Gust

OCTOBER 12, 2011

Last week , we took the plunge and began dissecting an example term sheet for a convertible debt financing round piece by piece. I’ll continue with more specific terms and wrap up next week with some thoughts about recent changes and trends for the future. Readers may find it helpful to download the sample term sheet from my firm’s website and follow along with the commentary.

Finance 107

Finance Term Sheet Pre-Money Valuation Early Stage 107

Gust

OCTOBER 24, 2011

In the world of business, you only get one chance for a great first impression. The stakes are high – you are asking an investor for money, a customer for an order, or another executive for a partnership. Badly written letters, long rambling or emotional emails, or an obvious lack of spell checking will brand you as a poor business risk before the message is even considered.

Audience 102

Audience Email Conversion Business Plan 102

Gust

OCTOBER 6, 2011

In my conversations with people in the startup world – from angel investors through entrepreneurs and employees with vast startup experience – I often hear about their perceptions of the marketing role as being pretty limited to acquisition. It is shocking to me how prevalent this POV is. I can’t count the times I heard people saying that “product development defines the product, and marketing gets the customers”.

Acquisition 87

Acquisition Marketing CPA PPC 87

Gust

OCTOBER 21, 2011

This week we move on to something near and dear to the hearts of entrepreneurs and investors alike: The exit, more formally known as a “ liquidity event.” For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for anoth

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

OCTOBER 21, 2011

Of course, the most frequent question angels hear from entrepreneurs is: what’s the one key thing investors look for in the funding process? The answer is below, but don’t cheat. You have to read #3 and #2 first. These days, a million dollars goes a very long way in startup world. So long a way, in fact, that you’ll be expected to show very concrete results with it, proof that the business is really on its way.

Early Stage 79

Early Stage Metrics Audience Revenue 79

Gust

OCTOBER 5, 2011

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. In this installment, I’ll dig into the “how” by dissecting an example term sheet based on a real deal. For those playing at home, you may find it helpful to download the sample term sheet from my firm’s website and follow along with the commentary.

Finance 79

Finance Preferred Stock Term Sheet Early Stage 79

Gust

OCTOBER 31, 2011

Oddly, perhaps, one of the most difficult decisions entrepreneurs face arises once the company begins to succeed. That’s usually when the first really “strategic” potential investors start to show up, presenting the question: sell a big chuck (or all) of the company at today’s valuation, or double down and go for the life-changing money? Very obviously, each situation has to be evaluated independently.

IPO 70

IPO Valuation Stock Partner 70

Gust

OCTOBER 14, 2011

Of course, Steve Jobs left us a lot of incredible lessons. Unfortunately, some of the really key ones, like “Be a genius”, can be tough to execute (I’ve been trying for years). But one crucial one that you can implement might be called the “Rhythm Method”: imparting a well-known beat to your product and service upgrades. Possibly the most shopworn piece of advice entrepreneurs hear these days is that constant iteration is the key to success.

Product 70

Product PR Matching Engineer 70

Gust

OCTOBER 11, 2011

You decide, after reading, which of these was a really good moment and which was really bad. Moment one: the annoying interruption. It struck me at the time as an annoying interruption, ill timed, and off point. It was just a few minutes into the pitch. She, the CEO of a fledgling pharmaceutical company with a lot of intellectual property, research, management experience, was confident, rolling through slides, and building momentum.

Intellectual Property 70

Intellectual Property Differentiation .Net Sales 70

Gust

OCTOBER 7, 2011

The Miss Universe contest was perhaps the most devastating loss of my life. Oh, not as a contestant… as an “all in” PR gamble that failed spectacularly and essentially bankrupted our startup. It was all so tempting. We had created the first portable 3D camera: a laser-bouncing device that captured an object’s geometry while a separate sensor grabbed the 2D image.

Las Vegas 70

Las Vegas Algorithm PR Internet 70

Gust

OCTOBER 11, 2011

Come one, come all, join us tonight at 9PM at the Sullivan Room. Drinks are on us!

New York 70

New York 70

Gust

OCTOBER 20, 2011

Individual accredited investors in typical angel deals put personal capital at risk for an equity share of growth-oriented, start-up companies. These angel investors generally invest $25,000 to $100,000 in a round totaling $250,000 to $1,000,000. In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 million and is established by negotiations between the entrepreneur and the angel investors.

Valuation 146

Valuation Pre-Money Valuation Intellectual Property Technical Review 146

Gust

OCTOBER 3, 2011

For a first time entrepreneur trying to figure out the arcane world of startup financing, it can be very confusing to understand the roles that different types of investors play in funding promising companies, as well as the point in a company’s life at which they enter the stage. It is not unusual to hear people refer to “angels-and-vcs” in a single breath, even though those are two very distinct groups with different attributes.

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

Gust

OCTOBER 26, 2011

As we conclude our convertible note financing series, there are assorted terms commonly seen in term sheets and deal documents that are worth touching on briefly. What seem like boilerplate provisions can be meaningful in some situations. As I’ve noted before, readers joining this series in progress may find it helpful to download the sample term sheet from my firm’s website and review the earlier posts covering the basics.

Finance 79

Finance Term Sheet Covenant Accredited Investor 79