Setting Membership Criteria In setting up an angel network, you need to determine the membership criteria. Here are some points to consider:  The Securities and Exchange Commission or SEC sets the investor criteria to allow for investments into startups. Members must meet the SEC criteria for accredited investors. Make clear the goals of the group, […]

Funding the Angel Network Program In setting up an angel network, you need to fund the program.  Here are some funding sources to consider:  Most angel networks charge a membership fee to cover the expenses for running the program.  For those groups using the fund structure, a management fee or carry can be taken from […]

Choosing the Investment Structure In setting up an angel network, you need to choose an investment structure. Here are some structures to consider:  Individual investments — the members can each decide if they want to invest and how much to invest in each deal. This allows for maximum flexibility for the members to invest in […]

Choosing the Regulatory Environment As angel networks expand across the globe, those groups outside the U.S. should also consider their local regulatory environment before launching an angel network. Here are some points to consider: 1. Is there a legal environment that allows for investment structures for venture funding? 2. Are there any restrictions on the […]

Choosing the Legal Structure There are several legal structures to use when setting up your angel network. Most angel networks form a Limited Liability Company or LLC. This gives the angel network a legal entity with which it can conduct business. The members often pay an annual fee to fund the operational activities of the […]

Choosing the Organizational Structure There are two ways to organize your angel network: member-led or manager-led. Member-led groups let the members source deals, lead the investments, and recruit the members. They hire staff members to handle the administrative tasks. Manager-led groups hire experienced professionals to perform key functions such as determining which startups to fund.  […]

Challenges in Angel Investing Angel investing can be fun and financially rewarding to the investor as well as helpful to the startup. It can also be challenging. Here are some challenges to consider: Angel investing requires hands-on work with the startups not only in funding but also in supporting them after the investment. Angels often […]

The Benefits of an Angel Network An angel investor will find many benefits in joining an angel network. The angel network can build resources to share with the angel such as due diligence. This is time-intensive work, so it helps to share the load. Angel networks provide more and better deal flow than individual investors […]

Should You Start an Angel Network? Before launching an angel network, assess your community as follows: 1. Do you have accredited investors interested in startup investing? 2. Do you have any investors who will take the lead on diligence and investing for each deal? 3. Do you have a champion who will organize and lead […]

In running an angel group, it’s important to provide regular reports for the investors about the investments as well as the state of the group.  For individual investments, negotiate regular updates from the startups to include the following: – Sales reports tracking leads, pipeline, and closed sales on a monthly or quarterly basis. – Financials, […]

A key part of angel investing is negotiating terms with the startup. It’s important to take time to negotiate good terms for the investors in your group. Key areas to focus your negotiations include the following: Valuation – this is the most important term as it determines equity ownership and is the primary determinant of […]

In running an angel network, it’s important to drive the funded startups toward an exit. Investors funded the companies with an expectation of a return typically in the 5 to 7-year timeframe. While some startups will fail and shut down completely, most startups continue as ongoing businesses. It’s important to review the status of those […]

After investing in a startup, it’s important for the angel investor to determine their role with the startup. There are several roles to consider: The investor can take an advisory board seat and provide coaching to the startup on an informal basis. The investor can take a board seat and help guide the founders through […]

There’s risk in startup investing as most investments don’t pay a return to the investor. In running an angel network, one must take steps to mitigate liability. It’s a best practice to have all members sign liability waivers stating they understand the risk of startup investing and take responsibility for it. The waiver should indicate […]

 In running an angel network, it’s important to set up a due diligence process. Diligence can take a substantial amount of time, so there needs to be a prescribed process for the members to follow. The process needs to be led by those with experience in diligence and startup investing. It starts with gathering core […]

In running an angel network, it’s important to set up several sources of startups seeking funding called deal flow. The best source is angel group members. Continually check with your members to see what deals they’ve seen or heard about. Other sources include the following: Incubators and accelerators often have deals, although most of the […]

The deal screening process is a key program for an angel group. The process needs to capture all available deals in one place for review. For each deal, sufficient information must be provided by the startup including their revenue, sector, product stage, and fundraise sought. The screening process can be done by the group as […]

In running an angel network, consider using online events for the program. Here are some key tools for creating successful online events: A website. This keeps track of scheduled events with information about each one including the name of the event, description, who should attend, and associated documents. Event registration. This page gives information about […]

