Jo Van Betsbrugge, PhD - Innovation Advisor [email protected]
District 3 Innovation Center February 12 2015
Raising $1M Without VC Money Bootstrapping Your Way to the Top
About NRC Concierge Service Provides personalized, expert advise
Guide small businesses and start-ups on funding programs and resources
Provide general advise to support growth
Referrals to 75+ federal, regional, provincial and local programs and industry partners
A Government Service – no cost or obligations
Contact an Innovation Advisor
In-person Consultation
Follow up e-mail & Referrals
o Not all *SMEs are Ventures
o Not all SMEs require VC funding
o There are 1 million SMEs in Canada
o Most SMEs will never need or receive VC funding
*Small and medium-sized business: 500 employees or less
Raising $1M without VC Money
#VC Deals and $ by Province - 2014
Source: Canadian Venture Capital & Private Equity Association
Bootstrapping a company with non-dilutive funding
“Bootstrapping a company with non-dilutive funding, i.e. from private foundations or public sources, is a way to create initial value and focus on the minimum viable product. Some also successfully sell their consulting or other activity related services such as clinical trial design to generate cash inflow while establishing at the same time contacts with future customers. Although not conventional for every business, bootstrapping does build great companies!” Faris Sabeti, Vice President at Comission for Technology Innovation, Switzerland
Ref: “About the Gaps in Early Stage Financing”, by Eugène Schön http://www.ctistartup.ch/en/networks/cti-picks/2012/10/02/about-gaps-early-stage-financing/
Funding sources
Start-Up Grants/
Competitions
Research Grants
Debt financing
Hiring grants
Tax Refunds
Clients
Crowd funding How to
obtain public funding?
Alternatives to VC Money
Government funding
Incorporated?
Innovation?
Full Time
Employees?
Business Plan?
Investment? Sales?
- Cost sharing - Risk sharing
Basic Table Stakes for Public Funding
Step 1 : Read a few books about your industry, get inspired….
… and learn from past successes and mistakes.
Case study: Steps to starting a company and raising $1M (non-VC) funding.
Step 3 : Start a company
Find a suitable name Incorporate Create a logo, website,… Put skin in the game!
Step 4 : Get noticed Start networking Get in the news… Get letters of support Start a funding road show (be selective)
Step 2 : Develop a business plan
Team, technology, total market How you’re going to make money? Identify funding requirements & sources of funding Get help!
Funding Case Study
$1M total financing
$720,000 public $$
$216K CLD
$125K IQ
$150K CSBFP $50K
SIJ
$30K grants (IRAP, EQ)
$50K SR&ED
$150K CED
$150K seed
Pre-revenue
First revenues
Working capital
Equipment loans R&D Marketing
$1M
$130K 1st clients
5 months
7 months
YEAR 1 YEAR 2
(non-dilutive, 24 months)
Funding Case Study
$216 CLD
$50K SIJ
YEAR 1
$125K IQ
$150K CSBFP
$541,000
$16,000 Young Promoter
grant, CLD
CLD
BMO/SIJ
BMO/IQ
BMO/IC
$525,000 debt
$200K, CLD, unsecured 24 month moratorium
$50K, BMO, personal loan Loan guaranteed by SIJ
$125K, BMO loan Loan guaranteed by IQ
$150K, BMO equipment loan Loan guaranteed by Industry Canada
DEBT financing
CLD: Centre local de développement SIJ: Société d’investissement jeunesse IQ: Investissement Québec IC: Industry Canada
Funding Case Study YEAR 1
CLD
BMO
BMO
BMO
$525,000 debt
$200K, CLD
$50K, BMO/SIJ
$125K, BMO/IQ
$150K, BMO/IC
Advantages of DEBT financing
9Non-dilutive, you maintain company ownership
9Often comes with moratorium on repayment of principal amount
9Limited personal guarantees (gov.guaranteed loans!) 9Pressure from banks to perform, to generate revenues, and respect financial ratio’s keeps you on track with your business plan
9Relatively inexpensive to obtain, quick decision turnaround from financial institutions
9Many solutions exist (incl. government)
‘Too often, young entrepreneurs dismiss debt financing as an option to fund their business, thereby missing excellent opportunities to capitalize their business’
Funding Case Study: The First Year
$525,000 in loans in year 1
How did I convince financial institutions and banks to lend money to my start-up?
Pre-revenue First revenues First
investments YEAR 1
Maximized every seed $ (bootstrapping), diligent $$ management
Create early successes (first products & services on the market, profit)
First products distributed by world-wide distributor (Traction!)
Leveraged in-house technical expertise and equipment to offer value-added services to SMEs that were in need of those services
Hybrid business model: products and services – a winning combination
Key success drivers:
A year of intense bootstrapping… that validated the B2B business model
Funding Case Study: The First Year
Bootstrapping Tips Generate revenues (sales) Maximize SR&ED Conserve cash (there will be rainy days…) Spend wisely (beware of success) Keep retained earnings in the company to pay for R&D Negotiate favorable payment terms (30, 60 days) with suppliers Make sure you get paid in time by your customers
“No matter what your industry, going it alone can be a huge challenge. But when the struggle is over and the business is running smoothly, you'll have the incomparable pleasure of knowing that you did it yourself. Those feelings of control, ownership and accomplishment are often worth more than all the VC dollars in the world”, Bootstrapping your Startup; http://www.entrepreneur.com/article/55776
• Shnarped is a social media platform that connects athletes to their fans
• Funding history: • 2011 - $35,000 co-founder cash and “sweat equity” • 2012 - $120,000 family&friends equity • 2012 - $50,000 IRAP financial contribution • 2013 - $5,800 Get Youth Working grant • 2013 - $380,000 additional equity from family, friends, angels • 2014 - $352,000 Recoupable Investment Canada Media Fund • 2014 - $80,000 SR&ED tax credit
• $1,022,800 total financing to date, with $487,800 from government funding programs
Funding Case Study
Where to find $$ for a company?
