Trends in funding </li></ul>
  3. 3. Startup Funding Options <ul><li>Bootstrapping ( self financed ) </li></ul><ul><li>Private Equity ( sell stake to investor) </li></ul><ul><li>Debt ( take a loan) </li></ul>
  4. 4. Life Cycle of Startup IPO Exit Selloff Merger Ideation Prototype Launch Growth Pre-Seed Seed Early, Growth
  5. 5. Bootstrapping <ul><li>Origin of bootstrapping </li></ul><ul><li>Start operations via internal resources </li></ul><ul><ul><li>self, friends, family </li></ul></ul><ul><li>Organic growth of business </li></ul><ul><ul><li>spend what you earn </li></ul></ul><ul><li>Business type </li></ul><ul><ul><li>product </li></ul></ul><ul><ul><li>services </li></ul></ul><ul><li>Not always possible </li></ul>
  6. 6. Bootstrapping…(cont) <ul><li>Moore’s law </li></ul><ul><li>Open source software </li></ul><ul><li>Cost of running business is decreasing </li></ul><ul><li>Much cheaper making prototypes </li></ul><ul><li>Freedom for business decisions </li></ul><ul><li>Easy exit options </li></ul><ul><li>Psychological factors </li></ul><ul><ul><li>bootstrapping gives a kick </li></ul></ul>
  7. 7. Seed Funding- Angel Investors <ul><li>Angels Investors are HNW individuals </li></ul><ul><li>Successful entrepreneurs, technologists </li></ul><ul><li>Smaller investment amounts than VCs </li></ul><ul><li>Personal investment decisions </li></ul><ul><li>Often known to startup founders </li></ul><ul><li>Work like venture capitalists but in individual capacity </li></ul>
  8. 8. Venture Capital Funding <ul><li>Available during all phases in startup’s life cycle </li></ul><ul><ul><li>seed, early stage, growth </li></ul></ul><ul><li>Professionally managed funds </li></ul><ul><li>VCs bring not just money </li></ul><ul><ul><li>Experience & advisory role </li></ul></ul><ul><ul><li>Contacts & networking </li></ul></ul><ul><ul><li>Very crucial during exit/sell off stage </li></ul></ul>
  9. 9. Venture Capital Funding…(cont) <ul><li>VCs look for ROI over entire portfolio </li></ul><ul><li>VCs have a exit timeline </li></ul><ul><li>Capital intensive businesses </li></ul><ul><ul><li>No option but VCs </li></ul></ul><ul><li>Pitfalls for startups </li></ul><ul><ul><li>Unwillingness to give away equity stake </li></ul></ul><ul><ul><li>Less freedom for business decisions </li></ul></ul>
  10. 10. Funding Trends- Debt v/s Equity <ul><li>Equity </li></ul><ul><li>Equity suited for high risk businesses </li></ul><ul><li>VC funding through stock sale is glamourised </li></ul><ul><li>No repayment (or interest) obligations </li></ul><ul><li>Loss (or profit) accrues to investors </li></ul><ul><li>Also advice, experience, contacts </li></ul><ul><li>Debt </li></ul><ul><li>Greater control over business </li></ul><ul><li>Interest payments are deductible business expenses </li></ul>
  11. 11. Funding Trends- VCs v/s Angels <ul><li>Startups’ choice </li></ul><ul><ul><li>Deal with an individual (angel) or a company (VC) </li></ul></ul><ul><li>Average investment amounts are lowering </li></ul><ul><ul><li>Moore’s Law, OSS </li></ul></ul><ul><li>VCs are getting nervous </li></ul><ul><li>Proliferation of VCs leading to herd mentality </li></ul><ul><li>Number of angels increasing </li></ul><ul><ul><li>Former entrepreneurs, HNW individuals </li></ul></ul><ul><ul><li>General affluence in society </li></ul></ul>
  12. 12. Funding Model- YCombinator <ul><li>Started by Paul Graham (technologist, VC) </li></ul><ul><li>Pre-seed funding </li></ul><ul><li>Very little money (about 6K per founder) </li></ul><ul><li>They take 6% equity </li></ul><ul><li>3 month program, mostly for people graduating out </li></ul><ul><li>Philosophy of low cost businesses </li></ul><ul><ul><li>More’s Law, OSS </li></ul></ul><ul><li>Every year, 8-10 startups funded from hundreds of applicants </li></ul>
  13. 13. Funding Trends – Incubation Centers <ul><li>Available in India </li></ul><ul><li>Not exactly funding </li></ul><ul><li>An initial support system for startups </li></ul><ul><li>Subsidized office space, hardware, bandwidth </li></ul><ul><li>Available at STPI, IITs, MBA schools </li></ul>
  14. 14. Thank You Presentation on www.slideshare.net & www.amitranjan.com
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Presentation delivered at the Seminar on Entrepreneurship held at SCOPE Auditorium, Lodi Road, New Delhi, 18/11/06

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