Discussion Topics

How to Build a Financial Model It’s best to build your own financial model so you understand it thoroughly. Here are the steps to build your financial model: Define the goal for the model.   Figure out how you will use it and what decisions you need to make. This will determine what details you need […]

Why Build a Financial Model? In building a startup, the financial model is a key step in validating the viability of the business. Templates can educate on what to include and how to format, but it’s best to start from scratch. Every founder should build their own financial model at the beginning of the company […]

Founder Business Skills Required In starting a company, there are key skills required of the founder: Here is a list of basic skills: Team building — the founder must find a co-founder, build a board, and make the initial hires. Leadership — the founder must set the vision of the company and build support within […]

Metrics for B2B SaaS Here are the key metrics for B2B SaaS startups: Committed Annual Recurring Revenue (CARR) – this shows the overall health of the business as it includes new users as well as churn. To calculate, take the current ARR and add new bookings and upsells, and subtract downgrade bookings and churn. Net […]

Metrics Investors Use Investors also use metrics. Here’s a list of key metrics investors focus on: Annual Recurring Revenue (ARR) Growth – the overall growth rate of the revenue is a key factor. Month-over-month growth demonstrates product-market fit. Magic number – shows how sales and marketing spend drives revenue. To calculate, take this quarter revenue […]

Your Top 3 Metrics  There are many metrics you can use for your startup. Focus on these top three metrics for your startup at each stage: For pre-seed, focus on qualitative activities such as customer interviews and community development. Track the number of calls made, the number of interviews completed, and the number of communities […]

Efficiency and Predictability Metrics In addition to growth, there is efficiency to measure. This is important to consider as you grow your business. Here are some key metrics to use: Magic number – shows how many revenue dollars your sales and marketing dollars generate. To calculate, take current quarter revenues minus previous quarter revenues times […]

Metrics for a Downturn Economy In a downturn economy, metrics can help you make decisions about your business. Here are some key metrics to consider: Net burn rate – measures the actual cash lost in a single month.  To calculate, subtract the total revenue from the total amount of money spent month over month. Use […]

Segment Your Data In running metrics, it’s important to segment your data as you grow. Segmentation helps identify the factors driving growth. Here is a list of ways to segment your data: 1. Location – the geographic location of the customer such as city, state, region, or country. 2. Industry – the market the customers […]

Meaningless Metrics   Some metrics are actually meaningless and tell you little about the business. Metrics should demonstrate customer interest and satisfaction through commitment of time or dollars. Here’s a list of metrics to avoid: Number of downloads – by itself, it doesn’t show the level of interest or progress. A more interesting metric is how […]

Marketplace Metrics  Here are the key metrics for marketplace startups: Match rate – the rate at which buyers and sellers engage with each other. To calculate, take the number of transactions in which there is a successful match and divide by the total number of attempted transactions. Time to match – how long it takes […]

Customer Traction Metrics In raising funding, customer traction is a key focus point. Here are the metrics for measuring your traction: Customer acquisition – this includes all sources of leads such as website, email, social media, and referrals, as well conversion of leads to customers. You can look at these metrics for each marketing action […]

Challenges With North Star Metrics The North Star Metric seeks to capture the essence of a business in just one metric. It makes decision-making easier. Anything that doesn’t foster that metric is deprioritized. It does change over time as the company’s priorities change especially with growth. It’s not always a simple metric and can be […]

Finding Your North Star Metric The North Star Metric is the one metric that drives the growth of the core business. Founders use it to focus the company around a common goal. Some startups focus on signups, others focus on retention, and still, others focus on engagement. If you don’t have much startup experience, then […]

Operational Metrics An efficient operation is one key to a startup’s success. Here are operational metrics you can use to check your startup: Basic efficiency – measures the overall efficiency of the business.   To calculate, take operating expenses divided by the revenues.   The smaller the number, the more efficient the business. Marketing efficiency – measures […]

Product Metrics The product is the core focus of the early-stage company. Here are two key metrics for understanding the performance of your product: The Heart Metric measures the quality of the user experience with the product. Here are the components of it: 1. Happiness – measures user satisfaction and ease of use through the […]

Scale-Stage Metrics After the growth phase comes the scale phase in which you ramp up the business. Here are the key metrics to consider at the scale stage: 1. Break-even per customer – this shows how many days until the new customer turns profitable. This is a key factor if you are using funding to […]

Growth-Stage Metrics Once you have product-market fit and start seeing growth, consider these metrics for your business: 1. Activation rate – the percentage of users achieving some step in activating your product. This helps you determine where users are dropping off. 2. Active users – the total number of users who used the product either […]

