Discussion Topics

In raising funds from Limited Partners, make sure to prepare the following marketing materials: Website. The website should reflect the values of the general partners and details about the fund. This is the first place investors go to learn more. Pitchdeck. Just as startups use a pitchdeck to communicate their…

To find the ideal investors for your VC fund, consider the following: Value proposition What is the value proposition of the fund? Answering this question will narrow the field of investors dramatically. What is the solution your fund offers? This could be funding women-led businesses, startups using the latest technology…

Limited partners considering an investment in a VC fund should check the references. Here’s a list of references to consider: Other funds the VC has worked with before. This could be in the form of a syndicate for funding startups. Entrepreneur network. This is the list of startup founders the…

Limited Partners in VC funds look at the team’s track record and also that of previous funds. Here’s a list of key metrics to disclose about your track record: Total Value to Paid in (TVPI)  Compares the value of realized gains and the estimated value of remaining assets to the…

Limited Partners test VC funds before investing. Here’s a list of the criteria LPs use to test the fund: Does the fund have a track record that is compelling? Does the fund fit an open slot in the LPs asset allocation? Does the fund manager have access to deals the…

In raising a VC fund, there are several types of limited partners. Here’s a list to consider: High networth individual This is a person who has a net worth of over a million dollars available for investment. They often participate as an active investor. Ultra high net worth individual. This…

Not all startups succeed. For those that don’t, there may come a time to shut it down. Here are some key points to consider in shutting down a startup: Before announcing the shutdown, collect all accounts receivable. Sell any inventory left on hand. Notify investors first so they are aware….

Many founders have unrealistic expectations and misguided notions about how startups work. Here’s a list of best practices to consider for launching a startup: Don’t bank on the idea alone. Startups need more than a great idea; they need execution. Launch as soon as you can. Delaying the launch means…

The Lifetime Value to Cost of Customer Acquisition ratio is called LTV:CAC and is a useful ratio in determining the health of a startup. To calculate the Lifetime value, take the monthly revenue and divide by the churn rate.  To calculate the Cost of Customer Acquisition, take the number of…

Startup founders receive buyout offers throughout the life of the business. Even in the early days of the startup, they have the opportunity to sell the company. At each round of funding, the founder has the choice to raise more funding or sell it. Here’s a list of reasons to…

Regulation by the government of an industry is meant to protect customers and provide a level playing field for the companies. The downside to regulation is that it inhibits innovation. It often favors the incumbents in an industry and makes it difficult for startups to succeed. It makes market entry…

Forecasting revenue is an important skill because investors want visibility into it. To forecast better, use the Trailing Four Months model. In this model, calculate the growth rate by taking the average of the growth rate over the last four months. Use this growth rate to forecast the remainder of…

The seed stage grows the business from 0 to $1M. The growth stage grows from $1M to $10M. The scaling stage grows from $10M to $100M. Here are the most common mistakes founders make at the scaling stage: They stop working on sales to focus on other areas of the…

Startup founders often believe their idea will carry the day with the investor. They propose their idea to spark interest. While that may be a good way to get attention, it will certainly not maintain it for long. Investors look for execution, not ideas. In raising funding, investors look for…

Napoleon never ran a startup, but his life provides many lessons for the startup founder. Here are some lessons to take away from his life: Underestimating risk — Napoleon underestimated the harshness of the Russian winter and suffered great losses. The startup should consider carefully the market to pursue before…

Artificial intelligence is a disruptive technology that promises tremendous benefits to the tech industry. Current products will be upgraded to use AI. New products will be introduced using AI from the get-go. Here’s a list of product strategies for AI: AI-based applications that use large language models called LLMs. This…

A CEO once said, I don’t mind people making mistakes. I mind people not learning from them. It’s important to learn from mistakes. There are several ways to do this. Learn from your own mistakes. Writing down the mistakes and what you learned helps reinforce your knowledge. Learn from the…

Technology adoption goes through several stages over the life of that technology. Here are the steps of adoption: Unknown — no one knows the technology. Awareness — some hear about it but don’t know what it is. Understanding — those who know it understand how it works but don’t know…

