Branding Strategies Branding sets your company apart from the competition. In building your brand consider these strategies: Start with your target market. Identify the ideal customer that you want to attract. Review the competition to see what they offer and how they relate to that ideal customer. Choose a positioning that the competitors have not […]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financials and Key Metrics for M&A In selling your business, the buyer will look for key financial metrics. Here are some key metrics to include in your pitch: Total revenue — revenue before discounts, returns, and adjustments. This shows top-line sales for the company. Sales in units — the number of units sold over a […]

Painting the Vision of the Value Proposition In preparing to sell your business it’s important to paint the vision of the value proposition. The value proposition is the reason a company wants to buy you. To gain the best price you must show how your company combined with the acquirer provides a better future for […]

Positioning Your Business To Sell In selling your business it’s important to articulate all the values in the business a buyer may desire. Here’s a list of sources of value to consider: The products or services generate revenue. This includes current and future revenue potential. The intellectual property that protects those products. This includes trademarks, […]

Advantages of a Self-Running Business In preparing to sell your business, make sure you are setting up a business that can run by itself at some level. Here are some key points to consider: Make sure the company doesn’t have the founder’s name on it. Build a great team that can carry on without the […]

Reasons To Sell Your Business There are many reasons to sell your business. Here are some to consider: You may want to scale up to reach more customers. By selling you can move into a business with more reach and greater resources. You may want to see greater operational efficiency. By selling you can join […]

Value of an Investment Banker In selling your business you may want to use an investment banker.  Here are some reasons to consider: Investment bankers know how to prepare the dataroom and what documents will be needed for the transaction. Most founders are new to the sell-side process. They know how to present your business […]

Why Acquisitions Fail? Not all acquisitions succeed. Here’s a list of why some fail: The buyer wants to eliminate a competitor by taking them off the market. The acquisition was simply a means to an end and there was no intention of continuing the acquired business. The investment thesis did not play out. The proposed […]

 Why Companies Acquire Other Companies? Companies acquire other companies for many reasons. Here’s a list of potential reasons to consider: Companies seek to acquire a customer list.   They want to grow their business by adding more customers. Companies seek to acquire intellectual property. They want the IP so they can expand their technology base. Companies […]

Acquirer Expectations In selling your business it’s important to understand the expectations of the acquirer. Acquirers will look for your accounting to be clean and well-organized. Make sure your contracts, loans, and intellectual property documents are in order. Acquirers will invest substantial time and expect you to do the same. This could be several hundreds […]

The Founder’s Exit The cap table shows the ownership of the business. It’s often the case in venture-funded startups that the founder ends up with less than double-digit ownership. There’s the issue of liquidation preferences and other terms that pay investors before the founder. In fundraising, make sure the founder’s position is covered and has […]

Mistakes in Emailing an Investor In emailing an investor avoid these mistakes: Skip the research and just treat the investor as you would anyone else. Try and tell them everything in the hopes that something will stick. Skip the attachments and make them ask for a deck. Ask for funding in the first email. Make […]

Adding Social Proof to Your Investor Email Social proof makes your email more compelling to the investor. Here’s how to add social proof to your investor email: Highlight key advisors you have brought on board. This demonstrates your startup has enough momentum to engage others. Showcase the customers you have engaged with. This demonstrates the […]

Best Practices for Emailing an Investor Here are some best practices for emailing an investor: Put the name of your company in the subject line. Use social media for making contact but not for pitching. Spellcheck the email to eliminate any typos. Refine the email to exclude filler words and phrases to make it as […]

Investor Email Essentials In emailing an investor consider these essential todos. Avoid sales-like verbiage as investors have their guard up against sales pitches. Focus on what value you can provide the investor. Keep the email short and concise. Remember, long rambling stories will not get read. Use numbers to make your case as it provides […]

When To Send an Investor Email Timing is important in sending an email to an investor. Consider these points in scheduling the send of your investor email: Your email should come at a time when there’s little competition for the investor’s attention. Tuesdays, Wednesdays, and Thursdays are the best days to send. Mondays and Fridays […]

