Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as grants. Grants are typically provided by government organizations to spur research and make…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as crowdfunding. There are several forms of crowdfunding such as crowdfunding with prepayment, crowdfunding…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups use equity to fund their business.  Equity is an ownership stake in a company.  Equity aligns everyone’s interest in the startup. It preserves cash since it’s only paid…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Another source of funding is supplier funding. Supplier funding comes from those who provide services to your company such as contract manufacturing, software development, legal, accounting services, and more. Suppliers…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as a line of credit. A line of credit is a short-term loan from…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as bootstrapping and barter. Bootstrapping is using your own funds and that of initial…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In today’s startup world it seems everyone is a startup investor in some form or fashion. Startup investors call me to discuss deal structures, valuations, or serial entrepreneurs. I can…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as equipment leasing. Equipment leasing is used to reduce cash requirements for a startup…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equipment leasing lets you borrow funds to obtain assets such as computers, machinery, and other items you may need to build your product and run your business.  Instead of raising…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as licensing. You may be able to reduce the amount of funding needed to…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as factoring. Factoring is selling your accounts receivables to a finance company at a…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. When you sell a physical product and invoice the customer, it can take 30, 45, 60 days or more before they pay.   Factoring provides funding by reducing your accounts receivable…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as loans. Loans are debt instruments that must be repaid. Startups can find it…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup. There are many others such as accelerators and incubators. Accelerators and incubators provide startups with workspace, mentorship, pitch practice,…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups use loans to fund their business. If you are taking a loan from family and friends, here are some points to consider: The first step is to determine…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups raise funding from family and friends on their first round to get the startup going. Before launching, make sure you do the following:  Co-founders should agree on the…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups use profit sharing to fund their business.  It is important that everyone involved has a very clear understanding of how “profit” is calculated. There are three locations in…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. I’m often asked if you should you take money from family and friends to fund your startup. Outside investors will look at family-and-friends funding as a sign of support for…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups use loans to fund their business. Here are a few ways to set up a payment structure and schedule. For payment structure you can use: Interest-only payments —…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many startups raise funding from family and friends on their first round to get the startup going. For those considering family-and-friends funding, think about the profile of the type of…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. So how do Venture Capitalists make money? VCs charge the limited partners a management fee on the funds raised. This is traditionally 2% which is paid out every year for…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The fund manager provides a quarterly report to the Limited Partners.  The reports typically contain the following sections: 1) Fund Manager Commentary — the fund manager provides an overview of…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Investors in the startup space have a certain expectation for returns.  Startups raising funding should keep in mind these expectations and only approach them if they have a deal that…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. When a Venture Capitalist makes an investment, they place a portion of their allocated investment upfront in the first round and save the rest for a follow-on round. Most VCs…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Both angels and venture capitalists often invest in syndicates.   In a syndicate, one of the investors leads the round and the other investors follow.  Sometimes the syndicate is a formal…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. A venture fund brings a fiduciary responsibility to those raising the funds from limited partners.  A fiduciary means the VC must act in the best interest of the investors. VCs…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing So how do Venture Capitalists raise funding? VCs raise funding from limited partners which include family offices, high-net-worth individuals, foundations, pension funds, and other sources. Institutional investors such as pension…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Targeting investors for your fund and getting buy-in is a key step in raising a fund.  Potential investors include family offices, high-net-worth individuals (HNI), and angel investors.  Larger institutional investors…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. So what is growth equity? Growth equity refers to investing in a company at later rounds such as Series C or D. These companies typically have $3-5M of revenue and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Returns on a Fund are based on the power law which means that the Pareto Principle applies: The bulk of returns come from just a few of the companies….

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In running a fund it’s important to analyze market segments. First, evaluate the leading companies in the market. Are there any leaders that stand out, or are all the companies…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Fund managers must present their investment ideas to the other general partners.  Here’s how to analyze a potential company for investment: 1) Identify a recent event for the target company,…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. There are 3 key legal documents for your fund. They are: 1) Subscription Agreement — describes how the limited partners purchase interest in a fund, or rather, subscribe to it….

