Up and Running

SEPTEMBER 19, 2017

When you accept outside money, particularly a private equity (PE) investment, however, that changes. In this article, I’ll provide some personal stories of how investors have navigated the balance between raising private equity capital and not losing control of their startup. You make all the decisions, when you want, how you want.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

Startup Professionals Musings

SEPTEMBER 30, 2013

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. A great business often starts with one person, but it doesn’t end there. Get a real customer and real revenue. It doesn’t prove your business model of pricing, distribution, and support.

Intellectual Property 281

Intellectual Property Entrepreneur Sweat Equity CTO Hire 281

Startup Professionals Musings

OCTOBER 7, 2022

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. Be prepared to explain your business model. How much equity ownership are you willing to offer?

Preferred Stock 304

Preferred Stock Exit Strategy Equity Angel Investor 304

Steve Blank

MARCH 12, 2014

We realized that past K-12 Entrepreneurial classes taught students “the lemonade stand” version of how to start a company: 1) come up with an idea, 2) execute the idea, 3) do the accounting (revenue, costs, etc.). We wanted to teach our students how to think like entrepreneurs not accountants.

Lean 334

Lean Customer Development Startup Silicon Valley 334

Startup Professionals Musings

JULY 22, 2020

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

Angel Investor 370

Angel Investor Intellectual Property Investment Bankers Private Equity 370

Steve Blank

MARCH 17, 2020

But next the question is, ‘What happens to my business?”. The questions every startup or small business CEO needs to ask now are: What’s my Burn Rate and Runway? What does your new business model look like? Next, take a look at your actual revenue each month – not forecast, but real revenue coming in each month.

Burn Rate 436

Burn Rate Startup Valuation Sales Cycle 436

Startup Professionals Musings

AUGUST 31, 2012

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. A great business often starts with one person, but it doesn’t end there. Get a real customer and real revenue. It doesn’t prove your business model of pricing, distribution, and support.

Intellectual Property 260

Intellectual Property Sweat Equity CTO Hire Fractional CTO 260

Startup Professionals Musings

NOVEMBER 13, 2021

If you are an aspiring entrepreneur, or an existing business, and haven’t yet sized any of these opportunities, you may be already late to the game. Usually these are revenue-generating e-commerce sites, or have the potential to be revenue-generating. There is value in the “idling capacity” of all assets.

Cuba 316

Cuba Venture Capital Community Valuation 316

Steve Blank

MARCH 31, 2014

Companies horde cash and squeeze the most revenue and margin from the money they use. In spite of this, private equity funds have used the rallying cry of efficiency to hijack corporate strategy and loot the profits that historically would have been reinvested into research and development and new products.

Private Equity 328

Private Equity Metrics China Intellectual Property 328

Startup Professionals Musings

JANUARY 4, 2020

Angel investors will perk up if you have a prototype or a few real customers, while venture capitalists will likely choose to wait until you have achieved several million in revenue or customer count. Be prepared to explain your business model. How much equity ownership are you willing to offer?

Startup 337

Startup Preferred Stock Exit Strategy Equity 337

Startup Professionals Musings

JUNE 17, 2011

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. A great business often starts with one person, but it doesn’t end there. Get a real customer and real revenue. It doesn’t prove your business model of pricing, distribution, and support.

Intellectual Property 253

Intellectual Property Sweat Equity CTO Hire Fractional CTO 253

Steve Blank

APRIL 26, 2022

At the turn of the century after the dotcom crash, startup valuations plummeted, burn rates were unsustainable, and startups were quickly running out of cash. Most existing investors (those still in business) hoarded their money and stopped doing follow-on rounds until the rubble had cleared. They’re Back. Why do VCs Do This?

Cram Down 413

Cram Down Founder Venture Capital Recapitalization 413

www.inc.com

SEPTEMBER 24, 2011

Will Work for Equity. Dave Graham Business Venture Capital Private Equity GlobalLogic Inc. But with the help of Grahams company, which specializes in creating tech systems for start-ups, Jumpstart grew to more than $50 million in revenue--enough to make it an attractive acquisition for media conglomerate Hachette Filipacchi.