How To Capture the Investor’s Attention in an Email In emailing an investor it’s important to capture their attention. The subject line and the first line in the email are the two best opportunities. Here are some techniques to consider: Key off a past investment made by the investor and call it out as a […]

The Investor Update Email After you have pitched an investor it’s important to update them on the progress of your startup. Investors look for momentum and traction in the startup before investing. Forecasting high revenue is not the same as actually demonstrating a growth story in progress. The update should go out no less than […]

Building Your Network for the Fundraise Before launching your email campaign, build out your network of investors. As you meet investors it’s important to collect their emails into a list to provide updates. Sort the list by type of investor — angel, venture capitalist, family office, etc. Note their investment interest — consumer, enterprise software, […]

Generating Investor Interest in Your Email Most investor emails are filled with stories, details, and other extraneous information in an effort to inform the investor. This typically creates long winding emails with big blocks of text. Instead of informing, you should intrigue the investor. In writing an investor email the key goal is generating interest […]

An Example Investor Email Format For writing the investor email here is an example email format to follow: Start with why you are sending this email. This could be seeking investment, asking for advice, or requesting a referral. If raising funding, write about the current status of the business and the fundraise that is currently […]

What the Investor Looks for in the Email In writing an email to an investor keep in mind the investor’s viewpoint. Here’s what investors ask themselves when opening an email: In looking at the email sent name, the investor asks how do I know this person? When reading the subject line,  the investor asks should […]

How To Write the Subject Line In emailing an investor the most important line is the subject line. This gets read by every recipient even if they don’t open the email. To make the best subject line consider the following: Draw from your research of the investor and include key points that are relevant. Include […]

Investor Email Best Practices Fundraising requires contacting many potential investors through email. Here are some best practices to consider: Keep the email short and to the point with no more than 200 words. The shorter the email the more likely it will be read. Start the email with the why.   Why are you reaching […]

How To Personalize the Investor Email In emailing an investor consider using the following to personalize it for the investor: Start with common connections and indicate any referrals made. Mention the names of mutual contacts who you’ve recently spoken with and give an update about them. Indicate a common range of interests and expertise such […]

Outline for the Investor Email In emailing an investor consider using the following layout: In the subject line include the name of your company, what you do in 5 words or less, and a recent milestone. In the body of the email expand on what your startup does in just a sentence. This could focus […]

Challenge in Cold Emailing an Investor In raising funding a founder will need to contact investors. For those contacts the founder knows, this is a simple process. For the rest of the potential investors the founder does not know, this presents a challenge. Cold emailing an investor is difficult for the following reasons: Investors receive […]

How Not To Email an Investor Founders raising funding can use cold email outreach to find investors. In emailing an investor for your fundraise avoid the following mistakes: Start the email by telling your entire story in one go. Investors want to know what it’s about before committing to hearing your whole story. Skip the […]

How To Email an Investor Founders raising funding can use cold email outreach to find investors. In emailing an investor for your fundraise consider the following: Research the investor and include key details in the email to show you have done so. Make the subject line informative so that even if the investor doesn’t open […]

Price Elasticity Price elasticity measures how much a price increase will decrease overall revenue. If an increase in price results in no reduction in revenue then the price is considered inelastic. Test your product’s price elasticity by increasing the price by 10% then measure the overall revenue after a month. If the overall revenue has […]

Per Seat vs per Use Pricing Many SaaS businesses use either per-seat or per-use pricing. Per seat pricing offers a fixed price for the customer making it easy to budget. It also provides a consistent revenue stream for the provider especially when applied with annual contracts. Per-use pricing works best for the provider whose cost […]

Premium Pricing Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing. Premium pricing sets the price well above the competition for a product. Use this pricing model to signal luxury. It’s the counter strategy to value pricing which offers the most product features for […]

Volume Pricing Volume pricing offers a discount for products or services bought in volume. Traditionally a discount was justified if a customer bought ten or more units of a product because the cost of sales was lower. Sellers used it as an incentive to encourage larger order sizes. Traditionally, a discount price would be set […]

