Become an Entrepreneur - From Idea to Realization | Agorana Media | Skillshare

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Become an Entrepreneur - From Idea to Realization

teacher avatar Agorana Media

Watch this class and thousands more

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

7 Lessons (1h 56m)
    • 1. Introduction - Unit 1

      6:55
    • 2. Your Idea - Unit 2

      10:48
    • 3. Financial Planning - Unit 3

      23:08
    • 4. Company Formation - Unit 4

      13:24
    • 5. Capitalization & Financing - Unit 5

      11:39
    • 6. Business Plan & Valuation - Unit 6

      33:00
    • 7. Investors - Unit 7

      17:25
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About This Class

Do you have an idea for a new product or service and don't know how to start?

This course will show you how to set up a new company, write a business plan and develop your idea. 

Our business professionals will teach you step by step through all the things you have to consider when building your company from the ground up. 

Meet Your Teacher

Agorana Media Corp. combines decades of experience including startup coaching, corporate finance, marketing and investor relation. The executive team of Agorana was involved in many transactions  on a worldwide scale. Agorana was formed to assist and support entrepreneurs to achieve their goals and strive for success.

See full profile

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Transcripts

1. Introduction - Unit 1: Hello and welcome to a webinar. How to become an entrepreneur set of a company, Write a business plan and raise funds. This is so legal disclaimer. You can also find it on a website at AC granna media dot com. This webinar will show you how to develop your idea or service. Then we will describe the different company types they are and give you an overview about corporate structures for the more we will educate you on what types of investments they are and what types of investors you might have to deal with. That off course depends on your approach. Then we will go into the topic of how to write a business plan and how to create a fact sheet, which is not only important if you want to address investors, but it's also important for yourself and your plan for your new venture. Then we will show you all to prepare pitch dick, which is more for personal presentations. We will show you the most important features and then finally we will show you how to access investors and how to find investments, which is very important. If you want to grow your company, everybody has an idea idea at some point in life and the things that he has found a great way to make a lot of money, something they can quickly develop an app and bring into the APP stores and make a ton of money very, very fast. These are stories of success we hear about once in a while, but lately, not so much anymore. Others think that they will sell a huge amount of their products within the 1st 3 months and become rich in no time. Well, they only a few cases that have worked out, and we hear about we don't hear about the millions of ideas, products and services that don't even make it to the market. Why, because of poor planning or poor execution or both, or not having the right access to sufficient funds are having the right management in place , or they have developed the idea only halfway and didn't calculate it through to the end or without putting in enough time to ensure that they have considered all aspects. That's why a lot of projects fail. Then all of a sudden problems came up and it wasn't possible to solve the problem due to like a funds the like of another ingredient there many mistakes that can be made when it comes to forming and sending of a company for a product. If you have something you want to sell, like a one time shot on eBay or Amazon or another similar company, that's another story. But to professionally sell a product repeatedly, you will need an entity, and there are several options. We will look at it. I want to show you how to build your own company from scratch and avoid common mistakes. But basically the first things you need. They always stay the same, no matter what entity tab you will be using. So the first question is, if you thought your idea through thoroughly, this question is not to make you feel uncertain. This question is to start demonstrating what it takes as a preparation before you actually start a company. It really doesn't make sense to just go ahead. Founder companies set things in motion, and then you find out that your product is too expensive or takes so long to develop, or it takes too much time or money to enter the relevant market segment. All the way you set up a company is not good for raising external money, which you desperately need to go on our to do it. Then you have to change things afterwards, which can be very time consuming and in most cases usually involves additional costs, sometimes substantial costs. And overall it's very annoying. You also have to ask yourself if you were the person that it's willing to relentlessly pursue your idea and won't stop until you reach your goal, or is it better to find a partner and that person will manage the company and you will just get a stake in the company for providing your idea? But you don't have to worry about taking care of the daily things again. Many ideas, instead of companies are disappearing in the first few months after they were started because off this off poor planning meaning that at the end of the day it can be a waste of time and money, and not to mention that you know that you personally have to deal with a failure, which can be very discouraging with regard to future activities. So therefore I want to describe how to do it right from the start trying to avoid mistakes . But I mean there will always be hurdles to take and problems to solve some problems nobody can predict or foresee. But from my own experience, I can say that by taking the right steps from the beginning that most problems will not even occur. And while you're in your plan, you can even deal with problems because it's a lot easier, as you have, like a like a path You, you are described from the beginning like that's your plan And the plan is, in my opinion, one of the most important things you need to do to ensure that you know all the right steps are taking. But whatever activity you develop, it is very important to keep in mind that you are running the show and you are the one who will be combining your idea with capital and apply proper marketing and you have the will to succeed. That is important. Your inspiration, your input and your effort is of utmost importance to actually turn your idea into a product that people will buy. Always remember that ideas themselves are not creating successful startups. It's always the people behind that idea that will make the difference in how much they are committed to execute the idea, all that vision to make it happen. This webinar will consist of seven units and is built to help you to find out if your ideas service can become successful and what steps need to be taken when you have finished a unit , I can only recommend to take some time to digest all information before you go on to the next unit. 2. Your Idea - Unit 2: Welcome back to a unit two of our webinar How to become an entrepreneur. This second union will talk about your idea and we would like you to put your own thoughts to the idea you have in writing, which means write everything down you can think of related to your product or service. Then after that, you should have a good sleep and read them again the next day. Well, I can see you laughing or shaking your head right now, but be assured it will have a great impact on your thoughts. You might have different thoughts that will be complementary or things you have put that in writing the day before we become absolutely obsolete as you have sort of another a better solution. You can repeat this procedure for a few days if you like, and you will see how your own idea will transform. Well, you will change things anyway when you move forward. And as you will get smarter over time regarding your project and you will find out that sometimes you need to change things. Oh, are you know, also certain ingredients while this gathering of information and re reading and re sinking is the first filter you apply to your own sauce. Make sure you write everything down. Now you have to do a thorough research what's already available on the market As for related products or services or something similar, whatever you can find. If you were in the rare and almost extinct position that you have a product that doesn't exist yet, you have the best position you can. You can have a product with the first to market advantage can become huge, so you need to really research as much as you can to make sure that you have a product like that. Research anywhere will help down to further channel down your thoughts and will help to eliminate or at things you thought about doing or not doing. So. When you have done that and still think your product is good, let's move ahead. Well from my years and years of experience, I can tell you that having a plan in place will enable you to master unforeseen hurdles and obstacles a lot faster and more efficiently. Of course, there will always be additional things that another the planet you and have to be taken care off, but having a good plan covering all aspects is essential for success. So without a plan, at some point you will be overwhelmed with all the things and aspects and tax you have to consider, and the workload will just become too much to handle. So therefore, think about partners. If you have a partner or more than one partner, it's even more important to have a plan and exactly defined from the start what everybody's tasks are. But choose your partner wisely if your partner has the same as ambition as you, which is like wanting to run your new venture. History has shown, and also for I can tell from my own experience that then it will often fail, as especially in the beginning, there can only be one master. Your partner should not have the same management goal or the same management ambitions as yourself, and in very few cases it works. But that's the exception exception with one or more partners. You have to define job descriptions from the start, even Mawr, for example. You take care of marketing and fundraising. The next partner takes care of product development and the next partners administrating at finances as an example over Ho. Always remember, it's your project. It's your idea. So the best thing is to always keep the final decision power to yourself. Which does mean that your partners can advise you and provide you with their input, but it's always important to keep the decision power. But first things first. Let's start list with the ideas after you have written down your own thoughts. And if done your own research just for itself, you should be careful who to tell and who do you share your ideas with is not like running off to the guy you have known, and you know that he's in kind of a similar business and tell him about your idea. You know, it's very easy to steal it if you can't protect it. I haven't protected it yet. And for companies that established and have operations, running at sometimes only takes days to include an idea like years in the range of products or services, and then your idea service will become obsolete and done. Therefore, I always recommend to use family and friends or close business partners. Short people you trust to brainstorm about your dear as a first step. Let them give you their input int and take notes of that. Don't influence them by revealing your research. Just say when something's at in the absolute wrong direction or is absolutely wrong. So don't not steer them in the ass. Total wrong direction. That's the often silly ideas that come from brainstorming. Have Bean the starting point off great new, compelling products? Funny example is this of these two guys from New York that just moved to San Francisco and we're sitting in their apartment and couldn't afford to pay the rent, and there were brainstorming but how to make some extra cash and they were making jokes how to do it. Then they