Having a better product than the competition is no guarantee of success, but it does help with your fundraise. Here’s how to build a better product: First, understand the customer and the work they must do. Know the overall process flow and how the customer’s job fits within it. Analyze…

Startups fail for many reasons. Here’s a list of the more common ones: Ran out of cash.  This is the most common reason of all.  Could not raise additional funding. Lost too much business to the competition. Did not generate enough revenue to make the business model work. Had a…

Angel investing can be a rewarding experience, providing not only investment returns but also making the world a better place. It also comes with challenges. Here is the challenge of angel investing: There’s a small number of investable startups. There’s a large number of startups to comb through to find…

Early-stage investments require follow-on funding to reach a substantial size, providing a return to the investors that justifies the risk.  Here are the odds that a startup will raise its next round of funding. After the first round, about half go on to raise a second round. This is not…

In startup investing, the team is the most important factor pointing to success or failure. Here are some key steps in evaluating the team for your startup investment. Look for examples of execution on the current startup. Execution trumps the idea. If there’s no execution, then it doesn’t matter how…

Founders raising funding often ask for general interest first with no commitment. A soft commitment is an interest from an investor just short of a commitment. Investors use this to maintain the dialog with the founder as they learn more about the deal. Some use this as a bargaining chip…

Startups raising funding must show a growth story. The best growth story is a revenue curve going up and to the right at a 45-degree angle. For venture,  the growth curve must be at least 50% year over year. Here are some key steps to take to expand sales: Increase…

Burn rate is a key metric investors use to check the health of a startup. Based on the burn rate and cash in the bank, one can calculate how much time the startup has.  Here’s how to calculate burn rate. Use incoming cash as the first data point.  It’s a…

Angel investors are familiar with startups raising funding who come through their normal channels. Deals are often submitted on their software platform or referred by a trusted source. In the world of crowdfunding, startups come through a new compliance channel called Reg CF. The startup posts their deal on a…

Startup investors not only provide capital but also ongoing support to the startup. Here are some key steps to be a good startup investor: Research the market and provide actionable recommendations to the team about customers to pursue. Provide ongoing support through the tough times as well as the bad…

Founders raising funding must capture the attention of the investor. Here are some key steps on how to make the pitch more engaging: Include market research to validate the problem to be solved. This touches on the target market, the competition, and customer needs. Make clear the problem to be…

Investors looking to invest in a startup often look at the revenue as a sign of traction. In the very early stages, the presence or absence of revenue indicates the fundability of a company.  As the company grows, one can look at the growth rate as a sign of traction….

Starting a fundraise can be a daunting task for the first-time founder. Here are some key steps on how to get your fundraise started. Research the market by talking with other founders who are raising funding.  Check the current climate for fundraising. Look at their fundraise documents, including the pitch…

Startups generate a return on investment for their investors by measuring how much their business generated funds returned compared to investment. For the impact space, one can calculate the return on mission. Here is how to measure the return on mission for your impact startup. Calculate the overhead-to-program expense ratio….

In pitching investors, founders should strive to connect with them. Here are some key steps to connect with investors: Fit the startup fundraising standards. Too many out-of-standard details such as fundraise amount, terms, and valuation will put off the investor. For example, traditional first rounds are $500K to $1M. Asking…

Investors looking to invest in a biotech drug startup should diligence the team for key skills. Here are the key skills needed for biotech drug development: Knowledge of how to drug a target. This means identifying a molecule, often a protein, that is associated with the disease to be treated…

Part of the startup’s pitch deck should be a market slide. Here’s what investors need to know about your startup’s target market. Who is the target customer? A good market slide segments the customers into categories and highlights the ideal segments for the startup’s product. Next, the market slide shows…

Most first-time founders talk about the product and how it works.  In pitching, it’s important to make the business case for your startup. Here are some key steps to use to make the business case: Start with the problem and show how it costs the customers a substantial amount in…