Bundle Pricing Bundle pricing sets the price on a package of services that is lower than if you bought each service individually. This generates more demand for the product since the price is lower. It can increase sales because the product bundle has more features and usability than an individual product. It can also be […]

Dynamic Pricing Dynamic pricing varies the price based on the current supply and demand. This pricing can be used to increase the price when demand is high and then lower it when supply catches up. This is often used in ride-sharing services which charge more during the rush hour. To use this pricing model consider […]

Freemium Pricing The freemium pricing model is used to expedite customer adoption of the product. Many companies use this as part of a tiered pricing model. The freemium model gives users some experience with the product. These are the advantages of a freemium model: It’s easy to implement as the price is zero for a […]

Flat-Rate Pricing Flat rate pricing is the simplest pricing model. There’s one price for the product or service no matter what features are included or how often the product is used. It acts similarly to the traditional software licensing model. It’s often used as a premium pricing model that includes everything the company has to […]

Tiered Pricing Tiered pricing offers multiple price points for a product with varying levels of functionality or service. It is the most often used pricing model. The advantage of tiered pricing is as follows: It gives the user multiple options to choose from.   The better the fit to the customer’s budget the more likely the […]

Number of User-Based Pricing The number of user-based pricing sets the price based on users. This works for enterprise customers where there are a number of workers who need to access the platform. This makes it easy to forecast and budget the cost of the product. The downside is that the customer may end up […]

Usage-based pricing Usage-based pricing focuses on how much of the product or service the customer uses. The more the customer uses the product the greater the price they will pay. To apply usage-based pricing to your product, identify your value metric and then assign a price to it.   Those using the service at a high […]

Value-Based Pricing Value-based pricing focuses on what value the customer derives from the product rather than the cost for the producer to build and deliver it. This pricing model focuses on how the customer perceives the product and what problem it solves for them. To apply value-based pricing to your product assess what price the […]

Promotional Pricing Promotional pricing gives your product an immediate sales boost. This is often used around holidays and special events. Offering a flash sale or a short-time-only discount can generate some immediate revenue for your business. Holiday specials can also be used to spur additional sales. Typical examples include the following: Buy one get one […]

Competitor-Based Pricing In pricing your product consider the competition. In well-established markets where the competition is entrenched, you may need to set the price in the same range as the competition. Review the competitors for their pricing structure. Take note of the price per unit and positioning of the competitors’ products in the market. Premium […]

Good Better Best Pricing In pricing your product consider the Good, Better, Best model. This model gives you three price points with which to cover the market. The Good price is set to capture the low end of the market. The key here is the core feature the customer wants and will pay for. For […]

How To Price a SaaS Product Pricing a SaaS product is different from a traditional product. A SaaS customer pays on a recurring basis such as every month or year. Since the customer is paying for a service for a period of time, then the price must reflect that usage. There are two pricing considerations […]

Calculating Your Value Metric Your value proposition is what the customer is buying from you. Stating it in unit economic terms is called your value metric. It could be storage space usage, transactions on a marketplace or other. Sometimes the metric is clearly assessed such as traffic driven to a website while at other times […]

Identifying Your Customer Profiles Your value proposition is what the customer is buying from you which drives the pricing for your product. In setting the price for your product first segment your customers and identify their personas and how they will use the product. Figure out their key care-about and match them to the features […]

Pricing Based on Strategy Your product strategy drives your pricing model. There are three strategies to consider which are driving revenue growth, gaining market share, or driving profits. For startups raising funding, driving revenue growth is the best strategy as investors want to see traction and growth. Regardless of the competition or the state of […]

Bad Revenue Not all revenue is the same. In fact, some revenue is bad revenue. Bad revenue comes from products that are underpriced. Without enough revenue to cover the costs of delivering the product, the company struggles. Customers become unhappy when they fail to receive the expected product or service. If done over a long […]

