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Startup Exit Strategy

Investing /

2 min read  The end goal of most startup organizations is to eventually exit the marketplace. This is when everyone involved in the deal makes their largest profit off the business. Strategy is key to a successful exit. In this article, we discuss how to plan for an exit, ways to exit, and how to negotiate the exit. Planning For an Exit Startups should start planning for an exit after they achieve product-market fit. The following are some key points to consider when planning your approach to an acquirer: What are the key metrics the acquirer will look for? What are the company’s metrics and how do they currently look? How big is the market for the company’s product? What initiatives are underway that will produce value for the company? How is your companies product compared to the competitor? What is your primary competitive advantage? How consistent is your growth rate? What is your forecast for the coming three years? How will your company be perceived by the potential buyer? Use them to guide your funding, hiring, and strategic plans. Looking For An Exit Startup investors look for an exit in the 5– to 7-year range. As a startup, you need to consider the exit from the beginning as the exit strategy can inform your decisions around funding, hiring, and more. Here are several exit options to consider: Mergers and acquisitions – most companies exit by being bought by a bigger company. Going public – some companies still use an IPO for an exit. It can be expensive due to compliance, so fewer companies take it. Private equity firm – more companies are staying private longer and often use PE firms to give the early investors an exit. Revenue sharing – some investors exit by taking a revenue share for their return. Liquidation – some companies can be sold for the assets to provide a return to the investors. Share buyout – some investors will accept a buyout of their shares from the company to provide an exit in the event there is no other option. If your investors are family members or others who do not expect to be paid back, then you can skip the exit and just maintain the business.  As you launch and grow your business, keep a list of potential exit options and consider what you would need to do to achieve it. Negotiating The Exit In negotiating the exit with an acquirer you’ll need to know the following: Key metrics about your business, both those that show the company in a positive light as well as a negative one. The total addressable market for your company. The top three opportunities your company can attack. The company’s competition and competitive advantage. The company’s track record in meeting forecasts and accomplishing milestones.  Also, acquirers will ask why you are selling the company and why now? Why is the acquiring company a good fit for your company? How closely aligned in operations is the company to the acquiring company’s operations? How much integration work will need to be done? What role will the CEO play after the acquisition? Think through the answers to these questions as most of them will come up.  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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How To Plan for an Exit

Fundraising /

2 min read At some point, every startup will need to exit the marketplace. Being prepared is key to doing this with success. In this article, we discuss how to plan for an exit and how to prepare for exit negotiations. Planning For an Exit Here are some key steps to take in planning the exit for your company: Understand why you are exiting the business.   Is this exit going to be seller motivated or buyer motivated? Explore the options. Consider who would be the best acquirer or which company would be best to merge with. Consider the market and industry. Is your industry consolidating? Is the market growing? Know what your company is worth. Research comparable valuations of similar companies. Revenue is typically a key factor along with profit. Start talking with potential acquirers and update them regularly on your progress. Ask other founders and CEOs for their exit experience. Find out what they discovered in going through an exit. Ask your current investors about their experience with exits to see what they know. Once you have a target acquirer, make a list of what they want to see in your company in order to buy it. This list becomes your strategic plan. Negotiating an Exit In negotiating the exit with an acquirer you’ll need to know the following: Key metrics about your business, both those that show the company in a positive light as well as a negative one. The total addressable market for your company. The top three opportunities your company can attack. The company’s competition and competitive advantage. The company’s track record in meeting forecasts and accomplishing milestones.  Why are you selling the company, and why now? Why is the acquiring company a good fit for your company? How closely aligned in operations is the company to the acquiring company’s operations? How much integration work will need to be done? What role will the CEO play after the acquisition? Think through the answers to these questions as most of them will come up. Preparing to Achieve an Exit At every fundraise stage the CEO can choose to raise funding or sell the business. If you choose to sell your business, how can you go about doing so? Meet all the C-level people at companies that could acquire you, and the CEOs of companies who are potential acquirers. Gain an introduction and then generate an ongoing dialog with the CEO. In the process of doing so, you can determine their interest in your type of business. If they like what you do and can see how it fits into their business, then you have an opportunity to pursue being acquired. As always in business it is about starting and building relationships. 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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Startup Organizations: Finding Funding

