Startup Professionals Musings

SEPTEMBER 16, 2023

Who would not want to join the unicorns (recent startups with a current valuation of over $1 billion)? But for founders who do their homework, the cost of entry is lower and the opportunity is higher than ever.

Intellectual Property 261

Intellectual Property Entrepreneur Angel Groups Social Media 261

Startup Professionals Musings

MAY 1, 2023

Investors may not be called cofounders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. Amount of venture funding provided. The challenge is for real cofounders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

Technical Cofounder 247

Technical Cofounder Equity Distribution Cofounder 247

Startup Professionals Musings

DECEMBER 30, 2022

Every business owner and entrepreneur I meet in my consulting rounds dreams of finding that “ disruptive ” innovation that will supercharge their business and move it into the ranks of business unicorns (billion-dollar valuations), such as SpaceX and Apple.

Technical Review 252

Technical Review Silicon Valley Software Review Metrics 252

Startup Professionals Musings

JUNE 11, 2022

Some nonprofit entrepreneurs think they can skip the whole plan, rather than just the sections on valuation, equity offered, and exit strategy. You still start the process with a business plan, but then you look for a philanthropist rather than an investor.

Angel Investor 327

Angel Investor Equity Technical Review Exit Strategy 327

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

NOVEMBER 28, 2020

Who would not want to join the unicorns (recent startups with a current valuation of over $1 billion)? But for founders who do their homework, the cost of entry is lower and the opportunity is higher than ever.

Intellectual Property 404

Intellectual Property Startup Angel Groups Social Media 404

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

OCTOBER 27, 2014

I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. The good news is that a patent can scare off or at least delay competitors, and as a “rule of thumb” patents can add up to $1M to your startup valuation for investors or M&A exits (merger and acquisition).

Software Review 250

Software Review Software Technical Review Intellectual Property 250

Startup Professionals Musings

AUGUST 19, 2020

That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity. Overall, managing cash flow and burn rate is more critical to your business success than having the right idea and the right product.

Burn Rate 310

Burn Rate Hockey Stick Salary Angel Investor 310

Startup Professionals Musings

MARCH 10, 2021

Often, the number one question that entrepreneurs fail to address is: “How much money do you need, and what valuation do you place on your company?” Additionally, you need to be able to communicate the essence that story and value to investors in a couple of sentences – your elevator pitch. Lack of clear objectives/goals.

Software Review 307

Software Review Due Diligence Elevator Pitch Early Stage 307

Startup Professionals Musings

JANUARY 27, 2016

I still generally advise software startups to file a patent as a barrier to entry from competitors and to increase their valuation by investors, but every entrepreneur needs to understand the tradeoffs.

Software Review 120

Software Review Intellectual Property Software Technical Review 120

Startup Professionals Musings

NOVEMBER 4, 2015

In a new book, “ The Leadership Capital Index ,” Dave Ulrich, a best-selling author, business consultant, and business school professor, provides some real insights and metrics on what makes up the elements of goodwill in the minds of top valuation experts. I have paraphrased his key points here as follows: Leader personal impact.

Leadership 120

Leadership Technical Review Due Diligence Valuation 120

Startup Professionals Musings

MARCH 25, 2023

Should they focus on increasing revenues and profitability, or entice more and more users with “free” services, to increase their valuation. Most are still confused about the right priority. Traditionally, it was simple. A business only achieved critical mass by becoming cash-flow positive.

Valuation 235

Valuation Revenue Viral Retention 235

Startup Professionals Musings

AUGUST 6, 2023

Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.

Angel Groups 201

Angel Groups Accredited Investor Due Diligence Equity 201

Startup Professionals Musings

SEPTEMBER 8, 2019

Some nonprofit entrepreneurs think they can skip the whole plan, rather than just the sections on valuation, equity offered, and exit strategy. You still start the process with a business plan, but then you look for a philanthropist rather than an investor.

Equity 235

Equity Angel Investor Technical Review Exit Strategy 235

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

NOVEMBER 25, 2020

Lack of checks and balances on startup valuations. A startup that is listed on a crowdfunding platform gets no formal pushback or negotiation on its declared valuation. Unreasonably high early valuations hurt the entrepreneurs, as well as professional investors, later when a second round becomes a down round or can’t be negotiated.

Equity 411

Equity Angel Groups Accredited Investor Due Diligence 411

Startup Professionals Musings

SEPTEMBER 29, 2018

That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity. Overall, managing cash flow and burn rate is more critical to your business success than having the right idea and the right product.

Burn Rate 223

Burn Rate Hockey Stick Startup Salary 223

Startup Professionals Musings

OCTOBER 17, 2022

Super angels sometimes drive up valuations. Perhaps because of their focus on building a large portfolio, or their competitiveness, these angels sometimes accept valuations that cause later friction while moving to VCs, or even other angel groups.