Warrants give the holder a number of shares to be exercised over a specified period to buy the company’s stock.  Warrants play a key part in venture debt. Companies offer warrants in exchange for a lower interest rate on the debt. Investors offering venture debt use warrants to gain access to the equity upside of […]

Litigation funding provides investments to businesses seeking to litigate a lawsuit.  Lawsuits come from businesses suing other businesses, tenants suing landlords, startups defending their intellectual property claims, and more. The one pressing the lawsuit needs funds to carry it through the courts.  Investors receive a return when the business wins the lawsuit and pays the […]

Revenue-based funding makes a startup investment and pays back the investor at the rate of top-line revenue. This aligns the investor and founder to the same goal – to create a business and grow sales.  The higher the sales, the faster the payback to the investors and the higher the compensation to the founders. Revenue-based […]

Salary-based funding makes a startup investment and pays back the investor at the rate of compensation the founders take. This aligns the investor and founder on the same goal, to create a business that can sustain itself and pay the team. The investors receive an agreed-upon percentage of any salary or profit the business takes […]

As your company grows and the equity becomes worth more, there comes a time to switch over to debt funding. There are several forms of debt to consider. Each one is used for a different application.  The primary options are as follows: 1. Traditional bank loan – requires a personal guarantee and is most often […]

Growth startups can raise not only funding for equity but also funding for debt called venture debt. Venture debt doesn’t dilute the founders and provides capital to continue the growth. Here are some key terms and conditions to know when looking for venture debt: There are term loans and revolving lines of credit with maturity […]

Venture debt is not for every startup or for all fundraises. It is best used in conjunction with an equity raise. The equity funding provides ongoing working capital that doesn’t need to be paid back. It works well between equity raises from institutional investors. The business must be up and running with stable revenue. Those […]

Venture debt can reduce dilution and give your startup more runway. Here are a few pointers to see if venture debt is a good fit for your fundraise: It’s often used with equity funding for purchasing equipment, making acquisitions, or making up for funding not acquired through the equity raise. If the company is in […]

Venture debt is on the rise in the startup world as more startups find it a useful part of their fundraise strategy. It’s a form of debt financing for venture-backed companies that lack the assets for traditional debt funding.   Venture debt has been around for as long as venture capital has been writing checks for […]

There’s an old saying in the angel world: If you want money, ask for advice. If you want advice, ask for money. In raising funding, most founders spend their time selling the idea to the investor. An alternative approach is to collaborate with the investor. The selling approach uses the entire ten-minute pitch talking about […]

Founders need to bring startup mental models to bear on their business. Here’s a list of key mental models to know: 1. Least worst option — use this model when all options are not ideal. 2. Jobs to be done — use this model to discover how your product fits into the customer’s workflow. 3. […]

In pitching your business, investors will ask questions about metrics such as customer acquisition cost, lifetime value, and churn rates. The purpose of the question is to discover what systems you have built into the company and how robust they are. In the early stages of a startup, the CAC, LTV, and revenue growth metrics […]

In running a startup, time management is a key skill for the founder.  Here are some key steps in managing time: 1. Set up a schedule with standard meetings, routines, and to-dos that recur each week or month. 2. Schedule your day in advance so you’re ready to execute the day when it comes. 3. […]

In pitching your business, focus on the benefits your product or service provides rather than listing out the features. Features answer the question — what, or what is it? Benefits answer the question — why, or why do you want it? In pitching your business, go beyond the features of the product to show why […]

In pitching investors, there are many ways to blow the pitch. Here’s a list of common mistakes startups make: Losing your temper and letting emotions get the better of you. Investors want level-headed people they can work with. Building the company only for the exit.   There must be a “why” behind the business. Inability to […]

In running a business, it’s important to use written contracts. It’s easy to negotiate an agreement verbally, but this often leaves loose ends that become a problem later. A written contract makes clear the responsibilities and duties of both parties and what each owes the other. It’s often the case that both sides make assumptions […]

In raising funding, you must have a growth story. Investors want to know your business is in motion with momentum and traction. Investors look for activity in four areas: sales, team, product, and fundraise. These are the factors under the control of the startup.   Other factors such as competition, market size, and growth are not […]

There are basic principles around fundraising that apply in every situation. First, the most important step in fundraising is to build a relationship with the investor. The more you know the investor and the more they know you, the better the outcome. Second, demonstrate results in every contact. Never show up without a currently relevant […]

