Entrepreneurial Resources

Entrepreneurs come in all shapes and sizes. Capital and resources do, too. There is a lot of jargon that occurs in the startup space that can be confusing to founders. It’s easy to recognize a need for capital or education, but not so easy to seek out the right kind of aid unless you know how to ask for what you need. The same goes for resources that an entrepreneur might seek out. The following is an introduction to start up vocabulary.

• Debt instruments relate to borrowed money (usually in a form of a loan) that need to be repaid. It requires monthly payments but does not dilute ownership.
• Equity instruments involve raising money by selling and giving up a portion of the future company to an external investor. It does dilute ownership and may result in a loss of control. Angel investors and Venture Capitalists utilize equity instruments.
• Convertible Debt instruments begin as loans from early round private investors (angels or VCs). The investors offer startups private loans with the expectation that at some point, the debt changes into equity ownership (stock) in the company.
• Incubators in Oklahoma are certified facilities that a start-up can lease for a finite period of time (typically 3 years) and often provide benefits through entrepreneurial communities, training, lower overhead, and some promotional benefit through the incubator organization and economic development agencies. Tenants at certified incubators have access to incentives like exception from state income taxes if they meet certain qualifications. Incubators vary across the state and may have commercial kitchens, manufacturing space, office space, conference areas, or even labs. Depending upon the incubator, there could be businesses that range from single person entities to lifestyle businesses with owner operators to high tech ventures.
• Accelerators provide many of the same resources as incubators, except that they take it a step farther and usually work with companies who will be seeking investors. Accelerators may organize pitches and provide services to get a startup investment ready like working with them on term sheets, due diligence, research and development, executive coaching and more. Services and introduction to investors are usually in exchange for an equity stake in the company.

Debt can take many forms. It may be a small business loan for facilities or equipment purchases. It could be a line of credit to supplement cash flow. It might even present as a credit card. There are instruments designed for both short-term and long-term need. Oklahoma is unique in the fact that there are many local financial institutions devoted to local economic success. There are also options for mezzanine or bridge financing options with some local economic development agencies and a strong network of small business development professionals. Entrepreneurs have many options to help them with business models, need projections, and more through their local technology center and agencies like REI, OSBDC, the Department of Commerce, and more.

Equity generally is better suited for ventures who intend to scale quickly and may be referred to as high growth. Investors are focused on a return for their investment and hold an equity stake in exchange for their infusion of capital. Oklahoma provides many avenues for entrepreneurs seeking investors through angel networks, public private partnerships, accelerators, and more. The important thing to consider when seeking an investor is that they are a vision match and a true partner that will provide more than just capital to ensure the venture is a success due to their portion of control as a stakeholder.

by Cara Jane Evans