financing of ventures

1. On Financing of Ventures
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leading Angel Investor and a loved
mentor to many young entrepreneurs in Turkey. We have
shared it on the web for everyone’s benefit. It is free to
use but please cite Ziya Boyacigiller as the source when
you use any part of this presentation. For more about
Ziya Boyacigiller’s contributions to the start-up Ecosystem
of Turkey, please go to www.ziyaboyacigiller.com

2. Introduction to Entrepreneurship
Sabanci University
BA, MBA and EXEC MBA
2004 through 2013
Objective: to develop entrepreneurial skills that can be
helpful for the successful formation and sustainable
growth of a start-up company. Use of creativity to
achieve strong differentiation through innovation will be
emphasized. How to do successful innovation will also be
a prime course objective.

3. SubT for ZB
• Startup Financing Life Cycle

4. Start up Financing Life Cycle
• Bootstrapping
• Debt
• Alternatives
– Angels Investors
– Seed Fund
– Venture Capital
– Private Equity

5. Available Mechanisms
Startup Phase
0 – 500K TL
Early Stage
500K – 5M TL
Growth Phase
5M + TL
Public
Private
LOAN
GRANTS
INVESTMENTS
LOAN
INVESTMENT
International Mechanisms
Individuals Institutional
ECOSYSTEM
KOSGEB
TOBB
TKB
İGEME
NMCP
İKV
TOSYÖV TTGV MPM

6. Conventional Funding Mechanisms
• Financing
– Halk Bankası
– Eximbank
– TKB
– Dünya Bankası
– Kredi Garanti Fonu
• Investment
– Hazine Müsteşarlığı
– TOBB
– KOSGEB
– Halk Bankası
– TKB
– TSKB
• Low risk tolerance
•Returns are pre-calculated
• Risk minimization tools are different
• Standardized, repeatable processes
• Increased red-tape proportional to size
• Use area and conditions well defined
• Not ideal for new product or service development
and launch
• Technology commercialization requires more
flexibility

7. Banks’ Perspective

8. Problems for SMEs in working with
Convention
34%
21%
13%
12%
9%
8%
3% Collateral
Uncertainty
Financials
Success Rate
Maxed out Credit
Financial Informing
Low Credit Score
Kaynak: SME Development Survey 2006

9. RISK

10. ALTERNATIVE FINANCING MECHANISMS
• Compared to conventional mechanisms:
– Higher risk tolerance
– Uncertain return
– Flexible procedures, processes
– Welcoming framework for the development of
new technologies and ideas
– Different risk minimization tools and tactics

11. EXPECTATIONS
RISK
REVENUE
Bank
Loan
Export
Loan
Venture
Capital
Private
Equity
Institutional
Investors
Angel
Investors
Side
Loan
- Interest
- Foreseable payment timeline
- Risk Control: Collateral, Mortgage, Credit
Score
- Unknown payment terms and timeline
- Risk management: Term sheet, shareholders
agreement, protective provisions.

12. Startup Financing Life Cycle

13. Alternative Financing Mechanisms
• Angel Investors
• Venture Capital

14. Angel Investors
• High networth individuals started in 1920s
• Startup or early stage investments around 0 to
500K
• Small scale, flexible
• Investing their own capital
• High return expectations – 5x , 10x
• Investing as a group
• 2008 – In the US 57,000 companies,
totalling$30B in investments, average investment
$450K
• 260,000 registered angel investors in the US

15. Venture Capital
• SBA Regulation provided the trigger in 1950s
• Managing funds that are created by pooling funds
from individuals and institutions
• Early and growth stage, exponential growth
markets
• Higher returns – 20X – 25X – IRR focus
• New projects welcome but reject rate is 98%
• Risk management: Due diligence, agreements etc.
• 2008 in the US $29B – 2600 investments
• Return: IPO, M&A

16. What do they look for?
• Idea
• Novel, innovative, disruptive
• High growth markets
• Scalability
• Team > passion, track record, chemistry
• Execution > profitable business model as well
as well thought strategic plan

17. Operating Model
• Introduction > Networking
• Elevator Pitch > 2 minute
summary
• Executive Summary & Business
Plan
• Term Sheet
• Negotiations
• Due Diligence > 2 weeks to 6
months...
• Agreement
• Portfolio Management
• Exit

20. Differences Between C & A
• Process
• Acceptable Risk
• Risk control and minimization
• Shareholder vs. Debt
• Return expectations
• Exit

21. I just created
ice cream that
never melts!

22. I really need to find
a good investment
for all this money.

23. My ice cream is
better then others
because it never
melts.
I love ice cream.
This could be big!
I need money
to build an ice
cream plant.

24. That’s a deal!
We’ll give you
$5M for 50%
of your
company.

25. $$$
Schechter
Ice Cream

26. 1 Year Later…

27. We are selling
10 million
ice creams a day.
We need more
money to keep
growing.
Why don’t I introduce
you to someone who
can help.

28. This is great but
maybe we should
just buy the company.

29. Sweet. We just
made 20 times
our original
investment.
I’m buying my parents a
new house and donating
millions to Schechter.

30. Who knew
ice cream could
be worth so much
money.
Where
should I
invest next?