Michael Gold Managing Director/CEO Crimson Capital Corp. February 2012

1. Financing Innovation
Michael Gold
Managing Director/CEO
Crimson Capital Corp.
February 2012
Copyright © Crimson Capital Corp. 2012

2. Obstacles
Entrepreneurs and innovators are key to economic growth and job
creation. But they often face obstacles in accessing the financing they
need to start and/or grow their businesses, including:
• Financial Institutions and investors (FIs) view them as more risky
• FIs view this finance as more costly
• FIs often require high levels of collateral and/or guarantees
• FIs usually require historical financial statements and a track record of
profitability, and/or prior experience successfully starting and running
a business
• Finance for entrepreneurs and innovators is usually very expensive in
interest rates or required returns on investment
• Investors require involvement in the business if not control
• Banks typically do not finance entrepreneurs and innovators
Copyright © Crimson Capital Corp. 2012

3. Types of Finance
• Equity
– Own equity
– Retained earnings (accumulated profit)
– Partners/Shareholders
• Quasi Equity
– Convertible debt
• Debt
– Overdraft
– Lines of credit
– Term loans/installment loans
– Purchase order finance, receivables finance, factoring
• Leasing
• Grants
Copyright © Crimson Capital Corp. 2012

4. Sources of Finance
• YOU!
– Savings, personal loans, housing loans
• The 3 F’s:
– Family
– Friends
– Fools
• Donors/foundations
• Government agencies
• Banks
• Commercial finance/leasing companies
• Angel investors, private equity investors, venture capitalists
• Suppliers/Customers/Partners
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5. Use of Funds
• Inputs, raw materials, supplies
• Packaging & graphics
• Components
• Finished/trade/commodity goods for resale
• Testing & inspection, shipping costs
• Space, utilities, insurance
• Personnel
• Subcontractors
• Services such as legal, accounting, advertising, PR, IP
• Equipment
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6. Collateral/Security
– Purchase Orders or Contracts
– Working capital assets (inventory, accounts receivable, etc.)
– Letters of Credit
– Cross checks/company blank checks/post-dated checks
– Promissory note
– Bills of exchange
– Bank guarantees
– Insurance (credit, export, etc.)
– Personal and corporate guarantees
– “Hard” assets (equipment, vehicles, fixtures, land, buildings)
– Shares in business
– Other Securities
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7. Preparation for Finance
• Product or service
• Market and customers!
• Financial projections
– Monthly!
• Concept brief/teaser
• Business plan
• Financing
– Amount, Type, Tenor, Collateral/Security
– Use of funds
– Results of financing (prototype, certification, new contracts, increased profits)
– Proposed repayment for loans or proposed exit/return for investments
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8. Pointers
• Know your market, customers and competition
• Know your costs and breakeven point
• Be able to present your business in 30 seconds (“elevator pitch”)
• Know how you will use the money from the financing
• Know concretely how the business will benefit from the financing
• Know how you will repay the loan or how the investor will exit their
investment and get their money back plus a healthy return
• Disclose everything
• Accept active involvement of financier
• Put in your own money and assets in addition to “sweat equity”
• Accept that financing will be expensive in interest or % of business
Copyright © Crimson Capital Corp. 2012