said, Well, ah, I think there's a conference in town and all the hotels are booked. Why don't we just put two mattresses in here and rent it out? Well, so these two guys bought two mattresses, put them in the room and offered accommodation, and they threw in a breakfast and offered for 80 bucks per night per bet. So that's how Brian Chesky and Joe Gambia started. Now it's called Airbnb. Today it's a $1,000,000,000 business. That is a very good example that it doesn't always take a lot of money to succeeds with a good idea. The next step we're looking at is research. You have to conduct a really in depth research on the Internet. What competitive products or services out there that might affect you or a similar to you or whoever your ideas? What industry will my product a service, Be it? So there are questions you have to answer for yourself so you can put together the whole idea in more detail. So there's a difference if you have a product or service. So specific products might involve a more comprehensive research, as it might involve suppliers and sometimes even importing parts from other countries. Then you have to assemble them, and sometimes you have to buy them from several sources from different countries to actually make your product. So you have to do the research for all the parts, all the raw materials you need. We don't want to really go into specifics right now for producing companies. They're just too many disciplines to cover, and this would be way beyond this course. But company playing to produce louse launch furniture has a very different supply chain in comparison to a community that wants to produce and sell books or wants to establish an online business. Therefore, we will focus on the basics. So you have to ask yourself if you have a service, what's the demand for your service and what service exactly are you offering? Is your idea product to sell? What suppliers do I need? Then you need to do a competition, analyzes what's on the market already. What product comes close to what I want to offer. Then the next thing is, you want to find the right price for your product, so you have to either research it do. A survey will find the price by comparing it to other products you confined, then had the after channel down your your pos, your point of sale. What makes my product unique. And why should someone by my product or service and not a product from from the competitive competition price quality delivered times? What makes my product different? Next question is, where do I want to sell my product? The local nationally, internationally online? What languages do I need? How can people pay them so payment systems is per invoice PayPal credit card, wire transfer. And what do they need to produce my product? So cost calculation off the purchasing price of parts off everything you have to purchase to make your product. Then do you want to establish your own production so they need to be a cost calculation of your own production? Or do you want to outsource the production? Then, if you want to outsource everything, you have to ask yourself who can deliver the quality at the price I'm looking for and still stay competitive, which means that can I keep a reasonable margin for my company at the same time? Then you have to think about legal restrictions. She could find that out yourself. It's it's good. Otherwise you might need to include a lawyer, as I cannot provide legal advice and also, as said before it very much depends on the specifics of your product. So that's basically a lot of questions you need to think about. This is not not a comprehensive list is just a few thoughts. I mean, there are a lot more you can think about a lot more things, but, uh, it is always important to add as much information as you can. Ah, so the better understanding of the Moor insights you will gain about your own product of your own company. And it also means that you can define how much maneuvering room you have and where your limits are. 3. Financial Planning - Unit 3: hello and welcome to chip the three of our webinar today. Financial planning. So you have completed unit one and you have completed unit to, uh, now you will know a lot more about your future company. You have, ah, defined good the product and services you're offering. You know exactly where you stand with your product. You have predetermined the audience you're going to target, and you will market your product to. So you have taken a look at the competition to know where and what kind of competing products you might have to face in your area. You have thought about partners or people that can help that can help build a company. Or, if you want to do it yourself without any partners, uh, you have looked at ah, everything besides the financials. So now you have to take a look at what your financial needs are, and what does it take financially to make your product or your idea of market ready? This is, uh, off course, always a very important factor. How to get your company financed and not to run out of cash while you're establishing and positioning your company in the relevant market space. So let's first take a look at pricing you have to take. You have to think about How much will my product my idea sell for? You have done the research on your competitors, and you know what? At what price range you will most likely be able to sell it. So this is set your price as mentioned before. If you have a new product like a product where there's no variation of it on the market already a first to market product pricing has to be determined. So if you, for example, can produce your new product for $50 that doesn't necessarily mean that you have to sell it for $100. You might be able to sell it for $500 or $1000 But that very much depends on what exactly your product can do. And if there's a costly alternative, for example, or if there is a demand for your product. So that is also something you have to find out. You can start creating any man for for your product, which is definitely part of the marketing have to do. There's no general rules to determine a sales price other than saying, I put 100% on top and that should cover all my costs. But let's take let's take a closer look at the cost and the margin, I said. Some say market up by 100% in your good. That's not always correct. It's the sin line, also between whatever someone else is ready to pay for it and being too expensive. So they turned you now and the previous units unit you have researched at what price you will be able to make or produce your product, which also costs, is called cost of goods. That means that you know your gross margin. Cost of goods include derrick material and direct labour expenses that go into the production of each good or service that is sold so the custom goods do not include regular overhead costs. To be able to go into your financial planning and determine your cost, you need to set. You have to set some costs for your monthly overhead, like rent, phone, computer software, travel insurance, so security. If you use employees, there can be a whole list of costs, depending on what your specific needs air and exactly what exactly you do, but, uh, to keep financial obligations low in the beginning, I highly recommend to only use contractors that at the beginning, that way you don't have to enter into contracts. Well, you have to commit yourself for a longer time or longer periods. So the next step is the profit and loss calculation. When you have gathered all these costs, you can put them into a simple profit and loss model calculation so it could look like this , which means you have the sales from product one. This is this is whatever you sell it for, Then you have the cost of goods. Then this year, across income, then you become You have the expenses, rent, phone, travel, insurance, computer leasing, marketing advertisement, consulting fees, postage delivery. So that's total expense. That's the sum of number 5 to 58 to 14. And then number 16 is a bit, uh, which is earnings before interest, taxes, depreciation and amortization, that is Ah, is ah is the isn't a number which, you know, shows what your operational activity will do. The David. It does not include the cost of capital investments, like for production plant or the equipment you need to purchase. These numbers are solely for operational numbers. To find out what kind of profit your business activity can produce, depending on your specific product, you can always add an extra paragraph like what the initial required investment is or what the set up costs are. Under this paragraph, you should put all the initial cost, like if you have to purchase three delivery trucks or special machine for actually producing a product of delivering your product again. That's that's very, very that very much depends on your specific idea. So in case you need a substantial initial investment, the numbers in your profit and loss calculation will probably reflect that the amount invested will pay off and you generate attractive profits over time. So that's another thing. When you have completed a table like this, according to your specific company requirements, you know what monthly cost you're dealing with. These numbers, of course, will change permanently as moving forward. But for the first few months you have a good idea what cost you have to face. Let's move on to the next step, which is the sales projections. You have to think about your sales projections on a monthly basis. You have to be very moderate and try to find the most realistic approach. It really doesn't make sense to predict moon numbers and that the sales fly high in the first months, and then you can fulfill the, uh, whatever you said. That's not good. These numbers can then be put into your model calculation and to find out your funding requirements like on top, you can find out what's my break even and and what time can I reach a break? Even when can I be profitable? This is the reasoning behind collecting all these numbers. It's exactly also part of the preparation you need to do to find out about your capital needs. So depending on the particular product or service you have, uh, you will also become cash flow positive at some point. That means that your sales margin will support all costs, and it might take up to year example. I will give you an example how to calculate. It will not cover all possible factors that costs, but you can add them in your own calculation. Meeting the specific requirements for your company is his an easy example. Let's say you decide to sell launch furniture because you have found a great supplier from the Philippines, where you can buy the furniture at a good price. Your hat costs for a set of lounge furniture is 500 bucks. Transportation, customs and everything else will cost another $100 per set. So which means your total heart costs of goods is $600. So, according to your research, you can sell the launch furniture for $1000 still have an advantage compared to your competitors. And it's looking good. Your margin will be $500 at $400 per cent. No, you have to include your monthly overhead costs like rent salaries, Social Security's phone marketing and basically all I don't necessary cost to run your business. The list can be long. Let's assume to make it easy for this, this sample calculation Let's assume your cost to run your business are a $12,000 per month that even includes us. A very moderate salary for yourself. Just a little site note Here, investors know, like if the founders, if the founder is paying him or herself a huge salaries, just must be very moderate. I mean if if you are one men showed all costs can be lowered significantly, that's for sure. As soon as you involve more staff, costs will go up dramatically. Staff are always expensive. Therefore, I always come back to my earlier comment, used contractors and raise enough money. So let's let's say in your plan you will. You will sell zero launch. That's the first months to the second five launch. That's the third Ate lunch. That's the fourth months. 