Complete Masterclass On Fundraising From Venture Capitalists | Chris B. | Skillshare

Complete Masterclass On Fundraising From Venture Capitalists

Chris B., Instructor, MBA and CFO

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35 Lessons (2h 8m) View My Notes
    • 1. Intro Video

      1:46
    • 2. Introduction

      3:34
    • 3. How Much Capital

      4:48
    • 4. Debt vs Equity

      3:55
    • 5. Matching Services

      3:22
    • 6. Crowdfunding Introduction

      3:19
    • 7. Crowdfunding Platforms Screencast

      6:35
    • 8. Crowdfunding Pros and Cons

      5:51
    • 9. Venture Capital Introduction

      3:09
    • 10. Venture Capital Process

      10:19
    • 11. Venture Capital Pros and Cons

      4:52
    • 12. Introduction to Angel Investors

      1:46
    • 13. Angel Investor Process

      3:27
    • 14. Angel Investor Pros and Cons

      4:01
    • 15. Intro to Business Plans

      2:13
    • 16. Review of a Business Plan

      10:05
    • 17. Conclusion to Business Plans

      1:37
    • 18. Introduction to Financial Models

      2:27
    • 19. Review of a Financial Model

      7:53
    • 20. Final Comments on Financial Models

      1:10
    • 21. Introduction to Investor Presentations

      2:18
    • 22. Review of an Investor Presentation

      5:28
    • 23. Final Comments on Investor Presentations

      1:12
    • 24. Introduction to Valuations

      1:55
    • 25. Review of a Valuation

      3:04
    • 26. Final Comments on Valuations

      1:03
    • 27. Term Sheet Introduction

      1:29
    • 28. Review of a Term Sheet

      9:15
    • 29. Final Comments on Term Sheets

      0:56
    • 30. Introduction to Exit Strategies

      1:18
    • 31. Management Buy Outs

      2:48
    • 32. Leveraged Buy Outs

      1:39
    • 33. Initial Public Offering

      3:38
    • 34. Merger and Acquisition

      3:58
    • 35. Course Conclusion

      1:35

About This Class

Are You An Entrepreneur, CEO or Business Owner?

Are You Frustrated or Overwhelmed With The Capital Raising Process?

Do You Have A Great Business Model But Need Funds To Get Started?

Do You Not Know Where To Start With Finding Venture Capital?

If You Answered "Yes" To Any Of The Above, Look No Further.  This Is The Course For You!

Join today and join the 100,000+ successful students I have taught as a Top Rated instructor!

Three reasons to TAKE THIS COURSE right now:

  1. You get lifetime access to lectures, including all new lectures, assignments, quizzes and downloads

  2. You can ask me questions and see me respond to every single one of them thoroughly! 

  3. You will are being taught by a professional with a proven track record of success!

  4. Bonus reason: I have worked directly with Venture Capitalists and Angel Investors! I've presented in their board rooms, met with them one on one, presented at board meetings for companies they invested in.  Unlike others, I actually know how the venture capital and angel investor worlds operate! 

  5. Extra Bonus Reason: Udemy has a 100% refund policy - no questions asked and no risk for you!

Recent Reviews:

John L of Maven Capital Group says "Excellent course!  I wish more people knew the proper way to approach venture capital investors.  With so many start up companies out there, having the edge above the others by knowing the proper process and what is expected of start up companies is of utmost importance.  This is the best course I’ve taken on Udemy. Chris is a terrific instructor and very knowledgable about the topic.  Definitely the go to guy on learning about VC Funding.”

Do You Want To Learn The Effective, Insider Methods To Raising Venture Capital For Your Company?

Lets face it, finding investors for your business can be difficult at best.  Its actually pretty much impossible.  If you are new to the journey you may not yet have endured the endless "not interested" comments you will receive.  If you have been trying for some time, you are probably exhausted by those "not interested" comments.

There's still hope!! Let me teach you how to wow angel investors and venture capitalists.  Knowledge is power and we are about to empower you!

Lets work together to change that and GET YOUR COMPANY FUNDED! If you have an investment worthy business, then lets empower you with the skills, knowledge and tools needed to find those investors and have them writing you a check!

By the end of this course you will be ready have INVESTORS FIGHTING OVER INVESTING IN YOUR BUSINESS!

What You Will Learn In This Course

This course teaches entrepreneurs, startups and small businesses all things involved in the capital raising process from A to Z.  Starting with an introduction to what to expect from the process, to what tools you will need, and how to go about finding potential investors is covered. 

With so many companies looking for capital and a limited supply of lenders & investors, it is important to give yourself any advantage you can to make the process effective and results oriented.  The investment process is often misunderstood - how much should you ask for, can you back it up, how do you approach investors, what type of investors are best, what should your expectations be for the investment process.   Get all your questions answered with this course. 

I will help you!

At any point during the course if you are confused or need clarification, send me a message! I'm here to help YOU the student, and I love interacting with you.  I've been in accounting & finance over 20 years and can most likely answer your question. 

Still not sold?  See what my friend JT had to say about it when I had him review it:

If you are a startup CEO or small business, don't be scared by the raising capital process.  It can be daunting, but after this course you will be well equipped to get funding for your company!

Additional Bonuses

I have also included a copy of my ebook "Fund Your Startup by Chris Benjamin" which you will find as a download in the last lecture.  Learn your options for funding, where to find investors, how to wow them, and lastly the must do steps to successful funding!

*** JOIN NOW AND LEARN HOW TO EFFECTIVELY AND EFFICIENTLY RAISE VENTURE CAPITAL FOR YOUR COMPANY ***

About The Instructor

Chris Benjamin, MBA & CFO is a seasoned professional with over 20 years experience in accounting, finance, venture capital and angel investors.  Having spent the first 10 years of my career in corporate settings with both large and small companies, I learned a lot about the accounting process, managing accounting departments, financial reporting, external reporting to board of directors and the Securities and Exchange Commission, and working with external auditors.  

The following 10+ years I decided to go into CFO Consulting, working with growing companies and bringing CFO level experience to companies.  I help implement proper best business practices in accounting and finance, consult on implementation of accounting systems, implementing accounting procedures, while also still fulfilling the CFO roll for many of my clients which includes financial reporting, auditing, working with investors, financial analysis and much more.  

Thank you for signing up for this course. I look forward to being your instructor for this course and many more!