Valuation is a key negotiating factor in startup investing. There are many valuation models available. The most common is the use of comps or comparables to see if the valuation is at market rate. Consider using the acid test for startup valuation. The acid test for startup valuation compares the…

In the early days of a startup, innovation can look trivial. Innovation is often applied to the lower end of the market. New technologies often start as simple devices or applications. These devices have minimal functionality and lack robust features. In vetting startups, look past the minimal functionality to the…

Startup founders take the CEO position because they bring the vision and passion to launch the company.   They know the domain and are building the core product and go-to-market strategy. They are the ultimate authority at the company. As the company grows and then scales, there comes a time for…

Forecasting is a key skill founders need for raising funding. Investors want to know the founders’ expectations for the business with the funds raised. Here are some key steps to make better forecasts: Start with a baseline. If the startup has revenue, then use that as the starting point. If…

The elevator pitch is the short form of your startup pitch. It introduces the deal to an investor and gives the key highlights. The goal is not to tell them everything but rather to intrigue them to learn more about it. Here’s how to build an elevator pitch: State in…

In pitching investors, there are key nuances that can make or break the pitch. Here is a list of nuances to consider when pitching: Use the pitch to build a collaboration. Funding is a part of it, but not the only thing. Start your pitch with your core value proposition….

Successful startup founders share several key skills. Here are the key skills for a startup founder to have: They have access to the networks that are vital to their startup success. This includes investor networks for funding and customer networks for buying the product. They are flexible. They can pivot…

Markets shift and change, creating new startup opportunities. Founders seek new markets in which to launch a startup. For those launching a startup in a new domain, here are some key steps: Read several books describing the domain and how it works. Talk to domain experts in the space to…

In a startup, revenue solves all problems. Funding can help, but only for so long. As long as you have cash, you can run the startup. When you run out of money, then it’s over. Revenue can fix any problem. If you need more sales support, you can hire them….

Anyone can be a founder of a startup. Here are signs of a good one: They have an innovative mindset. They look for how to innovate on the product, the business model, and more. They are self-aware. They know their strengths and weaknesses. They have a vision for their business….

A founding team includes someone who is building it and someone who is selling it. It’s important that the startup has two founders.  Here are some steps to find a cofounder for your startup. Figure out which role the founder is taking and look for a cofounder to fill the…

Anyone with an accredited investor status can become an angel investor. Here’s a list of key attributes of a good one: They know their industry well and how to invest in it. They know people and can size up a founder to determine if they are a fit for a…

A warrant is the right to buy a company’s stock at a specific price or range over a certain time period. The warrant acts like an option, but it issues stock, which dilutes the cap table. Founders raising funding offer warrants to incentivize investors to fund the company. Warrant coverage…

Venture capital can enable a startup to reach the next level through funding. There are downsides to VC funding. Here’s a list: The founders’ ownership goes down by 20-25% on each fundraising round. The VC model promotes growth over all other strategies. Taking VC money means taking the VC’s business…

The failure rate for startups is high at almost 90%. Here’s a list of reasons why startups fail: The founders underestimate how long it will take to gain traction in the market. The startup runs out of cash. The product fails to find product-market fit. The competition wins the market….

Building a minimum viable product or MVP is a key step in a startup launch. After some market research, there’s an ideation step on what to build. The rule of MVPs is that it should take no longer than six months to build and no longer than six months to…

Founders raising funding incur dilution. Their ownership stake goes down as they raise more funding. Founders start with 100% ownership. Each round of funding dilutes them by 25% or more. On average, founders own 60% after the pre-seed and seed rounds. After a Series A, they own 45%. After a…

In raising a VC fund, the size of the fund is a key component. Here are the factors that impact the size: The stage of startup. The later the stage, the larger the fund size. Sectors targeted. Some sectors, such as life science, will require larger check sizes. Percent ownership…

Startups seek out investors not only for funding but also mentorship. Most pitch sessions are valuable not because they raised funding, but because they provided feedback to the founder. The challenge for investors providing feedback is that it most often comes in a one-on-one format. For investors to be effective…