Contribution Margin vs. Gross Margin The contribution margin is the same as the gross margin but without the fixed costs included. It includes only direct costs and variable costs. This means the contribution margin will always be the same or higher than the gross margin. The contribution margin is used for setting the selling price […]

Gross Margin Is the Comparator Since not all revenue is the same, how does an investor compare one company to another? Gross margin is one key comparator. It measures how much revenue is available to invest in the growth of the business. Gross profit is calculated by taking revenue minus the cost of goods sold. […]

More Characteristics of Revenue Not all revenue is the same. There are several characteristics that define the quality of revenue. Here’s an additional list to consider: Repeatable — if the revenue is not recurring but rather repeatable then it has a greater value than the revenue that is a one-time event. Strategic — if the […]

Characteristics of Revenue Not all revenue is the same. There are several characteristics that define the quality of revenue. Here’s a list to consider: Predictability — if the revenue is recurring it has higher predictability and thus a greater value. Concentration — the more sources you have the stronger the revenue as you avoid over-concentration […]

Marginal Revenue Marginal revenue is the revenue for each additional unit sold. The additional unit comes with a marginal cost which is the additional cost on that unit. As the startup scales costs will rise and at some point, the marginal cost per unit will increase. Startups should raise their prices as they grow so […]

Operating Revenue Operating revenue is revenue from the core business. Non-operating revenue is revenue that comes from other sources. For example, if the company sells a service, that revenue is considered operating revenue. If the company sells a piece of furniture, that revenue is considered non-operating revenue. By separating the operating from the non-operating revenue […]

Accrued Revenue Accrued revenue is revenue that has been earned but has not yet been paid for. This could be project work that is billed when completed. The unpaid balance for the work done is considered accrued revenue. This applies to project work as well as loans in which the interest income is considered accrued […]

Unearned Revenue SaaS businesses charge a subscription fee for the product on a monthly or annual basis.  For those charging on an annual basis, the revenue generated at the beginning of the contract is considered unearned revenue. Unearned revenue is revenue received before the service actually occurs. The unearned revenue is not an asset, but […]

Components of Revenue Revenue or sales stands for the amount of funds a company earns. This comes from the goods or services the company sells. This is often called Gross Sales or Total Sales as it’s the total amount of the proceeds. Net sales are the gross sales minus any returns, discounts, or other price […]

Types of Revenue Not all revenue is the same as there are several types of revenue. SaaS companies earn different types of revenue through their product offering. Here’s a list to consider: Software licenses are quite valuable as one can charge recurring fees for them. Maintenance fees can also be valuable as they often recur […]

What Impacts the Quality of Revenue? Not all revenue is the same. Investors look at the characteristics of the business which impacts the quality of revenue. Revenue that comes from a source that will sustain longer will have a higher value to investors. Here’s a list of characteristics investors use to assess the value of […]

Solving the Chicken and Egg Problem In launching a marketplace platform you must solve the chicken and egg problem. You must have supply to engage buyers and buyers to engage suppliers. In the early days, you’ll need to do things that don’t scale such as recruit supply that is not in the network for a […]

Marketplace Platform Evolution Marketplace platforms evolve over time. Platforms start by connecting buyers and sellers. They follow with additional services such as ratings and reviews, background checks on the buyers, and quality control on the suppliers. Over time, the marketplace can evolve further by moving into delivery of the products and services. By controlling the […]

Marketplace Services In setting up a marketplace business, the more services you offer will lead to a better customer experience, leading to better retention. Consider adding these services to your marketplace platform: Manage the transaction from discovery to fulfillment of the service. Provide ratings of the buyers and sellers to foster transparency. Review the content […]

Metrics for Marketplaces In running a marketplace business there are several metrics for measuring the performance of the market and platform. Here are some key metrics to consider: Gross Volume — this is the total amount of goods and services transacted on the platform. Activity — the number of times a buyer engages the platform […]

Network Effects in Marketplace Businesses Marketplace businesses derive value from the network effects that come with matching buyers and sellers. The greater the number of buyers and sellers the more attractive the platform. One side of the marketplace can attract the other side. If one side is using the software platform, then the other side […]