Chris Benjamin, Instructor, CFO & MBA

Transcripts

1. Intro Video: Hi, everyone welcome my course. How to raise investor capital for your start up business. My name is Chris Benjamin on the road CFO of an accounting finance professional with over 20 years experience in the last 10 years, specifically have spent as a consulting CFO helping smaller companies grow their businesses , and a big part of that has been helping them with raising capital. So whether it's creating all the documents they need, like a business plan of forecasts and investor pitch deck, or helping them decide what's the best sort of investment to take on, whether it's debt or equity, should they be looking at angel investors or venture capitalists? What are potential exit strategies for their business? I help on all aspects of that through consulting as such, I've dealt with a lot, and I've seen a lot out there. So I want to put together a course for you entrepreneurs and start up companies to teach you the ins and outs of all these things you're gonna have to consider along the way. This course is kind of in some major sections. First, we're gonna talk about just in general. How do you decide how much money. You need a few things to look out for. That I give you warnings on. They're gonna talk about all the different types of investors, the pros and cons there and help you decide which is maybe the best for you to target your energy on. That is what we talked about. All the investor documents they're gonna need to put together like a business plan and the financial forecast that set up. Then, of course, we get the things like the exit strategies. What are the different exit strategies? What are the best ones suited for your company? So after taking the course, you'll feel empowered and ready to hit the ground running and start looking for investor capital wants to get a few things in place. So that said, I encourage everybody to go ahead and sign up for the course. Now let's get started on teaching you all the things you need to know to raise capital for your start up small business 2. Introduction: Hi, everyone. Welcome my chorus raising investor capital for your start up business. My name is Chris Benjamin Rhodes, CFO. I'm in accounting and finance professional with over 20 years experience and more specifically, the last 10 years I've spent as a CFO consultant helping smaller stage companies grow even all the way to go in public on the stock exchange. As such, I dealt with a lot of capital raising issues, finding investors, creating the proper reports, understanding term sheets and everything in between everything that we're gonna cover in this course. So this gives you an idea of how it's gonna go. Most of the videos will be talking head like this. I'm gonna explain terms I'm gonna explain. The process is just kind of a free flow. Lets you know what to expect as well, though we'll be looking at some screen captures of different things like business plans, term sheets, financial models, etcetera. It's gonna be a fairly in depth course. There's gonna be a lot of material, but that's OK. Feel free to take your time at at the end of the day. If you take in the entire course, you can then go back and re watch sections that may be our most applicable to your situation. So throughout the course, we're gonna talk about a lot of different subjects, and I'm going to get to those in a second. Just you have an idea where we're going as well, though there'll be some downloadable content. So I encourage you to download that things like worksheets for each section that you can then take notes on some of the terminology as well. Then they'll be quizzes. Reach section are most of them. So take those just to reinforce what you've learned and as well have some samples free to download things like a sample term sheet, financial model, lots of different stuff. Investor presentation. So there's lots of terrific material in this course. I'm really excited to deliver it. I've spent a lot of time building this course, So from the introduction after here, we're gonna talk about different things, like determining how much money you should raise. How do you determine that? Should you be looking at debt versus equity, the overall process from there, we're going to get into some of the specific types of lenders, if you will, So we're gonna talk about crowdfunding, which is very popular these days. There were also gonna talk about venture capitalists and their process and as well angel investors and their process. Each of them is completely different. So we're gonna focus on each one, has its own section. After that, we're gonna talk more about sort of the specific tools that you need to approach investors . So before you even think about going out, reaching out to them and trying to talk to them, you need several things in place. So we're gonna talk about a business plan, a financial model, an investor presentation, and then as well, we're gonna talk about valuations. How do you put evaluation on your company and how do we go about determining those numbers after those tools we talk about when we get to things like the term sheet? So we're now assuming you're at the point where you have found investors who are interested , how do we deal with the term sheets? Who presents what? What is all the terminology? And they're mean, we're gonna cover it all. After that, they were gonna dress exit strategies. What are the various exit strategies? The pros and cons of each type there. Several, and each one is very different in their nature. After that, we'll get to a conclusion. We're gonna go back, summarize what we've learned, made sure we met all of our goals on that as well. After the conclusion of a bonus lecture where I give you a coupon promo code that you use for any my other courses on the site. There's a lot of great courses in a lot of them tie into different things that we're gonna be talking about throughout this course. Such things as business plans, financial models, investors. So a lot of great topics there. So I'm excited to be able to offer you that. So that said, Let's get started. We got a lot of stuff to cover and I'm excited to teach you. So that's it. Let's dive in. Everybody 3. How Much Capital: So let's talk about how much money do you need to raise? Where do you come up with that number? Well, there's several different ways, and a lot of times I find entrepreneurs were at early stage and maybe haven't had the experience that of raising capital. Just kind of come up with the number. They think. Well, I need about $2 million to successfully launched this business. Unfortunate. That's not gonna fly with investors. They want to see detailed in detail how you came up with a projection of how much capital you need so where that number will ultimately come from. It's kind of your financial forecasts last year financial model, and we have a whole section coming up later about that. But essentially, what you're going to be doing to give you a heads up is projecting forward your revenues, all your expenses. Obviously, your sales in terms of quantity showing growth over time, and it obviously from the start, you need money. You need money to invest in assets, whether it's inventory or whether it's expenses as well. You need to pay people to work for you, maybe need to rent a location you need a computer equipment, etcetera. So you kind of need a bulk amount up front to get off the ground. And then you need enough to sustain the business while you're ramping up in making money. A lot of times, entrepreneurs make another mistake of assuming they're going to be successful right out of the gate, and that's just not true. So all this will be flushed out in your financial model on what will happen is that the end of the day you'll be able to see month by month what you're cashed. Efficiency is, And from that you can then kind of work backwards and say OK, you know, at our peak we were down 1.5 million. So we, in theory, if we had 1.5 million at the start, we would have been casual positive every month. I shouldn't say casual positive that you have a positive cash balance at the end of every month. Now certainly work in ah, buffer as well. You don't want the bare minimum, so that's one way to go about it. Another way to is to kind of just show up front and we'll see this in the financial model where you predict out and you say Okay, we need $10,000 for computers. We need 2000 for first month's rent. Whatever the case might be, we need 5000 front to hire employees, maybe 10,000 from marketing all these things. It's gonna differ for every company. So we're just going to kind of throw it examples throughout this entire course. They may or may not apply to you, but they should at least jog some thoughts in your head as to how you would apply these to your company. So that said, we would list out everything that we need up front and then as well, kind of in tandem with your financial model. Predict forward and say, Well, you know, we're not turning a profit until months, six or 12. Or maybe it's three years down the road again. Every company is different, so you need to cover those deficiencies until you can become profitable. Another thing. The factor, though, is the more money you take, the more equity you have to give or the bigger of alone you're gonna have. Now, most of the time we're gonna be talking about equity. You're going to give up part ownership in your company in order to get an investor interested. And what if you think about it from their perspective, they're buying part ownership in your company, and they wanted to succeed, and they're looking for down the road away to cash out. And because your company has grown, say, 10 times they're going a 10 times return on their investment. That's very high level. Of course, there's a lot more numbers and what not involved, but nonetheless, so most of time we're gonna be talking about equity occasion. I might refer to debt, and that would just be got took out a loan. And now you're paying interest. Things get a bit trickier. If you will orbit were complex. Sometimes you will get alone so you're taking on debt. But is convertible debt so the lender has the option to converted to equity. At the end of the day, there's basically the two types. They're either taking ownership and equity or their lending you money and its debt. Whether it's convertible or not, it's just changing from one type to the other. All that said, let's go back to determining how much money we need. So now hopefully you have a little bit of an idea of how we're going to go about it again. The specifics they're gonna be when we create our financial model. That's really when we're going to see how much money we need. We're projecting forward, and we're gonna put in a bit of a buffer. So that's that. I think about your own company. If you're already sort of have a number in your head, let's just as an example, issues one million throughout the course. So we assume whatever your company is. ABC, you sell widgets. And if you're not familiar with the term widget, it's kind of a generic business term to refer to whatever your product or service is. It's a again a generic, nonsensical term, so widget could be a camera could be a lamp. Whatever it ISS, it could be your consulting services. You sell widgets and you sell X amount of widgets every month, and that's growing, and maybe you sell different models of the widget, so you sell X amount of widgets. You're projecting your revenues forward, so I want you to start thinking about these types of things in a bit more detail than that kind of entrepreneur who just kind of comes up with a number like, Oh, I need a $1,000,000 but they don't really have a back for They just know that a $1,000,000 would help them out. So that said, Let's wrap this up and let's move on to the next lecture. 4. Debt vs Equity: so we touched on it a little bit in the previous lecture. Now we're gonna go little bit more specifically into debt versus equity. So, as I said, we already kind of mentioned it. But debt would basically be like taking out a loan. You open those people that money back, and there's gonna be a stated interest rate. It's pretty much a simple is that again they can adult tapes, the different terms to the debt. But for our purposes, just think of debt as a normal, like you have alone with your bank, a credit card. Or you have an investor who injected $1 million they're looking for, say, 5% interest every year. One thing to keep in mind with investors is your typically not going to get low interest rates or anything like that. You know, they're taking on a big risk by investing in you. You know, startup failure is very high, so unfortunately, you're also gonna pay a higher interest rate to reflect that debt with investors is probably a little bit different than, say, a credit card or a car payment. You know, they know that you're trying to start a business so they don't want to be taking money right back out of the company. It's oftentimes what they will do is and I say invest. They lend you the money so loan debt and then they don't expect to be start being repaid for, say, two years. That's all negotiable, and that's part of it. But you're definitely looking at at least 1 to 2 years out, and I would say to is kind of more of a common way of looking at it to give you time to use that capital to help it build the business again. They don't want to be taking money out of like, what's the point of them giving you a 1,000,000 then requiring you to pay $50,000 a month back to them? And that's 50,000 you could have spent on inventory and what not? So that's basically that now equity this ownership in the company and it's usually done through the form of stock. But we'll get to that in second, so an investor will give you X amount of money, say the $1,000,000 they will get so much equity back and it's a percentage of your company . How do you determine what percentage will part of its negotiation, and part of it then will be tied into valuation, which we're gonna also get to later in the course. So you put a value on your company. If you've ever watched some of the TV shows like Shark Tank or Dragon Stan, you've seen these kind of talks. The entrepreneur puts a value of, say, 10 million on the company, and the sharks will put a value of, say, two million. There's always a huge gap. You know, us, the entrepreneur always think your company's worth a lot more than someone else is willing to pay, and the truth might be somewhere in the middle. But the reality is, is that the investor is taking on a huge risk, so they don't want to give you a $1,000,000 only get a small equity piece when in fact, they were taking on a huge risk. They want to see the return for the risk, so that will come out in the negotiation and tied to the valuation of the company. So, equity, I say they take part ownership and it's usually done through stocks, so when you set up a company, let's just call yours X y Z Company will use that. So X Y Z company wants a $1,000,000 you sell widgets. That will be our kind of theme throughout the course, if you will, for your company. So when you set up your company and if you're in the United States will send it up in any given state. You'll figure out what's the most favourable state, and we're not here to really figure that out. In this course, there's certainly other courses or articles online. You can read about that. The popular ones are obviously Nevada, Delaware in Wyoming. It's all due to tax reasons, but you will state when you set up your corporation, you'll say we want to have one million shares that we can give out on. Then that's your pool of shares. So every investor, so those one million shares represent the entire company. So if somebody puts an X amount of dollars, you give them so many shares. And obviously the value of the shares is reflective of how much money they put in relative to everybody else. So that said hopefully understand the difference between debt and equity. At its simplest, just remember, debt is like alone to the company equity. They're actually buying and owning part of your company, typically through stock ownership. And obviously there's agreements and everything else in place. But that is debt versus equity in a nutshell. 5. Matching Services: So in this lecture, I just want touch briefly on what I'm calling matching services and almost giving you a warning. I've spent a lot of time in this business as CFO to start up companies, and he always entrepreneurs. You just want money to get your company growing. Or maybe you're already up and running and need more money to keep things going. You have growth plans, etcetera. So there's lots of different companies out there matching services that will basically come in and say, Hey, we really like your company. If you pay us a fee, we can go out and find you probably a 1,000,000 or $2 million. That sounds really good. And so they'll say, Okay, if you give us $10,000 up front, we'll put things and works will design. You know, investor presentations will reach out to our network of investors, and we're gonna get you in meetings in front of all these centric capitalists. And in no time you'll have your $1,000,000 about the star at the bottom of the contract says, You know it's not guaranteed. I've never once seen a matching service work out for a company and I always advise against them. Nonetheless, people still do it. And I had a previous client of mine used them over and over against my better judgment. They just wouldn't listen to me. And they felt like it was worth another shot of spending 5000 or $10,000 to try to get this no next new matching service to reach out to their network. And of course, they always send great. They have lots of contacts. They name off previous clients, they give you references. So you think, OK, well, these guys are legitimate and they can definitely help us out. I'm telling you very still, I want to be very seldom. I have not once ever seen a matching service work, and I'm hard pressed to go find a tale of one that does work. So even if they do work once in a while, that's not a risk you want to take with a little bit of capital that you might have up front. So I encourage you to do the legwork yourself. It's not gonna be fun. I guarantee you that it is difficult to raise investor capital. That's why I put this course together I want to try to give you guys a jump start on kind of the best practices possible to at least help you. That said, even taking this course I'm not saying that you are 100% all going to go out and be able to raise capital. Let's want to give you all the knowledge, all the tools that I have, and hopefully that call comes together and stars align, and you find investors that are also interested in your business. So that said, and just back to matching services, all I can say is the punch line is Please don't use them. I don't care how great they sound. But I really warn you against using any company that says they will locate money for you for a fee and they will never take it out of the back end. They'll never say, Oh, well, work, do all the work up front for free and then when we find you that $1,000,000 then we'll take our feet very seldom. They'll always want to feel fronts a $10,000 some percentage of the money, usually about 10% so they try to sell it as Well, we are taking most of our fee on the back end. You know, we're raising your $1,000,000 100 of that is ours are 10% fee. We just need a small piece up front. That five or 10,000. The reality is they know that you most likely won't get funded. They just want that fee up front, and then they're on to the next company. I can't warn you enough, obviously. So I'm going to cut it off here. But just use my best advice to you. My first bit of advice. In this entire course, don't use any of the matching services that are out there and use knowledge like that. I'm teaching you today to go out and do this yourself. 