This document summarizes sources of financial capital for startups in Sweden. It discusses estimating capital needs, including tangible and intangible assets. Sources of capital include grants, loans, bootstrapping, friends and family, crowdfunding, angel investors, venture capital, and later-stage options like buyouts and IPOs. Each source involves different tradeoffs in terms of control, risk bearing, equity dilution, and growth expectations. Crowdfunding can help validate the market, pricing, and build a brand or community.

1. Things to consider when
starting out (in Sweden)
Sources of
Financial Capital
Claire Ingram
Stockholm School of Economics

2. 1. Amount
of Money
Needed
2. Sources of
Capital
3.
Structuring
the Deal

3. 1. How much money do you need?
2. Sources of Capital
1. Stages of startup financing
2. Investors at various stages
3. Pros and cons of investment forms (discussion)
3. Structuring deals (Feb. 25th)
Many options, many stages

4. 1. Capital Expenditure (Capex)
• How much money do you need to get the venture off
the ground?
• Tangible assets: Hardware, computers, furniture etc
• Intangible assets: Legal costs, insurance, rent etc
2. Working Capital
• Capital needed to keep company running until it breaks
even
• Based on projections, so really just an estimate
• Often forgotten about – but is really the primary concern
of investors
How much money do you
need?

5. Month 1 Month 2 Month 3 Total
Tangible
Hardware
Computers
Intangible
Legal Costs
Rent
Insurance
Counting up Capex

6. • Most important thing is to deal with immediate risks
Money is usually tight
Team Risk
Technology
Risk
Market
Risk
Capital
Risk

7. Capitallessexpenses
Time
Working Capital:
What is ”break even”?
Starting point
Financial
Breakeven
Sustainable
Breakeven
Equity
Breakeven

8. • Financial break even point
• Covers external costs through revenue stream
• Usually measured in months
• Sustainable break even point
• Covers external costs, wages and generates some return
for the investor (~40%)
• Takes a few years, typically 1-3 years
• Equity break even point
• Repays the capital investment
• Can take many years
What is ”break even”?

9. Seed Early Mezzanine Late
Stages of Financing
Idea Business Plan Prototype Sales Profitability
Infrastructure
•Using your Capex
•Minimum Viable
Product
•Product
Cashflow
•Customer/User base
•Generating revenue
Profit
•Generating profit
(for investors and
selves)

10. Funding Possibilities
Seed
• Grants
• Loans
• Bootstrapping
• Friends and
Family
• Crowdfunding
• (Angel
Investors)
Early
• Angel Investors
• Venture Capital
• Loans
• (Crowdfunding)
Mezzanine
• Venture Capital
• Loans
• (Buy-outs)
Late
• Buy-outs
• IPOs
• Public
Placement
• Institutional
Investors
Strategic Partnerships
Customer-funded

11. Tradeoffs to consider
Control
Bear
Risk(s)
Alone
Equity
Dilution
Shared
Risk(s)
Loan
Bootstrap
Friends &
Family
Angel
VC
• Donation/Reward
• Equity
• Peer-to-peer loan
Grant
Crowd
Institutional
Investor

12. Control
Bear
Risk(s)
Alone
100 %
Sale
IPO
Private
Placement
Buyout

13. • Grants
• Depends on the terms of the grant
• But often no strings attached
• Also includes ”competitions”
• Loans
• Capital amount in exchange for interest
• May ask for personal surety
• Swedish state agencies often offer loans w/o personal surety
• Growth agnostic
• Bootstrapping
• Working on the side
• Financing through credit cards
• Customer financed
• Friends and Family
• Depends on terms – could be a loan or an equity share
• Typically growth agnostic
• Crowdfunding (get to later)
• (Angel Investors)
Seed

14. • Angel Investors
• Purchase an equity share
• Could be an individual, a team or syndication
• Invest at their discretion
• Typically expect to get involved in the business – either in
management or on the board (or both)
• High growth expectations
• Venture Capital
• Purchase an equity share
• Professional investors
• Has a pool of funds to invest – but typically more opportunities to
invest than firms to invest in
• Typically expect to get involved in the business – either in
management or on the board (or both)
• Even higher growth expectations (”Hockey stick growth”)
• Management Fees
• Loans
• (Crowdfunding)
Early Mezzanine

15. • Buy-outs
• Purchase by a large firm (Google, Ericsson etc.)
• Purchase by a Private Equity firm
• IPOs
• Initial Public Offering
• Really stringent legal requirements around transparency & disclosure
• Disclosure means that investors see firm as less risky
• Could be a way to grow business – or an exit strategy for
founders/investors
• Private Placement
Or ”exit?”
Late

16. • Doesn’t resemble the other sources as much
• (Potential) customer-financed
• Three different varieties:
• Donation/Reward, also known as ”Pre order”
• Debt
• Equity
Crowdfunding

17.  Validate market appeal
 Validate pricing
 Proof of concept
 Build a brand/community
 Finance first round of production
Reward-based NB for Tech

18. Image: http://blog.getnarrative.com/

19. Thank You!
Claire Ingram
Stockholm School of Economics
claire.ingram@hhs.se
@Claire_EBI