Grants, Loans , Loan guarantees, Tax credits, purchases by Fed.Gov,…
Crowd Funding
Start-Up Resources in Montreal Help with business planning, coaching, mentoring, securing investment
A Closer Look at a Few Programs
Programs that fund R&D NRC IRAP SR&ED (R&D tax credits) NSERC (college/univ. partnerships) Mitacs (internships)
Programs that fund pre-commercialization Build in Canada Innovation Program
Programs that fund marketing
Canada Economic Development Program for Qc regions
Programs for start-ups Futurpreneur Société d’investissement Jeunesse Fondation Montréal Inc BDC Start-Up Loans
o Loans for up to $15,000 to start a business. An additional $30,000 is available through the Futurpreneur/ BDC Loan Program.
o Business planning support and mentorship along with the loan.
o Loans are based on good character, credit rating, and business plan
Futurpreneur
Société d’Investissement Jeunesse
• Personal Loan Guarantee (up to $75K/promoter, $225K/company) to start or buy a business, or to acquire a significant share of of a company’s common stock
• Age limit: 18-40 • The personal loan must be fully invested in the company • Recent businesses supported: Tactus, Frank & Oak, BiogeniQ, Lito
Green Motion
Fondation Montreal Inc • Startup grants: $5,000 to $30,000 and support services • Age limit: 18-35 • Over $400,000 in grants, and a value of $250,000 in support
services per year • Application: 2 entrepreneurship contests (Feb, Sept) • Recent laureats: ReelyActive, BiogeniQ, Heddoko,
Idénergie, Tactus Scientific, Beeye, LightSpeed,…
National Research Council– IRAP INDUSTRIAL RESEARCH ASSISTANCE PROGRAM (IRAP)
o Type: Financial Contribution (non-repayable) o Application Period: Open o Competitive, based on level of technological innovation,
market potential, and management team
YOUTH EMPLOYMENT PROGRAM o Type: Grant towards first year salary (up to $20,000) o Application Period: Open o Based on qualified candidates
BUSINESS INNOVATION ACCESS PROGRAM (BIAP)
o Type: Financial Contribution (non-repayable) o 75%, up to $50,000 o Application Period: Open o Technical or Business Services, offered by public labs
and certain Not-For-Profit organizations
Scientific Research & Experimental Development Tax Credits
Revenue Canada & Revenu Québec o Type: Refundable tax credit (35% fed, 30% prov) o Application Period: Open o Free pre-project eligibility reviews for first time
SR&ED users (pre-claim service) available o R&D projects are assessed for eligibility based on
documentation and time tracking o Really not that complicated to obtain
Research Grants - NSERC NATURAL SCIENCE AND ENGINEERING RESEARCH COUNCIL - ENGAGE GRANT
o Type: Grant ($25,000) o Application Period: Open o Research Project to solve an identified technical
challenge o Based on technical challenge match with prof
IUSRA GRANT (Industrial Undergraduate Student Research Award)
oType: Coop hiring grant ($4,500) oApplication Period: Open oHire an undergraduate science/engineering
student for 16 weeks
Minimum eligibility requirements for Start-Ups: 2 years in existence, or 2 FTEs
Research Grants - Mitacs MITACS ACCELERATE PROGRAM
o Type: 50% matching grant ($7,500) o Application Period: open o Scalable 4 months research internship by a
graduate/PhD student o Based on project interest by prof/student o Any (publishable) research topic/department
MITACS ELEVATION PROGRAM o Industrial Post-Doc, up to 2 years o Application: next call: Spring 2015 o $25,000 industry partner contribution o Post-doc fellows receive stipend of at least $50K
Public Works and Government Services Canada – BCIP
BUILD IN CANADA INNOVATION PROGRAM (BCIP) o Type: Purchase of product/service (up to
$500,000) o Aim: bridge the pre-commercialization gap o Next application period: Summer 2015 o Competitive proposal process based on
level of innovation o Technology Readiness Level: 7-9 (late-
stage innovative goods and services)
Canada Economic Development for Quebec Regions Program
IMPROVE BUSINESS PRODUCTIVITY, INNOVATE, MARKET OR EXPORT
– Up to 50% of authorized costs for SMEs – Type: Repayable loan (SMEs)
• Usually unsecured • Interest-free • Possibility of moratorium (18-24 months)
– Application period: open – Average project size: $250K (marketing), $300K
(business productivity)
Business Development Bank of Canada
BDC START-UP LOAN SMEs in start-up or first 12 months of sales To qualify for financing, you must:
– Demonstrate realistic market and sales potential – Provide a solid business plan – Have experience or expertise in your chosen field – Demonstrate key personal characteristics of a successful
entrepreneur – Have a competent management team – Have a reasonable financial investment in the enterprise – Provide personal and credit references
Jo Van Betsbrugge, PhD Twitter: @jovbetsbr
Email:[email protected] Phone (514) 283-3040
National Research Council
Concierge Service 6100 Royalmount Avenue
Montreal H4P 2R2
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