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

OCTOBER 5, 2014

Waiting until you have something to sell before bringing on a sales and operations staff. Getting a sales contract before manufacturing inventory. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity. Social media is not rocket science.

Burn Rate 262

Burn Rate Hockey Stick Entrepreneur Salary 262

Startup Professionals Musings

NOVEMBER 21, 2016

Sales projections are less than one percent market penetration. Declare a $10 million valuation with no revenue or customers. The average valuation for Angel investments is about $2.5 Every startup needs focus, due to limited resources, so setting irrational goals implies overall poor business acumen.

Intellectual Property 120

Intellectual Property Valuation Technical Review Equity 120

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

AUGUST 21, 2021

When you see startups like SpaceX and Pinterest grow from a low valuation to a billion dollars in just a few years, it’s easy to assume that if you just keep doing what you are doing, you can get there as well. Switch your focus from product development to sales. Isolate marketing from sales for maximum customer focus.

Merger 379

Merger Due Diligence SEC IPO 379

Startup Professionals Musings

SEPTEMBER 14, 2016

Waiting until you have something to sell before bringing on a sales and operations staff. Getting a sales contract before manufacturing inventory. That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity. Social media is not rocket science.

Burn Rate 120

Burn Rate Hockey Stick Startup Salary 120

Startup Professionals Musings

SEPTEMBER 22, 2021

They need to believe your valuation, based on current revenue and intellectual property, and feel the equity offered gives them a real return for the risk. You need to show that you have a powerful team, and can attract and lead people with strong skills complimentary to yours for marketing, finance, sales, and operations.

Intellectual Property 352

Intellectual Property Equity Bootstrapping Valuation 352

Startup Professionals Musings

JUNE 25, 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 257

Technical Review Bootstrapping Venture Capital Incubator 257

Startup Professionals Musings

SEPTEMBER 30, 2011

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.

Pre-Money Valuation 246

Pre-Money Valuation Valuation NPV Intellectual Property 246

Startup Professionals Musings

MARCH 16, 2011

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 233

Technical Review Bootstrapping Startup Venture Capital 233

Startup Professionals Musings

MARCH 18, 2016

As an entrepreneur looking for professional investors, one of the quickest ways to lose credibility and get rejected is to start with a ridiculously high pre-money valuation. Equally bad is professing no valuation estimate at all, asking investors to “make me an offer.” First priority is real revenue, customers and contracts.

Intellectual Property 120

Intellectual Property Valuation Pre-Money Valuation Startup 120

Startup Professionals Musings

JULY 27, 2018

Potential investors love to see gross margins in the fifty percent range or greater, with recurring revenue through subscriptions, follow-on sales, or services. Customized marketing strategy and realistic sales plans. “If Business model showing costs, pricing, and margins. Team skills depth, domain experience, and track record.

Product 145

Product Intellectual Property Liquidity Event Exit Strategy 145

Startup Professionals Musings

MAY 1, 2019

Even huge valuation increases will evaporate overnight when profitability is nowhere in sight, and you run out of money. You can’t afford to close every sale, or handle every customer complaint. Control costs and adjust prices to maintain your margin. Convert to working “on the business” vs “in the business.”

Silicon Valley 215

Silicon Valley Bankruptcy Metrics Valuation 215

Startup Professionals Musings

MARCH 1, 2010

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 149

Technical Review Bootstrapping Startup Venture Capital 149

Startup Professionals Musings

AUGUST 5, 2013

At this stage you were expecting to be working on creating a good business valuation to attract future buyers, or at least funding college accounts for your kids. Set up group meetings, sales presentations, and special promotions using webinars, webcasts, and podcasts, rather than travel and personal meetings. Raise the marketing bar.

Entrepreneur 234

Entrepreneur Vertical Reputation Valuation 234

Startup Professionals Musings

SEPTEMBER 26, 2015

Perhaps they're way off in their valuation (usually far too high), or paralyzed by fear at seeing the other terms, because they have no idea what's normal, and what's worth a fight to the death (their startup's). In very early startups, which have no valuation, the term sheet may specify a convertible note.

Term Sheet 120

Term Sheet Demand Preferred Stock Liquidation Preference 120

Startup Professionals Musings

MAY 23, 2012

Longer-term, enhanced product value begets superior company valuation through your organization’s intellectual property (IP) portfolio. From time to time, include customers and sales members in ideation sessions. Once a new product is launched, a key metric is the ratio of new product sales to overall sales.

Intellectual Property 247

Intellectual Property IP Valuation .Net 247

Startup Professionals Musings

JULY 6, 2012

At this stage you were expecting to be working on creating a good business valuation to attract future buyers, or at least funding college accounts for your kids. Set up group meetings, sales presentations, and special promotions using webinars, webcasts, and podcasts, rather than travel and personal meetings. Raise the marketing bar.