Artificial intelligence-based startups continue to grow and increase. Investors funding AI companies should look for the following: Market size.   New markets can be difficult to measure. For brand new categories, calculate the number of users in the market and how much they will spend on an AI solution. For existing…

The unit economics of a startup determine its success. The stronger the unit economic case, the higher the margins, the faster the company grows. In analyzing a startup, measure the unit economics regarding customer acquisition cost and lifetime value. Calculate it at the unit level to understand the health of…

Unlike most venture capital funds that invest in startups, a fund of funds invests in other funds that invest in startups. Instead of investing in multiple funds, an investor can gain diversification by investing in a fund of funds. As with all good VC funds, there’s limited availability for investors…

Startups often choose to stay in stealth mode in the early days to protect their idea. In most cases, stealth mode doesn’t help the startup and can actually hurt it. Here’s the downside of going into stealth mode: It’s difficult for others to help the startup because they don’t know…

Limited partners consist of pension funds, university endowments, family offices, and high-net-worth individuals. Here’s how LPs select VC funds for investment. Track record. The VC must have a track record in the form of an IRR, TVPI, or MOIC metric. Ability to deploy capital. The VC must be able to…

Pitching is a key skill in startup fundraising. Here are some key steps to learn how to pitch: Consider taking classes and tutorials. There are many tools now available online. Consider signing up for a Toastmasters class. This gives you the opportunity to speak to a group and then gain…

Launching a startup is hard work. The hours are long, and there are many obstacles to overcome. The key to a successful startup is not funding from investors, but rather founders who stick with it. Losing faith in the business is the first step toward shutting down. To avoid this,…

Startup founders are successful because they execute. Many founders have ideas, but the execution separates the winners from the losers. Here are the core skills of a startup founder: They pick an idea and drive it all the way through to successful completion. They launch the startup and then proceed…

What makes for a great angel investor is a great fit for the startup. An angel is a great fit for the startup if they meet the following criteria: They have knowledge of your industry and can explain the insights into how it works. They have run or invested in…

In the startup funding world, there’s an SEC registration called a FormD. A FormD is an SEC filing for those who raised funding under Regulation D rules. It’s a public notice indicating an investment has been made. For companies receiving the funding, it lists the names or entities that made…

Running an angel network requires a source of revenue just like a startup. Here are some ways to fund an angel network: Charge membership dues. This is the most common form of revenue for an angel group. Charging the members generates more participation. This helps generate more funding for the…

In raising funding, startup founders must identify and contact many investors. Here are some key steps to getting a meeting with an investor. Research the target investor to identify what they are interested in. This could be a specific industry or sector. For general investors, focus on the top three…

Investors vary in the quality of the startup. There are some investors who bring gravitas to the deal that attracts other investors. Other investors are good, solid players in the market and can add value to the startup. Then there are the average Joe investors who are nice guys and…

The quality of the team, in particular the startup founder, is one of the most important factors of startup success. Here are some key qualities to look for in a founder.  Integrity is the most important quality, as this must be someone you can trust. Passion for solving the problem…

Valuation is a negotiation, not a formula. Before negotiating valuation with the investor, prepare for the discussion. Consider these points of preparation: Know the current market and what other companies are selling for. This is known as comps or comparables.   Have two to three examples of other company exits. Know…

There are certain phrases used in startup pitches that kill the credibility of the presenter. Here’s a list of phrases to remove from your pitch: “We have no competition.” If you have no competition, then you have no market.   This basically shows a lack of understanding of the current market…

Most angel investors focus on one of two strategies. They can be called Moneyball and Powerball. The Moneyball strategy invests the same amount of money in each deal. Each sector gets one investment. There are no follow-on rounds. Funds are considered in addition to startups. The powerball strategy invests a…

The key to a successful pitch is to articulate all the values in the deal. This doesn’t mean explaining how the product works in great detail This also doesn’t mean spending half your allotted pitch time trying to convince the audience that diabetes is a problem. It does mean, however,…

