Startup Professionals Musings

AUGUST 19, 2017

If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. Transition to a specialist role, plan to exit, be prepared to be pushed out, or plan to fail. The control and growth dilemma.

Hockey Stick 144

Hockey Stick Cofounder Entrepreneur Liquidity Event 144

Startup Professionals Musings

JUNE 6, 2016

Many ultimately struggle for five to 10 more years, before they achieve “overnight” success, or a liquidity event. Most entrepreneurs I know convince themselves that they can grow and sell their startup in a couple of years, and move on to their next idea. Maybe it’s time to cash out now. Exit at your peak, rather than be pushed out.

Liquidity Event 120

Liquidity Event Startup Angel Investor Entrepreneur 120

Startup Professionals Musings

JULY 19, 2013

If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback. Transition to a specialist role, plan to exit, be prepared to be pushed out, or plan to fail. The control and growth dilemma.

Founder 245

Founder Hockey Stick Cofounder Liquidity Event 245

Startup Professionals Musings

MAY 28, 2013

The only path to any return for equity investments is a liquidity event, like a merger or acquisition (M&A), or IPO. Build a path to 10x return. That’s why investors want to hear about your exit strategy. If you don’t have one, or intend to buy out investors with their own money, you probably won’t get much interest.

Liquidity Event 243

Liquidity Event Startup Equity Venture Capital 243

Startup Professionals Musings

MAY 18, 2015

Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out. Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role.

Stock 120

Stock Vesting Common Stock Founder Vesting 120

Startup Professionals Musings

DECEMBER 11, 2015

Investors need a liquidity event to get their money out. The best way to support your acquisition potential for $100 million -- or going public -- is to find a competitor who has shown it can be done. Like selling your house, there is no valuation more solid than a comparable next door.

Intellectual Property 120

Intellectual Property Liquidity Event Exit Strategy Angel Investor 120

Startup Professionals Musings

SEPTEMBER 7, 2015

Show a liquidity event and investor return at the end of the period. Don’t show projections with no red ink, implying that no funding is required, or you won’t get any investor interest. Investors don’t like funding requests to buy you a building or put money in the bank at no interest.

Liquidity Event 120

Liquidity Event Startup Initial Public Offering Equity 120

Startup Professionals Musings

AUGUST 7, 2015

Startup investments are extremely risky, primarily because the stock has no value until a future liquidity event, such as an acquisition or public offering. The entrepreneur needs to show a strategy for such an event, and a projected value and return to the investor. Potential investor return calculation and exit strategy.

Product 120

Product Intellectual Property Liquidity Event Burn Rate 120

Startup Professionals Musings

FEBRUARY 13, 2016

If you don’t plan a liquidity event, you won’t find many investors interested. How much and when do you foresee investors getting a payout? Technically, this is your exit strategy, usually a merger and acquisition (M&A) or initial public stock offering (IPO).

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

Startup Professionals Musings

AUGUST 13, 2012

These investors want to know that you are thinking about a liquidity event – when and how they will get their money out, with ROI. Attractive deals show double-digit positive growth per year, and revenues that are projected to $20M or more within five years. Exit strategy. For a family business, don’t project an exit.

Business Plan 283

Business Plan Sweat Equity Exit Strategy Intellectual Property 283

Startup Professionals Musings

MAY 13, 2011

These investors want to know that you are thinking about a liquidity event – when and how they will get their money out, with ROI. Attractive deals show double-digit positive growth per year, and revenues that are projected to $20M or more within five years. Exit strategy. For a family business, don’t project an exit.

Business Plan 290

Business Plan Sweat Equity Exit Strategy Intellectual Property 290

Startup Professionals Musings

FEBRUARY 3, 2010

Most quality advisors know that chances of a liquidity event are rare. One of the biggest myths that startups have is that you do not have to pay advisors, or you can pay them in future-value stock. What is the value of free? Stock is not adequate compensation.

Advisory Board 225

Advisory Board Startup Liquidity Event Stock 225

Startup Professionals Musings

APRIL 22, 2010

These investors want to know that you are thinking about a liquidity event – when and how they will get their money out, with ROI. Attractive deals show double-digit positive growth per year, and revenues that are projected to $20M or more within five years. Exit strategy. For a family business, don’t project an exit.

Business Plan 186

Business Plan Exit Strategy Sweat Equity Intellectual Property 186

Startup Professionals Musings

JUNE 6, 2022

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Liquidity Event 300

Liquidity Event Angel Investor SEC Accredited Investor 300

Startup Professionals Musings

MARCH 13, 2020

Define an exit strategy for investors to liquidate their share. They prefer a liquidity event such as an IPO or an acquisition by an existing large industry player, with a valuation at that time of five multiples or more of your projected revenues. Back up your projections with a simple financial model.

Liquidity Event 308

Liquidity Event Forecast Exit Strategy Bootstrapping 308

Startup Professionals Musings

SEPTEMBER 6, 2019

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Liquidity Event 224

Liquidity Event SEC Entrepreneur Accredited Investor 224

Startup Professionals Musings

SEPTEMBER 16, 2017

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Liquidity Event 184

Liquidity Event SEC Accredited Investor Angel Investor 184

Startup Professionals Musings

AUGUST 29, 2018

Payoff after a liquidity event is difficult and unpredictable. People see recent equity investors making billions by getting in early, ala Facebook and Amazon, and may not be prepared for the high probability of losing everything. Professional investors typically are accredited to at least the $200,000 level, and understand the risks.

Equity 180

Equity Due Diligence Angel Groups Liquidity Event 180

Startup Professionals Musings

NOVEMBER 1, 2013

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Accredited Investor 219

Accredited Investor Liquidity Event Stock SEC 219

Startup Professionals Musings

SEPTEMBER 24, 2012

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Portfolio 228

Portfolio Accredited Investor Liquidity Event SEC 228

Startup Professionals Musings

FEBRUARY 6, 2015

Once invested, you should expect no return until the first “liquidity” event in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public. Think long-term. It’s a lot easier to buy stock in a startup than it is to sell it.

Accredited Investor 120

Accredited Investor Liquidity Event SEC Entrepreneur 120