This document discusses financial planning and resource generation for startups. It defines financial planning as creating a comprehensive overview of financial goals and steps to achieve them. The objectives of financial planning are to determine capital requirements, capital structure, and frame financial policies. The importance of financial planning is that it ensures adequate funds, balance between inflows and outflows, and stability. The types of investors discussed are angel investors, public funding agencies, venture capital firms, private equity firms, strategic investors, and banks. Finally, the document outlines various options for startup fundraising, including funding the idea yourself, crowdfunding, friends and family, loans, and competitions.
This document discusses financial planning and resource generation for startups. It defines financial planning as creating a comprehensive overview of financial goals and steps to achieve them. The objectives of financial planning are to determine capital requirements, capital structure, and frame financial policies. The importance of financial planning is that it ensures adequate funds, balance between inflows and outflows, and stability. The types of investors discussed are angel investors, public funding agencies, venture capital firms, private equity firms, strategic investors, and banks. Finally, the document outlines various options for startup fundraising, including funding the idea yourself, crowdfunding, friends and family, loans, and competitions.
This document discusses financial planning and resource generation for startups. It defines financial planning as creating a comprehensive overview of financial goals and steps to achieve them. The objectives of financial planning are to determine capital requirements, capital structure, and frame financial policies. The importance of financial planning is that it ensures adequate funds, balance between inflows and outflows, and stability. The types of investors discussed are angel investors, public funding agencies, venture capital firms, private equity firms, strategic investors, and banks. Finally, the document outlines various options for startup fundraising, including funding the idea yourself, crowdfunding, friends and family, loans, and competitions.
This document discusses financial planning and resource generation for startups. It defines financial planning as creating a comprehensive overview of financial goals and steps to achieve them. The objectives of financial planning are to determine capital requirements, capital structure, and frame financial policies. The importance of financial planning is that it ensures adequate funds, balance between inflows and outflows, and stability. The types of investors discussed are angel investors, public funding agencies, venture capital firms, private equity firms, strategic investors, and banks. Finally, the document outlines various options for startup fundraising, including funding the idea yourself, crowdfunding, friends and family, loans, and competitions.
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Chapter 5 : Financial Plan and Resource
Generation
-Financial Plan Definition
-Objectives of Financial Planning -Importance of Financial Planning -Types of Investors Learning Objectives:
• Demonstrate understanding of the Financial Plan
• Determine the Importance of Financial Planning • Identify the Objectives of Financial Planning Financial Plan Definition
• is a comprehensive overview of your financial goals and
steps you need to take to achieve them. • gives a clear vision of the overall operating income and expenses of the business to distinguish if the company will gain profit and will be successful in the business world. Financial Planning -is the process of estimating the capital required and determining its competition. -It is the process of framing financial policies in relation to procurement,investment and administration of funds of an Objectives of Financial Planning
Financial planning has got many objectives to look forward
to: a.Determining capital requirements–This will depend upon factors like cost ofcurrent and fixed assets; promotional expenses and long- range planning. Capitalrequirements have to be looked with both aspects: short-term and long-termrequirements. b.Determining capital structure–The capital structure is the composition ofcapital, i.e., the relative kind and proportion of capital required in the business. Thisincludes decisions of debt-equity ratio, both short-term and long-term. Objectives of Financial Planning
c.Framing financial policieswith regards to cash control,
lending, borrowings, etc d.A finance managerensures that the scarce financial resources are maximallyutilized in the best possible mannerat least cost in order to get maximum returnson investment. Importance of Financial Planning
Financial planning is process of framing objectives,
policies, procedures, programsand budgets regarding the financial activities of a concern. This ensures effective andadequate financial and investment policies. The importance can be outlined as: 1.Adequate funds have to be ensured. 2.Financial planning helps in ensuring a reasonable balance between outflow andinflow of funds so that stability is maintained. 3.Financial planning ensures that the suppliers of funds are easily investing incompanies which exercise financial planning. 4.Financial planning helps in making growth and expansion programs which helps inlong-run survival of the company. 5.Financial planning reduces uncertainties with regards to changing market trendswhich can be faced easily through enough funds. 6.Financial planning helps in reducing the uncertainties which can be a hindrance togrowth of the company. This helps in ensuring stability and profitability in concern Importance of Financial Planning
The primary objective of doing business is to make money,