Startups require up-front costs to set up and build the company. Any financial projection that shows profitability in the first year is suspect. Upfront costs include building the website, filing the company legal entity documents, patent filings, and more. Hiring the team takes time and takes time away from building…

The early-stage startup has its own set of delusions founders must overcome. Here’s a list of delusions to watch for: Everyone else is a professional but not the founder.  The reality is that the founder has the opportunity to build a great business just like anyone else. Financial projections are…

In pitching investors, founders must explain how their product works. For those with highly technical products, here are some best practices for explaining it to others. Start with what the audience knows. Bridge the gap between their current knowledge and the topic under discussion.  Avoid acronyms and jargon that require…

Most investors have a checklist for what they look for in a startup investment. The counter to this is the negative list for startup investing. This list shows what the investor does not invest in. Here are some examples: Investments that will close shortly, leaving the investor no time for…

Investors funding startups know that the team is the most important element. In reviewing the team, look for founders with balance. There are some founders who can work on multiple aspects of the business, such as sales, product development, and team building. There are others who are specialists.  They work…

At each stage of the startup, the founder needs to have key skills to succeed at that level. Here are the key skills founders need: Seed stage — grit and jack of all trades. The founder at this stage needs to have grit to grind through obstacles and wear many…

Fundraising requires connections to investors. After a founder exhausts his own network, he must draw the circle wider to reach out to investors he does not know. Here are some best practices for investor introductions: Personalize the request for an introduction. If making it to an investor, show how this…

Startups have to go through the rollercoaster ride of highs and lows. There will be good times and bad times. Founders should identify what good problems are and what bad problems are. Good problems indicate you are doing well. These include the following: Increasing sales that outstrip your current team….

Anchor clients are crucial to early-stage startups. They provide a predictable revenue stream for the company. Here are key steps to close an anchor client. Identify a client that fits the ideal customer profile. Build a relationship with that client. Connect with them on a regular basis. Make sure you…

Investors want several things from a startup. Here’s a list for investors to consider when investing: Team  — They want a strong team that can not only build the product but also sell it. Product-market fit — This is a focused solution for a clearly defined problem.  The users are…

Founders launching and running a startup will experience highs and lows throughout the life of the startup. Some will find the experience exhilarating while others will find it debilitating. The difference between the two extremes comes down to the founders’ expectations relative to the reality of the startup world. The…

Minimum viable products or MVPs help the startup not only engage with the customer but also with the investor. Here’s how MVPs can help progress the fundraise. It demonstrates the product concept is viable. This shows the product can be built. An MVP demonstrates the founders’ commitment to the business….

Investors looking to find good deals should consider how to support founders. The more the investor can support the key founders in their network, the better chance they have at finding a place on their cap tables. Good founders launch a new startup every five years in most cases. The…

The Venture Studio model is a form of venture capitalism that brings numerous startups together and fosters their growth through shared resources and learning. Not all startups make it. The Venture Studio model takes the best of each failed startup and finds a place within a successful startup in the…

In raising funding, it’s best to have a network of accredited investors to pursue. For those who do not, one can start building that network. Figure out where the angel investors in your area hang out. Find out what they read, listen to, and talk about. Based on this information,…

Raising investment from family and friends is often a key step in a startup’s fundraise. In the early days, there’s no team, product, or customer traction. The founder has only an idea but lots of enthusiasm. It’s a sign of validation that a founder’s family and friends will invest money….

The Go-to-Market slide is important for seed-stage companies pitching for funding. It shows how the startup will enter the market.  Consider setting up an initial target market. List the top twenty customers who will buy your product and gather them into a group called the beachhead market. This shows a…

Building a full-blown product is unwise at the early stage, as the startup will inevitably build the wrong thing. It’s best to test the market first.  Minimum viable products or MVPs are a better solution than a product, as it’s cheaper and easier to do. The goal of the MVP…

Customer intimacy is a strategy in which one builds a relationship with the customer about their care abouts and expectations. The more one knows about the customer, the better one is able to support and meet their needs. In fundraising, customer intimacy can be a compelling value proposition for the…