Expanding a Marketplace Business After launching your marketplace business you’ll start work on expanding it. For the supply side, you want to increase the engagement with the suppliers.  Instead of being one source of many to your suppliers, you want to become their primary source. You can do so by setting up technical connections with […]

Narrow Marketplaces Marketplaces can be built vertically targeting one sector or horizontally targeting multiple sectors.  It’s best to start with a narrow marketplace focused on one vertical. The cost of starting it is much less than a broad one. By going narrow, you don’t have to generate a huge amount of supply.   You can start […]

Fintech’s Role in Marketplace Businesses Fintech can play an enabling role in a marketplace business. In addition to matching suppliers and buyers on a platform, fintech tools enable additional services that provide stickiness to the business. As the regulatory nature of fintech continues to constrain the growth of businesses, alternative financing becomes more prevalent.  Marketplace […]

How To Launch B2B Marketplaces In addition to B2C marketplaces, there are B2B marketplaces that are gaining rapid adoption. To launch a B2B marketplace consider the following tactics: Find participants who are not monetizing their value and help them capture it through a marketplace. Look for disruptions in the marketplace or economy as an opportunity […]

Assessing a Marketplace In setting up a marketplace business here are some key points to consider in choosing a potential marketplace.  The marketplace business model provides an advantage for the buyer, the seller, or both. The more often the buyers and sellers use the platform — daily, weekly monthly, or more —  the more valuable […]

Launching a Marketplace Business In launching your marketplace consider starting with a niche. Focus on what your team does best. Choose a niche in the sector that you can easily gain access to the supply side. This could be either by geography or by service offering. Offer above-average service to launch the marketplace.  As Paul […]

How To Start a Marketplace Business In starting a marketplace business you must consider how to structure it and then how to build the supply and demand sides of it. For the structure, you can target a specific vertical by focusing on one segment or go horizontal and cover the entire space. To go horizontal […]

What Is a Marketplace Business Model? The marketplace business model is becoming increasingly popular among startups. A marketplace business connects buyers and sellers through a platform. The platform facilitates the transaction and does not produce or provide the product or service. The platform often handles the payment, facilitates the logistics, and more. Examples of companies […]

Preparing for a Secondary Sale Transaction A secondary sale is important to the founders and employees of a company. It gives them the opportunity to sell their shares to gain liquidity in advance of the company’s exit. Here are some key issues to consider: Founders normally receive common shares when launching the company. There are […]

What Companies Should Know Before Allowing Secondary Sales? Companies who want to give their employees the opportunity to sell their shares should consider the following: Set specific timeframes to allow for stock sales by the employees. This limits the distraction of employees and reduces the amount of disclosure the company must do. Prepare disclosure statements […]

Valuation Method for a Secondary Sale In pricing a secondary sale here are some valuation techniques: Estimate the value of the equity by multiplying the revenue by the multiple for similar companies. For example, SaaS companies are sold for a multiple of 10X revenues. Reduce the value of any debt the company has. Divide the […]

Types of Buyers of Secondary Shares There are several types of buyers for secondary shares. Each has its own motivation for doing so. Here’s a list to consider: Employees often want more shares of a startup that is doing well. They may also want to sell their shares to pay for expenses such as college […]

Tax Issues With Secondaries There are tax issues associated with a secondary sale. Here’s a list of issues to consider: Gains on secondary sales are taxed based on the holding time of the shares. If less than one year, then ordinary income tax rates apply.  If longer than one year then the capital gains tax […]

Pricing Secondary Shares In selling secondary shares a price must be set. Since the shares are in a private firm there’s no market to review for a list price. Here are some factors to consider in pricing a secondary sale: Are the shares preferred stock or common stock? Preferred stock has preferences such as liquidation […]

Type of Secondary Transactions There are several types of secondary transactions as follows: Confidentially marketed public offerings — these offerings go to institutional investors. These transactions use an S3 form to provide shares to known buyers. Bought deal — these shares are bought by an underwriter who takes the risk of the transaction. Since the […]