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September 1, 2020

Building Your Investment Thesis

Investing /

2 min read For investing in a startup, consider the future and what will be needed then; don’t just look at the world as it is today. Map the trends and extrapolate out and consider what will be needed five years from now based on the direction of technology, the markets, and other factors. From this, you can build a view of the future and inform your investment thesis and begin your preparation for investing in startups. Creating Your Investment Thesis There are too many deals to look at all of them. You’ll want to narrow the field by building out your investment thesis. There are a few crucial steps to take if you haven’t done so already. Step One: View 50 deals, then write down what you like and what you don’t. TEN Capital is a great resource to help you field deals regularly, show you how to review them, and what to look for. Step Two:  Follow up one to three months later to see how each deal is working out. Checking-in regularly will inform your investment thesis as you will see some deals progressing forward, some stall out, and others pivoting to something else. Step Three: Write out your investment thesis in full, including: Your observation about a macro trend in an area you care about The position of the company in the trend Characterization of the company that gives it a competitive advantage Conditions for investing based on price and other factors Example investment thesis statements include: “Healthcare is moving to the home.” “Companies providing technology-enabled services will succeed.” “Companies with recurring revenue and a CAC:LTV ratio of 1:8 are preferred.” “Companies with revenue above $500K and pre-money valuation below $5M are preferred.” It’s essential to write out your investment thesis ahead of time, as you’ll often return to it. Allocating Funds In general, it’s best to keep your angel investing to 3-5% of your discretionary investment funds. These are funds you can lose and not impact your lifestyle or other investments. Determine in advance how much you plan to invest. Use a five-year window. Once you have that number, know how you’ll access those funds for when you need them. Keeping these funds separated from the rest of your investments will make managing the process easier. Read more: https://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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Have a Little Fun, Make a Little Money, Do a Little Good

Other /

1 min read There’s an old saying about angel investing: “Angels like to have a little fun, do a little good, and make a little money.” Angel investing is more than just about money. I’ve found the successful investments covered all three of the elements of the old angel saying.  It was fun. The people were great to work with.  It had an element of making the world a better place albeit on a small scale. Finally, it provided a positive return on investment so I could continue funding startups. Have a little fun Pursue deals you like. If you don’t like the deal, then why spend the time? Ask yourself, do I want to work with these people? Do I value the work they are doing? If you can answer yes to these questions, you are well on the path to finding a deal that lets you ‘have a little fun.’  Do a little good Once you have a deal you like, then ask, “does the company align with my interests?” Invest in startups that further that in which you believe. You may want to support your local entrepreneur ecosystem, or further a technology that can solve problems that benefit the general public.  Make a little money Get agreement on the terms of the investment with a defined exit. Use the 3X in 3 redemption to define the exit. If you can help the company then consider setting up an advisory position with them.  One of the biggest sources of burnout is uncompensated work. There’s an almost unlimited amount of work that needs to be done and the startup will load you up.  Set boundaries on what you are going to do and how you will be compensated. Consider including these negotiations in the term sheet, even if you don’t intend to provide advisory work as you may later be drawn into it. Having your time negotiated in the terms upfront makes it much easier to navigate the process. Remember, successful investments let you make some money, have some fun, and do some good. Read more: https://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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The Importance of Diversity in Your Portfolio

Investing, Other /

1 min read According to a Harvard Business Review study on increasing diversity in venture capital partnerships, the more similar the backgrounds shared by the investment partners, the lower the investment performance. Diversity, simply put, leads to better performing teams. Diversity of perspective breeds a startup that has a better understanding of the pain points that they’re trying to solve. The more a startup ensures that its team includes both women and minorities, the more likely it is to uncover the solution to the problem it set out to solve, and the more likely it is to yield a high performance. However, the fact remains that minority and women-owned businesses still struggle with funding when compared to their white, male, counterparts. While the investment space is working to shift this imbalance, the work is far from over and many still face an uphill battle toward equality. Minorities and women continue to face both structural barriers and biases when it comes to career paths. These individuals are expected to fit within a certain mold and stay within that mold. For example, less than 30% of the CEOs within the US are women. Statistically, however, there are more women in the US than men at roughly 97 men to 100 women. As Ola Gambari, COO of Hungry Fan explains: “It’s the idea of this preconceived notion that we have a lane, and we’re supposed to stay in it and, as a minority, if I’m not running a business focused on minority problems, I shouldn’t be running that business, neglecting the fact that I share all of the other pain points of other human beings in this society.” Instead, investors should be evaluating the business on its merits, not just the fact that it has minority founders. Again, it breaks down to recognizing that different perspectives matter and yield better results. As more investors embrace this knowledge, the more equality we’ll begin to see. Read more: https://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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