Cosi102

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### Let's look at our destination

* Nov 12 (ish): <a href="/content/topics/homeworks/hw-active-102/250_hw_102_proj_stage2_new/">Stage2: Term Project Stage 2</a>
* Dec 3 (ish): In class presentations
* Dec 10 (ish): <a href="/content/topics/homeworks/hw-active-102/300_hw_102_proj_stage3_new/">Term Project Final Reports</a>
* Dec 10 (ish): <a href="/content/topics/logistics/cosi102a_final_deliverables_manifest/">Cosi102a Final Deliverables</a>
* Dec 18 (ish, tentative): <a href="/content/topics/syllabus/cosi102a_presentation_content_tips/">Cosi102a Presentations Content and Delivery</a>

At that point you will have a complete business plan for your product/service. You will have designed it, validated it, priced it, test marketed it, etc.

<div class="callout callout-small">
  <span class="callout-badge">NB</span>You are not actually building it (in case you were still unsure!
</div>

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### Grading Questions

* All your work has been and will continue to be scored on a Meets, Does Not Meet and Exceeds Expectations
* You don't need to have 100% Exceeds to get an A
* Four categories of work will be weighted according to the <a href="/">Cosi102a 2024 Syllabus (printable)</a>
* Overall meaning of the letter grades is according to Brandeis Registrar: <a href="/">Cosi102a 2024 Syllabus (printable)</a>

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<h2 id="startup-funding">Startup Funding</h2>

<ul>
  <li>You need money to pay salaries and other expenses</li>
  <li>You don’t have revenue, or you don’t have enough profit</li>
</ul>

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<h3 id="where-might-money-come-from">Where might money come from?</h3>

<ol>
  <li>Friends and Family</li>
  <li>Consulting/Work on the side</li>
  <li>Angels - Individuals or in groups (e.g. Walnut or Common Angels)</li>
  <li>Venture Capital - Organized as funds - two sided (e.g. North Bridge or NEA)</li>
  <li>Incubators/Seed funding companies (e.g. Y-Combinator or TechStars)</li>
  <li>Crowdfunding (e.g. KickStarter)</li>
  <li>(Banks)</li>
</ol>

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<h3 id="what-stage-is-your-business">What stage is your business?</h3>

<ul>
  <li>These are not set in concrete, but they are typical</li>
  <li>Key parameters are: How much is being invested, and at what valuation</li>
</ul>

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<h3 id="stages">Stages</h3>

<ul>
  <li>Pre-seed:
    <ul>
      <li>Idea, maybe a prototype, no revenue</li>
      <li>1 to 5 founders</li>
      <li>Friends and Family, Angels, Incubators</li>
      <li>$10K to $100K investments</li>
    </ul>
  </li>
  <li>Seed: Prototype, maybe some revenue, no profit
    <ul>
      <li>1 to 5 founders</li>
      <li>Angels, Incubators, Seed Funds</li>
      <li>$100K to $1M investments</li>
    </ul>
  </li>
  <li>A-Round: Product, some revenue, no profit
    <ul>
      <li>5 to 20 employees</li>
      <li>Super-Angels, VCs</li>
      <li>$1M to $10M investments</li>
    </ul>
  </li>
</ul>

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<h3 id="angels-super-angels-micro-vcs">Angels, Super Angels, Micro VCs</h3>

<ul>
  <li>Generally invest their own money</li>
  <li>(Contrast VC who invest other people’s money)</li>
  <li>Decision making process is less formal and more intuitive</li>
  <li>Investment amounts are smaller</li>
</ul>

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<ul>
  <li>A “firm” that stands between two constituencies</li>
  <li>Limited Partners (LPs) and Startups</li>
</ul>

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<h3 id="limited-partners">“Limited Partners”</h3>

<ul>
  <li>Organizations like Universities or pension Plans</li>
  <li>Who need to “manage” a large sum of money</li>
  <li>They allocate portions of their funds to different investment types</li>
  <li>One of the investment types is “venture capital”</li>
</ul>

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<h3 id="venture-capital-as-a-investment-class">Venture capital as a “investment class”</h3>

<ul>
  <li>Considered high risk and very long term</li>
  <li>Startups and other businesses who need money</li>
  <li>New teams looking to raise capital</li>
  <li>Previously funded teams who need more capital</li>
  <li>Existing companies who are established and need more capital.</li>
</ul>

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<h3 id="value-add-of-vc-firm">“Value add” of VC firm</h3>

<ul>
  <li>Locating the best investments into a portfolio of investments</li>
  <li>Managing the portfolio companies for best outcome</li>
  <li>Over 7 years goal is
1. 10% companies are 100+x successes
1. 40% companies do “ok”
1. 40% fail outright</li>
  <li>VC pools “Limited Partner” funds into numbered Funds</li>
  <li>Each VC will choose an appropriate size fund.</li>
</ul>

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<h3 id="what-is-the-process">What is the process?</h3>

<ul>
  <li>Rounds of investment</li>
  <li>How valuation changes</li>
  <li>Term sheets</li>
  <li>Liquidation preferences will turn your hair grey.</li>
  <li>Founders have an idea - investors have money</li>
  <li>It’s a contract between founders and investors</li>
</ul>

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<h3 id="valuation">Valuation</h3>

<ul>
  <li>What is the company worth - what would it cost for me to buy it from you?</li>
  <li>Like any asset, it’s a negotiation (like a house)</li>
  <li>It’s simple arithmetic but it is confusing</li>
  <li>Pre-money - what is your company worth before the investment?</li>
  <li>Post-money - Note that this is equal to pre-money + amount invested</li>
  <li><a href="https://docs.google.com/a/brandeis.edu/spreadsheets/d/1e40QxrBat3WOoZ0kMV9Omd6MUius4JUaqSUvIamzILc/edit?usp=sharing">Let’s work an example in google
sheets</a></li>
</ul>

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<h3 id="rounds-of-financing">Rounds of financing</h3>

<ul>
  <li>What is a round</li>
  <li>How does it end? Liquidity Event</li>
  <li>Seed/Angel, A-Round, B-Round, … IPO or Acquisition</li>
</ul>

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<h3 id="what-you-negotiate-over">What you negotiate over</h3>

<ul>
  <li>Valuation and Investment amount are the key parameters</li>
  <li>How term sheets turn into “deals”</li>
  <li>What’s a seed deal?</li>
  <li>Should you or shouldn’t you?</li>
  <li>What are VC firms really?</li>
  <li>General and Limited Partners</li>
  <li>Why do people love/hate VCs?</li>
</ul>

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### Key Requirements

* Develop a plan that balances capital/time/milestones
* Decide what need to do now, and what can be deferred
* Define your financing milestones
* Determine how much capital to raise for your first milestone
* Ensure you position yourself for the next financing, ideally at a step-up

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<h2 class="shadow p-3 bg-white rounded">Thank you. Questions?<img class="img-fluid w-100" src="https://picsum.photos/800/100.jpg" /> <small> (random Image from picsum.photos)</small></h2>