Fundraising /

2 min read Every startup eventually asks the question: “Where will our funding come from?” There are several sources of funding that your organization can tap into. Some of the most common funding sources include consultation, contractor, crowdfunding, and supplier funding. Let’s take a closer look at each. Consultation Funding Consultation funding is using consultation work to pay the bills and salaries while you are building out your product. Consider looking for consultation work in addition to selling the product as some customers want more assistance in installing and using the product than in just buying the product itself.  The consultation also brings new insight into how the customer intends to use the product and what problem they are trying to solve. This is useful information to guide your product roadmap. Consulting work gives you more information about the market and the competition as you’ll encounter competitive solutions. This is also a great way to generate positive references to use when you launch your standard product into the market. While consulting may not be your ultimate goal, it can be a useful way to fund a portion of your product development. Contractor Funding Many enterprise software programs come from service businesses solving a problem for their clients. In searching for a solution on the market, they find none, so they build their own. Later, other clients come ready to buy it. This is one of the most overlooked forms of funding in the startup space. In contractor funding, you sell a customized version of what you want to build to an anchor customer for a substantial one-time fee and then use the funds to build out the platform you envision of which the customer gets a non-exclusive license.   The advantage here is you have a customer telling you exactly what they need and what they will pay for. They improve the product by testing it and telling you what changes to make. They become a happy customer that you can use to attract prospective customers. After three more of these engagements, you will have $1M of investment in your platform with zero dilution. Crowdfunding Crowdfunding can be sourced as prepayment for a good or service, or from accredited or non-accredited investors. Prepayments let you pre-sell your product before you build it. This works best for physical products that require funding for the design and manufacturing of the product. It’s a great way to test the market for a new product as it provides customer feedback on the product, price, and promotion. There are several platforms available for showcasing your product. There’s also crowdfunding from non-accredited investors. On these platforms, anyone can invest in your startup. It is for equity, so you need to understand the implications of it on your cap table. Finally, there’s crowdfunding from accredited investors which is no different than raising funding through angel investors and venture capitalists. The only difference is using a crowdfunding platform to find and engage the investors. There are a growing number of crowdfunding portals offering both general and specialized sites. Crowdfunding works well for startups with a product that is clear to grasp and easy to understand.  Supplier Funding 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 provide their services in exchange not only for cash but also for equity. This reduces the amount of equity funding you need to raise from investors. Contract manufacturers will invest in your business and in exchange they look for the startup to use their manufacturing services. Software development firms invest in startups by taking a portion of their software development fee in the form of equity. There are other examples, including lawyers and accountants who provide services in return for equity. This aligns their interest with your interest as the business must succeed for the equity to be worth something.  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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Investor Connect Interview: Ander Iruretagoyena of Impact Engine

Investor Profile, Other /

2 min read On this episode of Investor Connect, Hall welcomes Ander Iruretagoyena, the Senior Associate at Impact Engine. Headquartered in Chicago, Illinois, Impact Engine is a women-owned and led venture capital and private equity firm investing in companies driving positive impact in education, economic empowerment, health, and environmental sustainability. Impact Engine was launched in 2012 as an accelerator fund with the goal of identifying promising entrepreneurs starting businesses with the potential to drive both attractive financial returns and positive social impact. Impact Engine raised two subsequent accelerator funds in 2013 and 2014, all focused on investing in pre-seed stage companies. Across the three accelerator funds, Impact Engine invested in a portfolio of 23 companies. Between 2015 and 2016, Impact Engine shifted its investment strategy and raised a $10 million venture fund which invested in 22 companies. Between 2018 and 2019, they began operating as a public benefit corporation, raised a $25M second venture fund, and raised a $31.5M first PE fund, allowing them to invest in impact funds for the first time. Impact Engine’s investors include institutions, family offices, foundations, and individuals who believe in investing for both financial return as well as social impact. They are also committed to cultivating community among their investors. Their goal is to help their investors learn from each other and leading-edge impact investors who deploy capital across asset classes and geographies. Prior to joining Impact Engine, Ander was an investment banking associate at Bank of America Merrill Lynch, working with Latin American corporations. During these years, Ander worked on a total of 17 transactions for $10.7B across 4 products, 9 industries, and 6 geographies. Ander also previously worked on financial inclusion strategies at the Bill and Melinda Gates Foundation. Ander holds a BA in Economics as well as Latin American Studies from the University of Chicago and earned his MBA degree from the Chicago Booth School of Business. Ander is originally from Mexico and loves FC Barcelona. Ander shares what excites him now and discusses the state of impact investing, how he sees the industry evolving, the challenges investors and startups face, and more.  You can visit Impact Engine at www.theimpactengine.com/, via LinkedIn at www.linkedin.com/company/theimpactengine/, and via Twitter at www.twitter.com/TheImpactEngine.  Ander can be contacted via email at ander@theimpactengine.com, and via LinkedIn at www.linkedin.com/in/ander-iruretagoyena/.  If you would like to read the full transcript click here or listen to the interview click here.  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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Exits: How and When to Do It