6. Crowdfunding Introduction: all right. Congratulations were passed the introductory phase. And now we're jumping into some of the nuts and bolts. This one we're going talk about crowdfunding. So this a little introduction to it and they were going to take a look at some of the crowd funding sites. So what is crowdfunding? I'm sure you've heard of it. Been very popular the last decade. I would say it's basically where you put a project online on one of the crowdfunding sites , and basically we're looking for other people to invest in your company or preorder your product or service, whatever it might be. So you offer so slips again. Go back to our example. You set a goal. We're looking to raise $1 million for a company because we're going to use that $1,000,000 to build our widgets. Now, everybody that buys our widget in advance and give this $100 Let's say for our widget you get the special preorder package may be signed by the CEO to pack for 100 and $50 investment, etcetera. So it's not so much an investment in your company. It's more their pre buying something is what they're doing So you have a lot of individual small people giving you pieces of money. That's the crown nature of it. It's crowdfunding. You get no 10,000 people, all giving you $100. There's your $1,000,000 nonetheless, so it could be done in a few ways. Their pre buying, say, an item they can. You can do something like be one of our original contributors and contribute $20. They're not getting anything other than their basically donating or giving you $20. These people aren't either a lender nor they an equity investor. They're literally either just kind of giving you money. Just help you start or pre buying something that you're selling. There's several sites a lot of them could be targeted towards. Different things, like one is that I know of, and we're gonna look at them in the next lecture. That's why I don't want to get too much into them here. But it's geared more towards the kind of arts and crafts, if you will set section of the world so different artistic type projects, music, art, you know, handmade crafts, those types of things. There's others that are geared more towards sort of international flavor and sort of countries that have bad economies and helping those people that need a chance to get started. And all that really need is a little bit of money. It's called micro lending. So lots of different sites with different goals. But the end of the day, these people aren't necessarily buying into your company that just sort of like us at pre ordering or donating money to your company to talk a little bit more about it. You know who would use crowdfunding? Obviously, if you're an established company and you're looking to raise five million, crowdfunding is probably not for you. Who you are is probably the early stage entrepreneurs. You have an idea if you want to build this widget, but it's gonna cost you $5000 or $50,000 to get you know, enough inventory built in the place, sort of the minimum order you need to do maybe instill need to do the design work. Whatever the case might be at the end of the project, you're gonna have, and you're able to say, Hey, if we raise $50,000 in six months, we will actually have our device ready to go. That's the type of entrepreneur and type of company that's well suited for Crowdfunding cause you have undeliverable and sort of a timeline for when this will be built again. You know, if you're looking for the big bucks, the millions, that's when we get to venture capitalists. So that said, we'll end this introduction and then we'll take a look at some crowdfunding sites. 7. Crowdfunding Platforms Screencast: Okay, so let's take a look at a couple of crowdfunding sites. I've pulled up four here, and we're gonna take a brief look at each of them. I mean, obviously you can go to each of them and create the count and search around. Just kind of want to point them out. It's been a little while since I've used any of them, the two that I'm more familiar with our Kickstarter and Indiegogo, but we're going to get to those the last. So first is fungible. I brought up business crowdfunding that everyone, you know, find your business. Raise capital. Exact purpose of this chorus. Obviously, you can look at other people's projects. Let's just take a look at a few people and see kind of what people do is look for something interesting. Um, lean meals. I mean, this obviously looks like a kind of a copycat service of like blue, a brand and ah, free with the other ones are there's a couple that deliver basically fresh meals to your home, and then you cook them. Looks like you can set it to private, so remarkable to see everything about about this company. But in general what I spoke about in terms they have to create like a nice Laos. They have nice pictures, right up about the company meal delivery service. How it works on and on. It's fairly long here. Then let's see. Influencers. Okay. Taking a look here to see. Okay, The management team. Perfect. Um, so you can see here just one thing. I'll point out this just happen to be a example as randomly picked. But yes, it looks like they have a CEO and then an executive chef. And that's about it. Looks like I don't see any other management teams. So, um yeah, they don't really address it here. Nonetheless, I would expect to see more least a picture of the two people that you have. I'm So here's a quick look at sort of a fungible. Just zip up to the top here. Um, obviously, if you go sign up her here, let's just take a look at their about page, actually, really fast. We help companies get crowd funded heads on service under friendly. Well, what? They dio over 400 million in funding. I was their team. Fairly big company. I mean, they've been around for a good while, so that's them so you can check it out. I'm not gonna waste your time looking through it, but I just want to point it out. Let's go the next one. Go fund me most trusted free fundraising platform. So I'll just press that. I don't know if fungible charges a fee. I'm guessing they do. I'm guessing they all pretty much do, whether it's either up front or on the back and they take some percentage. So go fund me. Will be more Go. Finally, as far as I know doesn't like actually market things. So you can't come on here and find a go fund me project like there's not companies listed here. This would be more you started. Go fund me project and then it's you're in charge of distributing basically the link to it and asking people to donate money to, uh, to the cause. Probably the least likely one that you would use for starting company. But nonetheless, that's an option. Say all you need. It was $5000 to, you know, get a business plan written in a financial model or something like that. Maybe this is where you come and ask your family and friends. Hey, could you, you know, donate $100 towards my project? I'm trying to start a company, so that would be a good use of Go fund me Indiegogo I have been on from my former clients. They tend to focus more on the arts industries. If you will, um, Pacific and bring it up at all tech and creative works and community projects up they do. Actually, they've branched out as far as I remember. It used to just be more to the creative works. Um, and maybe the community projects, but looks like they've added in some technology, So they're a little bit wider depth now. I must come here for entrepreneurs started campaign. You could come here again. Let's just find 11 of these people have have a wireless charger that's a little bit better , obviously than the other ones. They're saying so if they have a flashy when I would watch it. But promo video looks like the pictures high quality pictures think about it was the video in action looks like, And unless we see lots of great pictures because my two right up, honestly, it's much more just like here's the product. Doesn't talk much about the management team or anything like that. I'm curious if it is somewhere else on here. Not that I see. Um, but you can see, like, this project raised, uh, just over 30 grand through 539 people and they've reached 303% of their gold. Only had $10,000 going 303 people, um, did it. So I mentioned usually. So this is a typical example where you give money and you're not necessary. Just donated to the company or and your definite not investing the company is pre ordering the thing that they're gonna build. So here you get when they call it perks on here. So get this perks up instead of what they plan on retailing. At 1 57 you can get it for 69. If you kind of pre order. Basically, I could get the quick pack. They have different models. Obviously, I'm just curious. If they do have and then a distributor bundle, sometimes they'll have just like a donation tab. Almost like you're not actually buying anything. It's just Hey, you can be one of our initial, you know, funders type of thing. Let's look at the last one. Kickstarter should be similar into Go, go. I'm going to kind of highlight their stats started. Project. If you want to start something, let's take a quick look down. If there's anything grabs our attention that we have a lot of the future projects on the front page, it doesn't look like I'm surprised. The last new nowhere they sino in here. Yeah. You have anything like fun? My you know, book. I'm writing a book type thing. Teoh. You know, I'm building a a bridge, and whatever the cows might be, they have it all on here. So that said, I'm just want to point out those four. Definitely check them out. They're all reliable and have been around for a long time. So you're not going to run into any problems on that front? Obviously, the biggest problem with, you know, doing this, I should say the biggest problem with one problem is that once you create a project, I mean, people aren't just gonna flock to it and give you money. You're still have to do your own promotion. And that was that will be one of the cons that we talked about for crowdfunding type sites . You really have to get in there and do your own promotion to get people to, uh, no, actually, Come look at your project. So there you go. There is some of the crowd funding websites. 8. Crowdfunding Pros and Cons: all right. So, as you saw as we looked through the screen view of the different websites a lot of different companies that offer the crowdfunding service, if you will, different targets that they're after, so you obviously would have to figure out a crowdfunding is for you. First of all, on what platforms are best suited for your company. So in this video, let's talk a little bit about the pros and the cons of crowdfunding. So first of all, let's just go through some of the pros. Well, one, it's fairly easy to set up. You just go to say one of the websites set up your company's profile. You have to do like an introductory video. You have to invest a bit of time. But compared to other avenues, like searching for venture capitalists, it's not so bad. It's not such heavy workload. So it's fairly easy to get your crowdfunding, you know, page accounts set up. It's not too bad, and if you do a great job at it, it's gonna be more successful. It'll draw more attention, and then once you start getting some people buying into, it'll get a bit of steam and might show up on the front page of the website. Whatever the case might be, fairly easy to set up would be one pro right off the bat as well. You're not looking for a big amount from one person. You're just looking for small amounts from several people. That's a little bit easier to get. Speaking of that, you might have a situation where you have a goal of, say, 50,000. But really, even if you get 25 you have enough to get started. So it's gonna come in peace meals, and you can set those parameters were, Hey, once we get to 25 were happy like we're not shutting the campaign down just cause we didn't reach 50,000 we will have enough to get started and deliver a product to all these people who did choose to buy into our company through the crowd. Funding sites up. You don't need to have an all or nothing type situation. It could just be a gradual. When you get kind of enough or whatever that milestone is, you get the money you can get started on your project. So another pro as well, because it's not a big investment firm or anything like that. There's not a lot of legal like big contracts and what not. I mean, the biggest sort of legal totally have is you're promising to deliver your widgets at X amount of time, so that's kind of your responsibility to do that. And you have to sign agreements I was with with crowdfunding site. But it's not again. It's not as big a production as it is with him, actually actual investor, like a venture capitalist just giving you a lot of money. So it's again. The whole process, in general is just fairly easy, from set up to taking in small investments until when it's time to get the money. You know, it's just transferred literally to like your bank account, and then you're up and running and you can get going and start working on your projects. You can keep people updated on the website on the crowdfunding site and your own side, of course, as well. Another pro is. You're getting kind of customers excitement in your product, you know, words getting out about your product. Already, it's almost a marketing tool. If your crowdfunding pitches is good and gets a lot of traction, maybe featured on the news get featured on some business website. Hey, you're the hot new product coming out next year, that type of thing. So there's a lot of prose that go along with Crowdfunding. So let's talk about a few of the cons. So obviously the biggest con is that if you need a lot of money, it's gonna be tough for you know, that $1,000,000 is going to be tougher to reach, then say $50,000. So it's not geared towards everybody as well. If you are a start up in the sense where your true start up, you haven't done anything and you really need money for all kind of the typical expenses, like payroll, office rent or maybe deposits. Maybe you buy inventory. You know, hiring a CEO, you're not really gonna be able to crowd fund that, not as easily anyway. It depends on the website, but that's gonna be not really well suited for a crowdfunding website cause they're not getting anything tangible. Adamant, they're basically just buying into you and again, those sites aren't really gears towards an equity investor who's giving you a bunch of money to do a lot of different things. Crowdfunding is more like give you a bunch of money to do one specific thing, and it's usually build your product or design your service. That type of thing so not geared towards everybody, good for small amounts, another con to being on one of the crowdfunding sites. Is that your pig? You're putting your product out there for everybody to see. So say you have a cool new widget and it's never been done before. Well, when you set up your program on one of the crowdfunding sites, now it's out there for everybody to see. You obviously have to do, and you have to do a terrific job selling it in order to get people to buy into it. But that also means that a potential competitors could be on there and might stumble across it. Or there's probably actively searching for things, and they might find it and might do a better job at it. Maybe they have something in the works already etcetera. There's also the negative of just sort of public embarrassment if you fail, so you're not secretly sort of building this thing, and if it fails, you can kind of shelf the product or project, and nobody needs to. No, no. If you put it out there and you had, you know, 10,000 people, you know, buy into your product, preorder it and you start building it and it just doesn't work out. It's costing way, Mawr and now you need a lot more money. They're not able to get it. It's just not working out. It's the thing you want. Design is very technical. It's just not come together. How you envision what you gonna do, so you're pretty much failed now, and you've ruined your reputation in terms of doing it a second time. We're starting another company, so there's that sort of public nature to crowdfunding or putting yourself out there. One thing also that I've noticed and heard from other entrepreneurs is that running like Crowdfunding program can almost become a full time job. You know, you're answering people's questions. You're constantly monitoring a program and trying up provide people updates as you go along . You really need to sell the program and your project online and end up spending all this time doing it and not enough time. Actually, working on your business, so it becomes a bit of a time burden as well. So few cons there. I don't know that they're super drastic. That could be. It depends on your company. In the nature, your products, that's up to you. The way of crowdfunding is the way for you to go. Or maybe we're gonna look at one another way to possibly approach investors that would be more suited for your company. 9. Venture Capital Introduction: So next we're gonna talk about venture capital. So I think we've all probably heard of it at this point in life, and we're gonna talk a little bit about what it is again. Look at the process of it and the pros and cons. So first of all, just thinking venture capital. So there are big venture capital firms out there. Basically, their motivation, if you will, is to take funds that they have and we'll talk about where those funds come from. In a second, take the funds that they have invest in sort of essentially speculative projects, entrepreneurial projects. And when those our big hits, they then cash out down the road, typically about 3 to 5 years is what they're looking forward to get their money back out of the project. So venture capitalists don't expect everybody to be a success even though they're investing in your company. Whoever's company, they obviously want everybody to be a success. They know in reality that only about one out of 10 will be a big hit. There might be a few that sort of break even do OK and the rest will be failure. So it's usually one big hit to the three okays. You know, seven failures is kind of what they're expecting. And that kind of puts perspective on what the true your success rate. Oven entrepreneurial start up company. IHS. So I mentioned they invest money. So where does that money come from? They have investors who basically give them to manage their money. So it's kind of like a mutual fund. Not quite. I mean, there's different regulations, all that, but basically big investors air giving the venture capitalist money who then pull it all together and then invest in, say, the 10 start ups there. Obviously, more than that. But we're for example, let's just say they invest in 10 and there is that one home run that does really well. So those big investors might be things like pension funds. No big time investors, companies that have access funds. It's not like some an individual who has, you know, $100,000 laying around. The venture capitalists aren't interested in that they're looking for big pools of money to bring in on, then invest. So we're not gonna get too much into the venture capital process in this video, just cause the next lecture is all about the venture capital process. I want inform you how they go about finding deals, screening them, learning more about companies and then willing it down to the companies that they actually invest in. And then once they invest, what's involved in that process. So we're talking all about that in the next lecture. For now, just keep in mind that venture capital is more geared towards at least a $1,000,000 arm or investment. You know they're not interested investing 200,000. So that's a good, quick way to determine if you're even potentially interested in pursuing the venture capital route most entrepreneurs find seemed toe want at least a $1,000,000 or more of this magical how that happens. So you have to be honest, and we'll figure that out in your financial model. But if you truly do need a 1,000,000 or more than venture capital may well be the way to go , I'm going to tell you it's very difficult. Very few people succeed, but I've been with companies who did land venture capital. Usually, when you get venture capitalist, not one firm, they'll be like a group of them that go in together to invest in your company. So I've worked with them. I presented in their fancy boardrooms, you know, the quarterly earnings and whatnot. So I have some experience with it. So I'm really excited to share it with you that we'll get to that in the ad venture capital process. 