a technopreneur willprobably look for investors that could provide them with capital investment to run or tostart the business idea that they had generated during the idea generation phase. Mostprospective investors are not looking for an opportunity to support the financial plan of aspecific person or groups. It is precisely advisable that those prospective investors willrecognize that the technopreneur have a passion for what they are doing. Types of Investors The six different investors types, ordered by expected time of encounter from earliestto later fundraising stages, include: 1.Angel investors-Angel investors are individuals willing to make high-riskinvestments in early-stage ventures. Typically, these individuals have hadsuccessful entrepreneurial experience in the areas of investment they consider.They usually are motivated by their desire to stay engaged in their past area ofsuccess but are not willing to follow the tough lifestyle they experienced duringtheir entrepreneurial days. Types of Investors
2.Public funding agencies-Public funding agencies with
the mandate and authorityto fund business ventures to achieve economic development, environmental,cultural, or social policy objectives formulated by policy makers at various levelsof government are good sources of funding, particularly at the early stage. 3.Venture capital companies-These are specifically established to invest in high-risk ventures that offer potentially high returns. VCists (VCs) raise funds tocapitalize investment funds that they manage. Types of Investors
4.Private equity (PE) firms-These are specifically
established to invest inrelatively mature ventures that have at least a modest financial or operational trackrecord while still offering relatively attractive terms in an intermediate time frame(i.e., one to five years). 5.Strategic investors-They are defined by their investment intentions more than any other factors. They could be a member of any of the previous types of investorswe have discussed; however, more often they are larger companies operating orinvesting in the same industry or a Types of Investors
complementary one or market as your venture.Very often
they are not in the business of investing in smaller ventures but maybelieve an investment in your business would offer them some strategic value. 6.Banks-If you have reached a position to deal with banks, you have reachedfinancial nirvana, as banks offer the lowest costs of capital. A famous saying goes,"A bank will only lend you money when you do not need it." Startup Fundraising Aside from the six types of investors, the startup community contemplated thefollowing options to raise a capital for your startup business based on Sarath, CP, a digital strategist and growth hacking specialist worked for both startups and big brands and helpedthem to build a strong brand presence and achieve growth: 1.Funding your own idea This way of raising funds is the most common among startup's early stages.Founders or the team members put their money together startup. Professionalinvestors in the market prefer this way of raising funds. Startup Fundraising
You must have some savings or assets that would be used
for the businessstartup. Funding your own startup is one way of telling your potential investors howserious you are about this venture. Putting your money in the project shows thatyou are willingly taking the risk of putting the money that you have worked hardfor at stake, supporting your idea with the faith you have in your company. Startup Fundraising 2.Crowdfunding There are various types of crowdfunding. You have to select which one isthe best for your business such as rewards or equity-based crowdfunding. It is anexcellent way to gather funds for startups with artistic projects or even to raisecapital to finance the manufacturing of new technology at a large scale.Any option you choose this option is of low risk as if you want to put theproduct in the market and also get funds to finance your product and make it thereality. This is also advantageous to get feedback from the early adopters of yourprototypes Startup Fundraising
3.Friends and Family
One of the best places t o raise funds is from your own house. As yourfamily is well aware of your talents, they will be willing to support you regardlessof what you want to do. Family and friends are the only ones who know yourpotential and will be willing to give money to start your business.This may seem like a great way of gaining investment partners, buteverything has its drawbacks. Acquiring loans or investments from family or friends may be advantageous to some businesses as they have faith in your talentsand your success. But for others that require assistance or guidelines, angelinvestors are best way as your family might not have those experiences which areneeded. Startup Fundraising 4.Taking A Loan Another way to get your startup financed is a business loan from a bank. Itis one way of keeping the initial control of the business in your own hand. Takinga loan for startups might be healthy but only to those who have full confidence thatthe business will prosper in the first run without difficulties. Again, it depends onyou and the type of business you want to incorporate.But while considering the loan, check the interest rates and also if you havecollateral to give. Crosscheck with all the facts, whether you are able to complywith all the terms of the loan. Startup Fundraising 5.Enter Competitions For gaining publicity, you can enter competitions if you believe that youridea is capable enough. Entering theses contests will be vey helpful to you as, inone hand if you win the competition you will get asource of finance, and on theother hand, you gain publicity for your product and people will be waiting for it tohit the market (it acts as advertisements).This is a low-risk option as you get your ideas out in front of investors andif it is good, you can win the competition and get the money rewards to finance thestartup of your business to succeed. If you are not able to make it and win the cashprize, being on that competition acts as an advert for you and angel investors maycontact you to invest in your idea. Both waysit'sa win for you