The Investment Deal：投资交易.pptVIP

The Investment Deal Dr. Stan Abraham MHR 423 Spring 2010 Stages of Financing Early-stage financing (highest risk) Seed capital – to prove the concept is viable Startup capital – to make the business operational Expansion financing (lower risk) Second-stage financing – first commercial sales Third-stage financing – rapid expansion Fourth-stage financing – to go public Seed Capital Highest risk (no assurance of success, long time before revenues are achieved) Sources typically include relatives and entrepreneur’s own capital Needed typically for RD To prove the concept To develop a working prototype VCs won’t invest at this stage Biotech companies were an exception Startup Capital Typically funded by venture capitalists or angel investors They require ROIs of 40-200% High ROI required in part to offset an average 80% failure rate Proceeds typically used for Marketing (expansion) Operations or production (expansion) Continued RD Staffing Subsequent-Stage Financing Typically provided by venture capitalists, investors, investment banks, corporations Multiple investors common (to share risk when investment required is too large ) Required ROIs in the 25-100% range Proceeds typically used for marketing, systems, new product development, expansion, and brand development Equity Financing Company must be valued first (value is often estimated) so a value can be placed on the shares owned by the investor The investor gets An equity stake in the company (percentage is negotiated) A seat on the board of directors Investment does not have to be paid back Risk is borne by the investor(s) Investment is for a limited time (about four years) Investment-Deal Terms Capital requested Percentage of the company given in exchange Uses of the proceeds Exit strategy (how would the investment be recouped and when?) Other conditions For example, stock buybacks based on achieving agreed upon performance milestones Will an Investor Invest? Depends on how attractive the deal is Depends on how s