Startup Professionals Musings

APRIL 12, 2021

In my experience as a business advisor and occasional investor, many of you won’t make it that far, succumbing to the high costs of getting those first customers, funding an initial inventory, and building an operational support process. Negotiate a line-of-credit with a financial institution.

Dilution 404

Dilution Incubator Bootstrapping Government 404

View from Seed

APRIL 30, 2015

It can be lower cost and can either buy more time or accelerate growth. Glen Mello: Venture debt is a good complement to equity. It’s generally got a lower cost compared to equity capital and can help support growth. Equity doesnt need to be repaid, so it’s a more “permanent” capital source.).

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

Startup Professionals Musings

JANUARY 4, 2020

Here is where projections of cost, pricing, volumes and cash flow are critical. If your financial model projects a negative cash flow in this period of $400,000, you should buffer this amount by 25 percent, and ask for $500,000. Be prepared to explain your business model. Are you flexible on the terms of the investment?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

David Teten

AUGUST 19, 2019

This structure offers some of the benefits of traditional equity VC, without some of the negatives of equity VC. I’ve been a traditional equity VC for 8 years, and I’m now researching new business models in venture capital. Benefits: Non-dilutive, flexible credit offerings that fit SMB or enterprise SaaS.

Revenue 60

Revenue Technical Review Software Review Equity 60

Startup Professionals Musings

JANUARY 19, 2020

The cost of entry for tech startups continues to go down. Twenty years ago, it cost several million dollars to launch an e-commerce startup, which can be done today for a few thousand dollars. Mobile and web software apps may cost even less. The large investment amounts preferred by VCs are no longer needed to launch winners.

Angel Investor 314

Angel Investor Venture Capital Silicon Valley Startup 314

Startup Professionals Musings

JANUARY 26, 2019

This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped. Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” Business model to maintain lifestyle is the primary driver.

Startup 194

Startup Equity Dilution LLC 194

Austin Startup

FEBRUARY 13, 2019

Not necessarily the entire business, but at some point, something will fail and you’ll either learn from it and grow or it will be the beginning of the end. Either way, if you know you’re going to fail, it’s much better to do so with your own money on the line than money that also costs you in dilution, perpetuity or more.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

Startup Professionals Musings

FEBRUARY 9, 2018

Bootstrapping allows you to maintain full control of your startup strategy, retain maximum equity, and avoid the time delay and energy spent to attract outside investors. You need a business degree to start a venture today. Business strategies are best learned from experience.

Incubator 180

Incubator Angel Investor Dilution Equity 180

Startup Professionals Musings

OCTOBER 10, 2013

This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped. Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” Business model to maintain lifestyle is the primary driver.

Founder 231

Founder Equity Dilution LLC 231

Startup Professionals Musings

DECEMBER 27, 2014

The cost of entry for tech startups continues to go down. Twenty years ago, it cost several million dollars to launch an e-commerce startup, which can be done today for a few thousand dollars. Mobile and web software apps may cost even less. The large investment amounts preferred by VCs are no longer needed to launch winners.

Angel Investor 260

Angel Investor Silicon Valley Startup Portfolio 260

Startup Professionals Musings

JANUARY 21, 2017

This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped. Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” Business model to maintain lifestyle is the primary driver.

Entrepreneur 120

Entrepreneur Equity Dilution LLC 120

Startup Professionals Musings

SEPTEMBER 10, 2012

This usually means not taking money from equity investors, since investors want fast growth, high profits, and an exit event, to allow investments to be recouped. Of course, even lifestyle entrepreneurs want to be happy, and want their business to be “successful.” Business model to maintain lifestyle is the primary driver.

Entrepreneur 241

Entrepreneur Equity Dilution LLC 241

Startup Professionals Musings

SEPTEMBER 5, 2016

You don’t have to fight for your equity, and no one can slow you down in decision making. A limited budget makes for a better business plan. Every startup I know has pivoted at least once, so learning from your mistakes should be a positive experience, rather than a painful error that will cost you credibility.

Bootstrapping 120

Bootstrapping Entrepreneur Startup Exit Strategy 120

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 117

Venture Capital Silicon Valley Founder Seed Stage 117

Startup Professionals Musings

MARCH 7, 2015

Here is where projections of cost, pricing, volumes and cash flow are critical. If your financial model projects a negative cash flow in this period of $400,000, you should buffer this amount by 25 percent, and ask for $500,000. Be prepared to explain your business model. Are you flexible on the terms of the investment?

Preferred Stock 120

Preferred Stock Exit Strategy Equity Angel Investor 120

K9 Ventures

JUNE 12, 2012

You get a situation whether investors are incentivized to put in more money into a company, not only to buy more equity, but also to fund the quick growth. Founders typically get their equity in a company once — at the time of founding and then get diluted with each subsequent round of financing.

