Startup Professionals Musings

SEPTEMBER 29, 2018

Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Burn Rate 223

Burn Rate Hockey Stick Startup Salary 223

Startup Professionals Musings

OCTOBER 14, 2016

The fact is that valuations are largely set by top venture capital investors and financial firms, and they all have their own proprietary formulas for assigning value. If your new venture is still in the idea or development stages, don’t even think about a high valuation. You have to earn a billion-dollar valuation, not declare it.

Intellectual Property 120

Intellectual Property Valuation Merger Exit Strategy 120

Startup Professionals Musings

AUGUST 10, 2014

Some analysts argue that revenue drives growth, while others say user growth drives revenue. Both have worked.Google reached $1 billion in revenue within five years of incorporation, and now has a market capitalization of over $400 billion. Long-term stability requires revenue growth and profit.

Revenue 246

Revenue Entrepreneur Valuation Viral 246

Startup Professionals Musings

NOVEMBER 26, 2012

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? This is the most concrete valuation element, usually called the asset approach.

Valuation 270

Valuation Pre-Money Valuation NPV Intellectual Property 270

Startup Professionals Musings

JUNE 26, 2016

Some analysts argue that revenue drives growth, while others say user growth drives revenue. Google reached $1B in revenue within five years of incorporation, and now has a market capitalization of over $400B. Long-term stability requires revenue growth and profit. Both have worked. Traditionally, it was simple.

Revenue 145

Revenue Valuation Startup Viral 145

Startup Professionals Musings

APRIL 17, 2023

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. On the other hand, if you are a new entrepreneur, still in the idea stage, professional investors will only tell you to come back later when you have traction (customers and revenue).

Angel Investor 313

Angel Investor Intellectual Property Investment Bankers Private Equity 313

Startup Professionals Musings

DECEMBER 1, 2017

Every business needs to develop a revenue model even before a product. The alternatives range from giving the product away for free (revenue from ads), to pricing based on costs, to charging what the market will bear (premium pricing). Revenue is a percentage of every transaction. Facebook spent $150 million getting started.

Revenue 166

Revenue Affiliate Advertising Retention 166

Startup Professionals Musings

NOVEMBER 21, 2016

Declare a $10 million valuation with no revenue or customers. The average valuation for Angel investments is about $2.5 Annual revenue projections exceed $100 million before fifth year. Annual revenue projections exceed $100 million before fifth year. million, so early numbers in that range may be negotiable.

Intellectual Property 120

Intellectual Property Valuation Technical Review Equity 120

Startup Professionals Musings

OCTOBER 5, 2014

Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Burn Rate 262

Burn Rate Hockey Stick Entrepreneur Salary 262

Startup Professionals Musings

AUGUST 25, 2018

Those that do it right also have the unprecedented opportunity to join the elite ranks of 250 unicorns (relatively new companies with a current valuation of over $1 billion). These days you can create a C-corp or LLC online quickly at a low cost, to serve you well in signing partners, intellectual property, investors, and revenue.

Technical Cofounder 184

Technical Cofounder Intellectual Property Silicon Valley LLC 184

Startup Professionals Musings

SEPTEMBER 6, 2010

Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” How much is NewCo worth to investors at this point (pre-money valuation)? This is the most concrete valuation element, usually called the asset approach.

Valuation 234

Valuation Pre-Money Valuation NPV Startup 234

Startup Professionals Musings

SEPTEMBER 30, 2013

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. Get a real customer and real revenue. Funding for pre-revenue startups used to be the domain of angel investors, but they have moved up-stage. Only real results count. Attract a well-rounded team.

Intellectual Property 281

Intellectual Property Entrepreneur Sweat Equity CTO Hire 281

Startup Professionals Musings

FEBRUARY 21, 2012

Pay people with equity or future revenue. Another one to avoid cash burn for software development is a contract for percent of future revenue. That will position the startup to raise a venture round at a favorable valuation. Focus precious cash only on producing revenue for your startup business. Great strategy.

