Discussion Topics

Investors should set up a deal flow process that takes startups through in a timely manner. Here are the deal flow stages: Initial contact — before reviewing a deal there’s often a call or email that describes the deal. It’s best to provide initial feedback and ask key questions about…

Deal flow takes a substantial amount of time for the startup investor. It’s important to organize your deal flow process so it’s efficient. Use these steps to organize your deal flow. Set up a separate email for deal flow and use it to capture deals from websites, social media, and…

Running deal flow is a time-consuming process. There are steps you can take to automate it. Here are some key points to consider: Standardize the information you collect by using forms on the website. Capture referral partners or sources so you can measure the results. Collect the startup submissions to…

Deal flow is key to a startup investor’s success.  Investors seeking startups to fund can follow these steps to attract deal flow: Build a global network of venture partners, scouts, and micro funds. Showcase your network to the startup community to capture more startup interest.  Set up a series of…

Investors seeking more deal flow should look to their own network. Here are some steps to find deals from your contacts: Identify the type of startup you want to fund.  Search for contacts related to that sector and domain.  You’ll find experts with deep knowledge of the technology, as well…

Deal flow is important to the startup investor. After you set up your initial sources, you can expand your deal flow in the following ways: Connect with other startup investors and offer to share your deal flow with them and invite them to return the favor. The best deals come…

Deal flow is the lifeblood of startup investing. It’s important to set up sources to provide quality deal flow on a consistent basis. Here are the steps to set up your deal flow sources: 1. Map out the entrepreneurship and funding groups in your geographic area or sector. 2. Use…

Deal flow is key to successful startup investing. It takes a great deal of time, so it’s important to build a strong process for managing it. It helps to use a software tool to track it. Start with the key steps for running deal flow as follows: Set up a…

Deal flow is critical to successful startup investing. Here are some key points to consider: Deal flow gives you experience with founders, valuations, exits, and many other aspects of the startup process.  It teaches you a great deal about the market, current technology, and the startup ecosystem. Deal flow gives…

So how do you know when not to invest in a startup? Here’s a checklist of show stoppers: – There’s no business plan and no plan for an exit. – There’s no vision for the company. – There’s no growth in the target market. – The business doesn’t provide enough…

The best deals have more investors than they need. So how does an investor gain access to those deals? Startups choose investors who can provide support beyond the fundraise. Here are some examples: 1. Offering specific advice on how to build the business and grow it.  2. Make introductions to…

As a startup investor, you will find there are many deals to consider. In fact, there are too many startups to diligence and pursue. You want to build quality deal flow channels that meet your criteria and screen out the noise. Quality sources often have experienced entrepreneurs working on their…

So how do you know when to pull the trigger and invest in a startup? After applying the investment thesis, check for the following: – There’s a strong team with integrity, industry knowledge, and business experience. – They have product validation and market validation – the product works and people…

While there’s a great number of startups looking for funding, the startup investor needs to set up deal-flow sources. Your personal network is a good place to start. Contact not only investors in your network but also attorneys and accountants who may see deals seeking funding.  You can join the…

In analyzing potential investments, it’s important to understand their business model and how well it meets the venture investors’ requirements.  The business model consists of unit and customer acquisition economics as well as market and business economics. Unit economics is the cost to provide a product that drives gross margin.  …

The elevator pitch can do more for you than just give you a short-form pitch. It boils down your pitch to the bare essence. This helps you focus on your core value proposition. It helps you think through your pitch so you can prioritize the most important points. It gives…

The elevator pitch is one of the most important pitches you can give. Here are some key points to remember in delivering your elevator pitch: Keep it around thirty seconds.  Practice it to get the timing right. Use the rest of your time to engage with your audience in questions…

Today we’ll talk about a rolling close. Closing a fundraising round can be challenging given the schedules of the investors. A rolling close is used in a deal that is open to investors who can sign the documents and send in their money on their own schedule.   This allows the…

In pitching your startup for funding, you’ll find many opportunities to engage investors. Not all opportunities will provide substantial time and attention to investors. Develop an elevator pitch for those times when you have only a few moments to capture the investors’ interest. Here are some key points to consider:…

The elevator pitch is a key tool in your fundraise. Here are some best practices to make your elevator pitch a success: Before delivering your pitch, learn something about your audience. What are their careabouts? What motivates them? Customize your pitch for your audience. Don’t try to tell them everything,…

Elevator pitches can be used in many ways. The pitch states the problem, the solution, and how to learn more about it. In addition to fundraising, it can also be used in sales. Instead of asking for an investment, the ask goes to purchasing the product. Another type of elevator…

The elevator pitch follows a simple format. Start with the people who have this problem so the listener has context. Show the cost in time or dollars to demonstrate the size of the problem. Demonstrate your competitive advantage over the other solutions. Quantify the benefit with numbers. Propose the next…

In crafting an elevator pitch, the intro is the most important part. You must grab their attention and make them want to hear more. Start with a problem and show how big and costly it is. Generate curiosity in the listener by telling them you have a solution to that…

To craft an elevator pitch, start with the end in mind.  Do you want to pitch an investor? Do you want to sell a product?  Start the pitch with the problem you solve and what your company does. There needs to be a hook at the beginning of the pitch…

An elevator pitch is a short version of your fundraise pitch. Use it when you are engaging investors in situations where the slides are not available and the time is short. It’s useful for setting up a more formal presentation by giving the investor a reason to take the meeting….