Startup Customer Success Metrics Once you have customers, the next step is to measure their success with your product. Here are some key metrics to use: Net Promoter Score – also referred to as NPS, this metric measures how loyal the customers are to the company. The metric asks the customer to rate the company […]

Seed-Stage Metrics Seed-stage startups have a few users trying out a beta product. The startup is working on the go-to-market strategy and focusing on customer acquisition. Key metrics to use are monthly unique users, monthly new leads, customer acquisition rate, and churn rate. This measures basic customer acquisition. To measure conversion, use the visit-to-lead rate […]

Start With Your Key Metric There are many metrics you can use to guide your startup. In the growth stage, start with your key metric that captures what drives growth. You can either focus on the total number of users or look at the total number of actions the user takes. Look for the value […]

Unit Economics In the early days of a startup, the revenue is small. Instead of focusing on the absolute size of the revenue, focus on the unit economics of the business. Unit economics shows your business model on a per-unit basis. Measure the cost of acquiring each customer and the revenue you receive from the […]

Pre-seed Metrics At the pre-seed stage, startups should focus their attention on engagement and referrals. Track how many visitors you can draw to your website. See how many of those visitors sign up for a trial.   The conversion rate is more important than the absolute number. See how many referrals are made and their engagement […]

Metrics by Stage of Startup Startups move through stages from pre-seed to seed to growth to scale. The metrics you apply should adjust to the stage of the company. Here’s a list of metrics by stage: Pre-seed – when you have an idea, use qualitative metrics and focus on basic activity. Key metrics include qualitative […]

Metrics by Stage of Life Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Startups go through three stages of life: product, growth, and operations. In the first stage, the startup focuses on the product. The objective is to find product-market fit with the […]

Metrics by Startup Objective A startup’s objective changes as it moves from early to later stages. Here’s a list of metrics by stage objective: In the earliest stages of the startup, look for conversions.   Basic validation is important to prove the market wants the product. This exercise will teach you what type of customers to […]

3X in 3 Terms I analyzed the results of several angel networks and found that 65% of the investments after three years were still in business but were no longer on the venture track.  In most cases, they were growing businesses but were not going to be bought out for a significant return to the […]

Startup Success Rates The early-stage failure rate of startups is quite high. Out of 100 startups, only 40% go to the next level at Series A. Only 22% of startups reach Series B. Only 15% of startups reach Series C. Only 8% of startups reach Series D. As for the success rate, only 9% of […]

Payback Plans Not every funded startup continues on the venture path to a high payoff from the sale of the business.  For those startups, investors using an early-exit term sheet can find a path out of the deal. There are several options for the startup to pay back the investors. The company can use a […]

Redemption Strategies In an early-exit term sheet, the investors have the right to redeem their stake in the company before an acquisition. There are several redemption exercise strategies. The first strategy is to recover the principal investment.   This makes the investor whole and now lets them play with “house money”. The second strategy is to […]

Key to Facilitation Is Operational Involvement In managing an early-exit term sheet, it’s important to facilitate the ongoing information rights due to the investors. Most term sheets provide rights to the company’s financial statements, including the income statement and balance sheet as well as the cap table. This duty is often left up to the […]

Redemption Facilitation Process In an early-exit term sheet, it’s important to have a redemption facilitation process. This includes the steps for setting up the bank accounts, capturing the investor’s interest, providing payouts, and investor updates. The process also tracks escrow of repayment funds and later, revenue share payments to complete the redemption process. For the […]

What Is a Cap Table? In raising funding, investors will ask for a cap table. Cap Table stands for Capitalization Table and is a document that tracks the capital structure of the company. In essence, it shows who owns how much of the company’s equity. So, a company that has had multiple rounds of funding […]

Challenges in Building the Startup Community There are challenges in building a startup community. It doesn’t happen by accident and it takes a focused effort over a period of time. Here are some challenges to watch for and overcome: Choosing another community’s strategy instead of your own. It’s common for startup communities to look to […]

How to Launch a Startup Ecosystem For those who want to launch a startup ecosystem, follow these steps: – Start with a group interested in startups and meet regularly. – Encourage startups to share their projects and invite others to support through coaching and making introductions. – Set up a blog and publish a newsletter […]

Signs of a Strong Tech Ecosystem In building out your startup ecosystem, look for these signs to know if you are on the right track: – Does the ecosystem have strong clusters of founders and developers that meet up regularly? – Does the local community foster the startup ecosystem? – Is failure acceptable or not […]

