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Challenges in Angel Investing

Investing /

1 min read Investing Challenges in Angel Investing. Angel investing can be fun and financially rewarding to the investor as well as helpful to the startup. It can also be challenging. Before considering becoming an angel investor, there are some challenges to consider: It’s Hands-On Angel investing requires hands-on work with the startups in funding and supporting them after the investment. Angels often fill in the gaps left by the local incubators and accelerator programs in coaching them into a place where they can raise funding. First-time angels can find it time-consuming and expensive to learn the process. It Requires Continuing Education New market segments require the angel investor to learn new industries and business models continually. It’s Risky There’s no collateral for the investment, and it can all go to zero as it’s a risky investment class. One out of ten investments will be a home run, two or three will provide a small return on investment, and the rest will fail. But it Can be Worth it Angel investing is not without its challenges, but it can truly be a rewarding endeavor. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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Key Elements of a Startup’s Story

Fundraising /

2 min read Storytelling is a key skill for any startup raising funding so let’s discuss the key elements of a startup story: In the early days of a startup, the product and team aren’t fully developed, and customers typically aren’t fully engaged. As such, investors look to the founders to understand the potential of the business. In this case, the founder who can articulate a clear vision of the company and fill in the gaps can win over the investor. The Purpose The first key element to the story you’ll use during your fundraise pitch is your purpose. This can also be seen as a theme. The purpose or theme comes from what inspired your startup. There was something about the world that you wanted to change, so you started the company to fix it. Start your story strong but letting the listener in on this information. To make your point even more substantial, try to connect your purpose to a universal principle or truth that everyone recognizes. Next, build your story around that theme. The Hero There second key story element is the hero. The hero is the character whose journey the audience cares about the most. In a startup fundraise story, this is the CEO. Most heroes are trustworthy and likable, leading the audience to empathize with them in some way. Painting the CEO as this character increases your chances of landing funding. Your story should focus on the hero and not just the product as investors seek to build a relationship with people. In this case, the company takes on the persona of the CEO. If the CEO is trustworthy, then the company will be considered reliable too. The Mission The third element is the mission- the job to be done. It is the goal of the hero both now and beyond the story. For your startup story, focus on what the CEO is trying to accomplish and how he plans to solve it. Outline how hard the problem is for the customer and how it can be made easier. Show how the proposed solution will save time and money for the customer. Talk about the steps to accomplish the mission; what must be done to bring the solution to the market. Finally, show how the product achieves the customer’s desired outcome. In telling the startup story, use the mission to set the direction. And always be sure to show how your startup’s mission reflects your core principles and values. The Obstacle The fourth element, the obstacle, stands between the hero and the goal. All good stories have a conflict that must be overcome. A startup’s obstacles could be competitors, lack of knowledge, regulations, and more. The obstacle creates tension which holds the audience’s attention and helps them experience the story for themselves. For your startup story, show the CEO facing the challenge in bringing the product to the market. Investors will empathize with the plight as they have been there themselves. Show how the CEO overcomes those challenges, remembering that the investors look for grit, determination, and persistence. The Plot After you establish the theme, hero, mission, and obstacle, you can start work on the final element of your story: the plot. The plot is a series of events that leads to achieving the mission. Plots can be set up in several ways, and choosing the suitable model will help make the story more engaging. Try to position yourself as David fighting Goliath: The small startup taking on the big corporation. Or, try telling a Rags to Riches story: How a small startup hit upon a big idea. You can also position it as a quest: Show the entrepreneur’s journey and the lessons learned. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-craft-a-startup-story/ 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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5 Things Investors Love to Hear in a Pitch