Angel Investor 342

Angel Investor Venture Capital Silicon Valley Portfolio 342

Startup Professionals Musings

SEPTEMBER 10, 2018

Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. Amount of venture funding provided. The challenge is for real co-founders to keep their equity percentage above 50%, or they effectively lose control of operational decisions.

Equity 238

Equity Cofounder Technical Cofounder Intellectual Property 238

Startup Professionals Musings

APRIL 17, 2023

Another good indicator of your real stage is the valuation you can set for your company at any given moment, to determine what portion of your equity an investor will expect of his money. Prior to the growth stage, your company valuation is limited to goodwill based on intellectual property and team experience, since you have no revenue.

Angel Investor 313

Angel Investor Intellectual Property Investment Bankers Private Equity 313

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

NOVEMBER 21, 2016

Declare a $10 million valuation with no revenue or customers. The average valuation for Angel investments is about $2.5 Investors assume that even if you survive, returns to them will be unlikely. Equity investors are buying a chunk of your company at today’s value, not what you think it may be worth in five years.

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

DECEMBER 11, 2022

Non-credible funding request or unreasonable valuation. Future unproven projections don’t set today’s valuation. Investors are looking to buy a chunk of the business, not the product. They need to know how much money you need, and what portion of the current business you are willing to offer for the investment.

Due Diligence 271

Due Diligence Intellectual Property Entrepreneur Preferred Stock 271

Startup Professionals Musings

JUNE 21, 2020

Should they focus on increasing revenues and profitability, or entice more and more users with “free” services, to increase their valuation. Most are still confused about the right priority. Traditionally, it was simple. A business only achieved critical mass by becoming cash-flow positive.

Revenue 434

Revenue Valuation Viral Retention 434

Startup Professionals Musings

JANUARY 22, 2020

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. Successful valuations above $5M are rare for startups. For later rounds with VCs, you need the detail anyway.

Angel Investor 322

Angel Investor Valuation Syndicate Syndication 322

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). Thus you have to do your homework to stay ahead of the crowd.

Technical Cofounder 184

Technical Cofounder Intellectual Property Silicon Valley LLC 184

Startup Professionals Musings

OCTOBER 5, 2014

That should equate to an adequate valuation for a $2 million follow-on Series-A round, without giving away all the equity. Overall, managing cashflow and burn rate is more critical to your business success than having the right idea and the right product.

Burn Rate 262

Burn Rate Hockey Stick Entrepreneur Salary 262

Startup Professionals Musings

MARCH 16, 2016

This term is currently applied to recent startups who profess a current valuation which exceeds $1 billion. Frothy startup valuations. Prime examples include Uber, Airbnb and Snapchat. People are even talking about “decacorns" -- investable companies with net worth now exceeding $10 billion -- like Dropbox and Pinterest.

Software Review 120

Software Review Sweat Equity Accredited Investor Angel Investor 120

Startup Professionals Musings

NOVEMBER 14, 2010

The trophy investor wants to know how much money is needed, where the money will be spent, how long it will take to spend it, the long term strategy for future spending and funding, and how the valuation will grow over time. Planning for valuation growth and investor exit should begin prior to the investment. Participation.

Intellectual Property 265

Intellectual Property Balance Sheet Phoenix Arizona 265

Startup Professionals Musings

AUGUST 4, 2014

Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. Amount of venture funding provided.

Cofounder 261

Cofounder Stock Founder Technical Cofounder 261

Startup Professionals Musings

JULY 22, 2020

Another good indicator of your real stage is the valuation you can set for your company at any given moment, to determine what portion of your equity an investor will expect of his money. Prior to the growth stage, your company valuation is limited to goodwill based on intellectual property and team experience, since you have no revenue.

Angel Investor 370

Angel Investor Intellectual Property Investment Bankers Private Equity 370

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

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

FEBRUARY 15, 2023

Adding free users or customers to increase valuation makes sense for a venture-backed startup looking to go public, but will kill bootstrapping. Defer your desire for expensive perks and vacations until later when you have time for them. You can have fun without spending big money. Favor profitability over revenue and user growth.

Equity 349

Equity Hockey Stick Bootstrapping Sweat Equity 349

Startup Professionals Musings

NOVEMBER 17, 2013

Often, the number one question that entrepreneurs fail to address is: “How much money do you need, and what valuation do you place on your company?” Additionally, you need to be able to communicate the essence that story and value to investors in a couple of sentences – your elevator pitch. Lack of clear objectives/goals.

Software Review 265

Software Review Due Diligence Elevator Pitch Startup 265