In launching a startup, consider adding a consulting program. New products and services often require additional training and services to help the customer achieve success. Over time, the product improves to the point that the customer can install and run it on their own. In the early days, use consulting…

Artificial intelligence brings a new type of startup to the investor for funding. Here is how to evaluate AI startups for investment. Market opportunity. For new applications that have never been done before, AI offers a greenfield opportunity. Estimate the current size of the target market and the value of…

Fundraising can be challenging both mentally and emotionally. Before launching your fundraiser, build your support network. In addition to building your investment documents, put in place people who can support you. Here’s a list of support to consider: Advisors — identify two to three people who can advise about fundraising….

Launching a startup is hard work. It takes time to build up the revenue to pay a living wage to the founders. So how does a founder pay the bills while launching a startup? Here’s one solution: Provide consulting and training services in the domain of the startup you are…

Founders who have raised funding should give their investors regular updates. Here’s the value of regular updates to the investor: It reminds the investor what you do and what progress you have made. This becomes useful later when the founder goes to raise the next round. It maintains the relationship…

Startups raise funding outside of family and friends after they have a product with some revenue. Founders who have a track record of building and selling startups can raise on an idea. Everyone else must validate the business before investors will consider funding it. Pre-selling the product is one path…

In launching a startup, the first goal is to generate revenue. Salaries come later and in some cases much later. Some founders look to the startup as a source of income. Fundraising from investors is not the answer to the salary question. Investors will not fund a startup that can’t…

Fundraising requires a set of skills. Those skills can be found in other areas. Here’s a list of skills and where to find them: Sales. Fundraising is fundamentally a sales process. One can transfer selling skills to fundraising. Marketing. Fundraising requires the ability to reach out to the investors to…

There are many valid reasons for raising funding. Here’s a list of reasons to consider for your fundraiser: The business is growing and is now ready to scale. It can be hard to bootstrap a scaling effort. There’s a clear need for a minimum viable product to establish the product…

Some startups seem to raise funding quickly and with great ease. The press coverage of startups often leads the reader to believe that the round closed in a short amount of time. In most cases, the startup spent substantial time planning and then campaigning to raise the funding.   It appeared…

Raising funding for a unicorn seems like a mystical art. The funding rounds are outsized compared to the norm. Here are the key components to raising funding to be a unicorn: The team has exits. If your team doesn’t have a history of successful startups, then build out your team…

Before launching a fundraiser, the founder should first develop a fundraising strategy. This is the plan for how to prepare and then launch a fundraiser campaign. Here are the key components of a fundraising strategy: Identify the problem to solve and ensure it is a substantial problem that will attract…

Startup investors look for revenue traction and momentum in the deal. Those with an idea only can struggle to raise funding, but it can be done.  Here are some key points to consider: Focus on the team, the problem, and the size of the market. Show the strength of the…

In startup fundraising, the discussion focuses on what the investor is looking for. This often comes down to a strong team, traction with the customer, a product with a moat, and momentum in the deal. A key component in raising funding is building a relationship with the investor. There are…

What Investors Are Looking for in Your Startup Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Investors funding startups look for key factors that point to the success of the…

Sales for a Biotherapeutic Startup Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In a tech startup, the customer is the one who buys the product. In a biotherapeutic startup, the…

Tools for Fundraising Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Before launching a fundraising campaign, set up the tools you’ll need. Here’s a list of key tools to support…

The Four T’s of Startup Investing Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. There are many ways to evaluate a startup. For investors funding SaaS startups, here are the four…

How To Pitch in a Down Market Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Down markets change the care abouts of the investor. The investor wants to know whether the business…

Prepping Your Website and Social Media for Fundraising Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Before launching a fundraiser campaign, make sure your website and social media…

Startup Metrics in a Down Market Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In an upmarket, startup metrics focus on growth rates, cost of customer acquisition, and scalability…

How To Tell When the Startup Doesn’t Have Anything Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Startups raising funding should bring customer engagement, if not traction, to…

LP Investing Mistakes Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Limited partners are referred to as LPs.  They invest in venture capital funds. Just as angel investors…