Venture Capital 105

Venture Capital Silicon Valley Founder Seed Stage 105

David Teten

AUGUST 21, 2019

Most founders who are raising capital look first to traditional equity VCs. Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. Should you raise venture capital from a traditional equity VC or a Revenue-Based Investing VC? Less or no dilution.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Transformify

JULY 23, 2018

To boost innovation and SME sector growth, the EU Commission has launched the SME Instrument of the Horizon 2020 program – the largest non-dilutive fund in the world. Why non-dilutive? It is a grant, not an equity funding. The startups are not selling equity or issuing new shares. If not, how will you address it?

Intellectual Property 66

Intellectual Property Angel Investor Dilution Startup 66

Austin Startup

MARCH 23, 2017

To briefly recap: 3/12 : Fred Wilson discussed why he dislikes convertible notes and SAFEs, and how priced equity rounds make more sense at the seed level. 3/20 : danprimack provided detail on Wal-mart/Jet.com’s acquisition of ModCloth, and how substituting (rather than supplementing) debt for equity can cause problems.

Dilution 54

Dilution Equity Warrant Distribution 54

Tim Keane

JANUARY 12, 2010

The investors and the entrepreneurs are – or should be – aware that the price of the company’s equity is set by the market – in simplest terms, what an informed buyer is willing to pay.   As a starting point, these become market comparable discussions based on other similar transactions within a recent timeframe and similar business.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Up and Running

APRIL 24, 2018

Not only that, but global equity funding to digital health companies reached $3.67 For example, having flexible work hours means you can hire talented candidates from different time zones, which will increase your productivity while keeping the costs down. Your health startup business plan should be a tool to guide your growth.

SBIR 73

SBIR Startup Artificial Inteligence Intellectual Property 73

Lightspeed Venture Partners

NOVEMBER 19, 2012

They believed that they could get customer acquisition costs to the $10-12 range, but as Cuban points out, that was just hope, they had no evidence to back this up. All e-commerce businesses should be examined through the lens of customer acquisition cost and lifetime value. The others all passed as well.

Pre-Money Valuation 166

Pre-Money Valuation Alabama Valuation Churn Rate 166

Up and Running

DECEMBER 9, 2014

The DIY mentality can really bog you down and become a burden eventually, plus it can really cost you more time and money in the grand scheme of things. I just wanted to break down those two pieces real quick the time side and the cost side. Then the second one here which I eluded to is really all about cost.

Small Business 95

Small Business Finance Forecast Metrics 95

Lightspeed Venture Partners

OCTOBER 22, 2012

The founders have more demand than they know what to do with, and want to raise $55k for 5% equity in the company to buy a second truck. But it only costs $65k to buy a new food truck, so it is easy for others to enter the market. and costs $1.10 to make, although that cost is expected to drop with scale.

Pre-Money Valuation 101

Pre-Money Valuation Valuation Dilution Differentiation 101

Berkonomics

AUGUST 27, 2015

They financed their companies, to the extent possible, in a manner minimizing the cost of capital, planning for organic growth in the number of customers served and in associated revenues. As the business owners had a longer-term perspective, decisions were made with greater deliberation and with a more conservative recognition of risk.

Intellectual Property 48

Intellectual Property Balance Sheet Stock Options Valuation 48

maplebutter.com

JANUARY 8, 2013

Outsourcing is something a big company, with a known customer / problem (that has revenue & traction) does to save cost. I don’t have any formal business training and I actually think it’s served me well. I have a proposal written up including full cost and revenue projections. No investor cares about a business plan.

Technical Review 44

Technical Review Startup Cofounder Software Review 44

Small Business Force

OCTOBER 22, 2017

equity, debt, some combination) or how you intend to raise it (e.g., angel/professional investors, private equity, crowdfunding) the process will always take more time and resources than you can ever imagine. For a consumer business, that number could easily be ten times that amount. Less dilution!

Entrepreneur 25

Entrepreneur Angel Investor Valuation Investment Bankers 25

Both Sides of the Table

FEBRUARY 14, 2016

In the case of startups the “buyer” is the VC looking to part cash for “purchasing” equity in your startup. Plus, down rounds trigger anti-dilution provisions. Just as with the late 90s there is no new “business model” that defies the laws of gravity.

Valuation 150

Valuation Down Round Startup Later Stage 150

Life Beyond Code

SEPTEMBER 27, 2011

Once the $1 million revenue milestone is crossed, entrepreneurs find it easier to find additional customers, manage working capital, and access funding, whether it is credit or equity. At 1/12th the cost, 1M/1M provides far more value. Of 1M/1M he says, “The value of your program is amazing.

Programming 116

Programming Silicon Valley Bootstrapping Technical Review 116