Some founders get lucky and achieve a successful exit of their business. They were in the right place at the right time with the right solution. Investors should be wary of founders who got lucky. Their luck may have come early in the life of the startup. It’s often the…

In raising funding, the first round is always the hardest. Here’s why it’s so difficult: There’s often no product or revenue to prove traction. The team, in most cases, is unproven. The market is not yet well defined. The ideal target customer has not yet been identified. How the business…

In a pitch, founders focus on the opportunity while the investors focus on the risk. Founders who raise funding have successfully shown how they mitigate those risks. Here are some key risks to mitigate: Team risks — show how the team works well together. Cite a substantial project the team…

Raising pre-seed funding is one of the bigger challenges in startup fundraising. This round comes at the idea stage, so there are no metrics around traction or product-market fit. Here are the keys to a successful pre-seed round. The current team must have strong experience in the domain and a…

Vertical SaaS is a known business model that narrows the focus to a single application. This reduces the cost of capital to raise and gives the startup the opportunity to go deep on an application. Here’s how to choose a vertical SaaS niche. Look for industry segments that are highly…

How Not To Follow Up With an Investor Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Founders raising funding should consider their approach to following up with an investor. Here’s a list of ways not to do it:…

Founders pitching investors can learn a great deal about an investor by the questions they ask. Investors apply the founders’ pitch to their investment thesis. They work through the pitch to see how it does or does not fit. For example, questions focused on the financials show the investor makes…

Both angels and venture capitalists invest in early-stage companies. Here are the key differences between the two: Angels invest their own money while VCs invest other people’s money. This makes the angel investor more risk-averse, while the VC often takes bigger risks. Most angels hold down a day job while…

In raising funding, revenue traction is a key driver in attracting investors. Here are some key steps to gain sales traction for your fundraise. Early-stage companies don’t have a large number of users, as that will take time. Instead, start with a small but dedicated set of users. Engagement with…

In raising funding, it takes several touches to close an investor. It’s best to create additional interactions with the investor beyond asking, ‘are you ready to invest yet?’ Here are some key steps to maintain presence with a prospective investor: Offer to provide a special discount on your product or…

In raising funding, the founder hears the response ‘no’ many times. Here’s what to do when the investor says ‘no’. Show gratitude. Thank them for their time and attention. Ask for feedback. Find out more about what they like about your deal and what they don’t. Connect on social media….

Fundraising is project management. In launching a fundraise, treat it like a series of projects. Here are the key steps: Start with investor documentation and build out the materials needed. Build a list of potential investors. Gain introductions to those investors. Set up meetings with each one. Follow up on…

In raising funding from an early-stage investor, the founder must build a relationship with that investor. Here are some key steps to starting a relationship with an investor. Learn their background and experiences from online sources. It’s important to know their education and work experience.  Research the investor by talking…

Startups raising funding need to show a growth story. Investors look for traction and momentum in businesses to fund. The ability to sell the product is a key skill for early-stage founders. Some founders are not good at selling and have sales call anxiety. Here are some key steps to…

Startups in the early days have little to protect the business beyond intellectual property. As the company grows, the startup can build a stronger moat. Here are some key steps for building a moat into a startup: Network effects — grow the network within your customer base to strengthen the…

Investors look for capital-efficient businesses to invest in. Founders looking to raise funding should first consider building a capital-efficient startup. Here are some key steps to building a startup that is capital-efficient: Look for a business opportunity that generates good revenue from the customer. The customer will pay a high…

In reviewing startups, here are the key metrics investors should look for: Annual contract value — the value the customer spends on the product in one year. This needs to be a meaningful amount of money in order to grow a startup. Customer lifetime value — the total amount of…

For those setting up a pitch session, here are the key steps so the presenter and investor get the most out of it. Decide the goal of the pitch session. This could be providing practice for the presenter, or giving feedback on the pitch, or making an investment decision. Determine…