10 Launch. That's the fifth and so on Until read through the air month Number eight Way will sell 30 launch sets in that month. No, let's take these numbers and put them into a profit and last model. So you have your month, you have your sets sold. So you have your sales here you can sell for thousands. Also, that makes the calculation pretty easy. Then you know sales go up every month. You have the custom goods. We know your custom goods is $600 per per set, which means that your margin is $400 per cent. So also pretty easy to calculate Well, and ah, so you could see what your gross margin is here. It goes up from 800 to $18,000 in months. Number nine. So you know exactly. Ah, what kind of money you will make, Which means that your expenses, we add the expenses. And month one, you have no sales. So you get hit with the full expenses. Ah, meaning that. Yeah. Gross income in months. Number one is minus 12,000. Then you have the first, uh, positive impact on a gross margin here. Which means your gross income will go. Ah, legal app. Meaning that's reduced by $800. Which is exactly the gross margin. You, uh, you do, and then you follow each month until you see in month number eight. You're gross. Margin is meeting your expenses, which means these two are zero. So you have your gross margins are gross margin of $12,000 your fee expenses at $12,000. So that means months number eight is the point where you operate. Break even, which means your margin will cover all the expenses you have. No. If you go a month further ahead, you see that you will start making money on months number nine. So you have the same expenses, but your sales go up. Which means that the sets sold, you know, will generate a gross margin of 18,000. Now you can deduct the expenses. Which leaves you with $6000. That, of course, is just a sample calculation. And, uh, and it does not include any taxes, sales taxes or anything else is just a flat calculation to give you an idea. Well, no. The next step is you have to look at cash flow. The cash flow calculation shows you how much money you will need to sustain your operations without running out of cash. Given the given sales numbers you were using. So, for example, you have the the sets, this the sets sold. You have the sales you have to cost of goods. The gross margin. You have the expense of gross income. Now we at the cash flow component. The cash flow component shows you each month what kind of money you need to sustain your operations. So first months minus 12002nd months minus 11,200 now you have to add the negative amount from months. Number 12 months. Number two, so then it's 23,200. And this goes all the way up to months number six, where you have a top A top off $57,200. And on months seven, it will start going down because you're, uh, your margin will become better and you will actually start making money. So, as you can see and month number six, you have $57,200 which means that that is the amount of money you need to keep to keep your operations going without running out of cash. After that, as you sell more lounge furniture, the required money, as you can see in 178 and nine will go down. So 55,200 months number 7 55,200 months number eight and it goes down to 49. And if you continue that line even with constant sales from months number nine, at some point you will come to zero and your capital will become positive because all the positive numbers you generate from the sales will eat up all the minus. You did in the 1st 8 months. So this is an easy calculation just to ah give you an idea for your capital needs. But all considerations, of course, are not including any sales tax or other texts that might apply to your specific business cases. It's it very much depends on from where you conduct your business and what sales tax will apply. In this state. You do or country you do business. And, ah, and all these numbers mentioned they don't include any initial or set up costs. Of course, you can go ahead and break all these numbers even further down and and in more detail and can put them all in a calculation. And this is what I also recommend. You know, uh, do a Excel spreadsheet. Put the numbers in there, you know, and add all the numbers you can think of, and, ah, and do your calculation. And now we come to the point Ah, where you can say that Ah, many units, the units you you predicted to be sold is great. If and if they changed to the better, it's it's even better. But when they changed to the worst is always good to have a financial buffer to support longer market acceptance times or was it s always considered that you say it's might not be a successful as you thought, and your projected sales numbers a different form from what? What you said. So if you then only had raised, let's say, $60,000 in this case, in our example case here. Ah, to support the time until your cash flow positive, then you have, ah problem if you can't sell the predicted units of your product of of your product. So, for example, if there's a months with unforeseen problems like your supply, I couldn't find transportation to deliver the product for two months, which means that for these two months, you have to cover the cost, but you have no revenues in this case. For example, you have to bridge these two months our example. That's two months of costs with which is $24,000. But you have no income. So very often these things, other problems like you cannot switch off the cost like you can switch off the light bulb in your room so the cost keep running. Therefore, I always recommend to raise enough money and be on the safe sight and they low market changes time for you to adapt to these market changes. Another example is, let's have a look at what happens. For example, if you add another product, an additional product would change things. So after that safe, after six months, you find out that in addition to the large said you're selling, there's a huge demand for launch high bar tables, which can be purchased from the same supplier. And you know that for you, it's an easy step to do. You can add another product with no market entry delays with no additional admit cost and probably only marginal additional costs. Transportation costs due to the fact that you already by the lounge stets from the same supplier. So let's have a look at what happens when you add this these thes lounge bar tables to the equation. So our assumption is lounge bar tables, high tables with chairs you can purchase for $400 all in costs, and you can sell it for $800. You can and you can always sell one bar table set with one launch set from the same supplier. So looks like this. You have your first months you have the launch set. This is your sales from the launch sets, and the bar table said Start in months number six. So you add the sales there, then you have the custom goods which are broken down into the launch. That and the bar tables. And you can see your total cost of goods and then gives you your gross margin. Which, of course, is going up a lot higher to the end because you're selling mawr of each product. Then you have your expenses, which haven't changed, because if you make a phone call in and you know, let's say your order, uh, one. Launch that or you say I order one launch set and one set of bar tables. It's all the same. So this is no, uh, additional expenses. So your gross income here has changed quite significantly. No, your cash flow all of a sudden. You see, in the beginning it's the same. And then in months number six, all of a sudden it's different. You see, a gross income is starting to change, which means that here in months, number seven you're Russ Margin is exceeding your expenses by $10,000. So your new break even is here somewhere between months number six and months number seven because you can support all your costs from the margin you generate. So as you can see, there is, ah, significant change in the results. You are now cash flow positive in months number seven and your capital requirements you need to get your business rolling went down from the example before 57,200 now to 52,400 in months. Number six. If you look at that and of course, future margins, I expected to grow faster and stronger. So these are very simple examples that might be different from the results. We got your specific product products, but you know, you can put this all in in a table. So this was an example for an additional product calculation. You, of course, have to do a detailed calculation yourself for your product to ensure that you don't run into any type of surprises, which might cost you an arm and a leg. And while you're establishing your business, this can be fatal, so always watch out. Always raise enough money. That's why you have to put together a detailed financial plan covering all expenses you might have to face. And also consider that as we are in the financial planning section right now, I will mention it right now, although we talk about this little later that you always have to add money for to raise money because there will be costs for raising money. Nothing is for free, like it starts with travel costs. If you have to fly somewhere to present your product project or even fly overseas to present your project there or just simple retainer costs. If you use ah, money professional to help you find investors, everything has to be considered. But we will get to that in Unit seven. How to raise funds and how to find investors. I hope this ah, hypothetical calculation showed you how it's done. I always recommend to put all these numbers into a Excel spreadsheet and play around with numbers and see what impact different sales projections will have on your ah gross margin on your break even point and on. And when you will become profitable, that's that's always very important. But as that set up your own Excel spreadsheet and player. Now let's move on to the next year 4. Company Formation - Unit 4: Welcome back to Unit four of our webinar. How to become an entrepreneur and this unit. We will talk about the company formation and meaning we will answer or we will show you what to do and what not to do when setting up your company. The first question you have to ask yourself is what is my goal? The structure you choose is, for example, directly correlated of to how you want to finance your company. Do you want to just run your company on a small scale? Do you want to get it finance between yourself and your partner? You want to raise money and make it a highly profitable company? Or do you want to raise money and plan on listing your shares at an exchange after one of two years of operation, I will give you some examples you need. You need to be aware of the fact that some company types are not meant for raising money. The corporate structures, one of the most important decisions to make. In the beginning, it will not only have an impact on the amount of taxes you have to pay but can also have an impact on your personal liability. Also, there's a difference in the amount of paperwork you have to do. And, of course, the money raising component again and again, the three most popular corporate structures or partnerships, corporations s corporations and sole proprietorships. Recently, the LFC, the Limited Liability Company and LLP Limited Liability Partnership have evolved in also possible corporate structure solutions. Let's first take a look at sole proprietorships. This sole proprietorship is the ah most simple form. It only involves one person who operates and owns the business. If you're all by yourself, this might be the structure to choose. The tax benefits of AH sole proprietorship are very appealing, as all income from your business operations will be included in your personal tax return. Just need to file a form to the 2010 and the profits and losses will be transferred to your personal tax returns. This might be an attractive solution as also, the losses from your business operations might offset some other income you have. The government allows you to pay estimated Texas and four equal amounts throughout the year , but now, to some of the disadvantages of a sole proprietorship, whatever happens with your business operations suitably personal, reliable for whatever happens. That also implies that if you owe anything, your asset is placed at risk as it could be seized to send us for any type of dead. Or if, if illegal file gets filed against you, you have you will be liable. Also, another disadvantage that needs to be mentioned is that, ah, it's your limitation to raise external