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. There are three key metrics for tracking the performance of a Fund. The first is Net Internal Rate of Return (called Net IRR) — this measures the performance of fund…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. For those raising a fund, you must develop an investment thesis for your fund or investing strategy. An investment thesis is a hypothesis that describes how a particular market is…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising a fund you’ll need an executive summary which should include the following: Fund Objectives, (Legal) Structure, Fund Specifics, Investment Strategy, Investment Criteria, Investment Process Overview, Management Team and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. One of the key selling points for a startup is their potential market size. There are several ways to find it for your startup. You could buy a market research…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. You can now start your own VC fund. Venture capital, angel investing, crowdfunding, and most forms of startup funding are best done through a fund model for when deal flow…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. As a startup, it’s helpful to understand the VC investor you are talking to and how they make money. In venture capital, there’s two ways to make money. First, VCs…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In calculating returns the timing of the return is a key factor. There are two metrics for measuring return. ROI is return on investment without respect to time, and IRR…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In angel investing the two basic approaches are generalist and specialist.  The generalist funds across all sectors but with certain criteria focused on growth rates, team composition, or monetization models…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. You’ll need to gather your basic company documents for investors to review. In preparing a due diligence box also called a dataroom, there are basic documents to include: Income Statement…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Many people want to work for a VC, especially those straight out of college. Most are not aware of the challenging dynamics that come with the VC life.  Here are…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. I once read a sixty-five page business plan that talked about the startup’s services and the benefits that came from it. After reading it, I met with the CEO and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In diligencing a startup, the team is the most critical factor in the process.  Since the startup has only a nascent product and perhaps some intellectual property, the team is…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In due diligence you may encounter red flags indicating something is wrong. Here are some that I’ve found: The founders are not investing any of their own money into the…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In due diligence, what isn’t being said or shared is as important as what is. When a startup pitches their idea, you should be skeptical of founders that don’t mention…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. So many entrepreneurs think the most important moment in the investor engagement is the pitch.   In fact, the pitch is the second most important.  The most important moment is the…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding you will hear “no” from investors a lot.   When I say a lot, I mean it’s more than most entrepreneurs think. I know one entrepreneur who made…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In running a fundraise campaign you’ll need to set up calls and meetings with investors who are busy and may struggle to find time to give you. Of course you…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. So how do VCs make a decision to invest? Venture Capital investors make investment decisions as a group. As an associate, partner, or otherwise, you must convince the team to…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In pitching you can position your startup in more than one way.  You could pitch for the sector it is in — such as Edtech. Many investors focus on a…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. So, how do investors decide to commit to a startup investment? Entrepreneurs look at the opportunity in the deal. Investors look at the risk. There are two factors that help…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. At each stage of funding, investors bring not only funding, but also some level of support.  From crowdfunding you receive not only the investment (or prepayment, if you are running…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding, start with your own network. Set up calls with angels, family offices, and others who you already know. Since the relationship is already built, it’s much easier…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. There are many sources of capital.   There are family and friend loans. There are bank loans. There are revenue share loans. There are equity investments in the form of convertible…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In the Coronavirus lockdown, we’re seeing trends that will establish the next cycle of startup innovation. We’ll see the government shift to building out the infrastructure and response programs for…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In the Coronavirus lockdown we’re seeing trends that will establish the next cycle of startup innovation. While already underway, there’s an accelerating shift to digital.   Startups in this area will…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In evaluating a team, there are elements to look for in a CEO for early-stage companies. The first is character. The CEO must have integrity and demonstrate character. Over time,…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Vince Lombardi once said, “Winning isn’t everything, it’s the only thing”. In startup investing, “Team isn’t everything, it’s the only thing”. All problems will ultimately be solved by the team….

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. After the COVID-19 pandemic of 2020, investors look to see if you have made your business COVID-19-proof. Here are some steps to COVID-19-proof your startup. Ensure your startup can continue…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The prospective investor wants to see traction in your fundraise just as they want to see traction in your core business.  In raising funding, investors will first express interest and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus pandemic impacts what venture capital funds. We’ll see changes in the following ways: Goods and services deemed ‘essential’ will receive funding such as cannabis, CBD, and hemp.  Alcohol…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding, you need to build a relationship with the investor and communicate your story.  Both take time.  It’s a numbers game. You have to put yourself in places…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Most investors look for startups in which they can find a return on their investment. In the diligence and funding process, what the investor really wants is to not lose…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus pandemic impacts many parts of the economy including logistics and supply chain. We’ll see changes in the following ways: The need for flexible manufacturing come to the forefront…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In pitching your business plan, consider using the story format. Start with the problem you faced. Show how you couldn’t find a solution so you created your own. And now…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus pandemic impacts many parts of the economy including education. We’ll see changes in the following ways: Education has been moving online for the last twenty years. With online…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. There are several approaches to Due Diligence. The most common is the “Thorough Approach” in which you review each aspect of the business and focus on the top items. Main…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus pandemic impacts many parts of the economy including work. We’ll see changes in the following ways: Increased usage of remote-work software tools. Video conferencing, shared drives, Slack, and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Investors look for some protection over the idea. Patents and trade secrets can help. Half the value of a patent is for show, to investors. In practice, it’s difficult to…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus pandemic impacts many parts of the economy including healthcare. For healthcare startups, we’ll see changes in the following ways: Increased use of telemedicine. The pandemic highlights the challenge…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. I’m often asked what venture capital looks for.  VCs look for emerging tech markets with strong growth projections. These sectors include blockchain, AI, Data Analytics, and other strong growth areas….

