Equity Financing for Scaling Companies

WPEO Connections Lunch with the Experts Today’s Guests

Virginia Almendarez Carolyn Rodz Geri Stengel StartUp Coach Tech Founder President IFundWomen Small Business Advocate Ventureneer, LLC Alice AGENDA

12:00pm Welcome & Introductions

12:05pm A Conversation with Virginia Almendarez, Startup Coach, Ifund Women Carolyn Rodz, Tech Founder, Small Business Advocate, Alice

Moderated by Geri Stengel, President, Ventureneer LLC

12:35pm Q & A facilitated via Zoom Chat Room Everything You Wanted to Know About Financing But Were Afraid to Ask

April 14, 2020

Presented by Geri Stengel Your Business Goal Will Shape Your Financing Choices

• Small business • High growth • Scaling company

• The stage of your company • The size of the market you are targeting • The potential of your offering • How fast do you want to grow? • How much money you need? • When will you reach profitability? • What will you use the money for?

Seed Startup Early Growth Sustained Growth

Reg A+, Mini IPO ✓ ✓ Venture Capital ✓ ✓ Angel Investors: Offline or Online ✓ ✓ Alternative financing ✓ ✓ ✓

Loan CDFI CDFI, Direct Lender, SBA Bank, SBA, CDFI, Credit Union, Alternative Finance Bank, SBA, Alternative Finance Reg CF, Intrastate Crowdfunding ✓ ✓ Rewards-based Crowdfunding ✓ ✓ ✓ ✓

Incubators/Accelerators ✓ ✓ Grants (SBIR, STTR, and local eco ✓ ✓ dev agencies/Competitions) Kiva ✓ ✓ ✓ Credit Cards ✓ ✓ Friends & Family ✓ ✓ Self ✓ ✓ ✓ ✓

High Grants Competitions Personal Savings Friends & Family

Mortgages Bank Loans SBA Loans CDFI Loans Accelerators + Incubators - Fees

Rewards Crowdfunding

Reg CF Affordability

Legend

Accelerators - Equity $ With Risks Credit Cards Angels Alternative Finance Venture Capital $ With Benefits

Low Accessibility High

• Free money • Restrictive • Time and effort • Slow • Highly competitive • Strings attached

Photo: Nicolas Picard on Unsplash

• Free money • High-quality advice • A time to reflect • Bragging rights • Practice makes perfect • Time and effort

• Motivated by love not profit • Greater flexibility and lower terms • Formalize the relationship and terms • Can you face this person at Thanksgiving if you lose their money? • Do not give too much equity away at the early stage, as it will make it more difficult to attract later stage investors

• Some provide money • Skills development • Access to mentors, investors, and customers • Risk management advice • Motivation and emotional support, especially through peers • Support after the program ends

• Equity financing: Shares in exchange for money. ROI through acquisition or IPO • Angels: Accredited investors — net worth $1 M+. Or, income $200,000+. It’s the angel’s money being invested • Venture capital: Limited partners invest in a fund. Fund has a thesis. It’s other people’s money being invested

• Target a large, lucrative market • Address a big market opportunity • Project a maximum return on investment • Need outside money to scale • Have market traction • Differentiate yourself from your competition

Photo by Nina Uhlíková from Pexels

✓ × • Less financial risk for you • Giving up ownership • Business expertise and and control of company connections • Time and effort • No monthly payments

• Referrals from trusted sources, such as the founders, investors, or lawyers • Demo days and pitch competitions • Angel club meeting • Trade conferences • College alumni investor groups • Online platforms, such as AngelList, CircleUp, Gust, OurCrowd, and SeedInvest • The Fundery Database of VCs predominantly investing in women

• Put together a top-notch team • Be prepared to give up a board seat • Connect personally • Be coachable • Show your passion

• Lines of credit • Term loan • Credit cards • Mortgage ‒ personal • And more

• Credit score • Character • Capital • Capacity • Collateral • Conditions

https://we.nyc/master-your-money/babson-tool/

✓ × • Maintain ownership of • Repayment your business • Need for cash flow • Tax deduction • Cost of capital varies by source

• Kiva — no interest • Banks — traditional and community • Credit unions • CDFIs • Alternative lenders • Online lenders • Crowdfunding

Fund underrepresented small businesses • Women • Minorities • Rural communities • Low income

• Provided by banks, CDFIs, credit unions, and alternative lenders • Partially guaranteed by the US Government • Need to have cashflow • Strong plan with projections and assumptions • Rejected by a bank • Takes a longer time to get approved