money as investment or loan banks and other institutions. They might be reluctant to grant loans to sole proprietorships, and which means that as a result, you will pretty much depend on your own your own sources to finance your business. So that much for sole proprietorships. Now let's take a look at partnerships partnerships. If you're planning your venture with a partner or several partners, a partnership is a possible structure. They're two different partnerships. As the General Partnership and Limited Partnership. General partnership is a structure where old partners are responsible for the obligations of the business. Like like that's for example, Ah limited partnership usually consists of general partners and limited partners, and the general partners own and operate the business, while the limited partisan investors, only, um limited partners will get whatever you have agreed with them, like a yearly dividend, for example, or something similar. Basically, you can count in agreement with the limited partners whatever suits you, but they're not necessarily the best solution. That is, as it requires a lot of administrative organ filings, especially if you're looking to get investors it. The tax profits and losses were reported by each part individually and ah, liability is another big aspect with the structure as every general partner is personal liable. And another problem that might arise is that every partner can act on behalf of the partnership and to into binding agreements, take out loans and make important decisions, which might put the business at risk in case of a dispute you have. So now we come to the, uh, most common form, the corporation. The corporation structure is independent from owners. It's so usually organized with shareholders who owned the corporation. That's also called C corporation and they have the owners. The shoulders have no personal liability, meaning that your personal risk I never at risk your personal essence. I never at risk, and the corporation is probably the best structure. If you want to raise investment money. With the cooperation, you can sell stock. There's usually common stock you can sell to capitalize your company. Another option is to give a preferred stock, which is usually characterized by having by, you know, having no vote during shelter meetings for any type of decisions Sheldon's have to make. Therefore, preferred shareholders will be paid first if winding up the company, for example. So there's Ah, there's always good and a bad side of the metal. But corporation will cost more to set up compared to other corporate structures. But we're talking a few $100 here. Uh, although tax returns and fabrics require more accounting after Inc. That's Ah, that's one thing. It also depends in which state you start your company. For many years, a Delaware corporation has been the most attractive state to form a company, and it still is. But if you do business in another state, you have to file in that state, you do business in an extra declaration and stuff like that. Another important point to mention is that the corporation pays taxes on profits and if ah , the distribute dividends, for example, to share old us if the shells have to pay taxes on those capital gains. But on the other side, corporation has the option to retain profits, and they can decide whenever they will pay dividends or bonuses to employees. So the corporations, as mentioned before off the set up to go public, which is of course, another, in my opinion and very positive aspect. And ah, see corporations can have an unlimited number of Sheldon's. That's another big advantage in my opinion. Then there is the the S Corporation. And as cooperation is more appealing to small business owners because of some tax benefits , profits and losses are passed on to shareholders and will be included in the individual's tax return, meaning there's only one level of tax to be paid compared to see cooperation where there is a double tax layer. So and but s corporations are limited to 100 shareholders, which means that seal that s corporations have a lot of the same rules like C corporations . But if you look at stop stock types, s corporations are limited. Only one stock type, which is the common stock and you can only have 100 taels, is so next option is the limited liability company AH, corporate structure that has been around since 1977. It's basically a hybrid solution, combining features from partnerships and corporations. The business owners. They're protected with a kind of a liability protection, like corporations without the double taxation, earnings and losses wiggle directly into the owner's personal tax returns. It's a little similar to an s corporation and, uh, Alice, You can also have it. Unlimited amount of shale is compared to an s corporation. Where you a limited 200 shareholders, as mentioned before any member Sheldon or owner of the LLC is allowed full partner, full participatory role in the business operation wide and the Limited Partnership partners are not allowed to any executive rule in the operation, so that very much depends on the taste. But if every owner and co owner of a lnc has a right to participate in corporate operations , well would be a little too much for me. But it said it depends on your taste to set up an ally. See, you need to file just you need to fight articles organization with Secretary of State wherever you want to conduct your business in Onda. What also needs to be mentioned is that L C. Is not having a perpetual life. It automatically dissolves after 30 years, or it dissolves when a member dies, quits or retires. That's another disadvantage in my opinion. So if someone wants to step out, then the L. A Z dies is in case you decide to use an LSE. You have to make sure how other states will treat in LSE. If you want to conduct business in that state as strongly recommend to use an accountant who has experience in dealing with jealousies and is familiar with the different rules and regulations, that's very important. The limited liability partnership I have had just a limited liability, meaning that every partner is liable for his her own malpractice and the other partners cannot be held responsible. This model is usually used in the professional practice like physicians, for example, meaning like you have, ah, practice with several doctors, and that's like a limited liability partnership. Whatever corporate structure you use, you have to make sure that you stay up to date with any possible changes that might occur. You have to stay informed and recess your structure to ensure that you are able to get the , you know, the most benefits from your corporate structure. That's always most important. Let me give you a few examples. Example. One. You're alone. You have an idea for a product and you have the financial strength to develop your product yourself. Always some contractors you're using and then you plan on selling your product one of one to each store and you don't need investments. Also, you want to take advantage of the tax losses from your investments that you already know what occurred during the 12 months of operations. So for this case of sole, proprietorship is the best structure. So example Number two, you are alone. At first. You have an idea for a product. Then you ask your buddy to give you some input and his opinion. And after you heard your idea, he wants to help you develop the product and bring it to market Between you and him. You can finance it all and you don't need investments. This would be a great example for general partnership. So the next case is example Number three. You have an idea, and you do not have enough money to finance it yourself. a provide enough collateral for a loan or convertible. Therefore, you want to raise equity investment from investors through a crowdfunding platform and from investors and institutional from private and institutional investors. You might get more than 100 investors from the crowd funding platform alone. As there, you can only get small investors. This is the perfect example for a C corporation structure. I personally I really like the sea corporation structure as it provides the most flexibility in whatever you do, allowing you to raise money from an unlimited number of shelters and always offer the possibility of going public. But you know that at the end, it always depends on the goals you have set for your company. Also, I can only recommend to you that you have to make sure that you will stay in charge as you are the one who is running the show. I said it before. I can only mention it again. It's your idea. Is your product your spirit that will come to life by executing your plan and bring your product to the market? That's what I think. Overall, always make sure that you stay in charge 5. Capitalization & Financing - Unit 5: welcome to Unit five of our Webinar. How to Become an Entrepreneur. Unit five deals with the capitalization and types of investment. Funding always has been the biggest problem for companies, especially for start ups, and even some small, established companies are having problems to raise additional money or expansion capital. That's that's always difficult. First, you need to decide which way you want to go finance you ready old by yourself In case you're considering bootstrapping, it is definitely an option, but it might use up all of your resources. Let's have a look at what types of investments you can access their different types, whereas each type has very specific characteristics, and we will have a look at the different types and the related advantages and disadvantages . The first thing that always pops up when you hear about financing a startup is the family and friends round. This is the seed money. This is the money family and friends come out with to help you start your business in case the project works out as planned. You will definitely be king of the hill for all your friends and family, in case the project is not going the way you planned it. It will for sure strain your relationship with the family and friends you brought in so you might need additional funding and the investment or the return on the disinvestment from your family and friends might stretch out for longer or for an indefinite time. Oh, we'll never get paid back. So I think that is always a problem if you deal with family and friends. And although it's a venture capital investment and every member of your family and friends you brought in, they knew from the beginning that it's an investment bearing the risk to lose, although the money. But you will always feel morally obligated in responsible to get them their investment back . So that's a question you have to consider when bringing in family and friends. The next type of investments is the Angel Investor Angel. Investors are usually high net worth individuals always on the hunt for good investments. They will get a stake in your company, and therefore they give you money. A good example is shark tank or dragons. Then these are angel investors. The advantage. The biggest advantage of off bringing in an angel investor is definitely that you would get all the money you need from this one investor, and they usually give you all the money. That's where they take a larger stake. But it also means that they get the valuation of a startup company for giving you all the money you need. So for in case you need $3 million total, but you need only $1 million a za first step. They gave you $3 million and the start of valuation, which means they usually get a large stake in your company. But therefore you get all the money you need in one shot and also angel investors. They usually haven't established network and can always help you with contacts and distribution channels. And they have you. But they experience in their business expertise, and, you know, overall helped the company grow because it's also in their interest. But disadvantage, as mentioned before, is that you usually give up a large chunk of your company, and they will definitely scrutinize your business plan. And, uh, you have to build a case why they should invest and things like that. So sometimes it's a little difficult. Also, most of the times Angel investors want to be involved in the company, meaning that