There are pros and cons to working with Corporate VCs. Here are the pros: They take a long-term point of view giving the startup time to grow and develop. They bring access to partners, customers, and other resources. They bring domain knowledge far beyond what most traditional VCs bring. They…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In working with corporate VCs, follow these best practices: 1. Consider access to the R&D departments of the corporate VC and how much value that will add to your startup….

Corporate VCs can leverage their position in the industry to sign up good startups with an investment. The corporate VC brings a network of partners, distribution channels, a brand, an existing product line, and more.  An investment can leverage their research dollars and achieve more than if they build it…

Companies setting up a corporate VC arm often make the following mistakes: Treating the corporate VC arm as purely an acquisition pipeline. There are several other ways to gain value from a corporate VC structure than just recruiting target acquisitions. Not taking enough risk in selecting startups to pursue. The…

In setting up a corporate VC fund in your organization, consider the following: Start with the legal structure. You can either create an LLC legal entity for the fund or move the fund inside the corporate structure. Next, establish your investment thesis in alignment with your corporate strategic objectives.   Build…

While traditional venture funds increase their fund size over time, corporate VCs should keep their fund size low. Traditional VCs seek higher compensation and can do so by increasing the size of the fund which increases their management fee. Corporate VCs are often compensated as employees of the company with…

There are several approaches corporate VCs can take in setting up their venture program: For finding innovations for current challenges the corporate VC can use collaborative innovation tools such as coding sprints, hackathons, or Xprize competitions. For generating new business concepts, utilize accelerators by either bringing in an existing program…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Corporate VC funding continues to grow as companies look for innovation and startups look for funding opportunities. There are several types of corporate VC funds. Here are three: 1. Traditional…

There are several tools for the corporate VC to use in a venturing program. Here’s a list to consider: – Hackathon – invite those in the industry or area to participate in a coding challenge to solve a particular problem. – Shared resources – provide the community with a set…

Founders looking to raise funding from corporate VCs should avoid the following mistakes: 1. Not matching the corporate VC to the needs of the startup – corporate VCs bring not only money but strategic value. 2. Not understanding the corporate VC investment strategy – some corporate VCs invest for a…

Startups looking to take corporate VC funding should be aware of the requirements put on founders. Here’s a list to consider: – Corporate VCs may seek consent rights on contracts the startup enters with competitors. – They may seek higher levels of compliance on the part of the startup. –…

The corporate VC must set up and run a program. Here’s a list of core functions the corporate VC must cover: Planning out the portfolio – this includes estimating the size of each investment as well as the type of company to invest in. There needs to be a target…

With the growing number of startups seeking funding, it’s easy to increase your corporate VC fund to capture more deals. Fund sizes in many corporate VCs increase almost every year. For many startups, too much funding can bring unexpected problems. It’s best to start small and grow the fund organically….

Corporate venture capital is venture funding from a company, rather than a fund raised from limited partners. Most corporate venture capital invests for strategic reasons rather than financial ones. Reasons for corporations to invest in startups include the following: – Gain market insight through their startup portfolio companies – many…

Corporate VCs follow the startup cycle with many launching their programs at the peak of the cycle. Most Corporate VCs last about 4 to 6 years, at which point the economic cycle creates a challenging environment for the company. To be successful at running a corporate VC, you’ll need to…

Overall, corporate VCs invest more than traditional VCs by about 2%. Corporate VCs operate the same as traditional VCs with some exceptions: – Corporate VCs seek a strategic advantage rather than a financial return – Many don’t lead funding rounds but only follow them – They bring strategic support to…

Corporate venture capital is an existing business utilizing venture funding to further the company’s strategic objectives. The firm takes an equity stake in startups either through an internal fund or off the corporate balance sheet.  Unlike traditional venture capital, corporate VCs look to gain a competitive advantage for the company…

Corporate venture capital is an existing business utilizing venture funding to further the company’s strategic objectives. The firm takes an equity stake in startups either through an internal fund, or off the corporate balance sheet.  Unlike traditional venture capital, corporate VCs look to gain a competitive advantage for the company…

To ensure an advisor engagement is successful, make sure you set up an advisor agreement. This is a contract between the advisor and the company and defines the work to be done. Here are some key points to consider: Make clear what the advisor will do — bring experience, contacts,…

For family and friends funding, sometimes a promissory note is used to set up a loan. Here are some key points to consider in reading a promissory note: 1. The note summary section establishes the relationship between the borrower and the lender, the date of the note, the total loan…

In negotiating the valuation, it’s important to understand the impact of that valuation on follow-on rounds and the exit. A waterfall analysis maps out the cap table with subsequent rounds of funding. To run a waterfall analysis, create a spreadsheet with the cap table owners and the current fundraise round….

The Cap Table is an important part of any diligence process. In reviewing a startup’s Cap Table, look for these signs of a problem: – The current team has little equity and thus little incentive to see it through to an exit. – The Cap Table is complicated with multiple…

Investors review the cap table as part of their diligence process.  They look for the following in the cap table: The founders have a large enough stake that keeps them motivated. Those who have very little ownership will most likely not stay with it for the long haul. The right…

A fully-diluted cap table shows the impact of the conversion of convertible notes. A convertible note has a date of issue, an interest rate, a discount rate, a valuation cap, and a maturity date.   Upon maturity, the debt typically converts to equity. The conversion is based on the principal amount,…

It’s important to manage your cap table as you go. Fixing it later will cost you time and money. Here are some key points for managing your cap table: Consider setting up your cap table with a provider that keeps track of all transactions in one place. Founders should take…