Gust

NOVEMBER 2, 2011

We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors. Product Rollout or Sales. Dave Berkus is a founding member of the Tech Coast Angels in Southern California, a lecturer and educator. Quality Management Team.

Valuation 79

Valuation Pre-Money Valuation Intellectual Property Southern California 79

Gust

AUGUST 5, 2012

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it assumes at least 100M users and $50M investment. Exit strategy.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Gust

FEBRUARY 2, 2014

The company now has more than 160,000 employees and revenues of $44 billion. As an entrepreneur, she grew EBay from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue, before moving on to HP. He built an overnight competitor to the U.S. Postal Service.

Entrepreneur 175

Entrepreneur Salary .Net Revenue 175

Gust

AUGUST 19, 2012

In this section, you need to be passionate about recurring revenue, profit margin, and volume growth. Marketing, sales, and partners. Describe marketing strategy, sales plan, licensing, and partnership plans. Describe marketing strategy, sales plan, licensing, and partnership plans. Competition and sustainable advantage.

Elevator Pitch 146

Elevator Pitch Exit Strategy Burn Rate Merger 146

Gust

NOVEMBER 18, 2012

Assign probabilities to active customer sales efforts, just as sales managers do in quantifying a salesman’s forecast. Particularly valuable are recurring revenues, like subscription amounts, that don’t have to be resold every period. Every customer contract and relationship needs to be monetized, even ones still in negotiation.

Valuation 187

Valuation Pre-Money Valuation NPV Intellectual Property 187

Gust

JULY 10, 2012

Narrow the market, narrow the business offering, and shorten the time from zero to revenue. 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. .

Bootstrapping 165

Bootstrapping Valuation Restful Sales 165

Gust

MARCH 9, 2014

In fact, the average spent by Inc 500 companies for sales and marketing expense continues to hover around 10% of overall revenues. If your early-year budgets for marketing aren’t 10% of projected sales or more, plus an early kicker for setup, you are probably underestimating reality, and jeopardizing your credibility with investors.

Marketing 146

Marketing SEM Viral Social Media 146

Gust

NOVEMBER 4, 2011

Although Intermix was doing well during that period, bringing in around $75 million annual revenue, all of the explosive traffic growth was occurring at one property, MySpace – the jewel for which FIM ended up acquiring the whole Intermix crown.

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Gust

OCTOBER 26, 2014

As soon as you bring in investors, they force you to plan for an exit (merger or sale) in three to five years. In most cases there is a direct correlation between the quality of your decisions and the size of your revenue stream. All you need is a blog, Twitter, email, some business card stock, and a little creativity.

Bootstrapping 176

Bootstrapping Startup Merger Salary 176

Gust

DECEMBER 14, 2014

For example, more customer leads are predictive of more sales revenue later. Hold the lagging measures for later (results available after the fact), and focus on lead measures first (predictive of achieving a goal). Define a compelling scoreboard.

Entrepreneur 189

Entrepreneur Founder Revenue Startup 189

Gust

NOVEMBER 15, 2012

In my own portfolio I have companies that are generally perceived to be extremely successful with high profile customers and lots of sales…but they just happen to have a liquidation preference ladder of $25 million!

Seed Stage 131

Seed Stage Hockey Stick Cap Table Liquidation Preference 131

Gust

JUNE 13, 2012

But in the real world, when you get to business numbers, sales are not accounts receivable and revenue isn’t income and people who read financial projections need to know that an apple is an apple, and not an orange. . Numbers are numbers, after all.

Finance 121

Finance Revenue Sales Startup 121

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 normally means more then 30 employees, and more then $1 million in revenue. Lesser amounts remain in the angel realm. Growth stage. Exit stage.

Venture Capital 171

Venture Capital Investment Bankers Angel Investor Initial Public Offering 171

Gust

JULY 16, 2014

Your $900,000, however, is made up of your ownership in a brand new company that likely doesn’t have revenue yet, let alone profits. We split the sale proceeds 90/10, and we were retroactively proven correct in the value we had originally assigned to the company.

Stock 167

Stock Startup Matching Revenue 167

Gust

JULY 29, 2012

Other examples are recurring revenue streams, like subscription fees, or referral fees, or subcontracting where you take a percentage. Exchanging equity for services is worth negotiating with legal counsel, accountants, engineers, and even sales people. E-commerce on the Internet is a good example of this.

Bandwidth 155

Bandwidth Bootstrapping Equity Startup 155

Gust

OCTOBER 11, 2011

Outline the revenue model. Most importantly, avoid the most common mistake of turning this into a sales pitch for your product or service. Make sure you clarify how large the market is, how much money they have to spend, and a positive level of growth. The investor is “buying” the business, not the product.

Elevator Pitch 174

Elevator Pitch Startup Differentiation Distribution 174

Gust

OCTOBER 20, 2011

In 2011, the valuation of pre-revenue, start-up companies is typically in the range of $1.5–$2.5 Such comparisons can only be made for companies at the same stage of development, in this case, for pre-revenue startup ventures. As can be seen the average (mean) pre-money valuation for recent pre-revenue deals is $2.1

Valuation 146

Valuation Pre-Money Valuation Intellectual Property Technical Review 146

Gust

DECEMBER 8, 2011

Sales contracts accounting for significant revenue. In the case of revenue contracts, they help pay for the related legal work. Employment handbooks and policies. Website terms of use and privacy policies. Office and equipment leases. Strategic partnership or distribution agreements.

Intellectual Property 139

Intellectual Property Non-disclosure Agreement Delaware Stock 139

Gust

JUNE 10, 2012

Founders now routinely use their home to operate their startup until they are well into the revenue phase. Sales and marketing costs. I now see and believe business plans that budget $1K for all this, versus a previous $20K or more. Facilities and staff. No office space rental, no secretary, and no accountant are required.

Cost 139

Cost Burn Rate SEM Startup 139

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

SEPTEMBER 5, 2012

Turn the question on its head: How could it make sense to lend money to a brand new, seed-stage company with no revenue, no products, and no collateral? (You In that sense it’s more like a warrant or option with a zero exercise price.). How can this possibly make sense? You won’t see banks doing that.)

Finance 134

Finance Convertible Security Equity Seed Stage 134

Gust

MAY 24, 2012

From the point of view of a venture fund that stands to lose some or all of its investment in a portfolio company, putting up $2 million or $10 million of cold hard cash for the entrepreneur to spend building a risky early-stage, pre-revenue venture, justifies significant preferences and protections that Common Stock holders, who invest only “sweat (..)

IPO 159

IPO Equity Common Stock Stock 159

Gust

DECEMBER 31, 2012

What you need is an experienced executive, who is willing to work for equity, and will happily step aside in a couple of years when your revenues exceed $20M. High-travel sales and buyer positions. Retail sales to Gen-X and Gen-Y. Customer service. Construction and heavy labor jobs.

Advisory Board 177

Advisory Board Angel Investor Startup Equity 177

Gust

AUGUST 7, 2012

Lots of plans build sales by taking a small percentage of a huge market, but that’s never convincing. Build sales on assumptions like web traffic, channels, events, sales locations, or combinations on those. They are not measured by the quantity of impressive graphics or the size of the revenue projections.

Business Plan 172

Business Plan Sweat Equity Salary Founder 172

Gust

NOVEMBER 25, 2012

This refers to the monetization or revenue model. In sales terminology, the mechanism by which a company delivers it product to customers is called the sales channel or distribution channel. You can’t do both at the same time. Value capture pivot. The “free” model doesn’t capture much value. Channel pivot.

Silicon Valley 187

Silicon Valley Architecture Startup Channel 187