Alternative Sources of Funding Your Business. Presented by: Eva Brown, Director of the Access to Capital Program

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1 Alternative Sources of Funding Your Business Presented by: Eva Brown, Director of the Access to Capital Program

2 WBDC Programs Business Start-up Program Established Business Program Finance Program WBDC Annual Entrepreneurial Women s Conference Procurement Technical Assistance Center Latina Initiative

3 Objectives Crowd Funding Incubators Investors FF & A Angels Venture Capitalist Alternative Finance Companies

4 What is Crowd Funding? Describes the collective cooperation, attention and trust by people who network and pool their money and resources together usually done via Internet Allows good ideas which do not fit the pattern required by conventional lenders to attract cash Often used to finance a startup company

network and pool their money and resources together usually done via

5 How Does Crowd Funding Work? Solicit pledges of small amounts of money from individuals who are typically not professional financiers: Entrepreneurs must successfully pitch idea Can be debt (microfinance) or equity A minimum threshold can be set; pledges are voided unless it is met

typically not professional financiers: Entrepreneurs must successfully

6 Crowd Funding Is appropriate for you, if you: Have a new, creative idea Cannot get money from traditional sources Have a social enterprise Need a small amount of start-up money

7 Crowd Funding Resources Profounder Professional site, for equity & revenue share Startup Addict No niche focus Believers Fund For new mobile apps Rockethub For creative projects Quirky For inventors New Jelly For artists CoFolio For Local Small Businesses Kick Starter For creative projects Start Some Good For social entrepreneurs Peerbackers For entrepreneurs and their dreams

New Jelly For artists CoFolio For Local Small Businesses Kick Starter For creative projects Start

8 What is an Incubator? Programs designed to accelerate the successful development of business support resources and services, developed and orchestrated by the incubator and it s network Increases the success rate for the small business for the long term Can be held in technology parks, university labs and government Often sponsored by economic development organizations

services, developed and orchestrated by the incubator and it s network Increases the success

9 How Does Business Incubators Work? Businesses must apply for admission; acceptance is usually based on feasibility of business ideas and workability of business plan Programs can vary, however most set graduation requirements by benchmarks, such as company revenue or staffing levels Businesses are offered office space and shared administrative services

business ideas and workability of business plan Programs can vary, however most set

10 How Does Business Incubators Work? Most common services include: Help with business basics Networking activities Marketing assistance High-speed Internet access Help with accounting/ financial management Access to bank loans and loan funds Links to higher education resources Links to strategic partners

activities Marketing assistance High-speed Internet access Help with

11 How Does Business Incubators Work? Access to angel investors or venture capital Comprehensive business training programs Advisory boards and mentors Management team identification Help with business etiquette Technology commercialization assistance Help with regulatory compliance Intellectual property management

programs Advisory boards and mentors Management team identification Help with

12 Business Incubators Are appropriate for you, if: Are a start-up business with a lack of resources Operate within the technology sector Have a viable business plan Have the ability to bring jobs to an target area Have a great chance of success According to the National Business Incubation Association, an amazing 87% of business incubation graduates stay in business

to bring jobs to an target area Have a great chance of success According to the National

13 Business Incubator Resources Industrial Council of Nearwest Chicago One of the 1 st in the country Sandbox Industries Medical industry specialty Lightbank At Groupon headquarters, technology start-ups Chicago Fashion Incubator Residency program Kitchen Chicago Shared kitchen space Chicago Metro Business Incubator Located in Arlington Heights, IL ARCH New Business Incubator In University of Chicago Booth School of Business Edgewater Development Corporation In partnership with the City of Chicago

program Kitchen Chicago Shared kitchen space Chicago Metro Business Incubator Located in Arlington Heights, IL ARCH New

14 What is an Angel Investor A wealthy individual who provides capital for a business start-up for ownership equity or convertible debt A common second round funding source for high growth start-ups Can fill the gap between FF & A and venture capitalist

convertible debt A common second round funding source for high

15 How Do Angel Investors Work? You must successfully pitch your company An increasing number organize themselves into groups or networks to pool their capital There is no set amount from an angel Angels typically seek a potential return of at least 10 or more times within a 5 year period Angels typically look for scalable businesses

into groups or networks to pool their capital There is no set amount from an angel

16 Angel Investors Are appropriate for you, if: Your business has the potential for strong growth and a clear path towards profitability Do not have a lifestyle company such as small consulting firms, local restaurants, and retail shops Have a strong niche, mission-based business Are comfortable giving up ownership and possibly control

company such as small consulting firms, local restaurants, and retail shops Have a

17 Angel Investor Angel Investors of Chicago Resources Provides capital and non-financial resources Midwest Investor Network Local and international Hyde Park Angels Focuses on IT Cornerstone Angels Investments between $250M - $2MM Your Network!

Local and international Hyde Park Angels Focuses on IT

18 What is a Venture Capitalist? A fund that provides financial capital to earlystage, high-potential, high risk, growth startup companies usually novel technologies Venture capital firms typically comprise small teams with deep industry experience Investments are done in a pool format which allows risk to be spread-out over several companies Venture capital is a subset of private equity

companies usually novel technologies Venture capital firms typically comprise small teams with

19 How Does a Venture Capitalist Work? Several investors combine their investments into a large fund and invest in many different startup companies Take a role in the management of a company Looks to exit within 5-7 years Expects extremely high returns in excess of 40% a year

invest in many different startup companies Take a role in the

20 Venture Capitalist Are appropriate for you, if: Have a high growth company Are comfortable with giving up some control You have a capital need > $1MM

21 Venture Capitalist Resources Madison Dearborn Partners Guggenheim Partners Adams Street Partners Lincoln International Apex Venture Partners

22 Friends, Family, and Associates Can have a role in both debt and equity financing They know your integrity, past accomplishments They trust you Document!

23 Alternative Finance Microlenders Companies Provides small amounts of capital to start-up businesses, usually to $35M Can be unsecured Can be credit score driven Accion Chicago, Kiva, WBDC

24 Alternative Finance Companies Purchase Order Finance Companies A short-term commercial finance option that provides capital to pay suppliers Designed for growing businesses with limited access to working capital and/or poor cash flow Typical business include a manufacturer, distributor, or reseller The Watson Group

25 Alternative Finance Companies Factoring Companies A finance company that purchases account receivables at a discount to receive cash Evaluates your client s risk versus your financial health Can become expensive over time Blue Sky Capital, Colonial Finance Company

26 Alternative Finance Companies Leasing Companies Good way to acquire capital assets Credit score driven Little to no down payment Offered through most banks and other finance companies, i.e. GE Capital Also offered from the selling company, i.e. computer software

27 Questions??? Thank you!

BUSINESS INCUBATORS. October 2013

BUSINESS INCUBATORS. October 2013 BUSINESS INCUBATORS October 2013 Prepared By: Paul Nicolosi Thomas Keeling Hinshaw Consulting, LLC (312) 343-2940 pnicolosi@hinshawconsulting.com tkeeling@hinshawconsulting.com WHITEPAPER: BUSINESS INCUBATORS