• Merchant Cash Advance: Is when a financer provides money in return for a percentage of the company’s future credit card sales. • Revenue Cash Advance: Are like merchant cash advances, except for companies that don’t do much in the way of credit card sales. In this case, companies pay back the financier through a direct deposit of a relatively small amount daily. • Receivables Based Financing: You can borrow against either their entire accounts receivable balance or individual invoices. Receivables based financing is popular because once you get approved, you can get funding immediately whenever you need to borrow, and because the interest rates are usually lower than merchant or revenue cash advances. • Accounts Receivable Factoring: Factors buy your invoices at a discount, often 5%, and then your customer pays the factor directly when the invoice is due. The implied annual interest rate can be high with accounts receivable factoring, but the financial technology now available means that businesses have a lot more flexibility in choosing when and how much to borrow. • Contract financing: Is a way for your business to receive a cash advance on work you have yet to perform. It is collateralized by a contract between your company and your customer. • Equipment financing: is the use of a loan or lease to purchase or borrow hard assets for your business. This type of financing might be used to purchase or borrow any physical asset, such as a restaurant oven or a company car.

✓ × • Quick and easy application • Interest rates can be high process • You may only be able to • Funds can be available get a large loan quickly • Lenders may go out of • You can secure financing business even if you have no credit or • You may not get any subpar credit discount if you repay your • You can use the funds loan early however you see fit • There may charge hidden • You can develop a fees relationship with a lender and get lower rates over time

• Seeking funding from the people who want your product and often you’re pre-invoicing for the product • Better for companies that have products and are aimed at consumers

✓ × • Debt- & equity-free money • It takes time and effort • Insight into the market • It takes money • Validation • There are often unanticipated • Customer engagement costs • A marketing boost • Funding for companies that are pre-seed to mature • One financing option women outperform men

• Build your network first • Research which crowdfunding platform is the right fit for you • Rewards matter • Do a pitch video • Put the “Why” into your story • No one-size fits all. Experiment • Show momentum • Provide updates • Money and effort grease the wheels of a success

• Enabled by Title III of the JOBS Act in 2016 • Raise up to $1M before, during, or after a VC round from your community including Main St investors • Best for B2C companies in consumer tech, health tech, edtech, AI, AR/VR, blockchain, food & beverage, retail, and cannabis

✓ × • Engages and expands • There are quite a lot legal your user/customer base and public disclosure • Provides a marketing requirements boost • It takes quite a bit of • May provides future bandwidth from founders to fundraising leads execute a successful • Maintains company control campaign — one line on cap table (if • It takes money using a Crowd Safe), no • Some follow on funders diss voting or information rights Reg CF

• Build your network first • Research which crowdfunding platform is the right fit for you • Marketing matters • No one-size fits all. Experiment • Show momentum • Provide updates • Money and effort grease the wheels of a success

• Marketing: Elevator pitch • Financials: Statements, Assumptions • Business Fundamentals: Investor Deck, Executive Summary

1. Make financial 6. Include what’s important statements conventional and summarize the rest 2. Cover past (if available) 7. Explain your and future assumptions 3. Do monthly for first 12 8. Consult a professional months then annually for year 2 & 3 9. Ensure that numbers 4. Project realistic numbers reconcile 5. Consider several 10.Ensure that numbers scenarios reconcile

1. Be brief 5. Project solid management 2. Be organized expertise: 3. Arouse interest 6. Conclude with a call to Immediately action 4. Provide substance 7. Make Your presentation • Define the market and its tangible potential 8. Make your slides readable • Solve a problem: • Turn the problem into 9. Prepare and practice opportunity • Analyze your competition and state your advantage • Describe the business • Marketing strategy

General • The Nuts And Bolts Of Starting And Financing A Business Grants • Grants.gov — A database of all federally sponsored grants. • Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Federal agencies providing grants: Departments of Agriculture, Department of Commerce - National Institute of Standards and Technology and National Oceanic and Atmospheric Administration, Department of Defense, Department of Education, Department of Energy, Department of Health and Human Services, Department of Homeland Security, Department of Transportation, Environmental Protection Agency, National Aeronautics and Space Administration, and National Science Foundation • State and local. Best to search for grants at the state and municipal levels. Accelerators • Seed programs • University programs

Equity Financing • The Next Decade Will Bring More Venture Capital To Female Founders • Learning The Language Of Investors Enabled This Founder To Raise $15 Million Dollars • Get Backed: Craft Your Story, Build the Perfect Pitch Deck, and Launch the Venture of Your Dreams by Evan Baehr and Evan Loomis • Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson • How Female Founders Can Crack The Funding Code • What is a convertible note • The good and the ugly of convertible debt financing • SAFE vs KISS, the evolution of the convertible note • How And Why Professional Angels Invest Time In Meeting Women Entrepreneurs • 10 Ways To Win An Investment From An Angel • How Women Angels Are Good For Innovation And The Economy • Want Venture Capital? Here Are 10 Must-Haves • The Fundery: The Essential Venture Capital Database for Women Entrepreneurs • Support Strengthens For Female-Founded Companies And Venture Funds • How Women Angels Are Good For Innovation And The Economy

