Gust

DECEMBER 28, 2011

In the “good old days,” angels invested in seed-stage startups and teed up promising companies for subsequent venture capital financing. If the company was successful, this quickly led to an IPO – a very happy ending for the entrepreneur, the angels, and the venture capitalists. My, my…how the world has changed. The two major differences in the exit environment in the past decade are (1) the disappearance of the IPO market and (2) the rapidly increasing size of the average VC fund.

IPO 153

IPO Venture Capital Entrepreneur Angel Investor 153

Gust

DECEMBER 8, 2011

In Part I , I gave a quick summary of the who, when and why of forming and documenting a new startup company. This week we’ll delve into what , exactly, is necessary or desirable to lay a solid legal foundation for a startup to build upon. I’m reluctant to give legalistic disclaimers, but in this instance, I do need to emphasize that the material in this article is legal information , not legal advice.

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

DECEMBER 23, 2011

A gigantic percentage of startup literature concerns how to raise capital. But before you start on that PowerPoint, let’s ask this: do you really have to? Or is it still possible to bootstrap and build a company organically? Strategically, the advantage outside capital provides is obvious: you can go faster. And since speed of iteration is often the factor that separates success from failure, access to adequate cash is indeed often critical.

Intellectual Property 127

Intellectual Property Balance Sheet Dilution Bootstrapping 127

Gust

DECEMBER 1, 2011

For years there has been a pervasive opinion across the entrepreneurial landscape that the US has a shortage of capital required to startup and grow new ventures. It is suggested that companies cannot find the cash necessary to start new and exciting ventures. Furthermore during this economic downturn, we’ve heard a crescendo of voices lamenting the lack of startup funding, as communities finally recognize that new companies are the key source of job creation in this country.

SBIR 120

SBIR Startup New York City Angel Investor 120

Gust

DECEMBER 27, 2011

Due diligence should always be a two-way street. A while back, I published an article on “ Startup Due Diligence Is Not a Mysterious Black Art ,” describing what investors do to validate your startup before they invest. Here is the inverse, sometimes called reverse due diligence, describing what you should do to validate your investor before signing up for an equity partnership.

Due Diligence 119

Due Diligence Entrepreneur Offshore Angel Groups 119

Gust

DECEMBER 3, 2011

Sure, you want investors. But sometimes the outsiders most capable of helping your business are those who invest time, not money. And I don’t mean because they lend a credible name to an investor pitch: way too many entrepreneurs look at names on Advisory Board as just a way to expedite a raise. If that’s all you really expect of the Board, you’re cheating yourself as well as the investors before whom you dangled the names.

Advisory Board 119

Advisory Board Equity Naming Entrepreneur 119

Gust

DECEMBER 12, 2011

After the idea, it’s all about execution. I often hear from investors that a great idea is necessary, but not sufficient. The most important thing is a proven team , meaning one who has built a startup before, and has experience with the execution process in this domain. I’ve talked before about the best personality traits for a good entrepreneur, but I’ve never talked about the importance of process.

Cost 114

Cost Business Plan Entrepreneur Startup 114

Gust

DECEMBER 19, 2011

One of the most important questions you will be asked by potential investors is how your solution beats the competition’s, not just today, but over the three to five year life of their investment. There is no perfect answer to this question, but there are many wrong answers which will immediately jeopardize your credibility. The concept is called “sustainable competitive advantage.

Viral 98

Viral Advertising Lead Investor Revenue 98

Gust

DECEMBER 16, 2011

You can’t overemphasize the stories when you describe your business. The best business plans are stories, and the best pitches are stories. Your most important story tells how and why somebody buys your product. That buyer, not you, is the hero of the story. Explain his or her problem, how he finds you, what makes her pull money out of her wallet (or click the link, or whatever).

Exit Strategy 98

Exit Strategy Angel Investor Differentiation Audience 98

Gust

DECEMBER 20, 2011

Picture a meeting room with a lot of windows, early evening, early Spring, the Oregon landscape darkening outside. Twenty or so angel investors (me included) sit on tables arranged like a big U, with a table in the middle for a projector, and a screen in front. An entrepreneur has just finished his pitch. He’s a man about 50, clearly smart, articulate, and knowledgeable.

Angel Investor 93

Angel Investor Oregon Business Model Search 93

Gust

DECEMBER 16, 2011

Listen my children and you shall hear. Of IPO dreams once held so dear. Our forefathers’ jackpot, guaranteed to arrive. Hardly a founder now alive. Can remember that famous yesteryear. So begins, of course, one of the most famous poems of the entire startup canon. And, a bit misty-eyed, this old war veteran can actually remember the glory days: Venture capitalists would commit tens of millions for a startup to buy expensive infrastructure; hire sales and marketing teams as products were still b

IPO 87

IPO .Net Social Network Mobile 87

Gust

DECEMBER 28, 2011

One of my pet peeves in pitches is the triple whammy of absurdly high profitability projections. I’ve seen entrepreneurs promising 30, 40, even 50 percent profitability in their projections. Why triple whammy? Projecting excess profits, at rates way beyond the normal, are bad for at least three reasons: Kills credibility regarding industry knowledge and realistic projections.

Angel Investor 79

Angel Investor IPO Search Web 79

Gust

DECEMBER 6, 2011

Overheard: I love your optimism. What I don’t like is the complete lack of experience that’s causing it. Ideally, a business pitch is exciting because the business potential is exciting. Optimism ought to be a combination of potential market, product-market fit, scalability, defensibility, and management experience. Better yet, early sales, initial growth rates, proof of concept in buyers or users or subscribers or signups or something equally concrete.

Angel Investor 70

Angel Investor Early Stage Business Plan Sales 70

Gust

DECEMBER 12, 2011

Without a doubt, Birchbox is one of the hottest startups on the planet right now. They are mentioned in any print, website, or television content concerning beauty, startups, New York, great entrepreneurs, women leaders , or the next generation of IPOs. So, its almost impossible to avoid them. Obviously, that’s because they’ve done a long list of things right, most of which you can find in that endless press stream.

IPO 70

IPO Social Network Revenue Aggregator 70

Gust

DECEMBER 7, 2011

There seem to be two motivations behind the current buoyant enthusiasm in Congress over crowd funding for entrepreneurs: 1) the democratization of funding for startup companies (no longer requiring such investors be wealthy) and 2) the job creation that is expected to result from creating more startup ventures. In my earlier post, Crowd Funding – A Critique for Entrepreneurs and Investors , I listed the pros and cons of crowd funding from the perspective of both entrepreneurs and investors.

.Net 98

.Net Revenue Networking Startup 98