10. Venture Capital Process: Okay, so let's talk about this venture capital process. That's probably one more, uh, exciting videos, if you will, Or videos. I think most people would be interested in cause everybody has dreams of landing that big investment from an investor in the wondering, How does that work? I mean, you might have some ideas, but let's go through it. So, first of all, venture capitalists, as I mentioned in the previous video, they have big pools of fun, and they're looking to invest in companies. At least invest a $1,000,000. They'll be looking toe, exit your company or pull their investment out within, Usually about five years. At another sort of standard benchmark to keep in mind is they usually want about 10 times their money. So in our example, we're going to say they're investing a 1,000,000. So they're hoping for a $10 million return five years from now. Sounds like a lot it is, but they're taking a big risk. And like I mentioned as well before, they very seldom have home runs. They're not gonna invest in 10 companies and get 10 cos I'll pay them 10 million back. We'll get 1 10 million they might get a few that pay a little bit. You know, they make it a little bit of money on, and then there's a bunch where they lose their money. So that's their risk. And that's why they set up such high standards, if you will, for what they're expecting in return. So one thing to keep in mind when you're start feeling out and maybe wanting approach venture capitalists, they get approached by a lot of companies. So for every safe 1000 companies that approach them go through their formal process and we'll talk about that in a second. You know, maybe 10. Make it to a point where they're actually talking to them and there's some interest there, and there's potential for investment. So small success rate. I want to warn you of that right away. There's a good chance I'm just being honest with you guys that you know you do. You jump all the hoops, you know. You send in the right forms. You fill in the applications you send in your business plan, and you just don't hear back where you get an email a month later says thank you. We've considered it, though we're not interested in your company. Best of luck. So you're gonna have to deal with a lot of rejection when it comes to venture capitalists, and I hope you're OK with that. But you have to keep trying and reach out to as many as you can. I will say this is where if you have any connections there, definitely the way to go. Having an in, if you will definitely will help out your success a lot more than just being the next person who sends in a business plan. The way it typically works is a venture caps level process, so you'll pick a site you'll burst or a venture capital firm to go to their website and see what their process is. Usually it's to fill in a form. Submit that with information about your company, probably upload either an executive summary or maybe a business plan with your company. Then you just have to wait and see if you hear back. So at that point, there just kind of screening through. So they're looking for things like Is your industry an industry that they're interested in because they all have very specific industries? Do you want enough money that they're interested again, You know, at least a $1,000,000. Are you projecting enough revenues and returns that they would be interested? So not everybody knows that. You know, they're looking for 10 times return on their money. So, you know, if you state that you're only gonna be able to double their money in 10 years, then they're obviously not interested. So I'm trying to give you a few tips here. How? Toe project Everything properly they might. Although the pen on the firm start looking at things like your management team, Who do you have? What's their qualifications? Things like that. So they're basically pre screening you looking for the 10,000 foot level, things that will indicate to them if yours is a company that they would be interested in from there, it's gonna funnel down. And believe me, that person screening those is probably a very low level. Might even be an intern for all you know, at a venture capital firm. So if you make it past that kind of stage, the next thing would be someone sort of higher up the totem pole, as they say would take a closer look at your business. You know, they're gonna look a little bit more at your financials and your projections. And who is the management team? And what, like, what is it that you do? What are these widgets that you sell? Letter. So great. A lot of times, his venture capitalists, these are smart guys, don't get me wrong. And they see I mean, they read so many business plans and they see things so you might go in and say, Hey, we're the first company that wants to sell this widget and they might turn on say, Well, last week we read about three other companies that are also wanting to sell the exact same thing so they might have way more insight into the market than you do about your own products. So be wary of that. It's good feedback. Don't get me wrong. But it's not a case where you can wow them with something because a lot of times they have already seen it or heard it, or they know why. It's not gonna be successful. So let's say you make it past the stage where someone a little higher up reviews or plan, they're actually a little bit, entrant. They're curious. Now they want to learn a little bit more about your company. What? They might do it again. It's gonna be different for every venture capital firm. So we're giving a kind of a generic process to see me. An idea of how the flow would work Might very case, of course, Company company. So next they have some interest so they might do one of two things. They might email you back and say, Hey, you know, we have some interest. Could you please send us these various documents on those documents Would probably be like your detailed financial plan, your business plan if they haven't already requested it. The management bios your investor pitch deck. So we got start asking for stuff and this is all stuff you wanna have, ready to go and ready for them. And later in the course, we're gonna be talking about each of those things that you want to have ready up front. So sure, they might ask for some oddball report, but you want to have at least have the major kind of things ready that they would potentially asked for and that you would need along the way. So we'll talk about those. But it's made visit planned financials, a pitch deck and an executive summary. So they might ask you for that where they might want to schedule a call. Just talk to you and learn a little bit more about your company. Kind of ask a few questions, you know, whatever they might be. Where'd you come up with the idea? What's your background? Why do you think you're a good fit for this company? Why did you project the way you did? You know, they're gonna ask hard questions. They're not just gonna be a fluffy interview. I mean, they might be friendly about it, but don't give Iran. They're they're starting to dig in. They want to pick it apart a little bit the entire process. You probably will feel very picked over just so you know, if you make it that far, it's only going to get slightly worse. But again, they're just trying to really find the best fit for them. So let's say you make a pass that round, if you will. Whatever that round is, whether it's a phone call or e mailing some information, they have more interest. Your next step is you probably have to present to them in person, so they're gonna want to see. I'd say a 10 to 20 minute presentation on this is where you really need your pitch deck and you got to come in and well put together. Pits deck later on in the course, that's very standard. If they're looking for specific things like, Who's the management? What's your product? What's the problem out there in the market and what are you doing to solve it? Those types of questions and more. So we'll get to that. But eventually go essentially. You'd be going and doing a presentation to investors and sort of going through all those things. And then they'll be Q and a time, and they're gonna ask you a lot of questions. Let's say you make a pass Q and A and now they're still interested. I mean, that's terrific. Then it gets to more formalities that probably do another round. The questions that might want to meet some of your other management team or other founders . They might want to visit your site. If you already have a location or say you already have a product you're building. They might want to come check things out and see it. So that all is very It depends on where you're at. And I'm seeing what you're doing, etcetera. Whatever it is, they're gonna be showing more interest. I really want to dig in and again there. They probably want to see, like, hands on what it is that you're doing. So be prepared for that. Eventually. See, you get to the point that whatever forms that takes, maybe they're several rounds of that. It depends, but they get to a point where there say yes, We're interested in investing in your company. So what they're gonna do is they're gonna offer you a term sheet and again later. In the course, we're gonna talk about term sheets, so terms she will spell out the terms of what they're willing to invest, how much equity they want. Lots of different caveats as well. We're gonna get to, although so there's lots and there's some that you should really watch out for as well, so they'll offer your term sheet. Then you go to a negotiation phase cause you might. It's easy. Isn't an entrepreneur to just want to take the money like guess they're offering us a $1,000,000. Let's just sign on the dotted line. That's not the best approach. You really want a lawyer to go through it evaluated and go counter offer there, Obviously interested in, they're willing to play ball, as you say, So you could negotiate a bit. So if you come up to a deal, then they'll be final sort of signing documents, if you will, and a closing day. It's almost like buying a house in that regard, like there's a specific date set when the money would show up on. Then that's it. They own part of your company, and then from there, there's a whole other third deal. Then you kind of go into running the business, obviously, and you have the money. But now you probably have some of the venture capitalists on your board of directors. You're gonna have to be reporting to them. They might be asking for ad hoc reports, etcetera, so expect them to be involved. Just because they have now invested doesn't mean they go away. They're going to kind of keep a close eye on their money. One other thing they might do. It might give you the money and tranches so they might. You might need a $1,000,000 they'll say, Well, will commit to a 1,000,000 but wrong and give you 200,000 up front And then once you kind of spend that, let's take a look at how you spent in it. Are you where you thought you would be? Because that will then dictate if they really want to give you the rest of the money or keep it flowing, and they can kind of hold the purse strings a little bit closer. So that's very comments. Expect that as well. Certainly they're not gonna prove every purchase you know, off $10 but they will be started giving you money and limited amounts and seeing how you spend it. So in general, that's the venture capital process. It can take a lot of time. It could take up to a year. Probably not that long, though, but at least say 3 to 6 months. It's just not gonna happen overnight, a swell like I said before, I want to warn you, it's There's such a small success rate of landing a venture capitalist. It's not reflective of your business. It's reflective of the fact that there's just a huge, you know, supply of entrepreneurs with ideas on a very limited amount of venture capitalists with funds that there wouldn't give out. So they can really cherry pick what it is that they want investing. So don't give discourage when you're working with. You know, I'm trying to find venture capitalists, and when you do find one that's interested, do your best to impress them, give them everything they need, have it ready and hopefully form a formal relationship with them and become a venture capital invested company. So that's it. For sort of the venture capital process. Feel free to send me any questions. Next, we'll talk about the pros and cons of venture capital because certainly there's pros and cons. 11. Venture Capital Pros and Cons: Okay, So now that you're a little bit wiser about the venture capital process, hopefully you're not scared by it. It's a big process. Don't get me wrong. It could be intimidating, but just kind of follow the You follow the process. You take it from Step one, where you go to their website and find out what it is they want you to do to, you know, submit your company for consideration. So let's get to those pros and cons. Let's start with the pros. So one of the prose is obviously you're going to get a large lump sum of money. So I mentioned it might be in tranches, but still they might commit to a $1,000,000 or $5 million whatever it is that you agree on . So that's a big munch bunch of money. So compared to, say, crowd finding, we're getting little bits tricking in. This is just one big mountain to kick start the company. So you go from struggling and start up company, too. You have a $1,000,000 in the bank. Let's just assume you get it all up front, and now you can start doing all those things in your financial plan you wanted to do. You can start hiring, you know, a CTO in a CEO in a CFO, and you get started marketing plan and start building a product or expand to a different country. All these awesome things you want to do. You can now do them. You have funds available, so definitely a pro there. When you land the venture capital, it's gonna be It's just you're off to the races and you're up and running another pro to the money is unlike alone or, say, a debt lender, that money is yours. I mean, in this regard that the venture capitalists is buying a piece of your company. It's not like they can take it back. They can't come back later and sue you and say, Oh, you didn't perform. So we want our money back and set a debt collector after you know they're taking a risk on your company. That's why they have their terms. Like, you know, they want a big chunk of equity. They want exit in five years, all those things so those air kind of their protection aspects. But essentially, that money is then yours to spend. And I'm sure they might kind of dictate a little bit how you can spend it. You can't just go by employees cars for every single employee if that was not part of the plan, but nonetheless, they're taking that risk. So even if your company fails and again, think back, I said, like, seven tends just gonna fail. They're almost unless expecting your company to fail. But on the odd side, your company might be one of the ones that just doesn't take off. And they spend all that money and the sales just don't come in and the company has to fold . That's okay in the regard that you don't have to pay that money back that $1,000,000. It's just gone, and you all move on until your next things. So another pro bringing in a venture capital firm is they have an expanse of networks I mentioned like they talked to so many different companies. They're dealing with so many different investors. They have a lot of connections out there in the markets so they might know people who can help your company, whether it's advisers, consultants or maybe just other companies they think you could partner with or maybe merge with down the road, so they have lots of connections and they can piece together deals a lot easier than you could. And, you know, their wheels are always spinning. They're always trying to think of a way to make things work better or efficiently. You know, obviously make more money for you and for them. But it's not bad to have someone like that on your side. And obviously, once they're invest in your company, they're on your side. So it goes from kind of that adversarial, you know, while you're trying to woo them to now they're just with you and they want to make everything a success. And Bigas it can be so That's a big pro having a veteran capitalised on your side. So now let's talk about some of the cons of venture capital. So obviously the one that we've touched on a few times. It's just they own part of your company then, so they get a say in what you do part of it, just through owning so much of your company. Whatever that percentages, chances are low to. They have a few of your board of directors seats, so they're gonna have a say in how the company is managed. What stock options you can put out, you know, product development. You know, all this stuff they're gonna have a say in your company now. So you basically kind of have an extra management team on board with you in that regard? Sure, they might not be their day to day at all, and they definitely wouldn't be their day to day. But you're gonna have to listen to them. I mean, remember, they're the ones that give you the money, so they kind of have a say in your company. So the other big condo venture capital again, we've touched on this already, but it's the fact that it is so difficult to get. So you're going to spend a lot of time and a lot of effort and a lot of frustration trying to find a venture capitalist, and you might find some and go through the process, and in the end, they still don't invest in your company. So that might have been time. Could have been better spent working on your product or marketing. We're looking at different avenues of investors, so keep that in mind. It's a lot of work, and the success rate is fairly low. So you need to decide what's that balance between how much time and energy you're willing to spend towards find a venture capitalist versus just looking at other avenues. And again, it comes back to how much money you need. Maybe venture capital is the only way you should be going. Maybe have other options, and we're gonna talk about angel investors coming up as well. So maybe that's an option where you could get sort of early stage funding that gets you going with a smaller investor and then maybe down the road, look at venture capital. But unless for pros and cons of our venture capitalists, there you go definitely some big pros and cons, so it's up to you to decide what's right for your company. 12. Introduction to Angel Investors: All right, guys. Now let's move on to a different type of investor, and that's an angel investor. So if you've heard of them before, terrific. If not, don't worry, we're gonna learn everything we need to know in this course right here, too now. So, first of all, who are angel investors? So they're typically high wealth individuals. Sometimes they form little syndicates. But let's just assume it's a high wealth individual who invests in companies. That's almost like their mini version of a venture capitalist and a lot of ways they are. So a lot of times they're not looking to invest the millions they're looking to invest, you know, the the 210,000 maybe up to a $1,000,000 in projects. Usually they are well, that should say there's two types. There's individuals who just have money and are looking for good deals. So if somebody brought them a good deal, they may well be interested on the flip side. There's also people actively seek out deals. So angel investors that are out there looking for projects so they run it more like a venture capital firm in that they're soliciting entrepreneurs to come to them with their proposals. They vet it. They want to see the presentation. They decide who they're going to invest in again. Sometimes those guys will actually form little syndicates and invest together and multiple projects just to kind of diversify their risks and at a little more formality to their process. So that's essentially what an angel investor is. It's just a person who is willing to invest in companies and again, they're gonna take on some of the risk. And they're either gonna be investing as debt or equity and can going to go both ways with venture capitalists that typically, well, look at equity. Or maybe convertible that angel investor. You probably have leeway on which way it just maybe their preference and what they're interested in. So that's a little bit about angel investors. Next, we're going to talk more about their process, and then we'll also talk about the pros and cons of angel investors. 