Arizona 40

Arizona Equity Iowa Venture Capital 40

Startup Professionals Musings

OCTOBER 19, 2015

In fact, an entrepreneur friend of mine, who made millions on her marketing expertise, asserted recently that most inventors fail in business because they refuse to believe that any business expertise or experience is worth more than 5 percent in partner equity. Intellectual property is a business issue, not a technical issue.

Technical Review 120

Technical Review Intellectual Property Cofounder Bootstrapping 120

Tim Keane

JANUARY 12, 2010

Term-sheets and Valuations: Thinking about Negotiations.   I’ve sat down with entrepreneurs and a copy of a term sheet guide I like [ “Term Sheets & Valuations - A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations ” by Alex Wilmerding, Aspatore Press.] The Valuation Question.

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

MAY 22, 2010

Don’t expect them to believe your $100M revenue projection, if you are still waiting for the first revenue dollar. A great business often starts with one person, but it doesn’t end there. Get a real customer and real revenue. It doesn’t prove your business model of pricing, distribution, and support.

Intellectual Property 222

Intellectual Property Sweat Equity CTO Hire Fractional CTO 222

Both Sides of the Table

JUNE 22, 2011

Ah, but today’s Internet companies have real revenue! But this mania to not miss out on the next big thing is driving some investors to pay growth-equity prices for traditional market risk (as in, they’re paying up before it is clear there is product / market fit). I said that at the Founder Showcase, too. and profits!

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Startup Professionals Musings

NOVEMBER 4, 2011

The corporate entity lends itself best to the concept of “sharing” equity required by investors, and unincorporated entities don’t get funding. It should answer every question an investor or associate might ask, including current valuation, funding needed, and exit strategy. Finalize your financial model.

Intellectual Property 249

Intellectual Property Angel Investor Technical Review Elevator Pitch 249

View from Seed

APRIL 30, 2015

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. So it makes it a lot more challenging when you have debt on the books that isn’t as longer term as equity. Traction and revenue? Business model?

Term Sheet 120

Term Sheet Equity Startup Seed Stage 120

Steve Blank

MAY 19, 2015

I had lunch last week with Tom, the CEO of a startup that was quickly becoming a large company – last year’s revenue was $40M, this year likely to be $80M maybe even $100 million in ad revenue. to drive traffic to their site, which they then turned into ad revenue. Upgrade their salaries and equity ASAP.

Technical Review 120

Technical Review Salary Early Stage Software Review 120

Startup Professionals Musings

FEBRUARY 2, 2019

If you are an aspiring entrepreneur, or an existing business, and haven’t yet sized any of these opportunities, you may be already late to the game. Usually these are revenue-generating e-commerce sites, or have the potential to be revenue-generating. There is value in the “idling capacity” of all assets.

Cuba 246

Cuba Venture Capital Community Valuation 246

ReadWriteStart

JULY 17, 2023

The platform has raised over $225 million through equity and debt financing to date. In the financial year ending in March this year, the startup generated a revenue of $18.5 Furlenco’s innovative business model has disrupted the traditional furniture industry in India.

India 104

India Acquisition Merger Curation 104

Startup Professionals Musings

SEPTEMBER 23, 2010

The corporate entity lends itself best to the concept of “sharing” equity required by investors, and unincorporated entities don’t get funding. It should answer every question an investor or associate might ask, including current valuation, funding needed, and exit strategy. Finalize your financial model.

Angel Investor 224

Angel Investor Intellectual Property Technical Review Elevator Pitch 224

Startup Professionals Musings

AUGUST 19, 2018

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

Angel Investor 184

Angel Investor Intellectual Property Investment Bankers Private Equity 184

Austin Startup

FEBRUARY 13, 2019

Consider convertible debt Before diving into a seed round, you may want to consider convertible debt over equity financing. Our strategic investor had a major impact on the way we shaped our business model, and we owe a lot of our success to his advice. With that in mind, we were not shy about being picky.

