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Funding/Business Supports (Personal Funds (Characteristics of appropriate…
Funding/Business Supports
Funding
Why?
Cash Flow Challenges
Purchase Inventory
Train Employees
Pay Employees
Advertising/marketing cost
Capital Investment Required
Land
Buildings
Equipment
Long Product Development
Potential Years before sales
Personal Funds
Majority of founders use Personal Funds
Sweat Equity
Value of time and effort founder inputs
Friend/Family funding
Bootstrapping
Being creative/thrifty/cost cautious to save money
Examples
Obtaining payment in advance
Hiring Interns
Sharing office space
Lease equipment/building
Buying used equipment
Characteristics of appropriate businesses
Weak Cash Flow
High Leverage
Low/Moderate Growth
Unproven Management
Equity Capital
Steps to raise
Determine Amount required
Determine appropriate type of funding
Develop strategy to interest potential investors
Exchange partial ownership for funding
Characteristics of Business for Equity Capital
Unique Idea
High Growth
Niche Market
Proven Management
Elevator Speech
Purpose
Outlines Business
Steps
Opportunity/Problem
How product/service fits
Your Qualifications
Describe the market
Types
Venture Capital
Invested by Venture Capitalist Firm
Funds raised from
Wealthy Individuals
pension plans
foreign investors
Investors called
Limited partners
Venture Capitalists called
General Partners
Fund few entrepreneurial firms
Examples
AIB Seed Capital Fund
AIB Start-Up Accelerator Fund
Bank of Ireland Early Stage Equity Fund
NCB Ulster Bank Diageo Fund
Business Angel
Invest personal Capital directly into startup
Halo Business Angel Partnership
Generally invest €50-€250k
Looking for companies 30-40% growth
Very difficult to find
Initial Public Offering (IPO)
Company's first sale of stock to the public
Shares of company sold on a stock exchange
Example
Irish Stock Exchange
AIM - London Stock Exchange
NASDAQ
Reasons
Way to raise equity capital for funding
Raises a firms public profile
Easier to attract
High level Customers
High Level Business Partners
Liquidity Event
Investors can recoup investment
Enables the company to grow
Debt Financing
Getting a loan
Characteristics of Business for Debt Financing and Bank Investment
Strong Cash flow
Audited Financials
Good Management
Healthy Balance Sheet
Other Sources
Vendor Credit
Business gets credit, can pay at a later date
Factoring
Business sells accounts to third party for direct cash
Crowdfunding
People pool money to support start up
Get an amenity in return
Example Kickstarter
Peer-To-Peer Lending
Financial transaction between individuals
Peer to peer lending network
Prosper
Difficult in Ireland
Money Lending regulation
Main Source
Bank
Creative Sources
Types
Leasing
Owner allows individual/business to use property for period of time in exchange payment
Advantage
Company can use property immediately
Short Term - Relatively cheap
Can purchase item at end of lease
Modest Down Payment
Monthly Payments
Long Term - More Expensive than purchasing
Grant Programs
Government Programs to help start ups with funding
Enterprise Ireland
Provide Advice and Support in
Tech Innovation
Business Development
Internationalisation
Provide funding in
Exploring new opportunities
Company Expansion
Building international competitiveness
Research and Development
HPSU (export, innovative, 1.3m sales 3y)
Businesses > 10 people
LEO - Local Enterprise Office
Businesses < 10 people
Staff/Board from public and private section
Each board has enterprise fund
Provide advice/mentoring
Provide Financial support
Eligibility
Niche Manufacturing/Niche International service
Tourism - Overseas visitors
Innovative Projects
Examples
Priming Grant
50% of qualifying capital up to €150k
Eligable Costs
Capital Cost
1st year salary
rental accomodation
Utilities
Marketing Cost
Consultancy Cost
Training Cost
Feasibility Study Grant
Up to 60% of eligible expenditure up to €200K
Eligible Costs
Innovation
Research
Consultancy
Miscellaneous cost
Strategic Partners
Partnership developed to share cost of development
Benefits
Share resources
Speed up development process
Reduce Cost in different development areas
Example
Biotech firms
Partner with drug companies
Bring product to market
Using smarter decisions dependent on income and funding to save money