Other /

2 min read As a startup investor, it is imperative that you are considering the exit strategy before beginning the investment as this is what determines your return on investment. When, how, and to whom the startup will sell are essential topics to cover at the beginning of your relationship with the startup organization. Let’s take a look at each of these topics. Timeline For an Exit Most exits come from another company buying the startup. It takes six months to a year to complete a buyout. Delays often come from the startup not being prepared or ready for the M&A process. Additionally, setting valuation and final terms can take substantial time for research and negotiations. To shorten the time, consider the following: Identify and contact the likely buyers and build a relationship before starting the process.  Position the startup leadership as a thought leader with published articles and keynote speeches to provide credibility. Build a data room of key documents that will be used in a transaction process. This is basically a gathering process, but does take some time.  Beware of competitors in the diligence process as they will have access to your detailed financials and other information. Understand the interest level from the buyer and what other activities may delay their work on your deal. Set realistic expectations for how fast things will go. Early Exits In setting the exit, most investors look to maximize the exit value. It’s important to remember that the metric investors use, Internal Rate of Return (IRR), has a time component to it. The faster the exit, the higher the IRR. As an investor, consider pursuing the highest IRR and not just the biggest dollar exit as bigger exits take longer. While the news highlights the biggest exits, the vast majority of exits are under $20M. Selling a business for under $20M is not that hard, however growing a business and selling it over $100M is very hard. Most acquirers don’t need the business to be large, they just need to know the business model is defined and is profitable. Staying in the deal longer opens up the investor for dilution and other events that reduce the return on investment. A startup should be proving their business model and turning it into a repeatable, predictable process. With funding and time, it will scale. As an angel investor, you should look for early exits and structure your investments accordingly. Finding Alignment Investors should gain alignment with the startup about the exit before making the investment. This includes the size and timing of the exit. There needs to be some clear thinking and research about who will buy the company and how much they will pay. The investors and the startup need to work together to achieve the exit. One of the biggest impacts on the exit for early-stage investors is follow-on funding. It’s important to gain alignment on the subsequent financing rounds required and the impact it will have on the early investors. It’s often the case the startup is overly optimistic and comes back later asking for additional funding.  Also, be sure to discuss the path the startup will take to achieve the exit; will the company grow organically, or will it push aggressively for growth? It’s important to maintain communication about the exit strategy and discuss whether the company is on track for it or not.  Finding The Buyer In selling a business there are two types of buyers: strategic buyers and financial buyers. Strategic buyers look for companies that can enhance their current business. Financial buyers look for companies that generate cash. Their motivations and concerns are different. The strategic buyer will look to see how closely the acquisition is to the buyer’s business and how much work it will take to integrate it, while the financial buyer will look at the financials to determine the cash flow and how long it may sustain. A company seeking a buyer will need to develop a relationship with CEO and VP-level contacts in the industry. This can be done through introductions, conferences, and other events. The company may also find an avenue through the corporate development team in some cases. Bankers are also potential conduits to potential acquirers. The board of directors of the acquiring company may provide an additional entry into the company. Finding the buyer takes time and building a rapport takes even more time.    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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Where To Source Funding

