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1 Do you really need investors? Bootstrapping vs funding Wolves Summit, Gdynia, April 2015

2 Raise or bootstrap?

3 For too many start-ups raising capital has replaced building a well-balanced business

4 Money is like gasoline during a road trip. You don t want to run out of gas on your trip, but you are not doing a tour of gas stations Tim O Really, Investor

5 Get your business off the ground How to fund operations? Bootstrap 3F s Friends & Family & Fools Owner s resources Crowd Crowdfunding platforms Public $ State & EU subsidies etc. BA & VC Business Angel & Venture Capital

6 Expectations versus Reality if you are a typical small business the odds that you will attract angel or VC investors are very low you should raise to boost growth and expansion and to optimize market timing you don t raise to validate idea, product and market the goal is to scale!

7 Expectations versus Reality The truth is that: many projects don t need investors investors don t need many projects many can launch an MVP* without fundraising *MVP = Minimum Viable Product

8 What is their common ground?

9 All are examples of successful bootstraps! All of them have became a very valuable companies without taking external capital at the very beginning

10 Successful bootstraps started 2008 with domain, basic tools & few hundred bucks all founders kept jobs to support cash profitable since its founding 2012 was valued $750m and took $100m series A investment probably cracked $1bn valuation

11 Successful bootstraps since 1996 Zoho bootstrapped itself to hundreds of millions in revenue $10m revenue in 2000 initial Family & Friends love capital grows annual revenue ca. 40% 2015 will hit $1bn revenue constantly turning down venture capitalists

12 Successful bootstraps CSN Stores founded in 2002 bootstrapped itself to over $380m in 2010 revenue in 2011 raised $165m for re-brand over $1.3bn in 2014 revenue $2.3bn valuation (IPO, raised $305m) lack of profitability nearly $150m net loss in 2014

13 You can develop a successful business without raising funds! But if you run a tech, bio, life science businesses you will need investors eventually

14 Who can bootstrap? ESCs that don t need high initial capital projects entering a high competitive market ESCs entering a low entry barrier market founders with some cash one- man band founder type

15 Finance your bootstrap Financing options Financing options 1 Personal income and savings 5 Lowest operating costs 2 Credit card, personal debt 6 Fast inventory turnaround 3 Sweat equity, barter 7 Short receivables, long payables 4 Joint utilization, sharing policy 8 Subsidy finance, love money

16 Bootstrap growth stages 4 Expansion stage 1 Start stage Financing options: personal & love $ sweat equity subsidies 2 Customer stage Financing options: first revenue and profit optimizations commercial loan business angels 3 Growth stage Financing options: growing revenue and profit commercial loan venture capital External funds: debt (loan, bonds) venture capital private equity IPO

17 Bootstrapping quick guide plan ahead with details start at home or share office don t quit job, start off part-time launch an MVP as soon as you can

18 Bootstrapping quick guide try to customize to start generating cash hire young smart engaged affordable staff outsource as much as you can and focus on important tasks

19 Right* investors are not bad!

20 Who is right for me anyway? chemistry the same vision similar expectations adding value or super passive if offering only money

21 Types of investors sharks: typical VC, sophisticated angels Best choice if you have the same goal and value definition as your investor. So you want a quick growth and scale, create and maximize value and exit sooner than later with a huge multiplier. This way potential dilution doesn t bother you.

22 Types of investors semi sharks: some VC, a lot of angels Best marriage material. This type will not only boost your growth and add value but also understand that building successful business is not only about money. So there is a big chance you will not lose control of your business at least as long as all milestones are reached.

23 Types of investors busy angels: semi passive angels investors Great, easy type if you know what you are doing. They are too busy running other businesses to constantly control you but still have time to support you and boost your growth.

24 Types of investors anti-investors: just money These are tricky. Lack of expertise and experience- easy to spot by questions they ask you or don t ask. If you are lucky they stay super passive but you are totally on your own. It is a double-edged sword so be careful using it.

25 What can you gain from the right investors? Money $ Network Speed Incentives Knowledge & experience Company image

26 Reasons you might not want investors You lose profits You lose control You lose time and focus You lose your business vision No need or no added value

27 Losing profits The old saying that 50 % of something is better than 100 % of nothing works only for business that cannot be bootstrapped!

28 Losing control Be ready to give up a large share of your business. The sooner you start raising the faster you dilute and stay with very little of your ownership.

29 Losing time and focus Fundraising is a dangerous distraction for early stage businesses Far better to spend fundraising time and energy improving and growing your business

30 Losing business vision When you take money from investors now their vision and business model become yours VC and sophis?cated angel investors have different priori?es & mo?va?ons

31 More reasons to bootstrap your business high efficiency you can grow organically better flexibility and the key advantage is a great leverage for future fundraising

32 High efficiency Bootstrapping your business you are forced to focus on generating revenue and keeping your operating cost low!

33 Organic growth Without investors on the board you are free to grow organically You can focus on chasing your vision rather than record-breaking returns for investors

34 Better flexibility Running a lean operation it is easier to stay flexible. You are not answerable to investors, you stay creative and open-minded.

35 A huge leverage When you are bootstrapped, profitable and growing company (meaning not being needy) you have a big leverage with investors.

36 Reasons you might not want to bootstrap much longer time to grow business you need large amount of capital to get started your business can fail quickly if you don t generate positive cash flows competitors can push you out of the market

37 Raise or bootstrap?

38 Should you raise from sophisticated Angel or VC investors? Bootstrap Do you run tech, bio, science etc. business? or / and NO YES Do you plan to growth and scale fast? or / and Do you want to disrupt your market?

39 Small seed round- love money, business angels, government Have you launched the MVP? or / and NO Does your business generate revenue? Launch an MVP or / and boost sale YES

40 Can your revenue stream cover the growth stage? Use government funds, commercial loans, small business loans etc. YES Bootstrap NO

41 Are you ready to share or give up a control of your business? NO You might want to reconsider YES

42 $ VC Investors Raise! 4 Angel Investors

43 Bootstrapping vs funding Bootstrapping If your market is already established and you have a lot of competitors go with bootstrapping Funding If your market is new and innovative you should develop as fast as you can and raise capital

44 No matter if you decide to raise or bootstrap, there are benefits and downsides going both ways

45 Final remarks to remember Spend and raise no more ($ and time) than you need: to reduce risk and increase valuation for the next round to achieve the next critical milestones for the particular stage of your business

46 But as much as you can to keep the market leader posi?on!

47 Final remarks to remember make sure you stay on the right track double-check you have time to build business while raising funds keep in mind that excess money kills efficiency choose investors suitable for your vision and purposes

48 Money is like gasoline during a road trip. You don t want to run out of gas on your trip, but you are not doing a tour of gas stations Anybody disagree?

49 Thank you!

50 Contact me Ewa Chronowska Partner Symfonie Capital LLC

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