Many entrepreneurs fail to build a financial forecast claiming they cannot predict the future. The purpose of the financial forecast is not for future predictions, but rather for communicating the business plan to the investors. From the forecast, the investor learns what growth rate the entrepreneur is considering. The forecast shows where break-even may come […]

If you successfully raised your seed round you will find that Series A funding to be a new challenge.  Series A funding is different from seed funding in several ways. In seed funding, the entrepreneur must convince the investor that they can sell the product. In Series A funding, the entrepreneur must convince the investor […]

So, who does the Venture Capitalist serve? The VC raises funds from the Limited Partner and invests in startups. In talking with entrepreneurs, they make clear the VC serves the Limited Partners first. Many founders talk about how helpful the VC is to their company and personal growth. Entrepreneurs are important to the VC and […]

There are many metrics for determining how well your SaaS business is doing. Net dollar retention is a key metric that indicates the health of the business. To calculate it, take the revenue at the beginning of the month, plus upgrades, minus downgrades and churn. Divide this by the revenue at the beginning of the […]

Investors look for certain things in the pitch to decide whether or not to pursue. In pitching VCs, make sure you cover the following points: Say what your company does in 10 words or less. This provides context so the investor knows how to understand the rest of the pitch. Show how your team is […]

Pitching is an important skill in fundraising. Consider these key points in your next pitch: Tell a compelling story, not just any story. Use the pitch deck to communicate the “Why” behind your business. Time is short, so make sure you hit the key points of the business — team, product, fundraise, in a logical […]

The process of raising funding brings the startup founder several intangible benefits. Here is a short list: Fundraising forces you to think through your business strategy and articulate it clearly. Investors will challenge your strategy requiring the founder to defend it. The pitch elicits feedback from the investors which often improves the plan. While entrepreneurs […]

In raising funding, the startup should be doing as much diligence on the investor as the investor is doing on the startup. Start by checking out the portfolio of the investor and making contact with CEOs who have been funded by the investor. Ask the CEO about their experience with the firm.  Most VCs tout […]

In approaching venture capital, it’s important to know something about the VC’s sweet spot for funding. By reviewing the VC’s website, you can see their portfolio. By reviewing their portfolio companies, you can get a sense of the stage and sector of deals they invest in. The best way to learn about a VC is […]

Startup founders need time-management skills to run a business. Here’s a list of key skills successful founders have: 1. Can set up daily routines and repeat them consistently. 2. Can prioritize tasks doing the most important ones first. 3. Can delegate tasks to others when others are better suited for those tasks. 4. Can use […]

Startup founders need strategy skills to run a business. Here’s a list of key skills successful startup founders have: 1. Business model design – the founder can review a situation and develop a business model to create a profitable business. 2. Buy vs. build – the founder can decide between buying a solution or building […]

Startup founders need problem-solving skills to run a business. Here’s a list of key skills to develop: 1. Critical thinking – ability to analyze the key factors around a situation and find the real problem to be solved. 2. Decision-making – ability to choose the right solution and see it through to implementation. 3. Lateral […]

Startup founders need emotional intelligence skills to run a startup. Emotional intelligence helps the founder control emotions and empathize with others. Here are the key components for building those skills: Self-awareness – this is the ability to know yourself and recognize your strengths, weaknesses, and limitations. The more you know yourself, the more you can […]

Startup founders need to be visionary to run a startup. Vision starts with seeing a business opportunity and applying a solution to solve it. The founder clarifies the vision and shapes it into a platform, product, or application. This informs the founder of all business decisions going forward. It starts with knowing the industry and […]

Startup founders need general business skills to run a startup. Here’s a list of skills to bring to your startup: – Ability to make decisions in a timely manner. – Ability to take risks on new ideas, people, and strategies. – Ability to communicate in a clear and precise manner. – Ability to show confidence […]

Startup founders need management skills to run a startup. Here are some key skills to have: – Ability to wear multiple hats at one time since there’s not enough revenue to fill every role. – Can hire and manage the team members.  – Ability to set strategy and direction for the team. – Can develop […]

Startup founders need to develop leadership skills to run a startup. Here are some key skills to have: – Know your market and research the competition well. – Demonstrate confidence in difficult situations and be able to make decisions and see them through. – Ability to build a strong team and support them. – Encourage […]

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Startup founders need conflict management skills to run a startup. Conflicts arise among the team members for the following reasons: They come from differing beliefs and viewpoints.   In the short term, the founder can separate […]