you can't make all the decisions by yourself and have to discuss and confirm the way money to spend and decisions are made and things are done in your own your own quote unquote company. So that's another disadvantages I see by using an angel investor. Next is loan, which goes along with boots driving. You might have already thought about it, but, uh, meaning to come up with the money yourself, for example, by taking a loan from a bank is, ah, risk you how you can take. First question is, if you have enough to cover all the cost you have put together under, you know, when we were looking at it and unit for. So this is something you have to consider. In this case, you will take all the risk yourself, but using alone. But you will own 100% of the company when you have no responsibility for other investors or you don't have to justify yourself. So depending on your project, this might be the way to go is the first step and once you have established the first things you can use some of other. You can use some of the other funding options for market entry for expansion, so but that depends on your taste. That is one option for sure. The next one is a corporation corporation with a larger company. Ah is definitely a way to go. But you know their dues Don's and their butts a lot of butts and saying that from experience usually takes long before they react and even longer before they will come to a decision. It's not very, very common that they make a decision within one or two weeks. Like another investor, larger companies have to go through several layers off evaluating your idea, your company and it's an approval process, taking weeks, sometimes months before they can come to, ah, conclusion so, or decision Ah, also very often, no, it's it will not. Your product or your idea will not be there first priority, and it might take some time before they will start initializing operations for your project and and then it will most likely take the majority off your company, which means that you have no further say of how things will be done in the future. It's it's a little difficult izing, but it also depends on how much cooperation is negotiated, how the corporation is negotiated and what exactly your product. Because sometimes you know you had. You just have a nisi product and it doesn't need any big development or need your input, just its distribution channels and then a corporation with a larger company might be the best way to go because you don't need to do marketing because they do it all for you. You don't need to present it because they do it all for you. You just you're just there giving them the idea or the product or the finished product, and they go ahead and market it, and you just collect the money at the end of each month or end of H quarter or half year old year or whatever. So that is definitely open to look into. But that all depends on your product and your idea, so that is very important to consider. So the next one is a convertible convertible is basically like a loan, with the option for the investor to convert the loan or parts of it into equity. Equity is like a stake in your company most of the times represented by shares. So that is convertible. This is the closest investment type to a full equity investment, and for a loan you usually have to also for convertible usually also have to provide some kind of collateral. And, ah, if you don't have any collateral, UH, usually convertible cannot be done, so the last option. And in my opinion, the most interesting option is equity. Equity is isn't a set before is an ownership of a company represented usually buy shares. And to raise funds by selling shares of your company is one of the most common ways to get your company financed. When you found your company, you issue a certain amount of shares and to equity finance your company. You decide to do a capital increase, meaning you will issue more shares at a certain price per share. Then you can sell your shares to investors at the price you and your board of directors or whoever's there have decided. This will also put evaluation tag on your company. The corporate structure you have chosen for this option is described in Unit three, So meaning is problem. Here is the timing and pricing of shares. So we come to price of shares. If you want to raise all the money you need in the first financing around, you will often give up a good chunk of your company, like at the Ah, like the Angel investor type. They give you all the money you need in the first step, but meaning they therefore take a big chunk of the company because all the money you need might represent a big chunk off the company given valuation at that point in time. So, for example, if you do like, uh, raising money in stages like there's the first stage you need first days you need a $1,000,000 you know, to get the company going, established the product, develop it and then after, let's say, nine months, you need another 1,000,000. But the company's further ahead, so you can take a higher price per share because the the more the product is developed, the more the risk will be lowered. So it's not a start up. It's not a fully startups, not the seat phase. It's even. We're still within the start up phase, but it's close to getting the product ready so you can give the company a higher value, which means that the price per share will also go up. So the further ahead you are with your company, the higher the price, the price per share can be, and ah and also you. You might have you men. You have used the first money to develop your product, maybe build a prototype, and maybe you are also already ready for market entry. So the second round of financing is done to expand your business or enable you for the market entry of your product. And it usually also involves some operating capital, and some is allocated to marketing. For example, you cannot really raise money through a crowdfunding platform with a sole proprietorship over the limited liability structure. That's why you have to think about what your goal is at the beginning and set it up correctly right from the start. Otherwise, it will just cost you time, money and it really nerves to apply all those changes. That's that's when you need to think about how you want to raise money for whatever funding activity you're going to use. You will need a business plan and we will describe your plan in detail and now close this unit and now you need to think about what financing structure you want to use. 6. Business Plan & Valuation - Unit 6: Hello and welcome back to Unit six of our Web. You know how to become an entrepreneur? Um, Unit six deals with business plan and evaluation of your company. This will be little more comprehensive as, ah, it variation of your company. And raising money sets the foundation stone of your company in the future. It determines from the start. What do you think your company is worth? And considering these calculations, you will raise your first funds based on this valuation, which means you will sell part of your company toe one of several investors. But let's summarize. First, you have researched your idea. You have decided for the corporate structure you want and you want what kind of finding see you're going for. So the first thing is, and a business plan the financial requirements. The next step that you have to side is how much money you want or better you need to raise for your company. This is the stretch between raising enough money to be able to develop your product prototype or bring your product to market and not selling out your company at the same time from the start, because right now you are a start up company and usually start up companies don't get very high evaluations again. All of this very much depends on the specifics of your company and its products with services you offer. So it's up to you to decide. What do you think the money you need? It's worth to you. As a startup company, you usually have no assets, no revenues, basically no income streams at all. So the next question is, how do I value my company if you make it too cheap? Investors might think that you don't think that your company is worth anything. If you make it too expensive, you need substantial back up to justify high price per share. So therefore you need to find a fair valuation. One approach is using the valuation off 10 times the profits before tax is. You were planning on the first year you started operations and then divided by two. That includes the development phase and usually the only last few months You will make sales. One approach is using evaluation of 10 times the profits before tax issue were planning for the first year after you started operations and then divided by two that includes the development phase, it usually the only last few months. You will make sales that way. That 10 times profit is a common variation, based in divided by two as the safety reduction. So, as example, we have the following set up. You have issued 12 million shares. You plan on making 12 million in sales the first year in $2 million in profits than your company. Valuation is two million and profits times 10 is 20 million. Divided by two is 10 million. You're looking for a $3 million investment that is 30% of your internal evaluation, meaning that you are playing to give away 30% of your company for a $3 million investment with 12 million chairs issued, 30% is about 3.6 million shares. That doesn't mean that the price will be accepted of that. This price is a fair price. This was just a example to show you how the calculation can be done. If you have no cash loan, income streams, no contracts, no nothing. This is one way to do it. Another way would be to find a similar company and compared with your company. But that's kind of tough as usually. Ah, there is at least one major difference between the between your company and the other one. You if you have started operations and you have revenues, meaning if you have an income stream, you can use several other methods. I'm not going to deep into those, but just to mention them. It's the discounted cash flow method, which is an intrinsic value approach. 2nd 1 is the comparable company method mainly used for listed companies and the cost approach, which is not very popular. But the cost approach shows what it will cost to replace the business you are trying to find. Evaluation for the first wester you will show it to you will show your pricing to We'll think it's a hell of a deal and he will invest. The next investor might say that you evaluation is too high and that at that price he will never buy stock in your company. So you never know. It's always that that thin line where you show that an investment is attractive to investors and that they will make a great deal when they invest in your company. At this stage, the only thing you have to pay attention to is at this stage that you don't lose control over your own company. Well, just from my experience in a little side note here, just wanted to say that I think that every in West investor who gives you money, like at a start up stage or seed stage, should make a lot of money because, you know, he is giving you his money. Therefore, you shouldn't be too afraid of giving away a good part of the company. In the beginning, they take the complete financial risk. It should be like rewarded for that. That's but that's just my opinion. So after the evaluation is done, you have to present your concept to investors. All the information you have gathered and more will now be inserted into a business plan. The business plan, usually in writing, gives a full picture regarding your idea. Lays out your company from an operational, financial, regulatory and marketing standpoint. Ah, of course, their business plan. Right, as you can hire and pay, they usually cost somewhere between five and can go as high as $50,000 it usually takes somewhere between two and two and six weeks, depending on your Ah project and specifications and how comprehensive it is. But usually to save money. Most fun, that's right to plan themselves. That's why I I want to emphasize the importance of a business plan and go a little more deeper into it here. Therefore, this business plan should include all factors that investors want to see. If you have