Start-Up Guide for the Technopreneur, + Website

DAVID SHELTERS provides investment banking, business brokerage, and financial advisement services through his company, Karon Business Consulting. He is also an active participant in the local tech entrepreneurial scene, presenting at numerous BarCamps and other tech conferences. Shelters currently mentors several local software start-ups and is the in-house financial mentor at Hubba, a co-working space in the heart of Bangkok. He has over fifteen years of entrepreneurial experience as a founder, cofounder, or financial advisor to numerous tech start-ups in both the United States and Asia. Shelters has a BA in history and political science from the State University of New York at Albany, an MS in international affairs from Florida State University, and has completed the coursework for a master's in international business studies at Georgia State University. David regularly blogs at www.financeforgeeks.com.

• Preface xiiiAcknowledgments xviiCHAPTER 1 Finance for Start-Ups 101 1Fundraising Stages 1Prefunding Period 2Seed Funding Stage 3Series A Funding Stage 3Series B Funding Stage 5Risk/Return 5Types of Funding 7Private Equity 7Debt Funding 8Alternative Types of Funding 9Public Funding 12Incubator/Accelerator Programs 13Capital Structure 13Intellectual Property 17Valuation 19Asset-Based Valuation Models 20Pro Forma-Based Valuation Models 20Comparable-Based Valuation Models 21Strategic-Based Valuation 22Exit Strategy 23Summary 24CHAPTER 2 Know Your Investors 27KYI #1: Their Primary Objective Is to Make Money 27KYI #2: There Are Many Types of Investors, Each with Different Expectations and Capabilities 30Types of Investors 30Investment Criteria 35KYI #3: Prospective Investors Are Looking for Success Traits 37Skin in the Game 38Innovation 39Defined Target Market 39Value Proposition 40Commercial Viability 41Risk Mitigation Factors 42Burn Rates 43Strength of Management 43Use of Funds 44Traction 45KYI #4: Money Is Not Enough 47Know the Space 48Nonfinancial Advantages 49Alignment of Interests 49Issues of Control 51Summary 56CHAPTER 3 Business Planning from a Strategic Financial Perspective 57Value of a Business Plan 57Composition of a Business Plan 59Executive Summary 60Defined Problem and Solution 61Product/Service 63Value Proposition 63Marketing Plan 65Management Team 72Strategic Partners 74Operational and Expansion Plan 76Company Objectives 78Current Positioning and Traction 80Risk Factors 81Financials 84Exit Strategy 90Business Plan Customization 91Marketing Plan 91Operational and Expansion Plan 92Company Objectives 92Financials 93Exit Strategy 93Business Plan Rudiments 94Summary 95CHAPTER 4 Financial Planning for Maximizing Returns 97Importance of Having a Financial Plan 98Assistance in Overall Business Planning 99Ensuring the Health and Integrity of Capital Structure 101Determining Sufficient Funding Amounts 101Securing Funding in a Timely Manner 102Securing Funds on the Most Favorable Terms 104Determining Appropriate Responses to New Challenges and Opportunities 104Instilling Discipline and Maintain Focus 105Maximizing ROI upon Execution of Exit Strategy 106Formulating a Financial Strategy 106Financial Objectives 108FREE 108FREE Measurement Tools 109Financial Plan Composition 120Rules of Thumb 121Summary 122CHAPTER 5 Successful Fundraising 125Planning Funding Presentations 125Prospectus Materials 127Executive Summary 127Business Plan 127Funding Proposal 128Private Placement Memorandum 129Shareholder Letter 130Technology Brief 131Demonstrations 131Market Trends and Research Report 131Other Miscellaneous Prospectus Materials 132Different Types of Presentations 133Elevator Pitch 134Lobby (PowerPoint) Pitch 135Conference Room Pitch (Formal Presentation) 135Summary 140CHAPTER 6 Becoming a Formidable Negotiator 143Prenegotiations 144Letter of Intent 144Nondisclosure Agreement 144KYI Research and Inquiries 145Leverage 146Negotiating Capital 149Due Diligence 149Due Diligence Checklist 149Due Diligence Response 149Actual Negotiations 150Term Sheet 150Negotiation Approaches 150Best Practices and Tactics 151Points of Negotiation (Terms) 153Have a Negotiating Plan 168Concluding Negotiations 174Successful Conclusion of Negotiations 174Unsuccessful Conclusion to Negotiations 174Negotiation Postmortem 175Summary 175CHAPTER 7 Establishing an Investment-Grade Organization 179Corporate Governance 180Attributes 180Benefits of Good Corporate Governance 181Corporate Governance Best Practices 182Corporate Governance Structures 182Ethical Behaviors 189Stakeholder Relations 194Summary 199CHAPTER 8 Financial Decision Making for Optimal Performance 201Financial Decision-Making Process 202Practicing Sound Corporate Governance 202Understanding Existing and Potential Decision-Making Dynamics 203Managing Financial Expectations 206Financial Decision-Making Structures 208Establishing Appropriate Decision-Making Bodies and Procedures 209Allocating Decision-Making Authority and Responsibilities 212Placing Individual Decision Makers on Appropriate Decision-Making Bodies 216Financial Decision Making in Practice 219Strategic Financial Planning/Fundraising 219Budgeting 221Operational (Day-to-Day) Financial Decision Making 222Financial Dealings with External Parties 224Exiting 228Summary 232Afterword 235APPENDIX A Sample Financial Plan 237APPENDIX B Sample Funding Proposal 241APPENDIX C Dictums of Entrepreneurial Finance 245Glossary 251About the Author 271About the Website 273Index 275

"The book should be an eye-opener for aspiring and new technology entrepreneurs and can help you navigate the dangerous waters known as venture capital. Even better, Shelters has over fifteen years of entrepreneurial experience as a founder, co-founder as well as an advisor to numerous United States-based and Asia-based startups."—YoungUpstarts.com