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FEV - Coggle Diagram
FEV
Lesson 2: Sources of Capital and Investment Rounds:
Pre-seed Stage:
Earliest stage of equity funding, when founders are usually working independently or with a small team;
Funding from friends, family, incubator, angel investor;
Typical raise up to $150k
Seed:
Seed capital is needed for further development;
Funding from angel investors or VC funds focused on early-stage investments;
Typical raise is $150k-$1m
Series A Seed:
Usually when startup has obtained some product traction & user base, and has demonstrated potential for exponential growth. Funds are usually used to scale internationally, improve and optimize product, add to operational capability, increase customer acquisition;
Usually from angel investors or VC funds.
Typical raise is up to $1m - $5m.
Series B:
Focus is to scale the startup. Capital is used to increase market share, grow the team and continue expansion.;
Usually from VC funds & from investors who led the previous rounds. Possibly some from later stage VC funds.;
Typical raise is $5m - $20m.
Sources of Capital
Equity-based Funding: Friends, Family, Angel Investment, Venture Capital
Debt-based Funding: Done quicker than equity rounds. Suitable when founder doesn't want to give up equity.
Hybrid: Convertible Notes; Startups borrow money from investors and the loan will either be repaid or converted into equity. (Predetermined by a trigger event)
Lesson 3: Know Your Numbers 1
Founder Vesting: Founding teams may fall out within a short period of time. The founder that leaves the startup may still have equity with founder vesting.
Company has the right to purchase a percentage of the founder's equity in case he/she walks away
Incentivize founders to be committed to the company for a period of time.
Runway: It is important for a startup to know their numbers, to know how long more they can sustain for, when they need to raise money, and how much to raise.
Cash Burn Formula = COGS + Change in Inventory + Expenses - (Change in accrued liabilities + Change in payables) + Capital Expenditure (Change in gross fixed asses/Change in fixed assets + depreciation expense) + Interest + Taxes
Deduct change in accrued liabilities and payables as they are expenses that have occurred, but not yet paid
Cash Build Formula = Net Sales - Change in Receivables
Net Cash Burn = Cash Burn - Cash Build
Cash Build is what the venture receives on it sales
Lesson 1: Raising Capital for Your Startup
Pros:
More money can help amplify success
Grow bigger, a lot faster
Leverages power contacts and influencers
Money can be used to improve branding
Money is critical for staying afloat
Cons:
Raising funds can be costly and time-consuming
Gives up control
Burden of owing others
Have to meet expectation of investors
The differences in money management can cause conflicts
Affects bottom line
Lesson 4: Know Your Numbers 2
Sales Forecast: Top Down Approach
TAM
SAM
SOM