Fundraising /

2 min read 5 Things Investors Love to Hear in a Pitch Investors hear pitches continually throughout the year. So many, in fact, that one’s eyes can glaze over. However, from time to time, an entrepreneur will make a pitch that will break through the noise. Investors are listening for a few key things that show you have a business with real growth; the rest is filler. Every entrepreneur has a story. Many are interesting, some are not. For investing purposes, there are 5 key elements that are sure to capture the investor’s interest. Real Traction Entrepreneurs who have sales and show it are head and shoulders above the rest. Most talk about the traction they will have in the FUTURE but not what they have today. In an investor’s mind, this equates to “No Traction”. Real Pain Point The entrepreneur has found a real pain point in the market and is filling it. Someone once said that customers pay for the pain to go away, they don’t pay for nuisances or inconveniences. Real Team They have someone building it and someone selling it and those team members know what they are doing. Real Product The product works and is non-trivial to build. It’s more than just spin marketing. Real Growth Prospects The market opportunity has strong growth potential and is not going to run out of steam in a year or two. Those are the elements that light up the investors in the room, if you really have it. Read more from the TEN Capital Education Center: 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 Benefits of an Angel Network

Investing /

1 min read An angel investor will find many benefits in joining an angel network. The angel network can build resources to share with the angel, such as due diligence. This is time-intensive work, so it helps to share the load. Angel networks provide more and better deal flow than individual investors can find on their own. The bigger the angel network, the more likely there will be knowledgeable investors about the market segments and startup business models. This lets the angel investor pursue deals outside their core expertise. Angel groups can write bigger checks than individual angels and thus command better terms with the startup. Experienced angel investors can share their knowledge with new angels. This is particularly helpful in setting valuations, defining term sheets, and supporting the company. Angel investors can find diversification through the angel network and its deal flow. An angel network will have more influence over its startup scene than an individual investor. Consider joining an angel network. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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Pitching Angel Investors

Fundraising /

2 min read Pitching to Angel Investors: Competition & Competitive Advantage If you want an investor to stop listening to your pitch presentation or stop reading the business plan, state how you don’t have any competition. You might be surprised at how many entrepreneurs make this rookie mistake in their pitch presentations. We hear it constantly, and it’s almost certain that you’ll lose credibility with investors. What Angel Investors Really Want I believe that entrepreneurs who say they have no competition try to convey a broad opportunity to exploit a market. This will have the opposite effect. The main reason is that the customer is solving the problem somehow now, even if indirectly compared to your solution. There’s always another company competing for the same dollar and if the investor finds out about a competitor from someone other than the entrepreneur, it makes the startup look even more unprepared. Competitive Analysis The competitive analysis in your business plan demonstrates to potential investors that you understand the strengths and weaknesses of your business. It also gives them a better picture of the market opportunity when researched thoroughly. When researching the competition for your plan or pitch presentation, focus on answering the following: Who is out there competing for the same dollars that you’re going after? Are they directly or indirectly selling products, services, or substitutes thatcompete? What are their strengths and weaknesses in the market? How are they currently positioned in the market? In what segments of the market do they operate? What is their go-to-market strategy, and how does that differ from yours? What threats do they pose that may impact your business? In other words, perform a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) on each of your competitors and compare them to your company. List the Key Competitors with their strengths/weaknesses in comparison with yourown. Show Specific Competitive Advantages of your solution. Use Numbers to make the comparison. The more numbers, the more solid your companylooks. Use numbers to show market share, your economic benefit, etc. Read more from the TEN Capital Education Center: 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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What gives You Competitive Advantage?