business secrets you don't want to reveal, you have to try and describe them without exactly telling what it ISS. That's a little difficult, especially if your idea can't be protected by a patent or another protection mechanism or trade Michael whatever. Then it's it's very hard to protect it. It's very hard to raise money without saying, without telling people what it is and with saying what it is you take the risk of. People say, Well, it's cannot be protected. I will do it and I have. You know, I have the opportunities, the possibility of financial possibilities to do that. It's Ah, it's a kind of tough I know. You can, of course, protect your idea. With a patent, you have to go through a patent lawyer if you want to protect your idea or product with a trademark. You can file that online any time. Always remember, if an established companies seize your idea, it might take them days to establish is as they have the money and already, you know, maybe have the market access. So it's sometimes really, really tough. But now let's talk about the business plan in more detail. Let's have a look at the key elements. We have the executive summary. We have the company description. We have the management section, a market overview products and services, the marketing strategy, financial planning, The investment offer. Independence is This is a very raw structure of a business plan. Often start up companies produce ah, the following documents to attract investors, which is a business plan effect shed and pitch take for a personal presentation as well as often enough a video presentation. If you use factory to your fundraising activity, it has to be very compelling, and it has to make the reader wanting to look at the full business plan. That's this means that the fact she'd must be very attractive because the investor you're addressing is off, not even reading the business plan. If he's not interested from what he understood and reads on the factory. So this fact she'd has to be flaming the factory. It needs to point out prominently all the advantages in highlights of your company. That's that's That's how you start attracting investors but sending them fact sheets first and only the factory, not the business plan. If you get foot positive feedback within a week or so, then they will ask for a comprehensive business plan. And even after a week, you can call yourself and ask and maybe talk to them. Overall, from my experience, I can say that phone call or one on one conversation is always the best introduction you can provide for your own project and your business. The fact It can also be video or any other type of presentation, like linked to some online presentation online video. But from my experience so far, I can say that an attached faction in an email like a pdf well, usually get a quick look, and that's where you have to present an eye catcher to keep the potential investor reading your affection. A link in an email usually doesn't get that many clicks compared to an attached. Pdf Because the pdf is right there it is there right now, a link. Then you know, you get transported somewhere and it takes time. And often these people don't have time, and they just want to get the eye catcher. And if that interests them, they will read it. Investors doesn't matter whether they're private or institutional. Always wants something in writing. They can print out study. Look at again again all investors Ah aware that an equity investment always related to a certain risk. So although you have extensively mentioned, describe all risk factors in your business plan was limited space on the fact sheet, which is usually a one or two pager. A short disclaimer node, referring to the comprehensive risk description in your business plan is usually enough as the business plan basically is the basis for an investment anyway. To sign up for an investment, you will need to include a subscription agreement in your a business plan documentation, which is usually in the investment offer section or in the appendices. Although you write the business, plan yourself when done, you should not shy away from letting a lawyer review the legal parts like the subscription agreement, for example, or other very important legal parts of your business plan to make sure that you're not missing anything which could bite you later. Now let's take a look at the business plan itself and all the sections. And after that, we will also look at a pitch. Take basically there many, many ways and lots of lots of variations off business plans out today, I will provide the most common version of a business plan, including all the important items. So, first of all, you have the executive summary, the executive summary, then the company description, the market overview and then operations. Let's start with the executive summary. The executive summary is a three pages max Brief description of your complete business plan . The goal of the executive summary is similar to that of a fact sheet. Ah is when the investor of the adviser, however, is reading it. Say this should say this project has potential, and it's worth looking at and more DEET looking at it in more detail. You can also say that an executive summary is a mini business plan, and it shouldn't be longer than as mentioned. Three pages the summer. Your right should be rich in in the third person. That is very important and from experience, I can say that most investors will already make up their minds by reading the executive summary, or the fact she'd respectively affected is basically the executive summary on two pages. Most institutional investors, they like executive summaries as they want to read first before they want to talk to you. You have to remember that only a compelling story you tell in your executive summary will open the door to further talks and might get you the funding you want from that investor. A business plan is usually somewhere between 40 in ages, 80 or 100 pages long, and no investor likes to read through like inches of paper. In fact, the investors will pretty much have made up their minds after reading the fact she'd or the executive summary. If you plan on pursuing the shark tang or Dragon Sten route to raise money with a pitch deck, you want to make sure you have a business plan in place to back it up. So next item is the company description Company description. Ah, you provide a further overview of your company, and this should include the company's purpose and mission. Formacion information. Ah, then location and region on the business stage and the milestone you have achieved so far that is, uh, should be not too long. Then the next section is the market overview. You should give a detailed description off the market you're addressing than some information about the market, what the growth numbers are, what they have bean in the past and what the expectation is for the future than, uh, the uses your target, how many there are and what their behavior was in the past and what is expected of them in the future and whatever other information is important. And you have to describe the niche if there is unease, your addressing or you're targeting other than the detailed market you are describing anyway. As for operations, you have to understand that this is the point where the investor will see if you have really understood what's going on in in the in your industry, and you need to describe the facilities to require the technology you require any equipment you need and the distribution plan and logistics. And of course, any legal and accounting needs. So the next four sections in the business plan our products and services than the marketing strategy, management and organisation and the financial plan. So now we first Goto products and services here described all products and services you will provide in detail. Describe what problem will be self was building your product or service or whatever you plan with it. Then you should maybe include some of the test results if applicable, and provide some pictures. And ah, maybe mentioned some future products we want to build. And, uh, of course, that there will be hundreds of possibilities and overview of anticipated future products. Or your plan went to develop what and when you will plan to rule them out. As for the marketing strategy, um, there's something, and this is section. You should also pay ah utmost attention to as investors and finest years are considering this as a key element. The more time you spend on this section of the more benefits you will have went presenting and talking to investors and should include a little competitive analyzes, then marketing budgets and channels you're going to use. You need to describe where the marketing money and how much will be spent and give the reader an idea of a possible impact. Like more market acceptance purchases, purchase purchases resulting in more sales are gaining market share or position the company for future marketing campaigns and so on. That's very important, And the next question you have to answer is how we approach your customer, UH, which can also be part of a marketing campaign. The next thing is, you can do survey results if there any you did in the past or any you have and then a marketing strategy also includes a SWAT analyzes. SWAT is an acronym for strength, weaknesses, opportunities and threats usually depicted in a picture like this, where you write down the strengths, the weaknesses, the opportunities and the threats. Strengths. Ah always like positive attributes of your company that you have control over advantages usually refer to to imply skills, crust efficiency, flexibility, reserves, this maintenance, cross reduction brand capabilities like energy saving, and you have to discover your strength and use them to your advantage. Weaknesses, of course, the opposite of your strings. Thes internal characteristics give a bit of a negative attribute that ah blocking your strength. But by identifying your gaps, you confed ways to improve and instead back up your strength. Up opportunities often have a high probability of bringing success. This can be, for example, a new technology improvement, a marketplace enhancement, a business venture or a possible company expansion threats. Of course, we all have threats. Threats can occur if you, for example, operate in several countries. And there's a possible political change and of ah, and might negatively affect your business or, if they're hidden, costs that are very tough to predict. As they vary for months, two months. These can be impeding factors that you have no control over. This is another way of showing it. SWAT analyzes. You can find lots on the Internet just to as an idea so a lot of people consider it. SWAT analyzes to be redone redundant, but it's it's very important. It's not only to provide you with the information about your own company, but can also help to counter threats and further improve the strength of your product or improve your overall business performance. SWAT analyzes is, by the way, he not only working for your company. A lot of companies are using SWAT, analyzes and apply to their key competitors to find out how to take advantage of their weaknesses. So that's one way off. Using the SWAT analyzes, Um, then you should include results of tests service. I mentioned that already, then described the different marketing channels you are planning to use an estimated costs for your marketing that is very important. This is a rough layout, but of course, depending on the specifications off your product with service, it can be a lot more comprehensive, and you might have to go into more detailed depending on what it is. So next point is management and organisation under the section, you need to show what staff will be required, what kind of team you need. You have to exactly describe the founders, the executives and the team than the Shelda structure, pre and post cash pre cash what it is right now. And post cash is like investors. And again, it's certain, ah, certain percentage of control of the company, then the board of directors and the consultants and the Advisor Board. If you have one. If not, you might wanna build one later and then, of course, you have to show an organizational chart like how your company's organized. This