Discussion Topics

Financial Work by Stage of Funding Each stage of funding requires financial work to be done by the startup. Here’s a list of financial goals to consider for your startups fundraise: Pre-seed — identify locked value in a customer segment. The output of this stage is a target market that…

Valuations by Stage of Funding At each stage of funding there’s a valuation range for the startup. This changes over time with fluctuations in the market and by sector. Here’s a list of ranges to consider for your startups fundraise: Pre-seed — $50K to $100K The output of this stage…

Fundraise Amount by Stage of Funding At each stage of funding, there’s a standard amount to raise. Here are the fundraising amounts by stage: Pre-seed — $250K to $500K This funding sets up the business and launches the customer discovery and product development process. Seed — $500K to $1M This…

Product Work by Stage of Funding The founder works on the product throughout the life of the business. Here’s the product work to be done at each stage of funding: Pre-seed — research the market to identify the customer careabouts and product features. Check the competition for their positioning and…

Purpose of Family and Friends Funding Family and friend funding is often used to start a business. Here are some key uses of funding at this stage: File the legal entity paperwork for an LLC, not a Delaware C corporation.  You can file for a Delaware C later if the…

Stages of Funding for Startups Startups go through a series of stages from launch to growth to scale. Each stage brings funding to the startup that serves the needs of its stage. Here’s a list of stages for startup funding: Pre-seed — this funding helps develop an idea, research the…

What is a whistleblower? Internal fraud is often caught by an employee. The employee who sounds the alarm is called a whistle-blower. The whistleblower is someone who reports fraud to the authorities. Whistleblowers fear retaliation for outing a manager or other employee. Those who want protections for keeping their job…

More Ways To Prevent Fraud in a Startup There are several types of online fraud. Here is a list of attacks to watch out for: Bots — these automated tools can infect your website and emails with viruses. Denial of service attack — this disables your website by sending too…

How To Avoid Fraud Fraud can be costly to a startup. Take these steps to avoid fraud in your business. Separate accounting duties — have at least two people handling the accounting and separate their functions. Know your team — run background checks on new hires and know your business…

Types of Financial Fraud There are several types of financial fraud related to startups in the investment industry. Here’s a list to consider: Misrepresentations — fraudsters can lie about the value, risks, and costs of financial investments. This also includes misrepresenting the financial condition and omitting key facts. Regulatory violations…

External Sources of Fraud There are several sources of fraud from outside a business. External sources of fraud pretend to be someone you trust. They create a sense of urgency and then demand payments. Here’s a list of common sources of external fraud: Fake invoices — the invoices show services…

Internal Sources of Fraud There are several sources of fraud within a business. Here’s a list of internal sources to review: Identity theft — the capture and selling of personal information for illegal uses. This is done by fraudsters capturing employee information through bank accounts and tax returns.  Asset misappropriation…

Red Flags Indicating Fraud Most fraud in businesses comes from employees and the management team. Here’s a list of employee red flags to watch for: Lifestyle changes show expensive new possessions such as new cars and homes. Substantial personal debt Addictions such as gambling or alcohol cause behavior change. Employees…

What Is Fraud? Fraud is officially defined as:  “The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” Fraud occurs in startups and small businesses and is usually through the action of a founder or employee. There are five…

How Does Chapter 13 Bankruptcy Work? Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Chapter 13  bankruptcy reorganizes the debt and sets up a payment plan. The debtor can keep their house as long as they make the…

How Does Chapter 11 Bankruptcy Work? Chapter 11  bankruptcy reorganizes the company and sets up a debt repayment plan. Here is how Chapter 11 works: It starts with filing a petition with the bankruptcy court. The debtor must file a list of assets and liabilities and a list of income…

How Does Chapter 7 Bankruptcy Work? Chapter 7 bankruptcy liquidates the company. Here is how Chapter 7 works: When a company goes into Chapter 7 bankruptcy proceedings, the bankruptcy trustee takes control of the company to liquidate the assets and pay the creditors. A Chapter 7 proceeding starts with a…

What is Bankruptcy? Business bankruptcy is meant to protect the personal assets of the owners of a firm. It gives your company a fresh start by relieving the business of debts. There are several types of bankruptcies. Consider these options for your business: Chapter 7 — Liquidation This shuts the…

Steps to Shutting Down a Startup There are several steps to shutting down a startup. Here’s a list of key steps to follow: Pay what is owed to employees such as accrued vacation. Pay all providers such as contractors, software vendors, and others. Collect invoices from any outstanding accounts.  Notify…

Preparing To Shut Down a Startup Sometimes the startup you launched does not make it and must be shut down. In shutting down a startup take the following steps: Give an early warning signal to the employees. Let them know what is happening such as we’re raising additional funding. Give…

