What is a Startup?
     A startup is a business that is in the process of 
         developing the underlying infrastructure needed to 
         support future growth
     A startup is a business engaging in the the following 
         three basic processes:
           • Developing and refining the offering and strategy to go 
             to market
           • Obtaining initial funding to begin operations
           • Building a capable management team to handle 
             operations 
   September 2001     Chapter 12: Human and Financial Capital    2
   Relationship between Human and Financial Capital
     Human and financial capital resources can 
        influence the business planning process and, in 
        turn, be influenced by the business plan
           • Human capital resources may include entrepreneurs, 
             management team, strategic advisors and partners, and 
             logistical advisors and partners
           • Sources for financial capital include debt financing and 
             equity financing
   September 2001     Chapter 12: Human and Financial Capital   3
                   Exhibit 12-1:
                     Startup Business Investment Stages
                                                    Early Stage                                         Expansion Stage                                  Later Stage
                                                                                                               Second-
                                                                                                               Second-
                    Financing                                     Startup              First-Stage             Second-              Mezzanine                Bridge 
                                                                  Startup              First-Stage                                  Mezzanine                Bridge 
                                         Seed Stage                Startup             First-Stage              Stage               Mezzanine                Bridge 
                                         Seed Stage                                                             Stage 
                      Stages              Seed Stage             Financing             Financing                 Stage              Financing              Financing
                                                                 Financing             Financing                                    Financing              Financing
                                                                 Financing              Financing             Financing              Financing             Financing
                                                                                                              Financing
                                                                                                              Financing
                                       Validate the          Build                 Expand               Provide working      Fuel substantial       Prepare for 
                                         business concept       management             production,           capital once          growth (typically       initial public 
                    Investment           (e.g. build            team and               marketing, or         shipping products     provided to             offering, 
                    Investment
                    Investment           prototype,             complete               sales                 or providing          business that           usually 
                      Purpose            develop business 
                      Purpose
                      Purpose                                   product                capabilities          services              are at least            planned in the 
                                         plan, conduct 
                                         market research)       development                                                        break even)             next 6 months 
                                                                                                                                                           to a year
                                       Angel investors      Angel investors         Traditional VC       Traditional VC       Traditional VC       Traditional VC 
                                       Traditional VC       Traditional VC          Corporations         Corporations         Corporations         Corporations
                      Type of
                      Type of          Consulting firms     Consulting firms                                                    Buyout firms         Buyout firms
                       Type of
                     Investors         Online VC firms      Incubators                                                          Investment banks     Investment 
                     Investors
                     Investors
                                       Incubators                                                                                                        banks
                      Source:  Gold Book of Venture Capital Firms, Bob Zider, 
                              “How Venture Capital Works,” Harvard Business Review
                                                                                                1
        September 2001                                        Chapter 12: Human and Financial Capital                                                                                    4
                          Exhibit 12-2:
                          Probability of Startup “Success”
                             Number of businesses 
                                       that go from:
                                     Idea to IPO                                     6 in 1,000,000
                                                                                          6 in 1,000
                         Business Plan to IPO
                                                                                             1 in 10
                                Funding to IPO
                      Source:  Saratoga Venture Finance; High Tech Startup Pg. 8
                                                                                               2
        September 2001                                        Chapter 12: Human and Financial Capital                                                                                  5
                         Exhibit 12-3:
                         The Relationship Between Human and Financial Capital
                          Human Capital Resources                                                                 Financial Capital Resources
                                Entrepreneur                                                                                     Equity
                                Entrepreneur
                                                                                                                           Bootstrapping
                                                                                                                            Bootstrapping
                                                                                                                 Angels                    Venture Capital
                            Management Team                                                                      Angels                    Venture Capital
                             Management Team
                                                                        Business 
                                                                         Business 
                                                                         Planning
                                                                         Planning                        Corporate Ventures              Holding Company
                                                                                                         Corporate Ventures               Holding Company
                                                                         Process
                                                                          Process
                            Strategic Advisors 
                             Strategic Advisors 
                                 & Partners
                                  & Partners
                           Advisory Board
                           Board of Directors                                                                                    Debt
                           Strategic Partners
                                                                                                                                         Commercial Bank 
                                                                                                             Trade Credit                 Commercial Bank 
                           Logistical Advisors                                                                Trade Credit                      Loans
                            Logistical Advisors                                                                                                  Loans
                                 & Partners
                                 & Partners
                           Necessary: Legal council, CPA
                           Supporting: Intermediaries, 
                             Consulting Firms, Incubators
                                                                                                 3
        September 2001                                          Chapter 12: Human and Financial Capital                                                                                       6