can be done like in the model like this. Look at it. This Ah, For an established company, this is probably a little further had from a startup company. But just is just to understand how organizational chart looks like to give you an idea. So something like that you will can show hierarchies and can show where, uh, you have what position, then the next one is the financial plan. Here. You have to, of course, provide old financial information. This includes the the latest balance sheets, if you have any. If your company's brand new, of course you don't have one, preferably balance sheets always included for the past three years. So if your company's new, of course this can happen. Then you should include the projections for the next three years. I should add the break even and cash will analyzes. Remember, we did a ah sample one earlier, and then you should do the income and expenses, state of school and projections. And of course, you shouldn't forget. That is very important to an investor. The use of proceeds. So what exactly is the money going to be used for? Yeah, they have to list start up costs, initial cost. And and this should be done in a very thorough detail. So also, consider and take into consideration that raising money will cost money. And because it's it's always if you, you know, have to go somewhere, travel somewhere. So this all has to go into your friend and to your financial plan. Some investors they like the milestone investment thing, which means they were basically commit to a total investment amount. And after that, the money will be paid out after reaching certain milestones. So, for example, if you get your prototype ready, the next money will come then, or you got a new important permit. Granted, the next money will be sent to you then, or you have achieved something else, which is very important for your business. So it's like reaching milestones. More money will be released to you. That is, uh, it's like partial partial payments in installments when reaching my stones. A lot of investors like that, especially angel investors. So the next one is, of course, the investment offer and the appendices. So investment off you have to exactly describe what you are offering, like the price per share or unit. And then you have to add what risks are attached to this investment because that is always very important, that you cover all risk and you don't leave anything out. And, ah, then, of course, you should tell the investor what your exit strategies. It's nice to invest money, but all investors want to know how they would get their investment back, plus a return on investment. So exit strategy, for example, can be to sell the company to a bigger company. Exit strategy can be to stay as is and paid dividends every year, or every quarter or every six months, or whatever exit strategy can be, and which is, of course, the ah, the most Wanted. One is to go public and list your shares at an exchange and then the shape the investors can sell their shares at that exchange. But overall, you have to be pretty clear off what the exit strategy is. Nobody will give you money if you can't tell what your exit strategy will be, say, oh, maybe this will happen. Or maybe this will happen. Or maybe this well, it will maybe happen anyway. But from the first from the first impression, you have to exactly know what you're looking for. So if you say I want, oh, pay dividends every year, then the investor knows Oh, your moral for for longer thing or you want to go public and list your shares within the next one or two years at a public exchange so I can sell my shares. That's very different. So and the appendices, you have to attach all information and documentation to back up whatever you have provided in the business plan, like articles of incorporation as all company documents, articles of incorporation, copies of insurances, licences, trademarks and patent registrations, contract appraisals and any other important research documents or reference references supporting your business plan so I can see that you're shaking your head again now. But all this information is required to present an investment opportunity to private or institutional investors. Don't be scared. It's not going to be perfect on the first on the first trial, but I know that you will do your best and make sure you have included all elements. Also consider that nothing here is carved in stone, and you can upgrade and amend things while moving forward. A business plan is like a living thing while moving forward. It will always have updated versions, but definitely it's a great guide not for an investor, but also for yourself and show you exactly what has to be done. Unfortunately, many entrepreneurs find out that they have partially huge gaps in their ideas and may fall short when it comes to question from professional investors. The business plan I've presented here will cover most items and invested, will and may ask you along the way. As soon as you find something that you haven't included, you're just added int and stay flexible with your program mostly used on one on one and life presentations also like online. Ah, pitch ticks. Therefore, we want to look at a pitch dick for a bit. A pitch take will be used for personal presentation off your product. Like it one on one investor meeting all luncheon with several investors listening to your presentation at the same time or online, and the good pitch dick should consist of not more than 10 to 12 slides maximum if you make a long pitch ticket might scare investors away to look at it, and investors are always impatient and they want the most information in the smallest possible timeframe. So therefore, it's of, at most importance to really make it short it possible and and only as long as necessary. You have presentation with a pitch stick should not exceed 12 minutes. In case a long presentation off 20 or 30 minutes, you will probably lose your investors somewhere between slight nine and 10. So that's why you should present the key elements off your company as early as possible. Focus on key elements, which is that concise, memorable cover pitch. The front page should include your logo, the business name, your tagline and your contact details. This ah, next part in the pitch dick is the summary. This is the first information about your that your company you provide it should grab the attention of the investor right from the start. Therefore, you need one or more key highlights you provide right at the start. Next thing is, the team team is also important, as it shows the capability off the management to actually execute your idea. Overall products and services only as promising as the people behind them. We went, we were there before. I mean, we talked about it before. Investors want to see that you can do it often if you have the experience in a related field, that's what you have to elaborate, and a good track record will massively contribute to gain, the investor stressed. If your idea is from a complete different sector, a sector where you have no experience, you have to show them that you have gained in depth expertise by studying this business extensively and that you're knowledgeable, highly motivated and dedicated to make your company successful. That is very important. Next thing in the pitch deck is a market overview as before in the business plan does not as long is, ah, point of them. Some highlights like growth or market size or the niece your addressing with a short description. Then you tell us about your product and what problem it will solve. I mean every idea that has been developed into a progress, a solution for a problem with something that wasn't available before, so describing important the highlights. Next. Of course, the marketing section. You have to describe your point of sale. What's your competitive advantage int and how you will use it then, of course, the financial projections the it can only be briefly described because it's it's only a 10 to 12 minutes sales pitch and will not allow you to go into much detail unless the investor really wants to know more than you could go into more details. So but you're probably 100% familiar with all the calculations. Sue can. You can probably explain everything by heart, but if not, you should have an extra slide ready to go. If if the investor wants to go deeper into that, so you can't leave any questions unanswered. And if there's a question you can answer, you rather say, I have to check that and get back to you as soon as I get home to my computer. So something like that in your considerations and your financial projects, and you should make very clear how you will become profitable and when you will reach your break even or stop being profitable. So then, of course, again, exit strategy and investment offer these also two important things like before. I don't want to go again into these two things exit strategy. You have to tell them how he can sell his investment again and make money. Or in the investment off will exactly describe how much he's gonna pay for per share in your for share of your company and, um, whatever company structure you're using. So overall a pitch dig is very similar to an executive summary, but it's a little different as you present it. Life. So it's it's it's more for telling. As for reading. So that was our six session of six unit and, ah, now we move on to a last unit. How to find investors and how to approach them. Thank you. 7. Investors - Unit 7: Hello and welcome to Unit seven of a Webby. Now, how to become an entrepreneur. Unit seven will deal with the question. How to find investors Definitely one of the most important things when it comes to financing your company. Well, look, let's look back and find out that we have everything ready to go. We have the fact sheet you have done all calculations you wrote the business plan and maybe a pitch tick and fact sheet. And whatever other motive marketing materials you can use to promote an investment into your company. Now you're ready to start contacting investors. The mood to invest is very often affected by the trend when looking at public stock markets . If we on a bull market, for example, meaning stocks are going up investors arm or in the mood to invest compared to them with during a bear market when stocks are going south in a bull market, of course, you have to phase a lot of competition from other companies that are also looking to attract investors private as well as listed companies. When we are in a bear market, everybody's leaving stock markets and is going cash or fixed income products like savings accounts, bonds and other products not exposed to any type of risk. Whatever situation there is, you are not listed, at least not yet, and you will not be affected by public. Stock market developments moving up are moving down. That's already a good argument to invest in your company. Now you also have to think about what type of investors you want to address. So let's first take a look at the different types of investors. We have already talked about angel investors, which I like high net worth individuals, so we're not going to go into this topic again. The next group is the group of institutional investors. Institutional investors are professional investors, like investment companies, asset management's fund managers, banks and all other by a Security Exchange Commission regulated institution. Institution investors usually invest money on behalf of clients or members. Institutional investors are also considered market savvy, but often have restrictions where they can invest. But we'll come to that little later. The next group are the high net worth individuals within the group of high net worth individuals. You have the ones with more than $1 million in liquid assets. That's the first group, the second group of very high net worth individuals with more than $5 million in liquid assets. Then you have the ultra high net with individuals with more than $30 million in liquid assets. The next group are the private or also called Retail Investors and private investor retail Investor is every person that invests his money into projects. There's no minimum amount. A private investor often has to sign additional risk decorations if he wants to invest into a