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2 min read: A common funding source for launching and growing a business is equity funding. However, equity funding is expensive. Luckily, there are many other sources of funding you can take advantage of and put to use. This article will discuss several sources of funding your startup can consider.  Anchor Clients Anchor clients are those who prepay for a custom version of your product. They are typically more prominent companies that have special needs. If you are building an enterprise or consumer software product, consider looking for an anchor client to pay you to create a custom version of it.   Anchor clients provide funding and a precise specification of what they want. Unfortunately, they often hurry and want the solution yesterday, which means they will pay the best price. Also, anchor clients give you information about the market. Anchor clients have researched it and have not found the solution they want. These clients become good references to use when you launch your standard product into the market. One of your platforms may require more than one anchor client to fund a version fully. Take the funding you need to build your platform and divide it by three, then look for three anchor clients to cover it. Bootstrapping and Barter Bootstrapping uses your funds and initial customers to launch your business. Investors tend to appreciate you investing personal funds as it shows you have skin in the game in addition to sweat equity. Barter is a valuable tool to reduce cash expenditures. Consider providing your services to businesses that can provide you with something you need in return, such as bookkeeping, accounting, legal, and financial work. For investors, this demonstrates resourcefulness and the ability to negotiate. Accelerators and Incubators Accelerators and incubators provide startups with workspace, mentorship, pitch practice, and in some cases, funding. Sponsorships are by universities, companies, and entrepreneur collectives.  Accelerators provide an intensive program to help entrepreneurs prepare their business and product for an initial investment. The classes are usually small, around 5-10 companies. At the end of the program, the participants pitch to investors for funding.  Incubators offer a physical workplace with offices, administration, and meeting rooms. In addition, universities offer accelerators and incubators for students and faculty who want to commercialize research. The accelerator or incubator may have a fund from which it invests in startups who complete the initial program. Often, this takes the form of equity funding. However, some programs structure it as a grant, and In addition, they often sponsor demo days in which you pitch to prospective investors. Other Funding Sources There are several other funding sources to consider. Some examples include: Grants: consisting primarily of government-based funds that are one-time offerings and are paid back. Loans: This is debt funding that the business must pay back to the loaner.  Factoring/AR Funding: This includes selling your invoices and accounts receivables in return for cash. Equipment Leasing: using equipment for a contracted time instead of buying reduces cash burn and spreads out the payments. Line of Credit: A short-term debt used for smoothing out the cash-flow cycles. Crowdfunding: This is collected via a prepayment for products from clients/customers. Consultation Funding: Extending your product to include consultation services is a way to bring in additional revenue. Supplier Funding: This consists of contract manufacturing or software developers who provide upfront cash injections in return for a contract to build or design your product.    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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Is Your Investment Ready to Exit Their Business?

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2 min read As an investor, you receive your most significant return on investment when your startup investment takes its exit. But, is your startup investment ready to exit their business? This article covers reasons to exit, when to sell, and how to exit successfully as an investor. Reasons to Exit the Business There are many reasons to exit the business. However, here are some key ones to consider: The company is ready to go IPO. By taking the company public, new ownership comes into place.  The market has changed dramatically, putting the future of the business into question. The business failed and can no longer remain solvent. The owners lose interest and decide to follow other passions. The owners lose the physical ability to run the business and need to find someone else. When to Sell For every business, there comes a time to sell. Ask the following questions to find if now is the right time to sell the company: Do they still want to run the business? They may want to move on to new projects and opportunities, and the current company may no longer be fulfilling. Do they still believe in the business and what it can do for them? Sometimes the market changes and the business opportunity is no longer there.  What can they get from the business today versus two years from now? Waiting a few years to sell may give them a better exit. Do they need more funding, and can they raise it? If they cannot, then consider exiting. What do the other team members want to do? Aside from your interests, what do the different stakeholders want? It takes a team to run a business. If they want an exit, that should be part of the consideration. How to Achieve an Exit for Investors It’s easy to get into a startup investment but challenging to get out, especially with a positive return. Most startup exits come when they sell the business to another company or go public on the stock exchange. It takes seven to ten years to achieve an exit in most cases. Most investors let the startup define the exit. If they do, that’s great. If they don’t, then you define an exit for your investment. I recommend using a convertible note that has a 3X in 3-year redemption right at the investor’s sole discretion. This provides you the option of exiting at the 3-year mark or staying in for the long haul. By year three it becomes clear where the startup is headed. They are either on the venture path to larger returns, or they have left the venture path and moved into payroll mode.   The problem with leaving the venture path is that most terms sheets give the investor an equity stake. If the company leaves the venture path and turns into a lifestyle business, then the equity is going to be worth, at most, a small return typically around the 10-year mark.  Define the exit you want and make an offer. Not all startups will take it, but many will.   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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TEN Capital 2021: Year in Review