Startup founders need human resource skills. Here’s a list of skills to bring to your startup: Can identify talent that matches the company’s strategy.   This includes defining the jobs with roles and responsibilities. Ability to find and recruit the right people for the position. This includes assessing the skills candidates have. Can craft employment agreements.  […]

Startup founders need some technical skills. Here’s a list of skills to bring to your startup: 1. Microsoft Excel or Google Sheets – you’ll use this for budgeting, forecasts, and numerous other applications. 2. Data analysis – you should be familiar with Google analytics and other basic analytic tools to gather information about your sales […]

Startup founders need some accounting skills. Here’s a list of skills to bring to your startup: Accounting vs. bookkeeping – bookkeeping is entering revenues and expenses into the proper accounts. Accounting is generating the income statements and balance sheets, along with filing tax returns. Accounting methods – know the difference between cash vs. accrual accounting. […]

Startup founders need some financial skills. Here’s a list of skills to bring to your startup: 1. For business modeling – ability to calculate the unit economics of your business model including cost of customer acquisition and lifetime value of customer. 2. For fundraising – ability to calculate pre and post-money valuations and the impact […]

Startup founders need some legal skills. Here’s a list of skills to bring to your startup: 1. Legal Entity – ability to set up an LLC or C-Corp for your business with proper articles of incorporation. 2. Cap Table – ability to set up the cap table with initial ownership of the founder, co-founder, and […]

Startup founders need recruiting skills. Here’s a list of skills to bring to your startup: 1. Ability to define the jobs to be done with the requisite skills. 2. Ability to identify qualified candidates in the market that meet the requirements. 3. Can engage the candidates to discuss a position in your startup. 4. Ability […]

Startup founders need marketing skills. Here’s a list of skills to bring to your startup: – Ability to analyze and choose a market segment to pursue – Can create a story around your startup that sells – Can define a position in the market and communicate it – Ability to contrast and compare the company […]

Startup founders need sales skills. Here’s a list of sales skills to bring to your startup: 1. Can craft a compelling story about the startup to sell to investors, prospective employees, partners, and others.  2. Knows the competition and the other choices the prospect has. 3. Knows the customer’s language, whether it be company-specific or […]

Writing is a key skill every entrepreneur should have. Email, social media, website copy, and more, all rely upon good communication. Here are some key points to remember: It’s not about you, it’s about your reader and what this will do for them. Write the way you talk in a normal, conversational tone. Summarize your […]

In managing deal flow, the key to winning the best deals is responsiveness. Startups submitting their deal are looking everywhere for funding and you’re just one option among many. Here are some key points to consider: Automate the initial response to a deal submission with an email acknowledging the sender. Customize the follow-up with the […]

In running deal flow, here are some best practices to consider: Automate your deal flow process as much as possible by capturing consistent information into one application. Track deal flow sources and analyze on a regular basis.   This shows where the best deals are coming from and where to spend time. Use online data sources […]

Deal flow is the lifeblood of the startup investor. It’s important to assess the deals in short order to prioritize follow-up. One way to help this process is to apply a rating to each deal. Here are some key factors and how to calculate them to use in your rating: – Revenue run rate – […]

Startup investing requires deal flow and the best deal flow comes from proprietary sources. Here are some key points to set up your own process: Contact your attorney and accountant as they are good sources of deal flow that aren’t known by everyone else. Launch a content marketing program. Your own podcasts, blogs, and more […]

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 key criteria. Encourage those that […]

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 other sources. Have everyone on […]

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 run metrics and track progress. […]

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 meetings to attract startups seeking […]

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 as those who know the […]

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 from other investors, especially those […]

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 the web and social media […]

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 source with angel […]

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 you practice on how to […]

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 of a return on investment. […]

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 potential customers, new employees, or […]

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 second and third businesses. While […]

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 will pay for it. – […]

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 local angel network in your […]

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.   This determines how much revenue […]

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 you messaging to use online […]

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 and answers. Talk at a […]

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 startup to take funding a […]

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: Start with the problem you […]

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, instead, tell them just enough.  […]

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 pitch is the question pitch. […]

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 steps to discuss further. Close […]

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 problem. Demonstrate your solution to […]

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 to capture attention. Describe your […]

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. The elevator pitch demonstrates you […]

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 can fund major projects much […]

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. 2. Document your work and […]

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 themselves. The pharmaceutical industry recognized […]

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 startup world has a higher […]

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 an investment structure with a […]

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 some upside on successful outcomes […]

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 or creating your own. For […]

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 investment fund  – This fund […]