2) Alternatives for raising money:
• Personal funds
i)Vast majority of founders contribute personal funds along with sweat equity that represents the value of the time and effort that a founder puts into a new venture.
ii)Friends and family are the second source of funds
iii)Bootstrapping is finding ways to avoid the need for external financing or funding through creativity, ingenuity, thriftiness, cost-cutting or any means necessary.
iv)Examples of bootstrapping methods:
• Preparing to raise debt or equity financing
*Two most common alternatives are:
i)Equity funding – exchanging partial ownership in a firm, usually in the form of stock, for funding
ii)Debt financing – getting a loan
Elevator speech
• A brief, carefully constructed statement that outlines the merits of a business opportunity.
• Most elevator speeches are 45 seconds to 2 minutes long.
• Preparing an elevator speech:
Sources of equity funding
• Venture capital
i) Money that is invested by venture-capital firms in start-up and small businesses with exceptional growth potential.
ii) Important part of obtaining venture-capital funding is going through the due diligence process.
• Initial public offerings
i) Company’s first sale of stock to the public.
ii) Initial public offering is an important milestone for a firm.
iii) Reasons that motivate firms to go public are:
• Sources of debt financing
i) Commercial banks
ii) SBA Guaranteed Loans
• Creative sources of financing/funding
i) Leasing
ii) Small Business Innovation Research Grants
iii) Other Grant Programs
iv) Strategic Partners