Strategic Investors 49

Strategic Investors Austin Angel Investor Bootstrapping 49

Startup Professionals Musings

JULY 27, 2018

This implies high odds of a scalable business, simply needing an investment to lead to success. Business model showing costs, pricing, and margins. Potential investors love to see gross margins in the fifty percent range or greater, with recurring revenue through subscriptions, follow-on sales, or services.

Product 145

Product Intellectual Property Liquidity Event Exit Strategy 145

Version One Ventures

OCTOBER 15, 2020

And >40% of that revenue is coming from in-game purchases. When they can invest the marginal engineering hour in listing a new token that drives revenue vs. saving some costs on settlement, it’s hard to justify. The app could then take a small % of all revenue from “paid” messages.

Networking 168

Networking Global OTC Security 168

ReadWriteStart

SEPTEMBER 10, 2010

They already have several customers including some telcos, and are at about $350,000 in revenues. Whether it is credit or equity, funding is very, very tight. VCs ONLY want to invest in momentum deals, which means you already have serious customer validation and traction and you are looking to raise money to scale your business.

Cloud 115

Cloud Silicon Valley Incubator Finance 115

Startup Professionals Musings

JULY 4, 2014

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

Angel Investor 232

Angel Investor Intellectual Property Investment Bankers Private Equity 232

Tim Keane

MARCH 9, 2011

This seems like an easy topic – debt where there is appropriate cash flow, equity when there isn’t.    And, while debt is less costly than equity, it can bankrupt a company more quickly than more expensive equity might. Business success is the ultimate goal. This is an equity example, of course. 

Finance 83

Finance Bootstrapping Startup Equity 83

VC Cafe

FEBRUARY 27, 2024

especially if the startup already has a product and revenue? In smaller funds, ticket sizes tend to be lower, so pre-seed is the only stage where micro funds are able to secure their minimum equity targets. Lower valuations and follow on valuation sensitivity – fundraising is a recurring event in the life of a startup.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Steve Blank

SEPTEMBER 14, 2009

3) invest in and take equity stakes in exchange for capital. Five Quarters of Profitability During the 1980’s and through the mid 1990’s startups going public had to do something that most companies today never heard of – they had to show a track record of increasing revenue and consistent profitability.

Silicon Valley 230

Silicon Valley IPO Technical Review Venture Capital 230

Startup Professionals Musings

AUGUST 13, 2016

For example, if you have a proven product, real revenue, a big potential market, and are ready to scale up the business, every investor will be interested. At this point, most Angel investors and a few early-stage VCs will be happy to talk, assuming you have the business model validated, and a large opportunity.

Matching 120

Matching Angel Investor Intellectual Property Investment Bankers 120

crowdSPRING Blog

NOVEMBER 30, 2012

Start With a Business Model, Not a Business Plan | WSJ – [link]. The danger of waiting to long to find a business model? … Checking In on Foursquare’s Valuation – [link]. Convertible Debt: really Bridge Loans and Equity Replacement Debt – [link]. Just got acquired?

Social Media 100

Social Media Small Business Central African Republic Design 100

Austin Startup

AUGUST 20, 2017

They’re looking to be paid properly in the context of the overall salary structure, including cash, benefits, and equity, and to be paid commensurate with performance. Keep the valuations consistent with company progress. Your business works as intended if you can attract customers that fit into the context of your operation.

Technical Review 48

Technical Review Software Review Cap Table Securities and Exchange Commission 48

Startup Professionals Musings

NOVEMBER 9, 2015

Yet many entrepreneurs rely on expensive outside services and outside money, rather than do the networking for a co-founder or two who have the right skills to work for equity. Creative and determined entrepreneurs always find ways to get people to work for equity, barter services or share later revenue rather than pay cash up front.

Bootstrapping 120

Bootstrapping Cofounder Equity Agile 120

Duct Tape Marketing

FEBRUARY 3, 2022

You're selling your culture, you're selling your client list, you're selling your business model, but that's it, you have no tangible also, you know, agencies, don't typically service clients in a localized market. Are they all SMBs small businesses or do you have enterprise really big clients? Do you have a leadership team?

Entrepreneur 78

Entrepreneur Technical Review Cofounder Valuation 78