FOR YOUR START-UP CEIM, 27 FVRIER 2015 Jo Van Betsbrugge, PhD - PowerPoint PPT Presentation

DES SOLUTIONS EFFICACES ET RENTABLES POUR VOTRE START-UP INTELLIGENT AND COST-EFFECTIVE SOLUTIONS FOR YOUR START-UP CEIM, 27 FÉVRIER 2015 Jo Van Betsbrugge, PhD Conseiller en Innovation - Innovation Advisor Jo.vanbetsbrugge@cnrc-nrc.gc.ca

About NRC Concierge Service Intelligent and Cost-Effective Solutions for Your Start-Up Overview of Funding Programs for Tech Companies Slide 2 of 49

About the NRC Concierge Service Launched in December 2013 Offered by NRC – Industrial Research Assistance program Free personalized guidance and advice on government innovation support programs 13 Innovation Advisors across Canada (3 in Qc) 700 client engagements in Quebec since launch Slide 3 of 49

IDEA Marketable Products Which support programs to use to turn a novel idea into a marketable product?

Partnership Model: 40+ partners, 100+ programs & resources FEDERAL REGIONAL PROVINCIAL Slide 5 of 49

Our Client Base Innovative* companies with less than 500 employees (SMEs) Any stage of the company life cycle (start- up, pre-revenue, commercial) Any stage of technology or product development (prototype, testing, validation, manufacturing, < 500 employees) Seeking funding, advice, expertise, facilities etc. *An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations. The minimum requirement for an innovation is that the product, process, marketing method or organizational method must be new (or significantly improved) to the firm. (Oslo Manual definition, 2005)

How Concierge Service Works Helping SMEs grow their business through customized guidance , advice , and referrals to the most relevant programs and services. 1-855-53 GUIDE Innovation Partner Client Advisors Programs and Contact (13 located Resources Centre across (40+ federal and Concierge provincial partners) Canada) Website • Summary Program Information • Contact Information http://concierge.portal.gc.ca Slide 7 of 49

Service de guide-expert NRC Concierge Service Success Story o Facilis Inc, Montreal: $400,000 in financing obtained through Concierge Service o "Thanks to the funding we obtained after working with the Concierge Service, we not only avoided wasting our time searching for support, but we also maximized our efforts to meet our business objectives and continue to grow through innovation .“ Alain Néron, President Facilis Inc. http://www.nrc-cnrc.gc.ca/eng/irap/success/2015/facilis.html Slide 8 of 49

Intelligent and Cost-Effective Solutions for Your Start-Up Case Studies on How to raise $1M in Non-Dilutive Funding for Your Start-Up. Slide 9 of 49

Funding Options for Start-Ups Founders, friends, family, $1,000-$50,000 crowd funding, angels Government $1,000-$500,000 programs Banks $50,000-$M VCs $1M+ Slide 10 of 49

Funding Options for StartUps Founders, friends, family, crowd funding Government Non-dilutive programs Banks VCs Dilutive Slide 11 of 49

Raising $1M without VC Money o There are 1 million SMEs in Canada o Not all *SMEs are Ventures o Most SMEs will never need or receive VC funding *Small and medium-sized business: 500 employees or less Slide 12 of 49

#VC Deals and $ by Province - 2014 Source: Canadian Venture Capital & Private Equity Association Slide 13 of 49

Alternatives to VC Money Start-Up Grants/ Competitions Research Crowd Grants funding Funding sources Debt Clients financing Tax Hiring Refunds grants Slide 14 of 49

Diagnosis Why companies don’t get funding No fundable idea No execution on idea Typical Lack of innovation Services without added value pain Lack of commitment Lack of determination points Marginal niche No business plan Single founder No employment created Running out of cash Slide 15 of 49

Diagnosis Why companies do get funding Why companies don’t get funding No fundable idea Fundable idea Prototype built No execution on idea Innovation Lack of innovation Prof/sci services Services without added value Full time employed Lack of commitment Execution Lack of determination Sizeable market Marginal niche Business plan No business plan Dedicated team Single founder Employment creation No employment created Revenues Running out of cash Slide 16 of 49

Funding Case Study #1 Minimal Viable Product (MVP) Clear monetization plan ICT Industry Team : tech + business Funding Challenges Slide 17 of 49

Funding Case Study #1 • 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 public funding programs Founders demonstrated commitment , determination and executed on their idea Slide 18 of 49

Funding Case Study #2 Life-Sciences Industry Funding R&D intensive High risk Challenges Requires vast amount of $$ Time-to-market 10+ yrs VCs come in at Phase II New funding models have No funding for early R&D been established in Quebec Very few funders in Canada  collaborative partnerships  CRO/CMO: revenue- generating service providers

Funding case study #2: Ten steps to raising $1M in non-dilutive funding. Step 1 : Read a few books about your industry, get inspired…. … and learn from past successes and mistakes. Slide 20 of 49

Funding Case Study #2 Steps 2-10 $1M (non-dilutive, $150K 24 months) $30K ? $50K ? ? $150K ? $50K ? $125K ? $216K ? $130K ? $150K ? Slide 21 of 49

Funding Case Study #2 Pre- First Working Equipment R&D Marketing revenue revenues capital loans YEAR 2 YEAR 1 $150K $30K CED $50K grants SR&ED $150K (IRAP, CSBFP EQ) $50K SIJ $125K IQ 5 months $216K boot- CLD strapping $150K equity Slide 22 of 49

Funding Case Study #2 Pre- First Working Equipment R&D Marketing revenue revenues capital loans $1M YEAR 2 YEAR 1 (non-dilutive, $150K 24 months) $30K CED $50K grants SR&ED $150K (IRAP, CSBFP EQ) $50K SIJ $125K $1M total Initial IQ financing $216K value CLD created $130K 1 st clients $720,000 public $$ $150K equity Slide 23 of 49

Funding works like a gear You want to have enough $ FFF money at each gear to FFF equity reach the speed required to get into the next one $$ 1 st partner Gov’t $$$ $$$$ Banks Slide 24 of 49

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 Commission 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/ Slide 25 of 49

Funding Case Study YEAR 1 $150K $216 $50K $125K IQ CSBFP CLD SIJ DEBT financing $541,000 $200K , CLD, unsecured CLD 24 month moratorium $50K , BMO, personal loan $16,000 BMO/SIJ Loan guaranteed by SIJ Young Promoter $525,000 grant, CLD debt $125K , BMO loan BMO/IQ Loan guaranteed by IQ CLD: Centre local de développement $150K , BMO equipment loan BMO/IC SIJ: Société d’investissement jeunesse Loan guaranteed by IQ: Investissement Québec IC: Industry Canada Industry Canada

Funding Case Study YEAR 1 Advantages of DEBT financing  Non-dilutive $200K, CLD CLD  Often comes with moratorium on repayment of principal amount $50K, BMO/SIJ BMO $ 525,000  Limited personal guarantees (gov’t loans) debt $125K, BMO/IQ BMO  Pressure from banks to perform keeps you on track with your business plan BMO  Relatively inexpensive to obtain, quick $150K, BMO/IC decision turnaround from financial institutions  Many 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’ Slide 27 of 49

Funding Case Study: The First Year $525,000 in loans in year 1 Reasons why this start-up could borrow $500K in Year1? Slide 28 of 49

Funding Case Study: The First Year First YEAR 1 Pre-revenue First revenues investments A year of intense bootstrapping… that validated the B2B business model Key success drivers: Maximized every seed $ ( bootstrapping ), diligent $$ management Create early successes (first products & 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