Gust

DECEMBER 1, 2011

Notice what is missing from this list of priorities: The company itself – that is, a business entity, most often a corporation , that will own the entire business (however defined), issue equity to founders, take investment capital , enter into contracts, make sales, pay employees and contractors, and so forth.

IP 114

IP Intellectual Property Equity Liquidity Event 114

Gust

NOVEMBER 18, 2012

Assign probabilities to active customer sales efforts, just as sales managers do in quantifying a salesman’s forecast. If you are still losing money, skip ahead to the cost approach. Calculate replacement cost for key assets (cost approach). Calculate replacement cost for key assets (cost approach).

Valuation 187

Valuation Pre-Money Valuation NPV Intellectual Property 187

Gust

MARCH 9, 2014

This combination will almost certainly get your plan tossed by potential investors, who understand all too well the need and cost for marketing in today’s environment. Viral marketing costs real money these days, which usually means adding at least an extra zero to budget estimates. Get exposure for your expertise.

Marketing 146

Marketing SEM Viral Social Media 146

Gust

APRIL 9, 2014

Rather more common is the practice of “evergreening” employee options, in which employees are given one or more additional option grants once their original grants have fully (or partially) vested.

Dilution 150

Dilution Equity Vesting Stock Options 150

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. As soon as you bring in investors, they force you to plan for an exit (merger or sale) in three to five years.

Bootstrapping 176

Bootstrapping Startup Merger Salary 176

Gust

MAY 29, 2012

Tell me what it costs to produce one unit, what the channel pays for it (if channels are relevant) or what the buyer pays for it, what it costs to ship, and so on. . Most plans are pretty good about estimating direct costs but bad about underlying expenses. By far the best validation of a plan is actual sales made already.

Business Plan 174

Business Plan Forecast Channel Cost 174

Gust

AUGUST 5, 2012

Explain in terms your mother could understand, and quantify the “cost-of-pain” in dollars or time. Marketing, sales, and partners. Describe your market penetration strategy, sales channels, pricing, and strategic partnerships. I’ll skip the basics here, and highlight only key elements that investors focus on: Define the problem.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Gust

JULY 10, 2012

Nothing validates a new business like actual sales. If you don’t have the product to sell yet, cook up a deal for pre-sales. Find somebody to write you a written promise of sales and contracts as soon as you’re ready. . Watch your costs. Sell Something. Offer huge discounts. Put it on kickstarter if you can.

Bootstrapping 165

Bootstrapping Valuation Restful Sales 165

Gust

AUGUST 19, 2012

Explain in analogies your mother could understand, and quantify the “cost-of-pain” in dollars or time. Marketing, sales, and partners. Describe marketing strategy, sales plan, licensing, and partnership plans. What is the planned exit strategy (IPO, merger, sale, including likely candidates)? Exit strategy.

Elevator Pitch 146

Elevator Pitch Exit Strategy Burn Rate Merger 146

Gust

AUGUST 12, 2012

Equally important, marketing and sales people should be able to identify benefits and marketing strategies, set prices, and validate a business model. Show the timeline, milestones, costs, and people required to produce the product or service. Business model, executive team, marketing & sales, financials, and funding.

Product 150

Product Business Plan Differentiation Business Model 150

Gust

OCTOBER 11, 2011

For example, “I just patented a new cell-phone technology that will double battery life for half the cost. Giving the product away, or selling below cost may make it attractive to customers, but your business won’t be attractive. This is a statement or question that piques their interest to want to hear more. About 150-225 words.

Elevator Pitch 174

Elevator Pitch Startup Differentiation Distribution 174

Gust

JULY 23, 2012

These assets often have a relatively low cost basis (e.g. original cost) – and in the cases of entrepreneurs who have founded companies, the cost basis is effectively zero – and a significant current market value that would result in large capital gains taxes if sold. The Tax Benefit. in excess of $25,000).

Stock 114

Stock Capital Gains Warrant Stock Options 114

Gust

FEBRUARY 2, 2014

During his ten-year tenure, Apple’s sales increased from $800 million to $8 billion. If you plan to become an entrepreneur, and already have business experience or an undergraduate business degree, skip the two-year delay and cost of the MBA. John Scully, former CEO of Apple. He has an MBA from the Wharton School of Business.

Entrepreneur 175

Entrepreneur Salary .Net Revenue 175

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. Exchanging equity for services is worth negotiating with legal counsel, accountants, engineers, and even sales people.

Bandwidth 155

Bandwidth Bootstrapping Equity Startup 155

Gust

NOVEMBER 29, 2011

Hockey stick sales forecasts are cool when they’re based on some justifiable logic. I always look for marketing expenses as a percent of sales, and headcount and personnel costs, and compensation for management. Well said. And to add some specific examples: I hate the high growth rates that aren’t built on detailed assumptions.

Hockey Stick 70

Hockey Stick Forecast Early Stage Finance 70

Gust

SEPTEMBER 29, 2011

For a traditional VC financing round structured as a sale of preferred stock, the best resources I can recommend are the Term Sheet Series by Brad Feld and Jason Mendelson and Startup Company Lawyer by Yokum Taku. Knowledge is power. Every installment or post in those series is a good read, and I won’t attempt to reinvent the wheel here.

Finance 178

Finance Term Sheet Preferred Stock Bridge Financing 178

Gust

NOVEMBER 22, 2011

At this stage, your startup better be selling a commercial offering, have price and cost validated, with significant customer sales and a real revenue stream. This is the realm of venture capital professional investors, with funding amounts of $1-10 million, often referred to as the “A-round,” or first institutional funding.

Venture Capital 171

Venture Capital Investment Bankers Angel Investor Initial Public Offering 171

Gust

OCTOBER 21, 2011

This metric doesn’t have to be a sales or revenue figure, of course (although those are my personal favorites); but it does have to be something solid that shows you’ve got something people want. 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

DECEMBER 8, 2011

For those of us who do it every day or every week, there is also a “ well-worn path ” involving reams of very familiar-looking documents that will take relatively little time (and therefore cost relatively little in legal fees) to prepare for a new startup. Sales contracts accounting for significant revenue.

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

SEPTEMBER 5, 2012

Angel investors don’t expect to get repaid, nor do they really want to get repaid; the return on their investment, if the startup proves a success, will come in conversion to equity followed by an eventual liquidity event (sale or IPO of the company), with a return of at least 5x or 10x the initial investment if all goes well.

Finance 134

Finance Convertible Security Equity Seed Stage 134

Gust

AUGUST 7, 2012

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. Lots of plans build sales by taking a small percentage of a huge market, but that’s never convincing. Tops-down projections.

Business Plan 172

Business Plan Sweat Equity Salary Founder 172

Gust

SEPTEMBER 17, 2014

Perhaps surprisingly, the components are NOT the traditional coding/business pieces; nor are they even coding/UI/business/sales, or whatever. This is where you find the superb Rails coder, AND the world-class information architect, AND the consummate sales guy, AND the persuasive biz dev gal, AND the brilliant CFO. Bottom line?

Coder 147

Coder Web Startup Salary 147