13. Angel Investor Process: So let's talk about that angel investor process. So it's gonna be similar to the venture capital process. Probably a little bit less difficult, a little bit less structured, but basically the highlights air the same. They're gonna have to approach this individual. But this time you have more of an end. Like you probably know we're gonna see me know this person already or you know somebody who knows them. So you haven't in with them. They probably will want to see things like your business plan your investor pitch deck your financial model. They'll look through it on their own time, evaluate and decide if it's something they're interested in investing in. And obviously you're gonna have to show them. Here's how much money we need. You know, here's the expected returns, and when you can expect your exit, they're gonna be interesting things like, what is their exit strategy? So no angel investor again, it's a smaller amount of money that they're investing, so it's probably less geared towards the company that is going for an I. P O. That said they might be sort of a first round. So maybe they're the 1st 100,000 for you to get up and running, and then you do plan on talking to venture capitalist later. Just keep in mind that angel investors might be wary of a plan where your exit strategy is venture capitalists cause they know how difficult it can be to raise venture capital. So once they go through your investment materials like a pitch dark and business plan, etcetera, when they have interests that obviously want to meet more with you and probably have specific questions about who knows what, it's going to depend on what, what their interest is or what's more detailed or less detailed in your investing pitch. May they want to know more about your marketing plan or how you're going to grow sales or, you know, how much money do you actually need. And can you do it for less etcetera. So they're gonna want to have a little Q and a session with you, maybe at their office, whatever it might be. Eventually you'll get to a point where they're either not interested. But let's say they are. They're actually interested. Now you have to come up with some terms. They might offer you a term sheet, but It's probably not gonna be to the extent of a venture capital style one they might want to have. They may want to have some input. A lot of times, Angel investors are just very passive. They just want to invest in companies that will do well and pay them back in the long run. So we'll get to the pros and cons. But obviously that's leaning towards a pro for an angel investor. They're not gonna be in your business every day, so they come to terms with you and they decide to invest. Whether it's again, debt or equity, you're more likely to get one or the other with them. Where is your not with venture capitalists and take office will lean towards equity. So that's up to you to decide along with them and figure out what's the best situation there. So, however, the vehicle is that they invest in your company, you know, you'll set a closing date. All that, and then you get your money. And let's just say it's $100,000 from there again. They're probably not gonna have as much input into your day to day operations. They're not gonna like sort of give you $20,000 each month or anything like that. They're just gonna be looking to invest in you. You keep them updated, send the monthly financial reports and that's pretty much the Angel investor process. It's fairly obviously simplified. It still takes a lot of time. This isn't something that happens in a week or two. We're talking 3 to 6 months. Probably That's very typical again. They're looking to invest up to a 1,000,000. But I think 100 like 110,000 is much more a target range for an angel investor. They're not gonna be as involved. They are gonna be looking for what their exit strategy is, and they're gonna be want to update it and sort of kept a foot of what's happening with the business. So we'll get to the pros and cons of angel investors in the next lecture. But for now, that's basically the process with angel investors. 14. Angel Investor Pros and Cons: Okay, so let's talk about some of those pros and cons for using an angel investor, and we'll start with the pros again. So the Pro is. Obviously, the process is a little bit easier than some of the other methods. Not as easy as, say, crowdfunding, but definitely easier than the venture capital process. Another pros. He might have more flexibility when it comes to whether you're offering debt or equity. Maybe you'd prefer to Dessau for debt like take out a lot you're basically taking alone with your angel investor and paying them back a fixed amount at a fixed rate on a fixed schedule. So that definitely could be a pro to using an angel investor, one more proto in angel investors. They also typically air fairly well connected network people. Now they're obviously have done well. They're successful. That's why I have money that they're willing to take a risk on and investing in entrepreneurs like you, so they probably have other business connections and probably locally as well. So if your company is something that locally could use more help, maybe you need to find a great marketing person. They might know somebody. They have good banking relationships, all those types of things. So there's lots of other ways you might be able to take advantage of the fact that you have an angel investor with your company. So now let's talk about some of the cons of angel investors. So if the person is, say, a family member or a friend and your company doesn't do well, that might create a bit of a rift between you. Obviously, you know you don't want to fail, and you obviously don't think you're gonna fail. That's why you're starting this company and you're willing to take on money. But those to say it did circumstances didn't work out. You know they might. Even though you might have an agreement with them, you know of an equity agreement, they might not look to finally, on the fact that your company failed. They might start questioning decisions you made. There's just that personal connection that makes it terrific if you do successfully. But if you don't, it's gonna because a bit of a problem, most likely between you and the Angel investor as well, because they tend to be just, say, an individual. And again, we're using an individual angel. Here is our example, you know. Typically, they want to invest passively, but they might also if they have time on their hands, they might want to be involved. And they might want to come, You know, be part of the company and help out, and they think they're helping out. But it's not quite the help that you want or you envisioned, like you really just wanted the investment. And now they're trying to help you out with marketing because they used to do marketing. You know, 20 years ago, whatever the case might be. And they're not quite up to speed on the latest marketing techniques. But still they want to offer input. That's difficult for you to tell them No, when you know they invest in your company. So again, it's just that sort of, you know, the local kind of nature of it might be great for you if it helps you, but it can also be a hindrance if the person's to actively involved and just one more con to think about. Obviously, it's a smaller amounts to say you are looking for a $1,000,000. You're just having no luck with the venture capital firms. But you have this angel who is willing to invest $100,000 and you're willing to take it. But you know, deep down that it's not gonna get you all the way. It's gonna get you part way, and you still need more money. But that angel investors thinks that, you know, that's all you're gonna need. Or maybe they can invest a bit more so it might just create a problem different dynamic where, you know, you are really looking for a bigger amount. You're willing to take the smaller amount, but you're still gonna need a bigger amount down the road. And whether that means the bigger say, the bigger amount came and they buy out the angel that might cause a problem or the angel. When it comes time to say you did find a bigger investor, will. The Angel investor is one of the original investors, so they might be holding out for a bigger piece, and they feel bullied by the venture capitalist. Lots of different dynamics can happen is basically what I'm getting up, and those are things that you might not be able to foresee. So if you do for see them. You definitely want to avoid any issues, but if you can't foresee them, it might be things that you just have to deal with along the way again. Another sort of analogy, if you will, is too many cooks in the kitchen. So if you know you have yourself the founder of the CEO of somebody else, you have an angel investor, and now you have a venture capital group. It's too many people trying to pull the company every which way. So you want to be careful. You know who your partner with you, definitely as faras. Just like they have money to give you. You want to make sure they are a good fit as an investor for your company, so that's it for pros and cons of the angel investors. 15. Intro to Business Plans: All right. So now that we've kind of covered a few different lectures and sections, all about different types of investors, let's get into some of the documents you need as a startup company in order to raise capital from those investors. So as we mentioned, pretty much any investor south from aside from the crowdfunding but an angel investor, An angel investor syndicate, a venture capital group, etcetera. They're gonna want to see a lot of different documents from you. And there's a pretty standard three or four that you you should just have ready to go from the start before you even start the process of talking to investors. Have these ready so and the 1st 1 is gonna be your business plan. So what is the business plan? Hopefully you're familiar. It's basically a detailed document that covers all aspects of your company. No. Who are you? What do you do? What is this widget you sell? How big is the market? How do you plan to market the actual product? Like, what's your marketing plan? Who's the management team now? What's the financial status? You know, in terms of financials and projections, all these things go in your business plan. It could be anywhere from 10 pages, 200 pages, ideally, somewhere in between. I think an ideal business plan for me would be about 30 pages, give or take. It's going to depend on how much you have to say. A 10 page business plan, though, definitely isn't going into enough detail. Where is 100 page business plan? Probably. It's too much detail. Nobody wants to read 100 page business plan. So what we're gonna do in the next two videos Let's take a look through a business plan or two. We'll kind of go halfway in the first video than halfway of the other half in the second video. I've written a lot of business plans in my days, working with start up companies presented them to investors. So I have a good idea of what people are looking for. And that's what I'm gonna be guiding you towards. I'm gonna pointing out sort of pros and cons of the samples that we go through, so they're not necessarily the best examples. They're good examples, but they're not the best cause I want the opportunity to say, Well, these are things you don't want to dio, And then, if you are more interested in business plans, actually have a course, not for a cheap plug. But I do have a course on how to write a business plan that's investor quality or gettinto way more detail about all these areas that we're gonna be talking about so nonetheless. Let's take a look at a couple of business plans and go through them and give you an idea of what you need to be writing for those investors out there. 16. Review of a Business Plan: Hello, everyone out there. All you sports bettors. I'm the Oracle and I want to put together a little video about Can you make a living betting on sports? It's, Ah, popular topic. When I went to search for sports betting just to see what was coming up that was one of the top rated search terms related to sports betting. So I kind of want to answer your questions or at least give you my opinion on how it works . Everybody's situation is different, so let's go over some things. I'm a spreadsheet type of guy. I like hard numbers. So what we're gonna do is just runs for a few examples. So you get a sense of what sort of metrics you need to make and performance measures in order to be successful as a sports better. Um, this is purely from a numbers standpoint, and then I'll touch on a few, like just other key things that you need to have in your personality to be successful at it . So I'm just starting with numbers, so I put together a little probability calculator. I do it by the month because there's a lot of very instead a day like one day Just the other day I won six at eight bets. And then the next day I won two out of six. So it's up and down day to day. But as a whole, um, you're very and shouldn't be too crazy month A month, So s so we're just gonna look at Let's go down here and then I'm going to look at a few other examples And what monkey with some numbers. So just, you know, thinking of myself or somebody so saying during a month you make one bet per day. You just say you bet my free pick. So you bet the free pick every day. Oops. Don't That means there's 30 bets per month on average. I mean, someone's 31 some months. 28 if it's February. So, um, I just go with. And a lot of this is formula driven. Justin, if you're in Excel Person, you'll see it's just that times 30 um, so I'm using a standard bet size of 1100. Certainly this might be $100. We're gonna look at some different numbers, like I said, but let's just say you have enough of a bankroll where you could bet $1100 on each of your bets. Um, so when you win, you're going to get 2100 back. That's 1000 price again, A few assumptions. And here one is that it's that 1.1 odds. Of course, some will be 1.5 would be 1.2 on average. Most for bats are going to be 1.1. Um, win rates. So I currently hit right around 60%. So we're going with 60%. And we're gonna kind of look at the worst case scenario in a minute, like I said, But let's just say 60%. That means that total during a month, you've bet 3300. That's your 1100 times 30. When you win, you're getting back 37 800 sets Your 2100. Um, it's not here times the 20. So you're 2100 that you get each time times your 60% win rate times the number of bets that you are making during a month. Hopefully, it all makes sense. Um, cost of info. So this is blank. This would be if you paid for basically any expenses that you have. So I put costs of inflows. That would be like if you say, but my picks on Capra Tech, um, that would come out of your profits. So I don't have nothing in here, but say you did. And you paid 250 bucks? Yes. So you just put it as a positive number and then number win Days 18. And that again, it's just the 30 days times the 60% cetra so profit on bets. So profit on bets is basically saying, Hey, we better total of 33,000 over the month. We won, We got back, I should say, 37 800 cell with our total profit on the bets on. Then after info basically subtracts out that to 50 I'm just gonna take that out for now. Um, and then r a y, which is return on investment, is basically saying we invested a total of 33,000 of our own money on bedding and we got we made on top of that 4800. That's 15% very respectful. So that quick example could you bet on sports for a living well, part of that depends on you. If you can live off $4800 a month, then yes, you could, um, we'll go into a few other things. But in theory, yes, you could. So thinking the same example. Come, let's just say not everybody combat $1100 every game. I'm fully aware that say, you could only bat 100 or 110 while everything basically gets downsized. And now, at the end of the month, you're only making about close to 500 bucks. All the other things. The same. Uh, could you live off that? Probably not. So instead, let's say, Well, I could afford about 110 a game, but I'm gonna bet, like, three games a day. Well, now you're up to 1500. I mean, basically, it's just a direct multiple. So now you're making about 1500 bucks a month, so it's up to you. You have to decide how much can you afford to invest in persistence? This, um, invest in nature bets. So the big factors here that are gonna determine if it's profitable for you and you could make a living off our won your bet Size and two. Very important is your win rate, and you have to be very honest with yourself. With this, it is easy to think, Oh, I can pick 80% winners. You hear people say it all the time. Nobody does, not consistently. Maybe you have a great week. I mean, I've done it on different days. There's been days when I'm 100% winner, but not every day. Ah, the average, say 60%. If you can hit 60% I would say, And you can then find your account and you have enough that you can use, like a decent bet size. You could easily make a living off sports betting. Um, so let's take a look over here. It's something. So let's go down to one again. And was so everything else the same. Except we dropped our rate to 53%. Like we, you know, make 100 bets. We win. 53 of them were just scraping by. Um, all the math works out. You make 400 bucks and profit. Now you have to think about something. If you're making $1100 bet every single day and at the end of the month. All you've made us $400 in profit. Are you gonna be very happy? Probably not. It's a 1%. It's probably be a bit lower, surrounded up, return on investment and it's tough. So this is where another factor comes into play. You need to be, and it's not mathematical. You need to be very specific and diligent with your money management. It is very easy to say, Lose one bed or two bats and then think, you know what? I'm just gonna bet big on the next one and try to recoup all that are gonna try to double my money. That doesn't work in the long run. You do get lucky sometimes and you might double your money. But when you get unlucky and lose it all, you're not gonna be happy. So she watched another video on money management. I'll put a link at the end of this video to it. It'll pop up, appear somewhere and watch that one. It's all about money management. That is probably the biggest factor that will determine if you're successful at sports betting and is definitely sort of the third factor when it comes to can you do it for a living? Sure, if you're good with money management and have a bankroll the work with, um and then you can hit a decent win rate. And I guess the bankroll. So you don't strap your bankroll, you manage it. Well, you have enough to bet this amount, and you can hit a decent rate. So all those things said, Can you certainly you need to be able to ride out the waves, the ups and downs. I wouldn't encourage anyone to quit their full time job to get into sports betting unless it's something they've built up. And you have a nice cushion. Put aside all those things that people tell you people want. Ignore. Um, I heard a lot. You hear a lot more hard luck stories than good stories. You have to be very diligent in your, uh, methodology and just being sure you bet the same amount every day. And if you go on a three day losing streak, be okay. Just make sure you're sticking dear. Whatever it is that you do that gets you 60% and off to the races, you are. So, um, just for fun Now, in a positive, More fun not aren't. I would say you managed to crank your bankroll up to whatever 40,000. So now you're like a 5% bets. So we use the standard bet size of 5% of your bankroll. So you have 40,000 so bet for you is 2000 and I would just say 2200 um, and say you you know you're good enough, Handicapper. You find three games a day and you're betting 2200. The math is so big that we have to expand. And there you go. You could be making 2800. Say you are only good for 57%. Still a nice return. Say you only have that 53. Yeah, not as exciting. Now I mean to I mean, don't get Iran's nothing wrong with making $2300 a month, but you're basically scraping by and it just so you guys know just to demonstrate this 53% is pretty much the minimum. There's a fraction there somewhere, but that you could hit and be profitable. If you only win 52% of the time, your negative and it has to do with the fact that there's a 10% commission on the losing bets. So you're gonna be losing. You have tow win just over 50% just to break even. So certainly you want to be at least and again. Remember, this is betting $2200 a game, three games a day on average. So, um, you could pull in 10 grand a month. So that said, I don't want to keep traveling on um, you can do do the math yourself. Hopefully, that's helpful. If you're kicked around the idea of being, you know, sports better handicapper for a living certainly definitely have your game down. First, make sure you can hit those high ratios. The 55 to 60% I wouldn't I really try it any less than their unless you can kind of consistently hit 60 uh, using sites to track your bets so that you're honest with yourself. Things like I protect totally free Sign up for an account, um, completely free. Put in all the bets that your action making so that where you're forced to like, see your graph every day and see if