Raising Startup Capital

Jeffrey  Bussgang

Background Note | HBS Case Collection | February 2014

Raising Startup Capital

Abstract

Entrepreneurs typically focus their full energies on business-building. But raising capital is a core part of building a valuable business. Developing expertise in raising capital is more than a necessary evil, it is a competitive weapon. Master it and you will be in a better position to make your company a massive success. But how do you finance a new venture? In this note, I will try to help answer this question by addressing the following topics:
• Types of funding. The two major types of startup capital are equity funding and debt funding although there are a few hybrid flavors as well.
• Sources of funding. These include venture capital firms, angel investors, crowd-funding, and accelerators/incubators.
• What investors look for. Each source has a different funding process and set of criteria which you need to understand before seeking funding from that source.
• The mechanics of equity funding. Seeking and securing funding involves setting amounts, agreeing to terms, and defining relationships.

Keywords: fund raising; venture capital; venture capital term sheet; venture creation/development; venture investing; venture philanthropy; entrepreneurial finance; entrepreneurial management; entrepreneurs; entrepreneurship; Jumpstart Our Business Startups (JOBS) Act; Non-equity financing; Convertible notes; convertible debt; debt financing; Raising Capital; National Venture Capital Association; venture capital firm compensation; crowdfunding; crowd-funding; Startup; start-up; startup management; Startups; angel investors; angels; accelerator; Venture Capital; Financing and Loans; Entrepreneurship; Business Startups; Financial Services Industry; United States;

Language: English

Format: Print

27 pages

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Citation:

Bussgang, Jeffrey. "Raising Startup Capital." Harvard Business School Background Note 814-089, February 2014.

Case | HBS Case Collection | October 2019 (Revised October 2019)

C16 Biosciences: Lab-Grown Palm Oil

Jeffrey J. Bussgang and Olivia Hull

Synthetic biology start-up C16 Biosciences wants to solve a big problem: replace palm oil, a major contributor to deforestation and climate change, with a lab-grown substitute. CEO Shara Ticku has ambitious plans to supply her lab-grown palm oil to food manufacturers, who use palm oil liberally in a variety of products from ice cream to margarine. In bringing her product to market, Ticku faces a tough decision. Should she roll out the product first in the personal care market, which has lower volumes and premium prices, or go straight for food? The meteoric rise of lab-grown meat company Impossible Foods has caught the attention of an investor, who wonders if C16 should tap into excitement about lab-grown foods to raise a Series A funding round. But are there merits to starting small?

Keywords: Entrepreneurship; Venture Capital; Supply Chain Management; Corporate Social Responsibility and Impact; Mission and Purpose; Natural Environment; Environmental Sustainability; Science-Based Business; Weather and Climate Change; Social Enterprise; Business Startups; Plant-Based Agribusiness; Agribusiness; Food; Social Entrepreneurship; Globalized Markets and Industries; Goods and Commodities; Corporate Accountability; Growth and Development; Innovation Strategy; Technological Innovation; Working Conditions; Product Marketing; Product Positioning; Supply and Industry; Product Development; Production; Corporate Strategy; Agriculture and Agribusiness Industry; Beauty and Cosmetics Industry; Biotechnology Industry; Consumer Products Industry; Food and Beverage Industry; North and Central America; Boston; Massachusetts; New York (city, NY); Southeast Asia; Indonesia; Malaysia;

Citation:

Bussgang, Jeffrey J., and Olivia Hull. "C16 Biosciences: Lab-Grown Palm Oil." Harvard Business School Case 820-008, October 2019. (Revised October 2019.) View Details

Cite View Details Educators

In 2018, Initial Coin Offerings (ICOs) were an emerging fundraising method for blockchain-based projects. As the ecosystem grew, there were many open questions on regulation, pricing, and even which projects were a good fit for blockchain. However, there was already some emerging consensus on the benefits and challenges of building with blockchain and emerging best practices for Initial Coin Offerings.

In summer 2017, Victor Santos, CEO of AirFox, considered whether to pivot his startup towards a new product built with blockchain—a quickly growing technology at the time. AirFox was an early stage startup that sold Software-as-a-Service (SaaS) to small telecom companies. AirFox was generating revenue and had a pipeline of interested customers, but it was running low on cash. In addition, Santos was finding it difficult to secure further venture capital investment. In the meantime, blockchain protocols were growing in popularity in technology circles and many blockchain projects were securing investment via Initial Coin Offerings (ICOs). Santos and his team brainstormed a new business, which would launch a new blockchain currency to facilitate financial services for unbanked and underbanked customers in emerging markets via their smartphone. Santos had to decide whether to go forward with the new plan despite regulatory risk, execution risk, and vocal opposition from some employees and investors.

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Raising Startup Capital

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