Discussion Topics

In working with an advisor for your startup, look for these characteristics: – The advisor has first-hand experience in the industry, running a business, closing sales, and more. – They listen and can relate your problems to actionable solutions. – They have been through the same challenges and experiences as…

In choosing a startup to advise, it’s important to find the right fit. Here are some key points to make sure you are a good advisor to the startup. Spend time with the startup to really understand if you can add value and if they are ready for an advisor….

Advisors take many roles in their work with startups. You can use advisors to fill gaps in the early stage of the startup. Some advisors provide support as informal advisors.  There’s no set goals, meetings, or formal advisor agreement. This is the most common way startups work with advisors. Those…

There are several types of advisors you can choose to help your startup. Here’s a list to consider: The Brand Name – This type of advisor offers their name to your company.   This can be helpful to attract investors, employees, and customers.  They typically bring some value in the form…

Good advisors bring good value to your startup. Great advisors bring great value. Spend time identifying the right advisor. In recruiting an advisor, pose specific questions and gauge the response. How does it rank compared to feedback from other sources? It should be the best or near the best of…

As an investor in a startup, you may want to provide additional value and sign up as an advisor. Here are some key points to consider: – Choose startups that you can help. – Make clear the work you plan to do such as introductions, networking, advising on the domain,…

Advisors can be very helpful to startup founders.  Here are steps to consider in selecting an advisor: 1. Check your company needs for the coming two years and determine what is missing. 2. Look for advisors who add value to the team by bringing the necessary skills and experience the…

Just as you have an ideal customer profile, so you should have an ideal advisor profile. Start with your industry and growth strategy and look for founders who have experience in the same. Look for someone who has already gone through what you are going through now. Start with those…

Advisors can help startups achieve higher growth, avoid problems along the way, and give the founder confidence. Here are some key points in choosing an advisor for your startup: – Avoid the “dabbler”. These advisors want to dabble with startups but don’t have any substantial experience to share. – Avoid…

Advisors can be helpful to your startup. Here are some key points to consider to determine if you need one: – If you haven’t run a startup before you’ll most likely need an advisor. – If you plan to raise funding, you’ll find advisors add gravitas to the team as…

The Convertible Note is a commonly used investment structure for funding startups. It’s a short-term debt instrument that converts into equity later. If the issuer wants a debt instrument without conversion to equity, a promissory note would be a better option. With a Convertible Note, the investor receives accruing interest…

Equity is used for investment purposes to give the investor an ownership stake in the company. To calculate your ownership percentage you take the number of shares you are purchasing and divide it by the total number of outstanding shares. Another way to calculate your ownership is to use the…

SAFE stands for Simple Agreement for Future Equity. SAFE notes were created to provide a convertible note-like structure for startup funding but without interest rates or maturity dates.  The SAFE note operates like a warrant which gives the investor the right to buy shares in a future-priced round. SAFEs are…

The traditional method of going public with an IPO is being challenged by a new model called a Direct Listing.   The IPO is typically run by an investment bank which hypes the new offering to investors to create a market. This oversubscription creates artificial demand for the stock.   After launching…

In raising funding or selling your business you may consider using an investment banker.  Here are some key points to consider in making the decision: They can build out the dataroom and do the appropriate research of competitors and comps.  An investment banker can create competition for your acquisition thus…

In negotiating the exit with an acquirer, you’ll need to know the following: 1. Key metrics about your business, both those that show the company in a positive light as well as a negative one. 2. The total addressable market for your company. 3. The top three opportunities your company…

Most startups are launched with the idea of selling the business for a substantial gain in five to seven years. Many companies reach that stage and find they can’t sell the business, at least not for the price they want. Here are some options: – Reduce your burn rate to…

In setting the exit, most investors look to maximize the exit value. It’s important to remember that the metric investors use, IRR or Internal Rate of Return, has a time component to it. The faster the exit, the higher the IRR. As an investor, consider pursuing the highest IRR and…

Most exits come from another company buying the startup.  It takes six months to a year to complete a buyout. Delays often come from the startup not being prepared or ready for the M&A process. Also, setting a valuation and final terms can take substantial time for research and negotiations….

In selling a business there are two types of buyers: strategic buyers and financial buyers. Strategic buyers look for companies that can enhance their current business. Financial buyers look for companies that generate cash. Their motivations and careabouts are different. The strategic buyer will look to see how closely the…

Startups should start planning for an exit after they achieve product-market fit.  Here are some key points to consider when planning your approach to an acquirer: – What are the key metrics the acquirer will look for? – What are the company’s metrics and how do they currently look? –…

There are several ways to exit a business. You can sell the business to another company or investor. This provides liquidity to the owners.    The downside is, it’s not clear what happens to the employees and the direction of the company. You can develop an employee stock ownership plan. This…

Most startup exits come through acquisition by another company.  In planning for an exit, you need to develop a strategic plan that prepares your business for the target acquirer. Here are some key steps: Identify the target acquirer and make contact with the CEO and VPs of the company to…

Investors should gain alignment with the startup about the exit before making the investment. This includes the size and timing of the exit. There needs to be some clear thinking and research about who will buy the company and how much they will pay.   The investors and the startup need…

There are several options for selling your business. Here are some of them: Strategic – This is a buyer that buys your business as it provides strategic value for their company. Financial  – This buyer looks solely at the financials, in particular, the cash flow, and buys the company without…

Even in the early days of the startup, the CEO must keep in mind the exit.  The investors funded with the anticipation of a return. While the vision of an exit may seem like a distant future, the decisions taken at the beginning often impact the exit at the end….