you're up or down and over time and you can run all kinds of cool metric. So do that. Track your results over time over a year, see how good you are and then go from there and hopefully this was useful. So if you like the video like button hit the subscribe, I always try to put out daily picks as well as just little videos like this, and that's it. And I'll put up that video to money management here, over one of my shoulders as well. Thanks to guys, this the oracle, everybody have a great day. 17. Conclusion to Business Plans: Okay, now that you've gone through a business plan, you've seen it in action. Hopefully, you're already familiar with the idea of Vincent's plans. You have an idea, though now what it is you need. I mean, certainly it's a big project just to write your business plan. You really have to think through all aspects of the business, but that's really one of the benefits of a business plan. If you think about it, zzz entrepreneurs to get excited about the product or service. Or maybe it's the marketing aspect or the website, or whatever it is that you're you're kind of mean areas. People tend to focus on that and get excited about, and they won't ignore the other stuff. Like, you know, if your ah product development person, you really don't want to think about the marketing aspect or the financial aspect, you just one thing about the cool product. Similarly, if you're the accounting finance guy, you think about all the revenues and projections and how many units on ways to cut costs. You're not as interested in whether the widget has the cool new feature or not. So business plan forces you as the entrepreneur the CEO, the founder toe. Think through all aspects of the business and get it down on paper. And also for then you have a document that you can present to someone someone says, Hey, tell me about your business. Here you go. Here's our business plan. Read all about it. That might be too much information for a random person asking, But you get the idea. It's something that you can easily hand off that spells out everything about your business without you kind of rattling it off and getting maybe too excited about one aspect. So it's kind of an objective document, if you will. A swell. So that's it for business plans? Certainly, if you don't have one, definitely get to writing your business plan. I mean, feel free to finish out this course to get an idea of everything you need, but you will definitely need to get started on your business plan as well as some of these other documents we're gonna be talking about in the upcoming sections and lectures 18. Introduction to Financial Models: all right. Next, we're gonna be talking about financial models, and honestly, it's probably my most favorite sort of document that a start up company creates. Just because I'm in the counting of finance Guy and I built so many financial models for companies over the years. It's ridiculous. It's really exciting to just go from a blank workbook to building out a full mile that details out your profit and loss. You know all your revenues expenses in your statement of cash flows your balance sheet. You know, figure out things like your best case. Your worst case. There's so much you can do in your financial model. And again, it's something that an investor is going to be looking for it. They want to see what what are you thinking in terms of growth, where your revenues gonna be at year over year? What's your ending cash balance gonna be now? What is it? How much money do you need? So that's one of the things that's going to be developed in the financial model where you spell out Well, here's how much money we need to do all these things and cover us until we're profitable. X amount of months down the road so financial models can get very detailed, specific or very loose. Not unless I lose, but just sort of high level. We want something in between with enough detail that, you know, it's shows that we put a lot of thought into it, and we did put a lot of thought into it. You know, we're not building this thing just because we have to. We're building a financial model because we want it for ourselves and as well, it happens to be a tool that investors are gonna want to see as well. It's something we're gonna be tracking. No life of the business. You know, we're constantly updating our financial projections, so I can't say enough about financial models. So what we're gonna do is much like the business plan. We're gonna dive in and we're gonna take a step by step. Looked through a financial model in the next video or two. Probably two videos. Just I think it will go a little bit long if it's one video. So we're gonna look through. I'm gonna point out the highlights. Things Teoh consider best best business practices on then, if you have an interest in financial modelling, and you will need one of these for your business before you go out to investors as well. Um, and just another inside. Some of this will go in your business plans. So you needed for your business plan your presentation industry, your company. So if you want to tackle it, terrific, if you are unfamiliar with it, you can certainly have someone else do it for you, and then you work with them and provide them the information, and they helped build it out and see if it's realistic. And then, as well, I will put in a cheap plug. I do have a course on financial modelling as well, where I go in the way. More detail on how to build one of these several hours, of course, typically takes about a week or two to build a good financial bottle. So that's let's go through a financial model and take a look at one 19. Review of a Financial Model: Okay, everyone. So now we're actually gonna walk through a financial model? This is just a sample. It's taken from a real company, but I've stripped out kind of the company information. It is available as a download. It's good for you to go through and what not? But if you're ever building a model, it's it's almost easier. You can take my advice to just build your own from scratch if you try to take one that's been made and kind of tinker with it and try to adjust it to your own needs because really difficult. Just because your assumptions will be completely different than theirs and the the metrics and the way the formulas air links out, I mean the best. Maybe you just use the formatting a little bit from the financial sheets, but I would certainly recommend that you build a financial model from scratch a name time I did. I always just started from scratch. It just worked out much better. So first of all we have are centralized set of assumptions, so we talked about a lot of the stuff in the videos prior to this, so I just want to kind of show you now in practice when it looks like So we have one tab here set of assumptions. So this company lists out product specific assumptions. And again, we're not going to go into detail into each tab and each like item that's on here. I just want to give you a feel for what it is, and then you can pick through the download as well. They put in some market data mobile video game systems, Peter Market. So just to give you a bit of color and what this company did is they created a specialty kind of wipe for electronic devices. So it was alcohol free, which most wipes aren't. Or they weren't back then and they came in different sent of flavors. It was geared more towards sort of a younger generation. So people cleaning their cell phones there, um, laptop screens, etcetera. So that's why you see a lot of data about cell phone subscribers and video game system etcetera. Because that's the market that they were targeting with their wives GPS, digital cameras, etcetera. So it then they have a few other miscellaneous assumptions corporate tax rate and interest rate, etcetera. So all the data on here basically feeds pretty much the rest of what happens in this spreadsheet, and that's the proper way to lay out a financial model. The next tab is a detailed profit and loss. So they did three years out, month by month, uh, have all their sales. So this one, they actually hard coded in the first few looks like. And then they If I'm looking up here at the formulas they code and then the growth rate and they say, I'm sure one of the assumptions was You know, this will grow X amount every months up. Ah, sales volume is growing. Then they break out their revenues. Their cost to get sold, come up with their gross profit, then down here, their staff and staffing expenses, office operational, marketing, travel, etcetera and even Don, which is earnings before income tax, depreciation and amortization. If you're not familiar with accounting, um, and then and just a quick aside, one of the reasons you show even does, because that's really earnings that you have control over. You don't have control over depreciation rates. You don't have control over income tax rates, etcetera. You can choose whether you spend money on travel or not, but you don't get to choose whether or not you pay taxes. So that's why companies will show line before kind of the bottom line just to show. Well, here's what we had control over and then we also had these a few other things like depreciation, taxes, etcetera and then their bottom line. It goes across. Obviously it's totaled for the year, and that's about it. So goes three years out, and then so that's a lot of detail. And really, the point of this is to go month by month and show what it is and make sure everything looks reasonable. Typically, then, on this next tab Ah, little bit colorful here. I wouldn't recommend some of this was actually the company colors. That's part of why they they did this, Um, but it's just a summary by year, So this is what someone outside of your company is more likely to look at. They just want the high level picture. They can dig into the details and back here. But certainly it's easier just to get a high level view of what it is right here. Then they did something somewhat unique they basically it a year, one year, one worst and best forecasts of the same base, which is kind of what they show over here for your one. Then they make adjustments. So the worst case and the best case basically latest factory and so say sales are 20% less and costs of goods are would also be 20% less if you're not selling us much, um, again, they're using sort of just generic kind of percentages. This isn't fine tuned thing, but it's really just the point is to show at the end of the day, they feel like the worst cases that make 1.3, most likely 1.7 things go really well, you know, just over two million. So, um, this isn't necessarily a standard financial thing that you would include by, um, no harm, obviously, and including it. Timeline again. Not really a financial thing. They kind of put a few things in this spreadsheet that would normally be in one. Um, just on there, that but not horrible. Ah, statement of cash flows. And now we're kind of back to more traditional financial modelling. That is just the first year looks like again. Circus colors wouldn't recommend those, But in their case that did work just cause it matched up with company, I still probably wouldn't recommend that. So this spreadsheet is should be completely driven off of other financial statements because your statement of cash flow is generated by changes in items on your P and l and items on your balance sheets up again. We're not gonna go line by line. This isn't an accounting class, but these air the standard kind of three headings for a statement of cash flows, operating, investing and financing. And at the end of the day, it leads to just say, What's our starting cash? It was a rainy cash starting ending, starting ending. You're looking for things like this ever go negative. So there's a couple of negative month seriously, obviously, can't have negative cash, so that doesn't completely work in reality in the real world, um, and then just a show where the cash growth growth goes next, they have a balance sheet again, only done for one month. Typically, you do this out the same period. So like the P and L was done for three years, you would forecast this out three years as well. Piano is probably the most important financial that people are looking at. So I could understand why someone would just show the balance sheet you're out. Um, no investor or anyone else is really looking at your balance sheet three years out where you're gonna be. They're mainly just interested in your P and l Second would be your cash flow. So again, we're not gonna go through detail by detailed Ah, lot of this again. It's just linked to the other sheets. This comes to again you need, like, an accounting kind of background or knowledge and accounting to put this together and how financial statements are generated and linked together. So ah, and then, lastly, just really quickly did a little break. Even analysis. It looks like they're breaking even in months for So there you go. There's just kind of ah, so this is very basic. Pretty much it could be slightly more basic, but it's a fairly lower level basic financial model just to get an idea of what it what it iss, um, a more elaborate one might include, like it's probably about five years and probably five years for all the main financials you do and said a year one as well. Just worst case. Best case you do it for probably at least the 1st 3 years, if anything else, probably include a few more match like graphs. And what not? And one thing I would slow like to include is a nice summary tab just with the highlights of Easter, the main financial self. Uh, that would be kind of my recommendations for a more fully flash financial model, but certainly nothing wrong with this one. So that said, there you go. That's the sample financial projections that we have forecast, how we want to name it and that is it. So enjoy and feel free to ask any questions about this. 20. Final Comments on Financial Models: all right, So now you've had a look at a financial model in the previous sexually took a look a business plan. They're probably getting an idea. There's a lot of material it needs to be created up front before even talked to investors. These other things your company just needs in place. Even if you're not talking to investors, you should have a business plan and a financial model. You might not need the investor pitch deck if you're not talking to investors, and that's coming up nonetheless. You saw that financial models fairly elaborate. It takes a lot of work, but at the end of the day, you have a tool that you can project for your business, and you can alter those assumptions and see like, Oh, well, if we sell 10% more, how does that affect us down the road? Those types of things that will also help dictate how much investment you need. So everything starts to tie together. I hope you're seeing so you kind of need. It's kind of like you need it all, but it's all big individual big projects, business plan, financial model, and then some of the stuff that's coming up nonetheless again. I don't want anyone to be intimidated. Everybody goes through this When you start up company, I want to be excited for it. These are things just need to create, and once you have them, it's easy to sort of relatively easy to maintain them and keep them up to date. So that said, that's a financial model in a nutshell, and we'll move on to the next section. 21. Introduction to Investor Presentations: Okay, so next we're going to talk about investor presentations. Often times also called a pitch deck. So essentially what it is is it's a presentation format, and I'm gonna use Power Point. It's my example. If you're on a Mac, it's keynote. There's certainly other programs that do it, but a Power Point presentation. It's basically summarising the business plan, if you will. Typically, it's 8 to 10 pages, and the point of it is that it would be used in a presentation to an investor. So you get to the stage where investor invite you in and they want to learn more about your business. They're probably going to tell you something like, Okay, we want to see a 10 minute presentation about the highlights. Your company. You want to be sure that you have it down to a rehearsed 10 minute presentation and what you're gonna speak to is this investor pitch deck that we're talking about. We're going to take a look at a sample in the upcoming lecture, so in just a minute, but what else can I tell you? It's really the highlights of the company, so it's going to be things like what is the problem that's out there in the market and what is your solution to it, Which is essentially, what's your product or service that you're offering? Who is the management team? What's your plan? How big is the market? What's your marketing plan for what it is that you do? What are some high level financials of your company? Not the details. None of this should be the details. It should be a true power point where it's very few points on a side, and then you speak like I'm speaking to you now to the slide you give them or information talking to them. And that's supposed to read a presentation. That's one of my pet peeves with people. So don't write out a whole presentation on the screen for them to read what the bullet points and then you speak to it. That's essentially what an investor pitch deck is the investor presentation. So we're gonna go through one. It will make a little bit more sense. Maybe once you see it again, it's probably the easiest thing you have to put together because the information is already there. You already have it in your business plan. in your financial model. Now it's just a matter summing it up and picking out the most important parts that are relevant and sort of showcases your company foreign investor, I will mention so typically would present this to them. They might ask to see it just up front. We might ask you to email it to them, and that's okay as well. You just kind of want to have it ready. Once you're done, maybe print off a Pdf version. Signee melt. Pdf rather than power point. Just a few best business practices there for us, unless let's take a look at an investor presentation deck pitch deck. 22. Review of an Investor Presentation: Okay, so now what we're gonna do is look through a sample investor presentation. This one's provided for download. Just so you know, it's based on a real company. I took out their information. I just put in my own logo. This is certainly not my actual companies presentation. I think you'll realize when you see some of the content, it has nothing to do with what I do. Is the CFL so nonetheless? Ah, first page and this A pdf. Typically, you do this in Power Point. It's just kind of a typical presenting software. Pdf Those sometimes easier to email people. So once you make it in power point, you can print it off to a pdf. So first is just the title page. But your company logo, your information, maybe a contact information. It was about just her. There we go just to get the sense of what it would look like kind of slide again. We're not gonna go through every detail on here. We're just giving you the sense of the major titles, and we've already kind of discuss what they are. Now you get to just going to see it talk a little bit about the background of the company who you are wide started. Second, talk about the problem in the industry that you're servicing. So basically, what it is that you're going to be solving and in the next side it is your solution. So you want to talk about just again going back? What is the problem in the industry? You know, it should be fairly obvious. Somebody should read this and go OK, yes, I see that, Um And then what's the solution you're providing? You know, you list out your points. So now there's a reason for your company to exist and for your product or service third, then you talk a little bit about the market. Who are they? Why would they buy it where they might also mention, like how big is in terms of, you know, annual revenues? Who are the competition? Just a word of advice. It's kind of frowned upon if you just say there's no competition, which is exactly what this company had done was never a fan of that. There's always something that's competing, even though you might be dealing with a problem and a solution for something that hasn't been dealt with before. There's certainly got to be some competitors, er or some company that maybe would enter the market. So it's good to just think about it from the 10,000 foot level. Who would be potential competitors. If there's not now, just say there's no competition. Makes people think OK, well, you're not maybe thinking about all aspects