Gust

AUGUST 10, 2014

Projecting the financials should be the last step of your business plan preparation, since it assumes you already know the opportunity size, customer buying habits, pricing, costs, and competition. Here are some basic rules of thumb that every Angel or venture capital equity investor uses, to help you anticipate their reactions.

Liquidity Event 176

Liquidity Event Equity Venture Capital Merger 176

Gust

OCTOBER 15, 2014

Gust and AngelList are equity-based platforms, used by Accredited Investors to facilitate the investment of money for an ownership interest in a company. For the equity group, however, it is not uncommon (and there is no downside) to listing on both Gust and AngelList.

Accredited Investor 144

Accredited Investor Angel Investor Equity Networking 144

Gust

OCTOBER 26, 2014

Bootstrapping avoids all the cost, pain, and distractions of finding angels or VCs, and allows you to keep control and all your hard-earned equity for yourself. Every outside hire increases your cost and risk. In summary, watch your costs, trust your gut, and drive forward with all the passion in your dream.

Bootstrapping 176

Bootstrapping Startup Merger Salary 176

Gust

SEPTEMBER 5, 2012

Convertible equity? The new form of convertible security or “convertible equity” is essentially a convertible note containing most of the usual terms — except it’s been stripped of the features that would make it a loan. How to finance a new seed-stage startup? Convertible debt?

Finance 134

Finance Convertible Security Equity Seed Stage 134

Gust

DECEMBER 7, 2014

Even a small investor in the early days will take a large equity percentage, due to that pesky valuation challenge. The best partners are ones who share costs and risks. With no investors, you will work harder to find vendors who will absorb costs and associated risks for a potentially bigger return later.

Bootstrapping 191

Bootstrapping Entrepreneur Startup Burn Rate 191

Gust

SEPTEMBER 29, 2011

The first is that they are the easiest deals to bang out quickly and cost-effectively, keeping the amount of legal work and negotiation on both sides to a minimum. Others have discussed in detail the pros and cons of convertible debt vs. seed equity rounds. Let’s take it from the top: Why convertible notes?

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Gust

MAY 11, 2014

A grant is not an equity investment, so the entrepreneur doesn’t have to give up a stake in the company either. But before you conclude that your funding problems are solved with grants, you should consider the direct and indirect costs of grant funding: Grant applications are bureaucratic. Professional help costs money.

Seed Money 164

Seed Money SBIR Dilution Government 164

Gust

JULY 29, 2012

Even though the cost of commercial office space is down, you still need to sign long-term contracts, make payments up front, outfit the space, and staff it. Barter your skills or equity for services you need. Exchanging equity for services is worth negotiating with legal counsel, accountants, engineers, and even sales people.

Bandwidth 155

Bandwidth Bootstrapping Equity Startup 155

Gust

OCTOBER 11, 2012

HOWEVER, there are many other good reasons for establishing the company as a legal entity…and for doing it correctly (which should cost you $2,500 – $5,000).

Delaware 122

Delaware Stock Options Cofounder Stock 122

Gust

DECEMBER 8, 2011

Readers can anticipate my next point in continuing the analogy: It makes no more sense for a non-lawyer to prepare fundamental legal, governance, equity and intellectual property documents than it would for a patient to self-diagnose and begin taking prescription-strength antibiotics or other medications. Newco, Inc.”) Newco, Inc.”)

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

JULY 8, 2012

In the last year, there has been a resurgence of interest, some say a bubble, by both angels and VCs, in a pre-Series A kicker to identify promising startups with seed funding, before major equity has been given away. Early-stage startup. Every startup is early-stage to someone. Business accelerator.

Early Stage 177

Early Stage Finance Seed Stage Entrepreneur 177

Gust

DECEMBER 18, 2013

Note: The one significant exception to this is that Friends & Family seed rounds are usually done as Convertible Notes with a Cap, because in the absence of a professional investor (such as a serious angel or an early stage VC) the extreme likelihood is that both sides will price the deal incorrectly, and will thus cause significant problems down (..)

Valuation 150

Valuation Founder Seed Money Common Stock 150

Gust

AUGUST 19, 2012

Explain in analogies your mother could understand, and quantify the “cost-of-pain” in dollars or time. What equity is the company willing to give in return for the investment? Here are the ten slides you need: Problem and market need. Give the “elevator pitch” for your startup. Solution product & technology. Exit strategy.

Elevator Pitch 146

Elevator Pitch Exit Strategy Burn Rate Merger 146

Gust

SEPTEMBER 17, 2014

There are a million ways to do quick, easy, low-cost rounds with prices. But lawyers will charge much more for equity.” Try doing THAT with equity. So if the next round is higher they have a much lower cost of ownership than the next investors anyways. My colleague: Whoa. And so forth. Not in my experience. Employment.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Gust

DECEMBER 16, 2012

The corporate entity lends itself best to the concept of “sharing” equity required by investors, and unincorporated entities don’t get funding. In most cases, a Microsoft Excel spreadsheet is adequate, with projection formulas for revenue, costs, and cash flow over the next five years. Line up an experienced team.

Angel Investor 179

Angel Investor Intellectual Property Elevator Pitch Angel Groups 179

Gust

AUGUST 5, 2012

Explain in terms your mother could understand, and quantify the “cost-of-pain” in dollars or time. Quantify existing skin-in-the-game, by insiders and outsiders, including sweat equity and capital. The most credible sizing approach is to do your financial model first with the volume, cost, and pricing parameters you want.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Gust

DECEMBER 27, 2012

The expectation is that in an era of increasing technology and decreasing costs, you will be bringing them an operating company with at least some traction. Keep in mind that any cash you put in will remain in the company as Founders’ Equity, and will only come back to you on a successful exit in which your investors make money. [3a.

Software Review 164

Software Review Term Sheet Technical Review Angel Investor 164

Gust

OCTOBER 6, 2011

Second – timely, cost-effective customer acquisition is a matter of life-or-death to most startups. First – startups are often strained for resources and people have to divide and conquer. Rarely can teams afford to play roles beyond their own, as people are already overworked with their core responsibilities.

Acquisition 87

Acquisition Marketing CPA PPC 87

Gust

DECEMBER 22, 2013

Consider the non-cash alternatives, like offering team members equity instead of cash and bartering for services. Each of these has a cost in time an effort. From your plan, calculate the absolute minimum amount you need to make your plan work, and then buffer it by 25%. Do you have a viable plan?

Entrepreneur 184

Entrepreneur Angel Investor Bootstrapping Venture Capital 184

Gust

AUGUST 7, 2012

Sweat equity can be a problem. Projecting absurdly high profits doesn’t mean it’s a profitable business; it means somebody doesn’t understand the business well enough to know its costs and expenses. They assume a single significant lie is a tip of an iceberg. Stupid profitability. Tops-down projections.

Business Plan 172

Business Plan Sweat Equity Salary Founder 172

Gust

JULY 1, 2012

We are talking about angel investors here, meaning people who invest their own money in early-stage startups for a share of the equity. Even in today’s market, there is capital available from financial institutions at a lower cost for these purposes. Non-profit businesses.

Angel Groups 143

Angel Groups Angel Investor Early Stage Startup 143