For the last 6 month, you have been thinking to start a business.
The only problem you have is, you don’t know what business to start.
One day, on your way to college, an idea strikes your mind.
You pull out your phone and write it down, you rush to your home and start planning.
Everything looks perfect, you know how to turn your idea into multi-billion dollar company.
Congratulations.
But its too early to celebrate because you don't have the capital to start.
You gather your family members, and you explain to them the idea hoping that they will invest
in the company.
Everyone thinks you are crazy, except your uncle, he decides to bet on you.
10 thousand dollars in exchange of 20 percent of the company.
it might not seem much but its actually a lot.
Because your uncle just valued your idea that's not proven yet at 50 thousand dollars.
So you register your company, issue 100thousand shares, and your uncle gets 20 thousand of
them.
You start building your website and designing your product.
In a few months, you run out of cash and you need to raise more money.
Unlike previously, where you simply had an idea.
Now you have a concept to show.
So, instead of going to your uncle again, now you can do something different like talking
to some the big guys.
such as Angel investors.
Angel investors are usually the rich dudes who are looking for innovative ideas or young
entrepreneurs to invest in.
Something like sharks in the shark tank.
It's not easy to convince these guys to throw money into your business, because statistically,
9 out of 10 businesses fail.
And you have to prove to them why you are an exception.
After talking to multiple angel investors.
Luckily, you could get one of them on board.
But first, you have to agree on the valuation.
There is pre-money valuation and post-money valuation.
it's not as difficult as it sounds.
Pre-money valuation is how you value the company before receiving the investment.
And post-money valuation is pre-money valuation plus the investment.
The higher the pre-money valuation, the less portion of the company the investor is going
to take.
You enter into a negotiation and you convince the investor to throw 1 million dollars into
your business, with 2 million dollars post-money valuation.
So the investor is going to take 50 percent of the company (1/2).
And your shares will get diluted together with your uncle ones.
That doesn’t mean, you are going to have fewer shares, the company will simply issue
another 100 thousand shares for the investor.
So, Now there are a total of 200K shares and your stake is 40%.
With a million dollar, you rent an office, hire some graphic designers, engineers, and
specialists to complete your product.
Finally, everything is ready, you are about to lunch your product, app, service, whatever.
But guess what, you are out of cash.
And you still need a marketing budget and salespeople so you decide to raise some more
money.
You go for a series B.
This time, you meet some VCs or Venture Capitalists.
They are not your typical angel investors.
These are dudes with MBAs and work in Venture Capitalists firms, who take other peoples
money and invest in companies such as yours.
Anyways, after multiple negotiations, they decide to bet on you.
Since you already have a team and a product to launch, your company hopefully now worth
more.
Lets the VC offers you a 10 million dollar investment with 20 million dollars post-money
valuation.
You find that offer fair and you accept it.
The company issues another 200 thousand shares and everyone’s stake gets diluted again.
Since the VC just purchased 50% of the company.
In case you are wondering.
No one has lost money so far.
In fact, everyone just got richer.
The angel investor, for example, had 50% of 2 million dollars when he invested in the
company.
Now he has 25% of a company that worth 20 Million dollars (which is 5 Million dollars).
In fact, your stake worth now 4 Million dollars.
Anyways you can go for Series C, D and so on.
Few years have passed.
Congratulations you have made it.
Your idea turns out to be a success.
Your business is finally making money.
Remember, everyone who has invested in your company has been waiting for you to grow big
enough so that they can cash out.
Especially your uncle who’s 10K investment now worth millions.
You have two options, you either get sold to one of the giants of the industry like
Instagram did.
Or you go public like Tesla.
And that's known as IPO - Initial public offering.
It's just another way to raise funds and issue shares, but this time, anyone can buy your
shares.
They are open to the public.
In fact, people can buy and sell your shares among themselves in the stock market.
Of course, we have missed many things in this video, but its the short oversimplified version
of how you raise money for your business.
If you are an entrepreneur and you are looking to start your business, now you know where
to get the money from.
But what's also important is you need to have an online presence and that's why you should
use HOVER.
Because Hover makes purchasing a domain easy and simple.
And that's exactly why I use Hover.
In fact, You don't have to waste your time figuring everything on your own.
Because They have the best in class customer support team who will help you with everything
you need.
Whatever domain extension you are looking for, you can find it with hover because they
have over 400 domain extension, so you will definitely find what will fit your business.
On top of that, you can create customized email addresses using your domain to make
your business more professional.
And you get all that for 10 percent off using the link Hover/proactivethinker.
Make sure you give them a try.For now, thanks for watching and I will catch you in the next
one.