Startup 236

Startup Vertical Reputation Valuation 236

Startup Professionals Musings

AUGUST 27, 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 247

Elevator Pitch Exit Strategy Burn Rate Merger 247

Startup Professionals Musings

SEPTEMBER 30, 2015

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 120

Exit Strategy Startup Valuation Acquisition 120

Startup Professionals Musings

JUNE 22, 2016

Use experiments to test every element of your business model – cost, price, marketing, sales channel, customer acquisition cost, lead conversion rate, and lifetime value. Traction is the measure of how many of these have been validated, and their projection to your business valuation. Define known growth constraints and breakthroughs.

Metrics 143

Metrics Advisory Board Startup Lean 143

Startup Professionals Musings

AUGUST 26, 2018

Concerns over valuations being reset to a new normal, and a soft exit market, are seen as key drivers. Public ownerships usually lends prestige and credibility to your sales, marketing, and acquisition efforts, but it may work counter to your vision of saving the world.

Exit Strategy 128

Exit Strategy IPO Initial Public Offering SEC 128

Startup Professionals Musings

MARCH 9, 2011

Longer-term, enhanced product value begets superior company valuation through your organization’s intellectual property (IP) portfolio. From time to time, include customers and sales members in ideation sessions. Once a new product is launched, a key metric is the ratio of new product sales to overall sales.

Intellectual Property 234

Intellectual Property IP Valuation .Net 234

Startup Professionals Musings

MARCH 28, 2011

At this stage you were expecting to be working on creating a good business valuation to attract future buyers, or at least funding college accounts for your kids. Set up group meetings, sales presentations, and special promotions using webinars, webcasts, and podcasts, rather than travel and personal meetings. Raise the marketing bar.

Startup 230

Startup Vertical Reputation Valuation 230

Startup Professionals Musings

JUNE 10, 2011

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 234

Elevator Pitch Exit Strategy Burn Rate Merger 234

Startup Professionals Musings

AUGUST 13, 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 283

Business Plan Sweat Equity Exit Strategy Intellectual Property 283

Startup Professionals Musings

OCTOBER 12, 2010

You can also use this space to keep track of innovators (R&D personnel) and rainmakers (sales & marketing personnel). Customers: A company’s only sustainable source of cash is sales, so you need to keep track of your business development efforts. Tags: scorecard venture value Akira Hirai business valuation.

Intellectual Property 223

Intellectual Property .Net Valuation Distribution 223

Startup Professionals Musings

FEBRUARY 13, 2016

What are your specific marketing and sales plans? You need to identify pricing details, sales channels, strategic partners and a customized marketing plan consistent with your industry and target segment. Justify funding requirements, use of funds and specify a current valuation estimate.

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

Startup Professionals Musings

AUGUST 7, 2015

Customers may be attracted to your marketing message, but investors look harder at the startup team, seeking superior expertise in the key areas of growing a business, product domain, financial, marketing and sales. Specific elements of your marketing and sales plans. Projected revenues and expenses over the strategic period.

Product 120

Product Intellectual Property Liquidity Event Burn Rate 120

Startup Professionals Musings

MARCH 23, 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 256

Stock Vesting Common Stock Founder Vesting 256

Startup Professionals Musings

DECEMBER 1, 2017

This is another popular model for platforms, e-commerce, and affiliates, where you as the transaction or product provider get a small percentage or royalty on every ultimate sale to customers by others. Amazon led the way on this one online, but distributors have long used this model in retail. Low product price, but support is extra.

Revenue 166

Revenue Affiliate Advertising Retention 166

Startup Professionals Musings

AUGUST 8, 2016

Investors look for sales at full price, to people you don’t know, to validate demand, price, and margin. Show an aggressive marketing and sales plan. Giving free beta copies of your solution to customers to elicit testimonials does not validate a business model. The best business models benefit social needs as well as business needs.

Intellectual Property 120

Intellectual Property Entrepreneur Elevator Pitch Exit Strategy 120

Startup Professionals Musings

DECEMBER 5, 2016

New” companies, like Uber, can build billion dollar valuations, and start acquiring older companies seen as much larger. If your imagination is primarily technical by nature, then you need to complement your efforts by attracting partners with more imagination in marketing, sales, finance, and operations.

Retention 120

Retention Valuation Equity Analytics 120

Startup Professionals Musings

JANUARY 22, 2013

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.

Vesting 245

Vesting Common Stock Stock Founder Vesting 245

Startup Professionals Musings

MAY 19, 2010

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 235

Elevator Pitch Exit Strategy Burn Rate Merger 235

Startup Professionals Musings

MAY 13, 2011

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 290

Business Plan Sweat Equity Exit Strategy Intellectual Property 290

Startup Professionals Musings

JANUARY 16, 2017

For example, Patagonia donates one percent of their sales to environmental charities, and Ben & Jerry’s awards five social change grants annually. All stakeholders see this as an advantage, encouraging new investors and raising the valuation of your business. Increases customer advocacy and loyalty in all markets.

Retention 120

Retention Government Valuation Employee 120