Other /

2 min read As 2021 continued to be a year of uncertainty and challenges, we at TEN Capital are thriving. As the investment world stabilizes, startups and growth companies continue to seek Capital, and new companies are formed every day to meet the demands of an increasingly remote workforce. At TEN Capital Network, we were fortunate enough to welcome three new team members. Yayati has come aboard to take over our outreach efforts. Shane took the reins of our events, helping them to grow in number and popularity. We also welcomed Demie, who stepped up to assist cross-departmentally with the extra workload. TEN Capital in 2021 Since January of this year, we gained 72 new ideal Clients out of  477 Startup pitches. We started the year with 12,033 investors and are heading into 2022 with over 15,000. Our investor network includes VCs, Angels, and Family Offices each investing in the Tech, Healthcare, CPG, Energy, and a variety of other spaces. TEN Fundraise Launch The TEN Capital Fundraise Launch Program is a self-paced program that helps startup and growth companies prepare a fundraise campaign. In addition to self-paced training, TEN holds monthly online meetings for answers to your specific questions about valuations, target investors, and readiness for approaching investors. Each month, come prepared with your burning fundraise questions and we’ll answer them in real-time. Do you need help preparing for your fundraise? Speak to a representative today about the TEN Fundraise Launch Program. Click Here TEN Capital Partners TEN Capital introduced our Partner Program in 2021 and today it is thriving. We are thankful to our inaugural partners that have been integral in helping us grow this year, including Arora Project, Investable Mastermind, Kickfurther, New Mexico Angels, Title3Funds, INNP Consulting, Kiwitech, CrowdVision Advisors, LLC, Wiss Early Stage, Keiretsu Forum. Events in 2022 2021 was a big year for TEN Capital Events. Since January, we have hosted 113 events with over 2,100 attendees leading to over 400 unique investor engagements for our clients. We welcomed 87 guests, hosts, panelists, and speakers through formal webinars to casual networking style, virtual events. In 2022, we are kicking into high gear with several new event formats, including TEN Fundraise Launch, TEN Capital Club, TEN Capital Quick Pitch, Angel Investor Insights, The Future of Funding Series, and more. Check out these and all of our upcoming events on our website: https://staging.startupfundingespresso.com/events TEN Capital for Crowdfunding On top of our current programs, TEN Capital now helps you prepare your equity crowdfunding campaign. We can help you: Select the right crowdfunding platform(s) Set funding goals with milestones to achieve. Set up a promotions budget Outline the plan for updates every two weeks — what news to post and when Website review (most investors will research your deal by visiting your website) Update your profile in investor databases such as Crunchbase and others. Speak to a representative today to see how TEN can help your Crowdfunding campaign. Speak to someone today! NEW! Investor Connect Non-Profit TEN Capital and Investor Connect are proud to Introduce Investor Connect Non-Profit. Make a difference! Your donation will go towards educating investors and startups about startup fundraising. Pay it forward with your donation to this cause. We do not charge any fees for this content. We rely upon your donations to extend this work. Donate Now! This Year on Investor Connect and Startup Funding Espresso Top 10 Investor Connect Episodes of 2021: 10. Episode 617 – Mike Audi of TIKI Inc. 9. Episode 620 – Sam Silvershein of Alpha Partners 8. Episode 634 – Brian Parks of Bigfoot Capital 7. Episode 616 – Richard Teideman Angel Investor 6. Episode 627 – Sarah Jennings of Beyond Angel Network 5. Episode 618 – Dr. Raymond Levitt of Blackhorn Ventures LP 4. Episode 625 – Adam Haber, Angel Investor/Trellus 3.  Episode 614 – Ross Darwin of Owl Ventures 2. Episode 608 – Julio Moreno of Santa Cruz Angeles 1. Episode 469 – Archie Cheishvili of GenesisAI Top 5 Startup Funding Espresso Episodes of 2021: 5. How to Manage the Deal Process 4.  Five Key Elements to a Startup Story: The Hero 3. Diligence Report 2.  SAFE Notes vs. Convertible Debt 1.How to Prepare for the Next Raise From the TEN Marketing Department While we had a lot of great content in 2021, there were a few standouts based on feedback from the network: Top 10 Blog Posts for 2021: 10. How to Secure Investor Funding 9. How to Write a Pitch Deck 8. 10 Reasons an Investor Will Pass on Your Deal 7.  Presenting Your Pitch Deck 6. The Most Common Reasons Why Startups Fail to Raise Funding 5. 5 Signs Your Startup Isn’t Ready to Raise Funding 4. SAFE Notes vs. Convertible Debt 3. 5 Things Investors Love to Hear in a Pitch 2. Pitching Angel Investors: Competition & Competitive Advantage 1. The Convertible Note: How Does it Work? Top 5 eGuides of 2021: 5. How to Craft a Startup Story 4. Due Diligence and Leading the Deal 3. Closing the Investor 2. Negotiations and Valuations 1. How to Build a Pitch Deck So from all of us at TEN Capital (Demie, Sam, Yayati, Shane, Lilia, Caitlin, and Hall), we hope you have a healthy, happy, and prosperous 2022. 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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Tips For Using Your Financial Model