of the company, and, um, you know, you're certainly not gonna have a monopoly on the market. Talk a little about a little bit about your revenue streams. Where will it come from? This company had five different revenue streams, so there's kind of giving the very basic, you know, here's how much we make on each of the streams, per whatever the applicable metric is. So they say, How are you going to make money? They went on. They did a little kind of image, obviously of the physical good, so that's fine. Who's the team? Some team management team at, you know, list out each person a few bullet points about who they are, what their background is educational and work wise, and maybe why they'd be a good fit for your company. Ah, this company premises had won the founder, and then they listed out industry advisers. Um, I talked more about this in the business plan, I believe, but I'm not really a fan of just listening at one person. You should at least address who is gonna take care of marketing or sales or accounting and finance. Ah. Then getting towards the end and we'll talk a little bit about the length in a second. Just a nice summary financial. So they put in their valuation. Um, not bad. Not typically, I would expect to see a summary of the P and L and balance sheet and what not? Not necessarily put the potential valuation, but certainly not a bad thing to include, um, so they put in their full detailed pl. I mean, it's the summary for the years, but all the details and obviously you can't even read this. So, um, not the best presentation balance sheet A bit better, but still probably a bit too much detail. Likewise here. So no comment. What I would have honestly done is taking all four of these slides and combine it into one . One flied with the highlights of each of them. Um, and then last I mean, just again interested. Learn more and then the company name. So that's about it. So it may seem brief, but that's what you want. You want about 8 to 10 slides? It really Should they at least touched on all the correct areas? The background? What's problem? What's the solution? What's the market? Whose team? Here's the financials room. Um, so they hit all the right things that might not have not did the best job with each of them , but nonetheless, they got it all. It's meant to just be an actual presentation. This is something you would talk to make, like a 10 or 20 minute presentation in front of potential investors with so as well. I'm a typically fan Ever. Try not to put too much ver Bijan each slide like really, it should just be a point. And then you talk to the point you don't need the worst presentation. Skill you could have is just reading the slides off. They could read the sides themselves up. Just another tip for you guys when you're creating your investor presentation. So there you go. Still, I just want to provide this again. This is a pdf. You can't edit it. I'd prefer honestly, that you did create your own from scratch. I wouldn't want somebody to kind of use this as they're template some, and I'd probably do something a little bit more fancy. I mean, I like the logo, obviously, on each page, but, um, just something a bit more exciting. So there you go. That's an investor presentation for you. 23. Final Comments on Investor Presentations: Okay, guys. So that was an investor presentation. Pitch tech slash. Both terms were used. I would say pitch deck is almost used more commonly with the investment community stuff. Now that you've looked her one hopefully have an idea. Like I said, really not too difficult to put together. You should already have the information. So putting it together is really just a matter of pulling out those important points, making it look nice and presentable, obviously, on having it ready to go. The other thing I want to warn you is just make sure you keep it up to date. So often times, people will be continually updating their business plan. You know, you write your business plan and people tend to just save the file off. Let's your business plan. But, you know, three months down the road, maybe you've hired a marketing person and a CFO. Well, they should be included in your business plan, but then also update your pitch deck. Nothing more embarrassing than going to a new investor meeting, you know, presenting to them and saying, Oh, you know, here's our management team hopes, You know, I left off the fact that we hired a CFO two months ago. Things like that you don't want to do so. Definitely keep them updated. Make it part of your routine. If you will always keep your documents updated at least fairly fresh, even if its weekly or if it's monthly monthly, will be better than nothing. So that said, that's an investor presentation and we will move on to the next section. 24. Introduction to Valuations: all right. In this section, we're gonna be talking about valuations. So what evaluation is is coming up with a dollar number that represents what your company is worse now and after the investors invest. So the terms used or pre money and post money, so pre money would be before the investors money comes in. So right now, today, what's your company worth? And then what's it worth after the investor puts their money in, Ah, little tip, The post money really isn't that difficult. It's just taking the pre money. Plus, whatever the investor includes our invest in your company. So there's several different ways to put evaluation on your company, and they could get fairly elaborate. Ah, lot of companies will hire evaluation expert to put these together for our purposes. We're just gonna look at a few ways of doing it that work fairly well, very standard kind of common industry practice. And they will serve you well enough to get you going. It's good toe. Have these numbers ready. You may want include them on your investor pitch deck. That's up to you. Most likely, you will be asked at some point what they are and I mentioned very early on in the course. If you watch shows like Shark Tank or Dragons Dan, they are. They always get to the valuation. What is the company think that they're worth? What do the investors think they're worth? And that will dictate what percentage of ownership you know. If you think your company is worth nine million and the investors putting in a 1,000,000 they would only own 10% of your company. The investor That might say your company is only worth a 1,000,000 we put in a 1,000,000. That's two million totals that we own half your company. Big difference, obviously. So that's where the valuation terms of dollars and then the dollars invested relative to the current value is really important stuff. We're gonna look at a few different ways to come up with valuations. Well, then it's up to you to figure out what's the best methodology for your company, and different situations lend themselves better to different ways of placing a value on the company, and that's about it. So we'll take a look at some valuations next 25. Review of a Valuation: All right, let's take a look at a sample of a valuation here. And this is a very sort of basic evaluation just to give you an idea of just the highlights . Certainly, if a company or an investor was interested, you would want it, then dig into the details of this, and they certainly would. So there's lots of different ways of putting evaluation on a company. So, um, what they're doing here is they're based disabling. Here's how we did it. Four different ways. Here's the valuation we came up with and then we're basically gonna average them is what they're doing. They waited each of them 25%. So, um and then came up with the with a total. So, uh, again not gonna go into the specific details want to show you more just the presentation here of how it looks. So for your equity, I mean, that number would be pulled straight off balance sheet. Four years, Cuba of net income off a profit and loss statement for years, cumulative sales discounted. The discount factor would be side calculation, so that would be kind of in the details where he would show that and then for your cash position. So where? How much cash did the show at the end of your four? So that's off your balance sheet or statement of cash flows. So the one that has a bit of calculation, it's the sales discounted, and it looks like there's a bit more here. It might even have the discount rate that they're using, some against standard. I mean, some of these numbers could be pulled off of financials. That one would need to be calculated would certainly want to show the calculation, but not necessarily on a nice summary. So, um, that's it. I mean, they said weight them each and they see each other's about 9.5 1,000,000 cash positions a little bit lower, so it comes out a little bit less. Other value. The company at 9.2 million after four years, Capital Structure Investor one will have 90% of the company founder. 10% and that's so that's their ownership percentage. And they're saying Okay, so if you came in as an investor and bought it on her own 90% of the equity, you could expect your value to be 8.3 million at the end of your four. And it's a simple Is that so? Um valuations, one of those things where it's easy to talk about and just say a number like Okay, our company's valid at 9.2 million and based on four different ways of calculating Perfect . But then you have to kind of take a step back and really think about what Does that make sense? Is it really worth that much, or will it be worth that much at the end of your four? And more importantly, what's it worth now is what investors will be most interested in calculating. There's there's not a ton of calculation when it comes to what it's worth now. It's basically what it's worth, literally what it's worth now. How much have you invested in? The company's say you put a $1,000,000 in and you have $1,000,000 in the bank. That's about what it's worse right now, Um, and sometimes to its it's what someone's willing to pay. It's almost like art. So whatever someone is willing to give you as evaluation is what it's worse to potential investor. So there you go. I just want to show you this. Just a sample. So when you do ever talk about valuation of your company kind of have an idea of what it looks like on paper? 26. Final Comments on Valuations: Okay, now that we've seen a few different ways to put a value on a company, hopefully one or two, those rang a bell with you, and you have a better idea what would be the best fit for you to apply to your company? You have an idea of how to calculate them. If you're a little bit lost, that's okay. Evaluations Or definitely maybe a bit more tricky, just in the the logic that you have to get wrap your head around in terms of value in your company. We're using some future numbers. Sometimes, sometimes we're not. We're using different aspects from financials. So if you have a problem, feel free to ask a question to me through the through the lecture. Obviously, there's the button you can hit, asked the instructor question. Feel free to do that. Or if you go look. There's lots of examples online. See on Google, where you could go look up valuations and how they're calculated, the different methodologies behind them. So don't have spent too much time time on evaluation. I mean, certainly want to pay attention to and have one prepared for your company, but it's not something that you need to spend weeks on. It's really something that could be done in a relatively short amount of time compared to things like writing a business plan or a financial model. So that's it for evaluations, and we'll move on to the next section. 27. Term Sheet Introduction: Okay. Next, we're gonna talk about term sheets and these air definitely really detailed. There's a lot to go through, so there's gonna be a couple of videos coming up where we go through a term sheet kind of template. I'm gonna point out all the major sections kind of terminology. You need to think about etcetera. I will warn you. So First of all, what is the term sheet? We talked a little bit about it. It's something that typically in a potential investor would give to you and say, Here's the terms off the investment that we would potentially making your company. So it's not a commitment, but they're kind of pre and that they're showing interest. They're excited about your company. They want to say, Well, we wouldn't invest if we could have all these set terms. So And it's not a simple as we'll give you a $1,000,000 for 100,000 shares, and that's it. Now there's a lot to it. So we're gonna look for a few examples. Of course. The warning. I'm not a lawyer. You should certainly have a lawyer. Look, at any term she are ever presented or you plan on sending out nine times out of 10. The investor would be the one giving you the term sheet. Seldom would you be proposing the terms up front nonetheless. But you probably would be counter proposing terms, so definitely involve some type of company lawyer. When you're making these decisions, as you see and I'll point out when we go through the example, there's lots of ramifications. So some sections in the term sheet might seem fairly no simple or just like Okay, that doesn't matter. That doesn't apply to us, but it might have big ramifications down the line. So we're gonna pick those out of the term sheet and talk about them when we looked through the video. So let's take a look at some term sheets and the terminology in them. 28. Review of a Term Sheet: All right, So now we're gonna take a look through a sample term sheet. It's available for download again. That's the pdf. Typically you. This will be drafted up by a lawyer. I mean, they're certainly templates out there. Um, and honestly, a lot of times, it would be the investor presenting this to you, so it's unlikely you would have to draft up your own term sheet. So I want Premier. This is a sample. We're going to zoom in to read it, but I just want to show you again. I pulled out the company's information. Just stuck in my own logos and whatnot. Um, term sheet. All right, let's zoom in here now on page two again, we're not going to read every page. Um, it's just page down, All right, so there's a lot of fill in the blank. So, um, as you can tell right off, it's a lot of sort of legalese. If you've ever bought a house or entered a larger contract, you probably familiar with this. But there's things like so the offering terms basically well, actually, let's back up here. First Company name, date, preferred stock, um, company name etcetera, closing date. So when the financing would actually close Who the investors are? How much share percentage that get for how much money? Total amount raised Price per share. Again. Just a quick walk through. I just want to show you guys what it looks like. We have an idea. Um, certainly Dalla this and read through it pre money valuations. They already learned a little bit about valuations, and the one that I showed you was sort of a four year evaluation. This is where the pre money valuation. So you think of pre money and post money valuation. It's a simple as adding two numbers. So say you worked out your valuation currently, and it was one million and you were looking for one million an investment than your post money is two million. It's just the two numbers added together. Simple is that capitalizations? The capitalization is your capital structure. Is that common stock preferred stock? How much of it? Etcetera? All right, so skipped down the next page charter some to get into things like dividends. So, um, these things are really important. I mean, it might at this point, it might just seem like great you know whatever they want. But definitely, if you're ever presented with the term, she would want a lawyer on your side to review it. These things could matter down the road quite a bit. Um, dividend, Sure, but one thing that caught my eye was liquidation preference. So that's if the company ever needed to be liquidated. Say it just didn't work out. You know, you went along, but you know nothing's ever really took off. But there's still money in the bank. Well, you want to read this because it probably says in here that the investors get their money back first. So if they invest it, say you invested one million and they invested one million, and then the company goes along and you burned through some of the money. And at the end of the day, it turns out there's only about $800,000 left when you decide to pull the plug. Well, if they have the first liquidation preference, that's all their money because they get their money back first. And then after that, if there's anything left, you will get your money. So ah, liquidation preference, definitely important on just continues here. Voting rights. Another thing. So them obviously are going to want voting rights that probably will see later on. But they probably want things like to be on the board of directors and whatnot as well. So you want to be careful that it's not always just a given that is proportional, like they invested 50% of the value, so they're 50% vote. That's not necessarily true. This could be stipulated to be anything protective provisions let you read through, trying to point out the highlights. Optional conversion. A lot of times you can convert, um, your investment to a different type of investment with the company, or they can, I should say, so they might give you a loan, but then with the right to convert it to common stock, and the reason they would do that is the company does really well, and they would rather have stock in the company, then just have alone with you. Ah, and to dilution. So, typically, a first time in the first round of investors don't want to be diluted. So say you invest a 1,000,000 they invested 1,000,000 then two years from now, someone invest 10 million well, they used tone 50%. And if everything was just on power now the sun they own a lot less because there's 12 million an investment in their own 1,000,000. So anti dilution provision basically say that they will. They won't be diluted out like they will always own. Whatever the case might be, they have formulas, but 50% Or they might say no less than 30% etcetera. So, um, calculations for that mandatory conversion Such a closing time. All right, So if there's an I p o their stock, a lot likely convert pay to play again. I don't read through each of these. I'm trying to point out the mainland's that are going to stock purchase agreement. So this is just continuing in the term sheet. It's basically again to sing. I'm working. We had the investors are giving you the company X amount of money and for so we get X amount of stock, find data and then investor rights agreements. So more legal registration, Registration of S three. So when you sell private stock, um, there still forms that need to be filed. So with the Securities and Exchange Commission, so in the United States. So, um, forms like an S three need to be filed. I'm safe thing. If the company ever went on to go public being AIPO there's several different sort of stages to that, and there's several different forms that need to be filed along the way. Let's see expands. Who will pay the expense lockups. Oftentimes there's a lock up period. So when a company goes public the 1st 6 months, none of the previous owners are allowed to sell stock. It just prevents. It's to help the market. You don't want to go public, and then all your investors pull out and sell their stock right away. And then your stock price crashes because, um, everybody's selling. So it's to protect those new investors on the market. Um, so they had 180 degree, but still, this is all creditable, um, management rights, right to maintain proportions. That's kind of like, um, delusion. There's requiring investor director approval. So a lot of times, even if they're not on the board of directors, they'll still say, Hey, before you do any of these things, we need to approve it, and a lot of times it will be taking on additional investment. Make a huge purchase. Relocate company, Higher key executive. Things like that. Um no. Okay. Competing on disclosures and play stock options. Um, just some rules, according to that. And again, this is an investor saying, Here's the terms that we want if we give you money. So things like this they're just saying, Hey, if for all the employees are gonna give him stock options, they vest a 25% per year basically, um and that's pretty standard. That's kind of an aside. And the reason is you say you hire a new employee and you just gave them stock, and then they quit the next day with no sort of provision. Then that would all be there's this gives people incentives to stay, and they earn their stock options over a period of four years. Key person insurance. So again, the investors want to make sure that you know the CEO disappears or the haIf um, there's insurance on them first, right to refuse a lot of times for self first, right to refuse. Often times that say the company does want to do another round of investment down the road . Say it's two years from now. Um, that basically dictates that the original investors have the first chance to invest. So things are going well, they want to put in. They would want to put in more money and not allow you to just go out and find someone else with money. Uh, get lockups. Voting board directors, founder, stock. Ah, almost to the end here. Actually think Lee in the capitalization, like in this example. So there you go. That's a term sheet standard term sheet. Everything's pretty pretty normal in there again. They would probably be the ones giving this to you, and he would certainly want your lawyer to review it. Um, it's exciting when somebody wants to invest to say you're out looking for a $1,000,000 somebody said, Hey, yeah, we're interested in Here's our terms. A lot on your prayers will say yes, you know, whatever we'll take it, you know, we're getting $1,000,000. Um, you definitely want to watch out for those things that a lot of companies have been burned when down the road something goes bad or investors want to pull out or say you want to get more investors even It's not Nestle bad thing, but your original Vester say, Oh, no, like we have the first right to investment money and maybe you don't get along with them while I mean things do go sour sometimes. So I'm definitely take a look through your term sheet yourself, obviously, and then have it reviewed. Question anything and again, it's not. Ah, it's usually not all or nothing. It's the type of deal where they're saying, Well, here's our terms and then you could go back and say, Well, you know, could we adjust this? It's a negotiation. 