Shutting Down a Startup 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 receivables. Sell any inventory left on hand. Notify investors first…

Best Practices for Building a Company Culture In building your company culture consider these best practices: Measure your company culture — review indicators that show how the company culture is performing such as employee engagement. Create rituals — establish activities you repeat consistently throughout the year to foster employee engagement…

How To Foster Your Company Culture A good company culture takes time and effort to build. Here are some steps to build out your company culture: Give outstanding benefits to the employees. Run team-building activities to encourage employee interactions.  Participate in community activities as a give-back. Promote wellness among employees…

Signs of a Good Company Culture Company culture is important for the success of a startup. Here are signs you have a good company culture: Employees feel they are respected and are treated with dignity. Leaders support the employees and help them succeed. Poor leaders are called out and removed…

How To Setup a Company Culture In building your company culture, realize you already have one for your startup. The initial hires have brought a culture to the company.  You can grow the company culture to a greater place. Consider these steps to grow and develop your company culture: Continue…

Before Building Your Company Culture Before building your company culture consider the following: Know your purpose Search for why your company exists. Identify your values Understand the core values of the company and what the company stands for. Hire the right people. Choose people who bring value to the company…

Characteristics of a Good Company Culture A good company culture will manifest itself in several ways. Look for these signs of a good culture: Stable workforce — the employees stay with the company a long time and there’s minimal turnover. Friendly atmosphere —  relationships among employees go beyond that of…

The Startup Company Culture The startup company culture brings a unique set of characteristics. Here’s a list of qualities to consider: Passion — the company is based on a driving passion to solve a problem or pursue a cause. Startups exude passion and everyone strives to work towards it. Personality…

Types of Company Culture There are several types of company cultures. Here is a list to consider in building out the culture at your startup: Clan culture — this puts the team first and places everyone on the same level. This promotes equality rather than hierarchy. Customer culture — this…

Components of Company Culture There are several components to building a company culture. Consider these elements in building out the culture at your startup: Purpose — the purpose of the company is the foundational element. The purpose motivates employees and drives the group toward a common goal. Growth — the…

The Importance of Company Culture Company culture shows the values, decisions, and behaviors of the founders and employees in a company. It’s important for founders to actively build the company culture. This is done primarily through the people you hire and the decisions you make. Building the right culture will…

What Is Company Culture? Company culture is the attitude and behavior of the employees and its leadership. This comes out in the form of decisions the company makes and the values the people hold. You can see it in how the employees act and work. In early-stage companies, the company…

Legal Issues Around Equity There are several legal issues surrounding equity to consider: You must have a legal entity to establish equity ownership. There are several types of legal structures including LLC, C-Corp, and more. The LLC is easy to set up and launch the business.  Delaware C-Corporation is the…

Best Practices for Founders’ Equity There are many decisions to be made with founder equity. Here are some best practices in handling those decisions.  The founder-co-founder split of equity can be anything except 50/50. A 50/50 split leaves no one in a position to make a final decision for the…

Best Practices for Equity Equity is a key component of startup compensation for founders and employees. While cash may be king in the short term, equity will be worth more in the long run. Here are some best practices for founders to follow: Treat equity as the scarce commodity it…

Equity Vesting Vesting is conveying the ownership of equity to the holder. Vesting schedules show the rate at which equity is vested over time. It is used to ensure founders and employees stay with the company till the proposed milestones are achieved. Investors will look for standard vesting schedules on…

Equity Dilution In the early days of the startup, the founders should raise only the amount of funding necessary to achieve the next milestone. The valuation of the company is low but will rise when adding products, revenue, and team members. Raising too much early on will cause the founders…

Equity Distribution Over Funding Rounds As the startup raises funding the founder’s and employees’ ownership stake will fall and the investor’s stake will rise.  This is due to the fact that more investors are added to the cap table over each round of funding. Both founders and employees undergo dilution…

Why Give Equity to Employees Employees are a key factor in the success of startups. Here’s a list of reasons why you should give equity to employees: Recruiting — the market is competitive, especially for quality candidates. A startup offering equity to employees will find it a competitive advantage over…

How To Give Equity to Employees Equity is an important compensation tool for employees. Startups that don’t provide equity must provide all compensation from the cash flow in the form of salaries and bonuses. This can be difficult on the finances of the business. Equity compensation doesn’t require any cash…

Evaluating Employee Equity Employees joining a startup will often receive equity as part of the compensation package. Investors know that only one out of ten startups will generate an outsized return. The rest turn in a modest return or fail outright. Employees should consider these factors in evaluating equity compensation:…