company. This way, the regulators want to make sure that the private investor is aware of the fact that it's a risky investment and that he can lose his whole investment. The next group is that of the crowdfunding investors. Crowdfunding has become very popular in the past years. Ah, and it's a very new way of raising money. There are some restrictions when you want to raise funds this way, crowdfunding investors. They might invest as little as $100 but you can get a lot of them. As crowdfunding seems a great way to raise money. Let's take a closer look at advantages and disadvantages. Well, advantages, usually a crowdfunding platform. I'm not charging any big upfront fees, and fundraising can be done fast. Well can be presenting. Your idea on a crowdfunding platform can also be seen as a form of marketing your project at a very early stage. Unconventional ideas or products might get finance a little easier. Sometimes he will also get feedback. How to improve your product or your idea. It's also an alternative. If you get turned down for a bank loan or you don't want to use traditional funding options . There definitely some advantages that are worth considering. But they also some disadvantages well, often setting up a crowd funding for a project It's not as easy as it seems compared to the traditional equity fundraising way. Unfortunately, not all projects that apply for two crowdfunding platforms get onto them. Most of the platforms you can choose from require quite some work in building up interest before the project launches. Also, sometimes it takes significant time, and also some money sometimes is required. Some platform rules say that if you don't reach your funding target that all investments that have been pledged will be return to to the investors and you will receive nothing. So for example, if you want to raise $100,000 you only raise $80,000 which will already help you to get your project started, the crowd crowdfunding platform says. No, it's not. You haven't reached your goal, so all the money will rebuild. We return to the investors. This failure, my damage, your reputation and might be a problem for other investors and scare them away when a crowdfunding platform is not buying into your concept. So I I would think about that really, really well on a crowd planning. Fret cut on a crowdfunding platform, you have to reveal all your business secrets and expose yourself to the risk that your idea concept might be stolen. Most crowdfunding platforms are using templates where you have to fill in your information , which often not the same as the information and order you have in your business plan. Another possible disadvantages. The number of Sheldon's you get usually shelled us have questions, especially when you are not listed at a public exchange. They will contact you for information. Shareholder owning one share has the same rights as a shelter, owning 1000 shares, so if they contact you for information and potentially you might get hundreds of investors . This is very time consuming whatsoever. If whatever funding option you're going to use is working, it was the right choice. I personally Onley see crowdfunding as the option if all other funding options are not working. But that, of course, depends on the taste. Some companies looking for funding are using several options at the same time, like classical fundraising and a crowdfunding combined. Where is no law? Not all crowdfunding platforms allow simultaneous efforts. Sometimes they wanted exclusively so to excess. Any type of investors can be done in different ways. From my personal experience, I can say there is no doubt that the best way to excess investors is by introduction. Usually, an introduction is provided by a company with an established network of investors like intermediaries or invest relation companies or any other professional money managing companies. Some online portals offer, uh to distribute your information, uh, to their database. But from my own experience, I can say that I used to around the fully license investment company myself and I had a database of more than 6000 private investors and a little over 200 institutional investors . So whenever we had a project, we send out a newsletter announcing the new project. This this data baseball's built over a period of more than 10 years, and, ah, this little anecdote was only to show you how an intermediary company works and intermediate company can be. Investment company can be a marketing company can be an investor relations company, a broker, for example, if you plan on going public or a mix of all of them off course, the services not for free and will cost you some money, usually a retainer for like, two or three months. As the intermediaries put work into it. The project needs to be introduced and off course. Nothing will happen overnight. It takes some time. How successful you will be very much depends on your project and how convincing your documents are. And ho, how much you will support your own project. Like if you're ready for video conferences, Skype calls, phone calls, visits one on one presentations, and what whatsoever? No company can guarantee you a success if you hire a marketing or invest relation Intermediary. Make sure that they explain to you exactly how they operate and what exactly they will do for you. Otherwise, some will try to a monthly fee somewhere between five and $10,000 as a basic fee, and not much will happen. Unfortunately, the times were intermediaries. Work, performance based are gone. In addition, most of them can't work on commission as then. It would be considered a financial institution and need to be licensed by the SEC, and most of them are not. That's why I can only recommend hiring professional intimidate you. Have you raise your required funds. Other than that, private investors are very hard to come by even tougher to get in contact with the high net with a new investors. Excluding Angela Investors, Angel investors are as mentioned before. Also, some type of high neck was individual, the high net worth individuals in 99% of all cases. I don't want to be bothered all day long with hundreds of projects effort and sent to them . So there's some online options offering access to retail investors. But honestly, I've never used any of those and have no opinion or experience if they are any good or not . I was involved in many deals that have included private investors from the start and for the second and third round of finance. And the company has addressed on top of the old investors, institutional investors. And that has basically always worked out within the big group off institutional investors. They are also big differences an institution. Investors are basically all investors, which are organized under a corporate roof and are regulated by the Security Exchange Commission or a similar institution in other countries like commercial banks, hedge funds, mutual funds, endowment funds, pension funds, insurances, investment companies, asset management's family offices, brokers They are more types of money managers in Europe with different license or permit requirements. But that would be beyond to scope of the webinar right now. That's why I always recommend considering raising funds from abroad as well. Switzerland, Germany, Austria, Italy, friends and also England are good countries to look for investments. Some regulations there a different, and they're not as restricted as layer in the US from the mentioned institutional investors there basically three types that will be interesting to approach foreign investment first, the asset managers, second family offices and third investment companies. Most of the other institutional investors only invest into your company if it's listed at an exchange, and even then they have certain requirements like liquidity in the market, for example, meaning that they must be able to sell the investment within 2030 or 40 days than other institutional investors require a certain market cap of your company before being considered for an investment. The next institutional requires to be in a certain geographical region, or your business must be in a specific discipline, like medical, out of motive or resources or whatever. And the next one only looks that invest into your company when your assets have a minimum of $100 million. There are many factors, said pre records. Its funds and other institutional investors have definitely not a target group to look for investments for a startup company. One way is to research institutional investors online yourself and contact them. It takes a great effort, and you slept on many, many emails. In fact sheets, executive summaries and presentations before you will get a feat big, but it's it's a very viable option. If you get feedback, you can be sure that they're very interested. But this having said asset managers and other money managers can also offer investments beyond their regular or, let's say, regulated activity there, for it's always worth to contact them, meaning that if they have high net was individuals on the management and they can use their vehicle to invest into your company. But they think your project is very interesting and profit promising. They can initiate contact. And if there's an investor who is interested in your concept, he can invest with, let's say, other money he has available. That's from my experience, very possible option and has happened many times with projects I did in the past. We also would like to show you some other options you can use to find investors. The 1st 1 is, of course, email. We have talked about a little bit, so you can email us too potential investors and try to catch their attention. So you have to create very compelling and good email front cover page, so to attract them. The next thing is fund raising platforms. Besides Crowdfunding platforms, there also other plants and where you can raise money. And if your project qualifies well, I think it's always worth trying. If the project this meeting your expectations, and the next thing is you can raise interest by product presentations, meaning depending on the specifics of your company and product. You can gain interest by marketing your product and creating a demand and then eventually that demand will bring up the question. Wow, this is a great product. Can I invest in that company? Then the next thing is a blawg. So there some blocks out there, you can create attention by blogging and telling your story and attract attention and build relationships there. The next one is, of course, social media. As we all know, social media is huge. These days you can start building relationships. They're using Facebook linked and Twitter, and the next option is events. Trade shows they're quite a lot. Money shows out there where investors are listening to ideas and projects. This could be gateway for you to excess investors and present the investment opportunity you have to offer like example. Page are you can go to a Web summit dot com money 2020 dot com, techcrunch dot com, sxsw dot com or collision confident. Come. These are all portals where you can present your product and start to create attention for your company. Of course, there are a lot of more a lot more events. You can attend and start networking. You have to look at up what geographical region you're in. And if it makes sense to go there, I know there is not, in overall, very satisfying and guaranteed solution to find investors, but that's the way it is. My opinion is, whatever fundraising activity you will develop yourself is is the one you should go for. You should get a company involved with an established network to help you to raise the funds. That's, in my opinion, the best and most success promising option you have again. It all very much depends also on your activity and how relentless you're going to pursue your idea. Approaching potential investors and promoting your company. That's overall, always the most important thing. How active you will become. Well, that's basically it. I would like to thank you for listening to this course. We also offer other to this topic related services. Please check out our Web site at AC Granna dash media dot com, and if you have any questions, feel free to contact us as well. Thank you