Fundraising /

2 min read Financial models contain numerical data about the past, present, and future of your business. This information can be used to make business decisions, analyze the financial health of the company, and can also be presented to potential investors. In this article, we provide tips for using your financial model. Using Your Financial Model in Your Pitch The financial model is a key component of your pitch. You should be using key financial numbers from the model to tell the story of how your business can scale up. To do this, start with your unit economics to show the business works. Show how the systems you have built drive the business using the financial model. Highlight the market size and how fast the market is growing as well as how you will go to market if you are in the early stage. Call out key cost figures to demonstrate you know the numbers that drive your customer acquisition process and retention rates. Show how you will use the funds by pointing to the costs for building products, generating leads, or closing sales. Show your cash burn and how the fundraise will give you runway. The financial projections alone don’t tell the story of your business. You have to pull out key numbers to tell the story. Using Your Financial Model in Your Pitch Deck Many founders cut and paste cells from the financial model spreadsheet into a slide. This renders the information unreadable as the spreadsheet doesn’t fit with the presentation format. To show your financial projections, consider the following: Don’t cut and paste from the spreadsheet. Investors cannot take in a detailed spreadsheet on a slide, only the high-level information. Instead, choose specific numbers from your financial model and place them into the slide using the same font and format as the rest of the deck. Choose three sets of numbers: Revenue, costs, and profits. For these categories, show last year, this year, and projections for the next three years. This provides a five-year window into the company. For each of the three categories, create a line graph. Avoid hockey sticks as investors will discount those numbers as unrealistic. Investors will look for the growth rate you are projecting. They will look to see when you go cash flow positive. Investors will look at the burn rate on the profit line and then check the fundraise to see how much cash runway you are proposing. The key takeaway regarding how to present your financial projections is the importance of calling out three key numbers such as the growth rate, months to cash flow positive, and the number of months of cash runway. How Investors Use Your Financial Model Investors use the financial model to understand not only the business but also to learn about the founder and their skills.  Here are some key points investors look for: Salaries: How well is the team compensated, and does this fit the stage of the business? Customer acquisition and retention: Have you built a system for acquiring customers and retaining them? Traction: What traction do you have going so far? Knowledge of the business: How well do you know the costs of running the business as well as what factors drive revenue? Scale factors: Based on the costs and customer acquisition model, how well can the business scale? Use of funds: How are you are going to spend the funds raised? Does it make sense for the stage of the business? Potential outcome: Is this a venture business or a lifestyle business? Consider how the investor will view your deal in building out your financial projections.  Feel free to try out our calculators and contact us if you would like to discuss your fundraise: https://staging.startupfundingespresso.com/calculators/ 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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