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Today’s question is from Markeyla Markeyla asked: I would love some direction about creating relationships in the VC world. Although I have been accepted into an accelerator, I don’t have…

Hello, this is Hall T. Martin with the Startup Espresso — your daily shot of startup funding and investing. Today, we’ll talk about how to achieve an exit in a startup investment. It’s easy to get into a startup investment, but difficult to get out — especially with a positive…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus economy is accelerating changes already underway. Content and engagement is moving online. This impacts healthcare and education in particular, as well as general business. As a startup, you…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus has sent the stock market into a wild ride of 1000-point swings every day. In talking with investors, I find the following: Early-stage investors continue to move forward…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. While the Coronavirus brings a lockdown in the movement of people, it doesn’t point to an altered future, but rather an accelerated one. The Coronavirus will accelerate changes in the…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The Coronavirus has taken an historic 10-year bull market and turned it into a bear market. With comparisons to 9/11, the 2008 financial meltdown, and the Great Depression, startups and…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding, investors want to know what progress the company is making.  After the initial presentation, the investor wants to hear about progress in four areas: Sales, team, product,…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Most startups focus on the product first and treat the customer as an after-thought.  The investor knows that in the long run customer revenue will make or break your business…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. To pitch your deal you must first start with a prospect list of investors. Include your contacts who are angels, family offices, and VCs. Canvas your network for those who…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The investor will look closely at the team in your startup. In particular, they will look for skills and completeness.  Your team must have the skills you need to accomplish…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. The sign of a quality pitch is the simplicity in the message. One test is, can you say your business in five words or less? You should know your business…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding, you always start with your core network and increasingly expand the circle outward. The list includes the following: Family Friends Coworkers Your service providers such as attorneys,…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Before you launch your fundraise campaign, prepare your business, investor documents, and your investor network. For the business, check with your team, board, and investors to gain alignment.  Your fundraise…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. For raising venture funding, first consider if you have a deal that’s in the game for venture funding by asking these questions: Is it a high-growth company? Is it scalable?…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In considering a fundraise, think about your ultimate goal with the business. Are you building a business that will be your lifestyle business for the next 20 years, or are…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. How do you know if you need funding for your startup? First, consider the type of business you are going to build and what it will take to get it…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. In raising funding it’s best to break the raise into milestones rather than raising the entire amount of funding in one go. Milestones are typically broken out as follows: Raise…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. I receive many a startup that tells me they’ve talked to everyone in their area to raise funding but they haven’t found all the funding they need.  What can they…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. After you’ve built your fundraise campaign and your list of interested investors, it comes time to close the funding round.   Here are some pointers for closing:  Sort and prioritize…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. To launch your startup identify a large market then target a small segment of that market to attack first. Choose your first segment based  on easy to access and a…

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Securities law allows for startups to take investments from family and friends.  Here are the relevant exemptions. Rule 504 is The Seed Fund Exemption This allows you to raise up…

How much equity should you give up to the investors? Friends & Family Round: Less than 10% most often in the 5-6% Angel Round: It’s 20-25% VC Series A Round: 25% to 30% It’s important to keep the founders motivated so if too much equity goes to investors, there’s little…

Are you considering launching a Series A fundraise? For startups not requiring FDA, you will need the following: – A product with revenue, preferably above $500K/year – A growth plan to reach $10M annual revenue – A strong team with growth company experience – A credible funding plan to maintain…

Luis asks: Why am I being rejected for funding because I am a startup? Investors always ask that I have at least one year in business or more and that my company has revenue. Usually, when you start a business you start from scratch. That is when you need the…