Startup investors look for an exit in the 5-7 year range. As a startup, you need to consider the exit from the beginning as the exit strategy can inform your decisions around funding, hiring, and more. Here are several exit options to consider: – Mergers and acquisitions – most companies…

Here are some key steps to take in planning the exit for your company: – Understand why you are exiting the business.   – Is this exit going to be seller motivated or buyer motivated? – Explore the options. Consider who would be the best acquirer or which company would be…

There are many reasons to exit the business. Here are some key ones to consider: – The company is ready to go IPO. By taking the company public, new ownership comes into place. – The market has changed dramatically putting the future of the business into question. – The business…

For every business, there comes a time to sell it. Ask these questions to find if now is the right time to sell your business. Do you still want to run the business? You may want to move on to new projects and opportunities and the current business may no…

Startups have a high failure rate. What percentage fails? Out of 100 startups/investments: -75 will fail or turn into a lifestyle business within 2 years  -25 will remain on the venture track after 2 years Of those 25: -half will die or turn into a lifestyle business between years 2-4…

Running a fundraise with investors is similar to running a sales funnel with prospects. You must take the investor through the stages of awareness, interest, desire, and commitment. Here are the steps you need to take: Stage 1: Awareness – identify and contact an initial list of investors. Start with…

After you’ve had an introduction and talked with the investor either in person or on the phone, it’s important to follow up with the investor to answer questions, update about progress, and walk through diligence. Investors are not interested in spending time to hear about your forecast, they are looking…

In startups, cash is king. It’s the key financial metric to watch. Growth may be going straight up, customer traction may be better than ever, but if cash runs out then it all comes crashing down. Cash management is a daily exercise.   The first step is to understand every inflow…

Platform products facilitate two-sided marketplaces that match buyers to sellers.   The most common metrics used in platform products are buyer/seller metrics, inventory metrics, and transaction metrics. Buyer/seller metrics include the number of buyers and sellers on the platform. Also, the growth of buyers/sellers and the number of repeat buyers/sellers should…

Many startups use SAFE notes and Convertible Notes for their early-stage investments. So what’s the difference? A convertible note is a debt instrument that converts into equity later upon an event such as raising an equity round or reaching a maturity date. A SAFE is a Simple Agreement for Future…

Storytelling is a key skill for any startup raising funding. In the early days of a startup, the product and team aren’t fully developed and customers are typically not fully engaged.   The investors look to the founders to understand the potential of the business.   The founder who can articulate a…

In seeking a buyer for the company, there are two basic choices: a strategic buyer or a financial buyer.   The strategic buyer is typically a company in your industry that is seeking to acquire technology, teams, a customer base, or brands. They will look at those aspects of your business…

After you complete your fundraise and thanked those who helped you, take time to prepare for the next fundraise. Take the investor prospects, the ones who did not invest, and add them to a list to update every 3 to 6 months about your progress.   Investors are often curious about…

After the fundraise is complete, wrap up the current raise by doing the following: 1. Thank those investors who helped you, as many of your contacts made introductions, offered advice, and more. 2. Also, thank team members, friends, colleagues, and providers who assisted you.  3. Close up the due diligence…

I’m often asked what return angels and venture capital investors seek in their startup investments. Angels generally seek around a 30% IRR (Internal Rate of Return). That would be 3X their investment in four years. For longer timeframes, angel investors will be looking for a 5X-10X return for a startup…

Investors calculate their returns using metrics ROI and IRR. So what’s the difference? ROI is the return on investment without respect to time. IRR is the internal rate of return which is the return on investment with respect to time. If I invest $100K and 5 years later I receive…

I’ve seen CEOs pitch and when asked about their numbers, they defer to a CFO or someone else for the answers. This is not a good look for the CEO. Investors want to know you are on top of it, and knowing your numbers is one indication of it. As…

In raising funding, you’ll need to propose a value for the equity in your startup. This is called valuation. One way to determine it is to use the liquidation method. Here’s how it works. The exit value is set to the value of the business at liquidation, which means the…

In raising funding, you’ll need to propose a value for the equity in your startup called valuation. One way to set a valuation is to use the 5X your raise method. Here’s how it works. Most investors want to see the valuation for their money coming in at 20%-25% of…

In launching your product you have a choice to either set a high price that gives you a high margin, or a low price yielding a low margin for sales. The high price is harder to sell, but you don’t have to sell as many units to make the business…

In running a startup there will be upturns and downturns. Managing a downturn takes a different approach from the upturns. First, seek advice and guidance from others such as investors, mentors, and CEOs. Don’t delude yourself into thinking it’s better than it is and that it will turn around soon….

In a fundraise, one typically uses the same term sheet throughout the raise. From time to time, investors will demand certain rights and conditions.   If there are no investor representations, then you may be able to do so. For some investors, you may need to vary the terms of the…

In valuing a startup for an investment, it’s useful to find valuations by looking at similar startups. This technique is referred to as ‘comps’ which stands for comparable. This method looks for companies in the same sector and analyzes both exits and investments to determine the current valuation for the…

In negotiating the valuation, the investor can use current market comps or comparables to set the initial price. By looking at companies in the same sector and stage, one can find the range of valuations. From there, the investor can raise the valuation based on the values the startup has…