Burn Rate 232

Burn Rate Startup Salary Equity 232

Startup Professionals Musings

OCTOBER 18, 2023

Even if you don’t have a formal board of directors, it pays to have trusted advisors who will give you regular unbiased feedback on your team strengths and weaknesses, financial and operating ratio norms, and an external view of current company valuation issues. Your valuation and salability depends on the credibility of this effort.

Exit Strategy 248

Exit Strategy Valuation Acquisition Metrics 248

Startup Professionals Musings

FEBRUARY 15, 2023

Most new teams are geographically dispersed these days anyway, so paying rent for an office should be differed to later stages when revenue is plentiful. Favor profitability over revenue and user growth. You may not be acquired for 10-times revenue, but quick exits and public offerings are no fun.

Equity 349

Equity Hockey Stick Bootstrapping Sweat Equity 349

Startup Professionals Musings

DECEMBER 11, 2022

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Startup Professionals Musings

JULY 22, 2020

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. On the other hand, if you are a new entrepreneur, still in the idea stage, professional investors will only tell you to come back later when you have traction (customers and revenue).

Angel Investor 370

Angel Investor Intellectual Property Investment Bankers Private Equity 370

Startup Professionals Musings

JANUARY 28, 2011

Pay people with equity or future revenue. Another one to avoid cash burn for software development is a contract for percent of future revenue. That will position the startup to raise a venture round at a favorable valuation. Focus precious cash only on producing revenue for your startup business. Great strategy.

Burn Rate 231

Burn Rate Startup Salary Equity 231

Startup Professionals Musings

SEPTEMBER 14, 2016

Deferred payments start with stretching the payables period but, more importantly, include giving employee equity in lieu of a higher salaries and negotiating vendor deferred payments out of future revenues. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity.

Burn Rate 120

Burn Rate Hockey Stick Startup Salary 120

Startup Professionals Musings

JUNE 26, 2013

It’s higher risk, but higher return, to pick the big winners early, before Angels have set unreasonable valuations and restrictive terms. More sources of funding for early-stage startups may drive up valuations on these deals, which will lower the returns for the Angels and super-Angels willing to do these deals.

Angel Investor 231

Angel Investor Entrepreneur Early Stage Silicon Valley 231

Startup Professionals Musings

AUGUST 31, 2012

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. Get a real customer and real revenue. Funding for pre-revenue startups used to be the domain of angel investors, but they have moved up-stage. Only real results count. Attract a well-rounded team.

Intellectual Property 260

Intellectual Property Sweat Equity CTO Hire Fractional CTO 260

Startup Professionals Musings

JANUARY 9, 2021

Even if you don’t have a formal board of directors, it pays to have trusted advisors who will give you regular unbiased feedback on your team strengths and weaknesses, financial and operating ratio norms, and an external view of current company valuation issues. Your valuation and salability depends on the credibility of this effort.

Exit Strategy 434

Exit Strategy Valuation Acquisition Metrics 434

Startup Professionals Musings

JANUARY 7, 2013

Your friends and family are really the only answer until you have a significant revenue stream. Use friends, family, and angels, if possible, to get a product, revenue, and customers first before the VC connection. To make this work, you will need an initial valuation of at least $5M.

Venture Capital 252

Venture Capital IPO Elevator Pitch Initial Public Offering 252

Startup Professionals Musings

NOVEMBER 13, 2021

Until I read the classic book “ The Business of Sharing, ” by Alex Stephany, who founded JustPark (current valuation estimated at £80M), I too had no idea of the scope of opportunities, and the 300 or more players already out there. Usually these are revenue-generating e-commerce sites, or have the potential to be revenue-generating.

Cuba 316

Cuba Venture Capital Community Valuation 316

Startup Professionals Musings

APRIL 24, 2011

Your friends and family are really the only answer until you have a significant revenue stream. Use friends, family, and angels, if possible, to get a product, revenue, and customers first before the VC connection. To make this work, you will need an initial valuation of at least $5M.

Venture Capital 233

Venture Capital Revenue Elevator Pitch Silicon Valley 233

Startup Professionals Musings

JUNE 17, 2011

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. Get a real customer and real revenue. Funding for pre-revenue startups used to be the domain of angel investors, but they have moved up-stage. Only real results count. Attract a well-rounded team.

