Gust

NOVEMBER 4, 2011

Entrepreneurs and investors who have spent any time dealing with convertible debt seed financing transactions are likely to have encountered the subject of valuation caps.

Valuation 98

Valuation Pre-Money Valuation Vesting Merger 98

Gust

OCTOBER 8, 2014

We agreed that there were two significant proof points that she needed to achieve in order to demonstrate a high likelihood of success: price point and sales traction. She designed a software solution that she was planning on selling to enterprises for $100,000 a year. My answer is almost always the same.

Venture Capital 163

Venture Capital Finance Early Stage .Net 163

Gust

OCTOBER 20, 2011

Marketing/Sales Channels/Partnerships 0-10%. The company needs some additional work on building sales channels and partnerships (80% of norm). Marketing/Sales/Partnerships. Experience in sales or technology. Size of the target market (total sales). Orders or early sales from customers.

Valuation 146

Valuation Pre-Money Valuation Intellectual Property Technical Review 146

Gust

DECEMBER 16, 2011

And, a bit misty-eyed, this old war veteran can actually remember the glory days: Venture capitalists would commit tens of millions for a startup to buy expensive infrastructure; hire sales and marketing teams as products were still being built; and lease out big slugs of office space for the coming hiring spree.

IPO 87

IPO .Net Social Network Mobile 87

Gust

OCTOBER 11, 2011

She was interrupted when she clicked to the financial summary, a bar chart showing three years of annual sales, gross margin, and net income. As they summarized their numbers, they were projecting enormous growth in sales with relatively tiny marketing expenses and huge profits, like 50 percent of sales before taxes.

Intellectual Property 70

Intellectual Property Differentiation .Net Sales 70

Gust

OCTOBER 25, 2011

What if you have a strong position in an interesting niche, and you can fund your growth with sales and prepayments, so you don’t need outside money? Take for example a critical mass business that has to grow fast and will never make it if it doesn’t; that’s a business that needs investment. But what if that isn’t you, or your business?

Cofounder 133

Cofounder Angel Investor Equity Software 133

Gust

DECEMBER 6, 2011

Better yet, early sales, initial growth rates, proof of concept in buyers or users or subscribers or signups or something equally concrete. Ideally, a business pitch is exciting because the business potential is exciting. Frankly, in a business pitch, I mistrust shows of undue optimism, passion, and resolve.

Angel Investor 70

Angel Investor Early Stage Business Plan Sales 70

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

NOVEMBER 1, 2011

Services generally aren’t scalable (except web services) because you need to double head count to double sales. By scalable I mean that you can gear up to sell 10 or 100 or 1,000 per hour.

Angel Investor 93

Angel Investor Intellectual Property Finance Web 93

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

OCTOBER 14, 2011

Obviously, a frantic reaction to someone else’s move will damage the way your biz dev, sales, product managers, engineers, PR people, and strategy teams interrelate. They’re relaxed. Your customers should feel the same way. It reinforces processes. And that’s hard enough to get right already!

Product 70

Product PR Matching Engineer 70

Gust

MAY 24, 2012

By contrast, venture capital and angel investments normally take the form of Preferred Stock with rights and preferences set forth in the company’s Certificate of Incorporation and other governance documents. Options and warrants, when issued, are also typically exercisable for shares of Common Stock.

IPO 159

IPO Equity Common Stock Stock 159

Gust

OCTOBER 3, 2011

If a company is appropriate for angel financing , for example, it is highly unlikely that it would also be in a position to raise venture capital, and vice versa. Finally, north of, say, $10m – $20m , you’d be getting money from a later stage venture capital fund, whose paperwork will be similar to the earlier VCs.

Finance 70

Finance Venture Capital Intellectual Property Early Stage 70

Gust

JANUARY 5, 2012

But, this SEC limit has created some problems for these high-tech phenoms, both in raising additional capital and in private sales through secondary markets in which early investors resell shares to a large number of smaller US buyers.

SEC 131

SEC Angel Groups Technical Review Private Equity 131