Employee Equity Equity compensation for employees varies greatly based on the location, type of startup, and job to be done. An overall allocation for employees is around 15% of the total equity. The first five hires receive 1% to 2% each. Later employees receive 0.25% to o.5% each. You can…

Advisors Equity Startup advisors can help a startup establish the business and find the right track to grow. Some informal advisors help the business without any compensation. Some formal advisors help the business but require compensation. Advisors seeking compensation look for a small piece of equity. Most advisors are not…

Co-Founders Equity Running a startup requires a complete team. Someone is building it and someone is selling it.  In the early stages of a startup, the founder is doing one of these and the cofounder is doing the other. Founders should look for cofounders whose skill complements their own. Since…

Types of Equity There are several types of equity in a business. Here’s a list to consider when engaging a startup: Authorized shares — the maximum amount of shares the company can distribute. Outstanding shares — the number of shares actually distributed. This determines the current valuation of the company….

Founders Equity Founders of the startup receive equity to generate loyalty to the firm. Cofounders also receive equity. In splitting equity between the founder and cofounder, avoid the 50/50 split as this puts no one in a position to make final decisions. There are many tough choices to make in…

Key Equity Terms Equity represents the ownership stake in a startup. Here are some key terms to know about equity. Vesting — the transfer of equity ownership from the company to the employee.   A typical vesting schedule is four years. Each month a portion of the promised equity is vested…

Startup Equity Basics Equity is an ownership stake in a company represented by shares. The three stakeholders are the founders, the employees, and the investors. Founders start with all the equity and then create and give shares to investors and employees in return for funding and labor. This additional equity…

Brand Equity Brand equity is the value that comes from customer recognition of the brand. Startups with brand equity command a higher price for the product and differentiate from the competition. Here are the key elements of brand equity: Brand recognition Customers recognize the visual identity of the brand and…

Common Branding Mistakes In developing the brand for your startup avoid these common mistakes: Spending too much on an agency. Most of the work comes from you, your team, and a graphics design professional. Take ownership of your brand building and outsource key elements of the project such as logo…

Best Practices for Rebranding Most startups will at some point need to rebrand their business. In rebranding your startup consider these best practices: Just as you start with a minimum viable product so you can start with a minimum viable brand. This allows you to test out your brand to…

How To Rebrand Your Startup There are several reasons for rebranding your startup. A new name may be required due to trademark issues. You may need to differentiate the company from the competition. Before rebranding your startup, build a team to review the brand and create a new one.  In…

Why Rebrand Your Startup There are times when a startup should rebrand itself. Here’s a list of good reasons: Your current brand no longer reflects the values and mission of your startup. Your startup changed position in the marketplace and the brand no longer matches the promise you made. Your…

Managing Your Brand Once you have established your brand it’s important to manage it ongoing. Here are some key steps to consider in managing your brand: Assign a team member to manage the process. Budget resources for managing the brand. Review how well the brand is doing in recognition, awareness,…

Key Elements of a Brand A strong brand that resonates with the audience has several key elements. Here’s a list of elements to build into your brand: Authenticity: Customers look for brands that are trustworthy in that they deliver on the promise. Decide what promise you make and stick to…

Steps to Building Your Brand In building a brand from scratch follow these steps: Start with purpose. Identify the reason behind the company and why it exists. Research the competition. Find out what other companies are doing to avoid duplicate messaging. Identify the target customer. Get specific about who you…

Best Practices for Creating a Brand In crafting your brand consider these best practices: Research your competition to see what type of branding they use. This gives you an idea of what customers are seeing now and what may be an opportunity to do something different. Identify the buyer persona…

Types of Branding There are several types of branding strategies. Here’s a list to consider for your startup: Company name — this strategy builds the brand around the name of the company. High-end products and luxury brands often use this strategy. Individual products — this strategy builds a brand around…

Brand Metrics After launching your brand, track the performance with metrics. Here are some key metrics to consider: Awareness — use surveys to gauge how many people are aware of the brand. Associations — see what key attributes people associate with it. Linkage — see how many people associate your…

Branding Positioning Statement A brand positioning statement describes your product, what it does, and how it’s different from your competitors. In crafting your brand positioning statement consider the following: Start with your ideal customer and address their needs. Contrast your solution with products currently available. Give your solution a product…

Branding Positioning Brand positioning is the place your brand holds in the customer’s mind. It should associate your brand with a positive experience. Here are some key strategies to consider for building your brand positioning: Quality — this showcases the quality of your product.   Use customer success stories, a long…

Branding Strategies Branding sets your company apart from the competition. In building your brand consider these strategies: Start with your target market. Identify the ideal customer that you want to attract. Review the competition to see what they offer and how they relate to that ideal customer. Choose a positioning…

Building a Brand A brand brings benefits to the startup. Investors find value in a brand and will reflect it in the valuation. A strong brand differentiates your startup from the competition. It will make your startup memorable. Here are some key steps in building a brand for your business….