Assessing Your Startup Ecosystem  In building your startup ecosystem, take time to assess its effectiveness. Here are some key points to look for: Do entrepreneurs connect and learn from each other? If not, set up events to increase the interactions and foster interactions. Do the entrepreneur groups share resources? If not, foster collaboration among the […]

How to Get the Most From Your Startup Ecosystem  For those who want to engage with the startup ecosystem, here are some key points to consider: Know why you want to engage with the community and what you want to take away from your experience. The best way to meet people is to join groups […]

Building Your Startup Ecosystem Resource List In building out your startup ecosystem, start by identifying the resources in your area. Search for the groups that foster and support startups. This includes the following: – Incubators and accelerators. – Coworking spaces catering to early-stage companies. – Local media organizations that feature startups. – Blog sites that […]

Organizations of a Startup Ecosystem Take inventory of your startup ecosystem for what currently exists and what does not. Here’s a list of organizations to look for: – Universities that provide the founder talent. – Angel groups and other investor networks for funding the startups. – Venture capital funds providing funding. – Incubators and accelerators […]

How to Attract Startups to Your Startup Ecosystem  In building your startup ecosystem, recruit startups to move to your area. Here are some best practices to attract them: It takes technical and business talent to build and grow startups. Highlight the talent available in the area, both experienced and those fresh out of university. Set […]

Where to Focus Your Startup Ecosystem In building your startup ecosystem, focus on the strengths of the community. Interview the local economic development group to find out what startups already exist. Talk with investors to find out their interest in startups to fund. Review the local businesses in the community to see what skills their […]

How to Build Out a Startup Ecosystem In building out your startup ecosystem, consider these points: Start with five successful serial entrepreneurs. Identify their sector and type of business. Interview them on how to multiply those businesses. Target their sector for growing new businesses. Figure out what additional resources are needed. Set up leadership resources […]

Steps to Building a Startup Ecosystem  In building the startup ecosystem, the entrepreneurs drive it. The role of the ecosystem builders is to create connections and networks. Here are some tools for building connections in your startup ecosystem: Robust set of meetings, happy hours and coffees, and activities that bring the founders, investors, and providers […]

Components of a Startup Ecosystem A startup ecosystem is a network of startups, investors, and others who come together to foster startup formation and growth. It is fueled by talent, funding, and customers. In building your startup community, tap successful serial entrepreneurs to lead. Use their star power to capture attention and draw investors and […]

What Is a Startup Ecosystem? A startup ecosystem is a network of startups, investors, and others who come together to foster startup formation and growth. The network fosters innovation through shared resources such as capital, talent, and mentorship. At the core of the network are startups led by founders who launch high-growth businesses. Accelerators and […]

University Angel Network vs. Traditional Angel Network The university angel network has similarities and differences to a traditional angel network. They both consist of a group of investors interested in funding startups. They both want to make a return on their investment. They both want to socialize with others. They differ in several ways: The […]

Finding the Champion In launching an angel network at a university, it takes a champion to see it to fruition. In addition to a business school sponsor and five check-writing angels, you’ll need someone who will be the champion for the group. The champion needs to be well connected with the university, the alumni, and […]

Retaining Members In running a university angel network, the attrition rate is often lower than for non-university angel networks. The university group has a great answer for “Why invest in startups?”. Many members join to support the university. The group’s primary purpose is to provide the student with an educational experience and help prepare them […]

Offline vs. Online Meetings In running a university angel network, consider both offline and online meetings for the members.  Online meetings allow you to run education sessions, screening meetings, and pitch sessions along with diligence follow-up. Since the members need not travel to campus, these can be short half-hour calls or longer ones.  These meetings […]

Fund Documents In setting up a university angel network, you’ll need fund documents for the prospective members to review. You’ll need to establish a legal entity for the fund, typically an LLC. After that, you’ll need to write the company agreement documents.  This includes the formation of the fund, its term, purpose, and more. You’ll […]

Why Set Up a Fund? Consider setting up a fund early on for your university angel group. For every one alumni who joins the angel group, there will be three who will join the fund.  Angel investing takes time and many will not be able to participate in pitch meetings and diligence. The fund gives […]

Student Participation Is Important Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In setting up a university angel group, the student experience is the primary objective. To ensure the success of the group, set up a program for the students to provide investor […]

Where Does Making a Return Fit In? Many angel investors want to support their university group, local entrepreneur ecosystem, and more. The primary goal is building up their local community or network. In addition to supporting the community, the investor needs to make a return on the investment.  Investors will want to see a return […]