Crowdfunding

Startup and Emerging Business Fundraising Opportunity

Presented by:TBIN, Inc. The Business & Investment Networkbusnetwk.com(631) 979-0476

Crowdfunding History-

1997 - A rock group raises $60,000 over the web to fund its U.S tour.

2004 - Producers use the internet to raise $50,000 to make a short science fiction film 

2008 - Crowdfunding used to help victims of Hurricane Katrina

2009 - Kickstarter uses crowdfunding to raise money for business projects and ideas

2010 – Crowdfunding sites begin to raise money to pay for medical costs

2012 – The Jobs Act allows for general solicitations. Crowdfunding rules for investing are pending.

Startup Business Environment

The Great Recession As a result of the “great recession” of 2008 investing in startups

all but dried up creating a situation called the “Valley of death”

Risk aversion –most start ups will fail Time and money required to evaluate new companies

The vast majority of venture capital firms decided to abandon seed capital investment and wait for the next round - usually after a company has generated some level of revenue  

Jobs Act

In response, since new business account for almost all net new jobs in the U.S, Congress passed Jumpstart Our Business Startups Act on April 5, 2012.

Rules regarding general investor solicitations are now law Rules regarding crowdfunding are being drafted by the SEC

As such, the environment for raising early stage capital has improved.Once crowdfunding rules go into effect that environment is likely to get even better.

Current Sources of Capital

Current sources of capital:

Personal capital Loans Friends and family Grants from municipalities or educational

institutions Third party Investors- general

solicitation/crowdfunding

Taking Advantage of this New Environment

Differentiate yourself by making a compelling case

The basic questions that an investors will want to know:

  How much money are you trying to raise ? What are you going to do with the money ? How am I (the investor) going to receive an attractive return ?

Answer these question in a clear and convincing way and you will increase your chance of obtaining the capital you needWould you invest in your company?

Other Benefits Associated with Building a Compelling Case

Other Benefits of building a compelling case:

Realize for yourself that your new product or service is not as “hot” as you thought

Could be that you are too early stage whereby rewards program might make more sense

Boost your confidence/ reduce your own risk/increase valuation

Creates a blueprint for success

– The objective is not to raise money but to build a successful business

Building a Compelling Case

Every start up is unique

Unique product or service

Unique stage of development

Unique ownership

Unique capital needs

Would you invest in your company?

Building a compelling Case

Building a compelling case aka: The Business Plan Key elements:

Define your market Define your next step Describe your management team Understand your regulatory environment Explain the status of your Intellectual property How to deliver your product or service to market Build a financial model Explain you use of proceeds Define your potential exit strategies Valuation

Building a Compelling Case

Defining your market

Define your market niche

Define the market size- domestic/global

Identify key players – your competition

Pin point what makes you unique

What is the target percentage of the market you intend to capture

Would you invest in your company?

Building a Compelling Case

Having the right management team

Researcher/ entrepreneur

Business expert

Advisors- other experts FDA Supply chain Manufacturing

Building a Compelling case

Define your next step and how you are going to accomplish it

The plan for what it will take to develop our (X) to a production ready product

Industrial design Commercial feasibility Rapid prototyping Production ready product (with manufacturing specifications)

Here is our plan for what it will take to develop our ecommerce/ social networking site

Here is our plan to bring our production ready product or service to market

Would you invest in your company?

Building a Compelling Case

Define your regulatory environment

Our product or service will require Class II FDA approval

It will take two years to obtain It will cost “X” dollars to accomplish

Would you invest in your company ?

Building a Compelling Case

Define the status of your intellectual property (if any)

Here is the plan for what it will take to develop our patents

This is the status of the patents we will obtain Here is the timeline Here is the cost My patent attorney (advisor)

Would you invest in your company?

Building a Compelling Case

Explain how you are going to deliver you product or service to market

Once our product or service is ready for the market here is how we will sell it

Distribution channels Social media Internet Conventional advertising

▪ Print▪ Radio▪ Television

Advisor?

Would you invest in your company?

Building a Compelling Case

Develop your financial model Each step in the process has costs associated with them that need to be presented in a three year financial model

Salaries Professional /consulting fees Overhead costs – rent, telephone , internet , office supplies Development cost Capital expenditures Marketing

Building your financial model is how can you clearly define your use of proceeds

It answers the questions – how much money do you need and what are you going to do with it.

Would you invest in your company?

Building a Compelling Case

Use of proceeds

Clearly explain what you are going to do with the money Overhead (salaries, rent etc)- working capital $ X Product development X Intellectual property X Marketing

X Capital cost - furniture, fixtures, computers etc X Total $ XXXX

Would you invest in your company?

Building a Compelling Case

Exit Strategy

How and when you (the investor) are going to receive your attractive return on investment

Sell or license the intellectual property you develop Sell the product or service you develop to a competitor Build an operating company that produces cash flow over time Obtain follow up rounds of financing Initial public offering (IPO)

Would you invest in your company?

Building a Compelling Case

Valuation If you obtain investment capital it will involve a valuation- how much it will cost, in

terms of ownership, for the amount of money being invested.

Another reason why building a compelling case is so important Highly subjective :

Stage of development Amount of money being invested Overall market potential Amount of risk involved Timeline on exit strategy Comfort level

Would you invest in your company?

Make it Happen !

Questions ?

This presentation is available on our website busnetwk.comDan BartleyTBIN, Inc.busnetwk.comdbartley@busnetwk.com(631) 979-0476