Fundraising Is a Sales Process Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Fundraising is a sales process. Consider these steps in setting up your fundraiser: First, build the investor documents, including pitch deck, terms sheet, and data…

Founders often mistake their pitch deck for their product launch strategy. But the two serve different goals. The pitch is meant to raise capital — the launch is meant to earn trust. A strong product launch strategy doesn’t just announce features. It builds a narrative: who it’s for, what it…

Founders looking for investors face the same challenge as those looking for a date. Just as in the dating world, both the investor and the startup exaggerate their strengths. Some don’t know exactly what they want from the other. Just as there are marriage contracts, the startup world has term…

Founders raising funding should consider what investors want to know about their startup. Here are some key points to make before the meeting: Show how your startup fits the investment thesis of the investor. This should include how it fits with the sector, stage, and trajectory of the startup. Investors…

Founders raising funding need introductions to investors. Here are some common mistakes introducers make with investor introductions. Lack of information Most founders ask for an introduction but fail to provide enough information for the introducer to make a meaningful introduction. It’s best to include some context in the request. Lack…

After fundraising comes building the team. The core team may already be in place, but growth will demand new hires. Here are some key points in hiring the team for your startup: Have your high-performing team members interview new candidates. The high performers tend to hold others to their standard….

Venture capital is a job that many aspire to hold. It’s challenging, but it provides great experiences. For those who want to become a venture capitalist, there are several paths. Start by working in a startup in a sales role. Some of the most effective VCs are those who have…

Investors look for large target markets that are growing well. Founders looking to launch a startup often look for huge problems to solve. Since startups are limited in their resources, they must find a way to solve a large problem with few people and products. One solution to this problem…

Investors looking for startup investments need to screen deals efficiently. Here’s a set of criteria to apply to startups before pursuing diligence. Check the team. Do they know what they are doing? Do they have the skills to achieve the goal? Do they have passion and grit? Check the business….

In the early days of a startup, the founder seeks to build and sell a product. In the later days, the founder seeks to scale the business. Here are several ways to scale a startup: Raise funding to fuel the scaling strategy. This could be a substantial amount of funding…

Press releases can help the startup gain exposure in the marketplace. This helps recruit employees, find customers, and attract investors. Founders can do this upon closing a round of funding. Here are the steps to write a press release for your startup: Start with a compelling headline that motivates the…

Building an MVP is a part of almost every founder’s work. Here are the key steps to build an MVP. Most founders build an MVP and then talk to users. Instead, talk to users first and then build the MVP. Take into account the users’ feedback. Release the initial MVP…

The startup life brings many challenges. It’s not for the faint of heart. It will demand the best of you and will test you often. Here are some key challenges in the startup life: Most founders have co-founders to deal with. Maintaining the relationship is tantamount to having a marriage….

When finding new startup ideas, start with your own interests in mind. Look for solutions to problems or challenges you face. Here are the steps to finding new startup ideas from your own experiences: Choose a problem that is a major pain point. Skip the casual problems that generate solutions…

In raising funding, the founder will find that investors vary in their approach to the startup’s fundraise. Some will want a valuation set while others just want to be in the deal. Some will invest because of the team, others because of the product or sector. Founders should customize the…

Investors funding startups look for founders who have the right characteristics for success. Here’s a list of key characteristics of fundable founders: Grit is top of the list. Launching and running a startup is hard work and takes years to see an exit. Founders with grit who can last through…

Founders who take on funding start the process of transferring control of the company to the investors. As the funding moves from Seed to Series A, the investors increase their control. Most seed-stage companies have no board of directors. Instead, they often have a board of advisors who can provide…

There are several reasons international companies expand into the US market. The US market is the largest market in the world and provides the most opportunities to the company to sell its products. Funding in the US is more available than in most other countries. Startups moving to the US…

Investors should foster the local startup community. The more vibrant the community, the better the deal flow. Here are some key ways investors can foster it: Provide events and activities that connect and network startup founders with co-founders. It takes a complete team to make a startup successful, so it’s…