The Downside of Venture • How Founders Take Back Their Companies Without Angering Investors • Five Ways Founders Can Avoid Breakups With Their VCs • How To Ensure An Angel Or VC Is The Right Match For You Using Multiple Forms of Financing • How This Founder Went From Serving People With Lyme Disease To Serving The One In Three People With Chronic Conditions • Grit: The Entrepreneurial Quality Of Successful Black Female Founders • Female Founder Provides Small Loans To Help College Students Avoid Dropping Out • How To Raise Capital When Your Company Does Well By Doing Good Kiva ─ Crowdfunding Light • Raising Money With a Little Help From Your Friends Rewards-based Crowdfunding • How Your Small Business Can Raise Money From Its Community • How To Blow Past Your Crowdfunding Goal Using Female Empowerment • 8 Tips For Crowdfunding Success • Crowdfunding Is A Female Founder's Best Friend

Regulation D Rule 506(c), Title II of the JOBS Act • Stand Out in the Crowd: How Women (and Men) Benefit From Equity Crowdfunding Regulation Crowdfunding (Reg CF) • This Startup Addresses Social Distancing With An Engaging Experience For Kids And Their Relatives • The Government Shutdown Grounds A Drone-Focused Unicorn • How Reg CF Closes the Financing Gap for Women Entrepreneurs • How Your Small Business Can Raise Money From Its Community Bank Financing • Grasshopper Ain’t Your Grandma’s Commercial Bank Alternative Financing • Alternative Financing Helps Health Startup Grow • Closing The Small Business Financing Gap: Invoice Factoring Basics • Closing The Small Business Financing Gap: The ABCs Of Merchant Cash Advance • New Options Close the Financing Gap For Women Entrepreneurs In The Next Decade Revenue Based Financing (Can be an alternative to equity financing) • Finding Growth Capital Does Not Have To Be A Challenge For Female Founders • Growing Companies Have Financing Alternatives

Online Lenders • Kabbage: The Care And Feeding Of A Fintech Unicorn Community Development Financial Institutions (CDFIs) Loans • CDFI Locator • How Women Can Get The Loans Their Businesses Need • When Big And Small Business Pay It Forward, Communities Thrive • Money's There If Small Businesses Know Where To Look • Affordable Financing from a Trusted Source to Start and Grow Your Business • Think You Don’t Qualify for Small Business Financing? Think Again Interest Free Loans • Women Become Financiers To Disrupt The Funding Landscape For Entrepreneurs (SheEO) • How A Woman Entrepreneur Relied On Persistence And A 'SheEO Loan' To Bring Solar Energy To Haiti (SheEO) • Persistence Is The Key To Entrepreneurial Success (SheEO) • Raising Money With a Little Help From Your Friends (Kiva) Women Funding Women • Five Ways Women Will Get Women The Funding They Need In 2019 • How More Women Are Stepping Up To Fund Women Entrepreneurs In 2018

• http://www.forbes.com/sites/geristengel/ • @ventureneer • http://www.linkedin.com/in/geristengel • http://www.facebook.com/Ventureneer • [email protected]

Why smart women are crowdfunding For women who have big ideas, we’re here to make them happen.

IFundWomen is a startup funding platform providing access to capital through crowdfunding and grants, expert business coaching on all the topics entrepreneurs need to know about, and a network of women business owners that sparks confidence, accelerates knowledge, and ignites action. A HOLISTIC APPROACH TO FUNDRAISING

Coaching Creative Connections Crowdfunding + Grants WHAT IS CROWDFUNDING?

Crowdfunding is when you raise small increments of money, from lots of people that you know, that adds up to just enough money to achieve a specific goal. WHY SMART WOMEN ARE CROWDFUNDING?

1 Prove demand 5 Raise pre-seed round

2 Build prototype 6 Build buzz + awareness

3 Pre-tail product/service 7 Don't want venture capital

4 Drive sales + marketing 8 Avoid going into debt THE IFUNDWOMEN METHOD It's all about the prep

PITCH NETWORK REWARDS ACCOUNTABILITY HONING MAPPING STRATEGY TRACKER

1 2 3 4

a clear, concise pitch know who is going to the products, services, stay on task, every single that explains the problem buy your product and content you are day of your campaign you are solving and your or services going to sell solution SEEKING ALTERNATIVE SOURCES OF FUNDING

School budgets alone could not fund our dance program, so we needed to raise funds in order to continue our assemblies.

— MARISA HAMAMOTO AVOID DEBT OR GOING OUT OF BUSINESS

We needed to keep our business open and grow our programming.

— CLAIRE WASSERMAN Now, go get funded.