Placeholder Image

Subtitles section Play video

  • 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.

For the last 6 month, you have been thinking to start a business.

Subtitles and vocabulary

Click the word to look it up Click the word to find further inforamtion about it