29. Final Comments on Term Sheets: Okay, so now that you've had a look at a term sheet, I'm sure you're it's, you know, a lot to take in. That definitely is. I never I always get overwhelmed with them. Certainly, though, it's something where you know there's a lot of content in the term sheet. It really boils down to the major sections, making sure your bases air covered both on the investor front and on your front. And then, obviously you are definitely interested in how much money for how much equity and what terms go along with that. So after looking through those I hope you appreciate, they should always have a lawyer. Take a look at it, but essentially, that's what you can expect. And be happy, because if you're at the point of looking at a term sheet, that means you're really getting close to having an investor invest in your company. So whether that comes from an angel Investor Investment Syndicate, a venture capital group, whatever the source of the term sheet is again, be happy that you have in front of you. And now it's time to sort of finesse the details and make sure that you get the best deal for your company that you possibly can 30. Introduction to Exit Strategies: Okay, now we're going to the topic of exit strategies. So this is something you have to think about early on. So even though it's the X ed, how are investors gonna get their money back as well? You want to think about yourself, but we're focused more on the investor for this course, obviously. So how are they gonna x your company so they invest their $1,000,000? How did they get that $10 million out? Or the Angel investor? That's 100,000. How does he get his 500,000 or $1,000,000 out that he was hoping for those air all exit strategies. And there's lots of different ways and investor can exit a company. There's about, say, four major ones that I can think of, and we're going to go through them one by one and talk about them. Certainly there's pros and cons siege, and also they're very specific to the situation. So, like, for example, in AIPO, which certainly everybody's heard of an initial public offering, your company goes public well, that's gonna lend itself to a certain type of company and not a lot of other ones. So we're gonna talk about each of the exit strategy, possibilities, what they are and what kind of companies and situations they lend themselves to. So hopefully, at the end of your toe, identify one or two exits that apply to your company. So when you're thinking about talking to investors and they say, Well, what are you thinking for? In terms of an exit, you and answer ready to go, You know I feel would be perfect. And here's why. So unless let's go one by one over, I talk about different types of exit strategies. 31. Management Buy Outs: So we're gonna talk about management. Buyout is an exit strategy in this video. So what is a management buyout? Well, it's pretty much how it sounds. So the management team of a company buys out other investors. So what does that mean to say you had an angel investor where it's gonna go up like one example that we kind of use in this case? So an angel investor invested 100,000 originally, you know, they were hoping to get 200,000 out within the next four years. The company does, well, the management team. Really, You know, maybe they're tired of the Angel investor. Maybe they're just It's at a point where it makes sense. The company has done really well. The management team has been rewarded. Maybe they paid bonuses what the management team does, and they see Prosperi in the company. They want to continue to be involved in the growth of the company, so they want to almost invest in the company of themselves. And the way they do that is by buying out the Angel investor. So the management team, let's just say it's three people. It's us. You know, the CEO the CFO on the CTO chief technology officer. They pull the resource is probably personal. So, you know, maybe they've been awarded bonuses and they pull them all together or they find other people who will lend them money. As individuals, you know, they take out a loan at the bank. Let's use a simple example. So they all get money wherever they get it, whether it's the personal money or they take out loans themselves. And they buy out the original investor, who in this case is that Angel investor? That's essentially a management buyout, and it can be a proposed exit strategy. It's an exit. It's true. Exit for the Angel investor. They get their money, plus the return out. Now the management team actually owns the company or there, at least you know, invested in. However, they structure the deal on their end. You know, they basically I want to get rid of, but they buy out that angel investor now they can decide whether they take on debt from the company, or they're probably most likely in the situation. Just gonna be equity owners in the company, and they basically own the company. Now that's a management buyout. It's really not that difficult. To wrap your head around doesn't happen often. You probably don't hear about it as much as probably done more on a private level, it's not obviously big scale companies and corporations. For one you know, the management team needs to be able to pull enough resource is to buy out on investor. So think of a venture capital firm that investment $1,000,000 that the management team really gonna be able to put together. You know, $10 million to pit pay off the venture capitalists and buy them out. It's gonna be a lot more difficult. So you hear about mansion pilots in a smaller company situation. So if that's what you're thinking you'll be at. So maybe you're really small and you think in a couple of years will be at a point where you know you'll be a bigger company. But you don't see yourself is like a multimillion national company, but maybe you will have enough that you could just buy out those investors management. Buyout might be the way for you to go 32. Leveraged Buy Outs: So we're also going to talk about a leveraged buyout, which is very similar to a management buyout, with just a few sort of twists, if you will. And I probably could have included them together. But just to clarify what the differences. So in a leveraged buyout, it's typically again the management team buying out on investor. But they're buying them out with funds that aren't necessarily their own. So I mentioned and measured by out, they might borrow the money from someone from their bank. In that case, I was thinking of a situation where the bank is lending the individuals. Let's just say it was me. I'm a manager at a company. I borrow money, maybe equity against my home and I get Equity loan. I use that money to buy out an investor and basically by the company myself would be a management buyout. A leveraged buyout differs in that the money that I borrow is secured by the company itself . So instead of you know, it might be a bank. But say it's some type of private lender that's willing to lend me money that's backed by the assets of the company. So they're lending me money. I'm still buying out that Angel investor. The company is now mine. But that loan that I have with whoever it was that gave me money is now secured by the assets of the company very similar to management. Buy out the mechanics. You know, I'm getting money and buying out an investor and the same. It's just the fact that the lender to me now has the security that the company is its backing. That loan that I have with them versus Where's the management buyout? I'm just using my own funds and where those air my own funds because I save them. I sold some investments Oregon Equity Loan from my home or wherever I got it. None of those air backed by the company. They're kind of separated in a management buyout. Leveraged buyout. There's a tie between who's given me money and the actual company that I'm buying out 33. Initial Public Offering: Okay, so let's talk about sort of the most popular exit, if you will, on initial public offering. So an initial public offering is basically where the stock of the company has taken public and traded on the stock market. So all the original investors who would be, say, your venture capitalist probably management team, even employees who own shares of the company. No shares. Air now publicly traded and they can sell them on the market like you would sell any shares on the stock market. Now that said, there's a lot more to it than that going public on the stock market. Slash and AIPO can take years of work. There's lots of forms to fill out. There's lots of hoops to jump through with the Securities Exchange Commission. Of course, I'm talking about the U. S. Stock market. I'm not as familiar with other countries, obviously. So my apologies. If you aren't in the U. S section, you might ring true in your country. But I'm not sure, but there's a lot of forms and formalities that go with it. You're gonna be involving lawyers. You're gonna be involving accountants, auditors, etcetera. It takes a lot of work by the time you file forms. A lot of times they then become outdated in the process. They have to be re updated and resubmit it. And then Security Exchange Commission is asking questions. I've been through a couple IPO's, and it's definitely a lot of work. It can be frustrating at times, but it feels like you're constantly caught in a wheel and spinning your wheels, trying to make things happen, but eventually thinks creep along and to get to the day when the company actually goes public. So, like I said, when that happens, all the shares that were in the company and are now publicly traded the typically holds put on the insiders, if you will, in all the previous you can't sell in the 1st 6 months unless the protect the new investors . So the person you know who doesn't know much about your company, or maybe they know a lot, but they're not involved in your company who just buy shares of your market now out in the mark, like now that's publicly traded it protects them from everybody. The previous owners just dumping their shares on the marketing, lowering the value of the stock, so there's lots of nuances when it comes to hypos, and I'm I don't currently. But I'm quite considering putting up, of course, about I pose and all the ins and outs and the process that it is because it's fairly interesting. It's fairly involved. And I think it's something that unless you experience it, you really don't appreciate what all is involved in it. So definitely fascinating, but nonetheless a tigress. I po is certainly an exit. If your company plans on growing to the point where there is gonna be a big market demand for your company, it costs a lot of money to go public off state hiring all those auditors and lawyers, etcetera. So there's definitely pros and cons. It takes a lot of time, but at the same time it could be very rewarding. And it does provide immediate, I say immediate. But after the six month holding period out for your investors, they can choose to keep their shares or sell them on the market. At that point, it doesn't matter. There was there now publicly traded shares and they're not necessarily having a direct influence on your business anymore. Aside from they might still be on the board of directors and other things. There's lots of INS announced. Like I said, So I p o definitely good for companies, but you definitely need to think about companies that will have a big market capitalization . There'll be a lot of demand for your shares on the market, and you're willing to spend the time and the cost that it takes to go public. So I po is definitely attractive. It's kind of one. Everybody will know when you throw out the term AIPO, but it's definitely a sort of bigger beast than it sounds like stuff. Keep that in mind a lot involved in an I P o. Certainly a plausible exit, though, for company plans on growing fairly big. And we're gonna talk about one more, which is really two more methods of exit in the next lecture that maybe some nice in between between the big AIPO and just imagine buyout 34. Merger and Acquisition: Lastly, we talked about mergers and acquisitions. You probably heard of mergers, acquisitions, or M, and A says they're often referred Teoh. Let's talk a bit about what they are and where they kind of fit in this world of exit strategy. So ah, merger. Essentially, two companies come together and form a new company, an acquisition. One company acquires the other company and kind of holds onto their original identity. Sometimes the acquiring company will take on the identity of the company they acquired. But that's in rare instances, and there's reasons for that that would probably need to get into for this point. So a merger and acquisition would be a terrific exit if there is a market for it and your company. So say you're growing company and you're in a market space where there are competitors that are bigger, but you have a better way of doing it. You know, you designed video cameras that you have patented some great new high end technology that all the other companies they're gonna want. So you go your company and start selling like hotcakes. Certainly a merger isn't, you know, past the realm of possibility because your competitors Those big companies probably want that technology. So they're gonna want acquire your company, Bring it in. So sorry. I said merger, but they're probably acquire your company and make it may be a division off their bigger company. Um, Google acquires a lot of smaller businesses. In fact, there is. One company is about 10 years ago and they had a travel website where they would predict travel fares there basis Seattle. I forget the name of the company but actually visited their headquarters. And that's all they did. They had built different algorithms, someone not to predict plane flights and affairs and whether you should by now, by later, you know, exactly wait a little bit how, what percentage chance or they're going to go up. Google acquired them, and now they're part of when you go search for flights and whatnot on Google, it's built into their sort of flight tracking. So companies like that get acquired by the big guys, and that's what they want. They want to grow, you know, they built their company to something bigger. Google paid a lot of money for them and bought out all the original investors. Unfortunately, with an acquisition. You might also lose your company in terms of the staff. Certainly you'll lose your identity as you know the little guy, but they might just replace you with their own in House staff. That's one kind of negative to an acquisition. But if you're looking to just do that to start a company, grow it and get bought out, an acquisition is a very viable exit strategy. Merger is similar in the sense that you know you combined two companies in a merger. You're much more likely to know combine your synergies between you and another company and grow something even bigger. So maybe you have a consulting company in one type of software. There's another company that has the hardware that goes well with that type of software, and I'm just I don't know exactly what it is. It's just a year ago theoretical example. You guys might merge together and create some new company that has both now the software and the hardware. So both companies still almost exist. We exist as a new company. They probably keep you know, the software guys want to keep their software. Guys, the hardware guys want to keep their hardware guys, When I say there, guys like there, you know, product development team and their testers on their salespeople and all this stuff, you might get some, you know, collusion where you just you know, you get rid of a few people, the dead weight, if you will, But nonetheless, we're digressing now. The point is, you combined two companies and create something bigger, and in doing so, you probably have the opportunity. So maybe one company, the one merging company, has a lot of assets. They have a lot of cash flush with cash. So when you guys merger ableto buyout a previous investor from your company on the software side, there's lots of different ways deals could be struck there. But it's certainly again another viable exit strategy for an investor. So that said, um, it's definitely a specific situation like you would have to kind of think about well, are we good target to merge with somebody? Where are we a good target to be acquired by somebody? If though you think you are in that position, that hey, a merger and acquisition might be the exit strategy that you want to be thinking about and that you're pursuing down the road 35. Course Conclusion: All right, everyone. That's the course. We're at the conclusion. Congratulations. We've gone through a lot of material in this course. We've talked about the different types of investors, the pros and cons of each of them, all the different documents we're gonna need to create, and then all the different exit strategies you have on deck. There's a lot to think about when it comes to your company and raising investor capital. Encourage you. Obviously, to start with things like building your business, plan your financial plan and go from there, then I hopefully through the course. You've also had a finer sense of the types of investors that are best suited for your company. So whether that's you know, the big guys, the venture capitalists or just going with the crowd funding or something in between like an angel investor. Or maybe it's sparked different ideas and you there certainly different ways t to do this, you know, you start with a small investment and eventually lead up to a bigger investment nonetheless , as well. Hopefully, it was really useful. Looking through all those investor documents. I really liked going through them, and I love sharing my knowledge with you guys. So that said, That's the course. Feel free to reach out to me at any time. I really I love hearing about people's success stories. So certainly if you have questions, reach out to me or you just want to share a success story. I would love to hear it. I love interacting with your students. That's it for me. I hope you enjoyed the course. Go ahead and leave a review if you can. I really appreciate when students through that and give me your feedback. I love hearing. I want to know what it could do better. Or if you have ideas for other things, you'd love to see me teach. You know, I've been around the block and I've done a lot in the entrepreneurial world. So always looking for ideas on what you guys would love to learn about so I can share it with you guys. That's it. I'm Chris Benjamin. Thanks everybody for taking the course