Intellectual Property 253

Intellectual Property Sweat Equity CTO Hire Fractional CTO 253

Startup Professionals Musings

AUGUST 25, 2017

They come at the early stage while a startup has no revenue or valuation, so professional investors are hard to find. In today’s fast moving market, the basic product development cost and time are critical to survival. Quick low-cost design and fabrication alternatives are extremely valuable.

Technical Cofounder 153

Technical Cofounder Intellectual Property Wiki Cofounder 153

Startup Professionals Musings

MAY 18, 2020

Most new teams are geographically dispersed these days anyway, so paying rent for an office should be differed to later stages when revenue is plentiful. Favor profitability over revenue and user growth. You may not be acquired for 10-times revenue, but quick exits and public offerings are no fun.

Hockey Stick 423

Hockey Stick Bootstrapping Sweat Equity Intellectual Property 423

Startup Professionals Musings

MARCH 14, 2020

Getting investors to trust you with their money is always a challenge, and it’s even more difficult in the early stages, where you don’t have a significant revenue stream, a few customers, or maybe even a product yet. Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation.

Due Diligence 308

Due Diligence Intellectual Property Preferred Stock Seed Stage 308

Startup Professionals Musings

OCTOBER 20, 2017

Due to the efficiencies of digital, it is now commonplace to have companies with billions of dollars of revenue and valuation, with few employees, and without years of building infrastructure. Pay-as-you-go provides infinite ability to scale every business. New competitors are built to be digital from day one.

Technical Review 136

Technical Review Demand Valuation Business Model 136

Startup Professionals Musings

JANUARY 7, 2023

Perhaps the most famous bubble for startups was the dot.com craze that crashed 20 years ago, where the highest valuations were given to companies with massive user growth, but minimal revenue or profit. Falling victim to a magical mania or bubble. This one may be back, and due for another crash. See point #1 or watch history repeat.

Intellectual Property 314

Intellectual Property Entrepreneur Bankruptcy Viral 314

Startup Professionals Musings

SEPTEMBER 20, 2021

They come at the early stage while a startup has no revenue or valuation, so professional investors are hard to find. Here are some key positives from an entrepreneur perspective: Shorten the time and cost from idea to prototype. In today’s fast moving market, the basic product development cost and time are critical to survival.

Startup 397

Startup Cofounder Incubator Early Stage 397

Startup Professionals Musings

JANUARY 22, 2020

Since they know that most startups fail, their target return is ten times investment, so be prepared to talk cost vs revenue and product life. Set a realistic valuation for your startup to attract angels. A typical valuation for an angel investment is $2.5M, meaning a $500K investment will cost you 20 percent of your company.

Angel Investor 322

Angel Investor Valuation Syndicate Syndication 322

Startup Professionals Musings

JUNE 25, 2012

Just don’t quit your day job before your new company is producing revenue. Use this approach before you have a real valuation, a real product, or any real customers. The advantage is no time and effort searching and preparing for the other alternatives, and you don’t have to encumber yourself or give up control of your company.

Technical Review 257

Technical Review Bootstrapping Venture Capital Incubator 257

Startup Professionals Musings

AUGUST 5, 2023

Friends and family are key at the idea and early development stages, when you have minimal business valuation. Angel investors typically provide early-stage rollout funding, while venture capital firms won’t be interested until you have real traction and revenue during scaling.

Angel Investor 246

Angel Investor Stealth Bootstrapping Early Stage 246

Startup Professionals Musings

SEPTEMBER 9, 2010

It’s higher risk, but higher return, to pick the big winners early, before angels have set unreasonable valuations and restrictive terms. More sources of funding for early-stage startups may drive up valuations on these deals, which will lower the returns for the angels and super-angels willing to do these deals.

Technical Review 215

Technical Review Early Stage Venture Capital Startup 215

Startup Professionals Musings

OCTOBER 7, 2022

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. The average valuation for angel investments is $2 million, which will get you $500,000 for 20 percent of your startup.

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304