Purpose of a Brand The purpose of a brand is to show why your company exists. It’s your reason for being beyond making money. Customers buy products based on both logic and emotion.  The brand helps you tell your story in a way that connects with the audience’s emotions. Good…

What Is Not a Brand The strength of a company’s brand is how much customers believe in the promise of the company. Here’s a list of what the brand is not: Marketing positioning Market positioning is where you are positioned in the market while the brand is where you are…

Why Your Startup Needs a Brand Branding is more than just a logo. Your logo is your visual identity. Your brand is the promise your startup makes to the market. Here is a list of reasons to craft a brand for your startup: It gives the startup a singular message…

What is a brand? Your brand is your promise to the customer. It’s based on the mission of the company. It appeals to people who share the same vision as you. It gives the company a unique positioning over the competition. Your brand impacts everyone in the company including investors,…

Should You Be an Advisor? Investors are often tapped to advise startups. Here are some key points to consider when asked to be an advisor: Are you interested in the startup and what they are doing? If you’re not interested then nothing else really matters. What is the time commitment…

Startup Advice for Those in College For those in college who want to start their own business use your college days to prepare. Here are some things you can do: Set up the legal entity and the website for the business. Identify the key websites and information resources about your…

Life After the Buyout Life after a company buyout will be different for the founder. Here are some key areas to prepare for: In some cases, the founder will have an earnout that provides additional compensation for meeting revenue or earnings goals. For those who gain stock in the new…

Legal issues in an acquisition There are several legal issues involved in selling your business.  Here is a list of key areas to review: Liability — the buyer assumes the liabilities of the acquired. This includes any outstanding litigation as well as compliance issues. Intellectual property — the buyer will…

Strategic Acquisitions There are strategic acquisitions and financial acquisitions. Strategic acquisitions are made for factors other than financial considerations. Here’s a list of strategic reasons buyers acquire companies: The acquired company provides sales growth for the buyer. Startups are often in emerging technology markets with the promise of future sales…

Key Elements of a Purchase Agreement In selling your business, the purchase agreement outlines the key terms. It’s important to review it carefully.   Here are some points to consider when evaluating a purchase agreement: Check the definitions section to understand what the key terms mean. Review the price and how…

Characteristics of an Interested Investor In selling your business, check the buyer’s interest in the deal. Here are some key points to look for: The buyer accesses the data room to review key information. Questions from the buyer indicate they are looking for alignment in the company and not just…

Price and Terms of the Deal In negotiating the M&A transaction both price and terms will be discussed. While the top-line buyout number is the main focus, the underlying terms should also be considered carefully. Here’s a list of terms to review: Payment amount — how much and when will…

The Letter of Intent in M&A In an M&A transaction, the letter of intent or LOI defines the general terms of the deal. Here are the key components of an LOI: Key players — define the buyer and seller in the deal. This makes clear who is buying whom.  High-level…

Understanding the Buyer’s Strategic Roadmap In selling your business, it’s important to understand the buyer’s strategic roadmap. Here are some reasons why you should know it well: You can position your business for acquisition more effectively if you know how your business fits into the buyers’ roadmap. You can communicate…

Ideal Buyer Characteristics In selling a buyer on acquiring your business, you’ll want to create an ideal buyer profile. Here’s a list of characteristics to consider when building it: Financial vs strategic — Are you looking for a buyer looking for a financial-only deal or one who wants a strategic…

Why Build a Target List of Buyers In preparing to sell your business you’ll need to build a target list of buyers. Here’s a list of reasons for why it’s important: Focus — the list focuses your efforts on those who are the best fit for your business so you…

Valuation Methods for an M&A Deal There are several methods for calculating the valuation of a company for an M&A deal. Here are some key methods to consider: Multiples of revenue or earnings — each industry segment has a commonly used multiple based on revenue or earnings for valuing the…

Factors Impacting Valuation Valuation is a major issue in selling your business. Here are some key factors impacting the price: The size of the company buying your business — the bigger the company, the higher the potential price. Demand for your company — the more buyers in the mix, the…

Financial Projections for M&A In selling your business, the prospective buyer will want to see financial projections showing how you expect the company to perform. There are three financial statements to complete:  Income statement, Balance Sheet, and cash flow statement. It’s important to develop a realistic projection. The projections should…