Gust

DECEMBER 6, 2011

A medical device company, on the other hand, may need cash resources to pay for FDA testing, designing the prototype, manufacturing the product, establishing an inventory of the devices and establishing marketing and sales channels for the products. Most high-impact companies need substantial cash resources to sustain their rapid grow.

Angel Investor 179

Angel Investor Venture Capital Valuation Software Engineering 179

Gust

JUNE 17, 2012

Use this approach before you have a real valuation, a real product, or any real customers. Exchanging equity for services is worth negotiating with legal counsel, accountants, engineers, and even sales people. Just don’t quit your day job before your new company is producing revenue. Friends and family.

Technical Review 164

Technical Review Bootstrapping Venture Capital Incubator 164

Gust

JANUARY 30, 2014

Reasonable valuation. Proven team (tech/product/design/mark eting/sales/domain/etc.). Platform/partnership/bizd ev/API strategy. External validation (ideally traction and/or passionate customers). Viable business structure and cap table. But most important of all , it must have an entrepreneur on whom I’m willing to bet.

Cap Table 119

Cap Table API Valuation Startup 119

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

JULY 10, 2012

Lower your valuation. 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. . Reduce the risk on the big questions of viability and market.

Bootstrapping 165

Bootstrapping Valuation Restful Sales 165

Gust

OCTOBER 21, 2011

For convertible notes, the only liquidity event we need be concerned with is an acquisition of the startup in the near future, before the maturity date; otherwise, the notes will convert to equity of one kind or another, and the eventual sale of that equity (in a public offering, acquisition, or private sale) is a different subject for another day.

Finance 79

Finance Pre-Money Valuation Term Sheet Liquidity Event 79

Gust

AUGUST 19, 2012

Marketing, sales, and partners. Describe marketing strategy, sales plan, licensing, and partnership plans. What is the current valuation of the company? What is the planned exit strategy (IPO, merger, sale, including likely candidates)? List and position your competition, or alternatives available to the customer.

Elevator Pitch 146

Elevator Pitch Exit Strategy Burn Rate Merger 146

Gust

NOVEMBER 22, 2011

It wouldn’t work anyway, since your valuation at that stage would be less than the funding, meaning you would have to give away all ownership for the money. 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. Growth stage.

Venture Capital 171

Venture Capital Investment Bankers Angel Investor Initial Public Offering 171

Gust

JULY 23, 2012

To qualify for a deduction, the donation must be accompanied by an independent valuation appraisal. This is not always feasible or advisable in the case of private stock, and it also reduces the amount contributed (as the donor would need to pay tax upon sale of the stock). Deductions are against ordinary income. in excess of $25,000).

Stock 114

Stock Capital Gains Warrant Stock Options 114

Gust

MARCH 16, 2014

The difference in value between what the Founders paid and the fair market value of that stock based on actual sale to outside investors will be characterized as compensation income resulting in what could be significant tax liability to the Founders. Valuation has very little meaning until an outsider invests.

Stock 175

Stock Vesting Common Stock Founder Vesting 175

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 5, 2012

Marketing, sales, and partners. Describe your market penetration strategy, sales channels, pricing, and strategic partnerships. Convince investors that you have lined up sales channels, strategic partners, and a viable marketing strategy. Include a current valuation estimate. See where your cashflow bottoms out.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Gust

OCTOBER 3, 2011

This will usually be documented as either a straight sale of Common Stock (which is most typical) or else as Convertible Note which converts into the same security as the next professional round, but at a discount (which is actually better for everyone). From +/- $1.5m

Finance 70

Finance Intellectual Property Venture Capital Early Stage 70