Bunker Labs DC teamed up with Vets in Tech to present the ins-and-outs of seeking capital and get inside the heads of those who lend and invest.
One of the most common and frustrating challenges start-ups face is access to capital. And for veterans in particular, their military experiences do not often bring them into this area. While many veterans can relate to “end-of-year spending” in record time (legally, of course!), most have never asked others for money to build a scalable and sustainable business.
Held at the U.S. Patent and Trademark Office in Alexandria, VetCap is part of a national series of workshops to help train veteran entrepreneurs on where and how to raise capital, as well as to connect them to a network of financing sources. Our November event consisted of a 90-minute panel followed a number of pitches from local start-ups. DC’s panel featured experts across six different types of capital:
- Moderator, Kate Kohler, Principal at Korn Ferry
- Venture Capital, Christopher Steed, Managing Director at Paladin Capital Group
- Angel Investment, Doug Doan, Founder, Hivers & Strivers
- Venture Debt, Adam Soller, Director, Business Development at Oxford Finance
- Marketplace Lending, David Bann, VP of Sales and Business Development at Streetshares
- SBA Loans, Craig Heilman, Director of Veterans Programs at SBA.
Here are some of the nuggets we heard from our panel:
The first step of successful fundraising for your business is determining the right target audience
All capital providers have different profiles of companies they will fund. Deciding who you’ll approach for raising capital depends on: the size and stage of your business, your business sector, your path to profitability, and how much you need to raise.
Not All Funding is the Same. Here’s What Each Type Looks Like:
- Venture Capital (VC): invests for a minority share of stock in your company; usually preferred stock security; typically $3-30 million; will be very active in your operations, typically invests over 5-8 years and exits upon IPO or acquisition
- Angel: Generally three types of angels: 1) friends & family, 2) organized angel groups (Angel Capital Association maintains a list on its website), and 3) accredited platforms; usually a “simplified” version of the equity a VC buys or a loan that converts to equity when the company raises its next financing round.
- Venture Debt: This is debt financing for venture equity-backed companies that lack the assets or cash flow for traditional debt financing, or that want greater flexibility. Generally structured as a three-year term loan (or series of loans), with warrants for company stock.
- Peer/ Marketplace Lending: “Crowdfunding for debt.” Replaces the bank with individual lenders and investors. The StreetShares model is 1) Shark Tank: borrower “pitches” to investors (online picture and paragraph), 2) eBay: investors bid/compete to lend; Combine best offers into single loan
- Crowdfunding: a new approach to raising capital for new and existing projects/businesses by presenting offerings to a large number of contributors or investors, typically over the internet. Gives entrepreneurs an opportunity to attract funds through social media, affinity groups, industry portals.
- S. Small Business Administration (SBA): Equity financing including Guaranteed Loan Programs (Debt Financing), Bonding Program (Surety Bonds), Venture Capital Program
Here are the Types of Companies that Each are Looking to Invest In:
- Venture Capital: Companies with the potential to grow rapidly (50-100%+ per year) that are targeting a large market (usually $500 million or more). Companies that are creating a new market or disrupting a big, existing one. Fast growth, productive, high margin.
- Angel: Most likely looking for high-growth companies with a great team and traction.
- Venture debt: Often tech companies with strong management teams who have raised a large seed or Series A round with reputable investors. Looking for serial entrepreneurs with a track record of success, strong management teams, and the ability to execute. Also like companies that have reputable investors and well-known funds that offer more than just money.
- Peer/ Marketplace Lending: Any small business/startup with: at least 1 year in business, some revenue, principal with reasonable credit. Looking for companies that have generated revenue, are creditworthy and have a great story.
- Crowdfunding: Varies by stage of development – Crowdfunding outlets are developing for all stages. Looking for good leadership, a clear idea and ask, and a clear strategy.
- S. Small Business Administration (SBA): Like all lenders, SBA is looking for candidates with the 3 c’s: credit, character, and capacity. Looking for planning, creativity, ethic and preparation.
For the final portion of the evening, the panel listened to pitches from a number of start-ups to include: Bunker Labs DC start-ups SRV’D, Snowcreek Consulting, RECON and locals Steptoe Group, LLC, Pair, MATBOCK, and ReVest.
“VetCap was a great event. The panel was top-notch and did a great job explaining the “how” and “why” behind what investors are looking for. The opportunity to pitch and connect with local investors was well worth it,” said Snowcreek Consulting Partner Suzanne Dougherty.
We look forward to co-hosting our next VetCap event in fall 2016. For those who are interested in future sessions like VetCap, consider becoming a member of Bunker Labs DC to learn more from similar experts and founders. Please contact Mary Iafelice at [email protected].