Fundraising /

2 min read  Many entrepreneurs are unaware of what gives their product a competitive advantage, confusing anecdotal stories for concrete evidence. Recurring Revenue Competitive advantage increases revenue by 30% over the competition. This creates a loop where the extra money coming in becomes a competitive advantage to improve the startup’s product or offered services. In today’s world, you would think every business has recurring revenue. Yet, most companies that are raising funding did not structure their business for recurring revenue. Recurring revenue helps your business in several ways: Opens up your business to new customers who could not afford your product previously because the one-time payment was too high; breaking the payment into smaller steps means that more customers will be able to afford it. Provides an ongoing revenue stream to plan your business better as you know how much you will have coming in. Helps you maintain engagement with the customer and gives you the chance to find new opportunities to serve the customer. Platform-Based Solution Consider adopting a platform-based approach to your business. A platform-based solution is a competitive advantage over a single product company as platforms reuse the research, design, architecture, and product packaging. Customer support is also turned into a recurring factor. Network Effects Most businesses increase in value as the customer base grows and validates the product/service. When users encourage others to join the platform, it is called Network Effects. As the number of users increases, so does the value of the platform. If a business can harness that customer base and turn it into a community that more aggressively attracts other users, this will become a competitive advantage. Virality Virality is a key competitive advantage in which users invite other users to join your platform. This approach, in turn, reduces your cost of customer acquisition. Though this is similar to Network Effects, Virality is different. Network Effects shows the platform increasing in value based on users interacting directly, while Virality seeks to engage via social platforms online. If you build virality into your product, you will have a trackable pool of prospects to monetize and a lower cost of customer acquisition. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-craft-a-startup-story/ 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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Should You Start an Angel Network?

Investing /

1 min read Should You Start an Angel Network? Before making that decision, there are several questions you will need to ask yourself. Before launching an angel network, assess your community as follows: Do you have accredited investors interested in startup investing? Do you have any investors who will take the lead on diligence and investing for each deal? Are you, or do you have a champion who will organize and lead the angel group for the first two to three years? Do you have a flow of startups seeking funding that you can access? Is there a resource for incubating and educating those startups in the area? Are there local service providers such as attorneys, accountants, financial advisors, and others who can support the startups? Are there other investor groups that currently fund those deals in your community to support syndication? Is there access to follow-on funding for startups? Research your community to see what currently exists and what must be built. Check with the local entrepreneur groups to assess and get their potential support for starting an angel group. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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Thinking Like an Investor

Fundraising /

2 min read A start-up’s ability to close an investor can make or break the company; to tie up the deal successfully and efficiently, you have to think like an investor. Understanding what an investor is looking for in a company and its end goal will help you tailor your pitch and supporting documents to appeal to their specific wants and needs. Below, we share with you what investors really want and how investors and venture capitalists make decisions. Continue reading to set yourself up for success. What Investors Really Want Most investors look for startups in which they can find a return on their investment. In the diligence and funding process, what the investor wants is not to lose all their money. Essentially, they want to reduce their risk to zero. As a startup raising funding, you can help the investor find confidence in you by showing the risk mitigation you have put in place. For each concern, you should show how you’ve mitigated that particular risk. For example, when asked: “How do we know the team will execute?” Respond with: “We’ve demonstrated execution so far with these results…” When asked: “How do we know we can sell the product?” Respond with: “We’ve sold X amount so far and will continue using the same process.” Remember where the investor is coming from and show how the risk has been reduced, even though it’s not zero. How Investors Make Decisions Entrepreneurs look at the opportunity in the deal. Investors look at the risk. Two factors help the investor decide to invest or not. The first is the worst-case scenario approach. They look at the worst-case scenario. Oftentimes, this is them losing their entire investment or being stuck in a deal for the next decade with little to no return. However, if the investor can live with the worst-case scenario, then they move forward. The second factor investors weigh when deciding whether to make a deal is reputation. How will this deal impact their reputation? Many have a standing in the community and their investor circle, and this reputation impacts how other investors treat them. They don’t want to be seen as the fool, and if the deal turns out to be a dud or even goes sideways, their reputation takes a ding. In presenting your deal to an investor, consider how the investor will view the deal and its impact on them. How VCs Make Decisions Venture Capital investors make investment decisions as a group. Therefore, you must convince the team to move forward with the deal. After the initial pitch to a VC investor, the startup meets the rest of the investment team and pitches the entire group. The team decides together to pursue diligence. With the diligence results, the team again comes together to make a go/no-go decision. The advocate for the startup makes a case for moving forward with the investment. It’s best to arm your advocate with enough information to make your case. The startup should also remember that the advocate is taking both a reputation and financial risk on the startup, which is never easy. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/closing-the-investor/ 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 Cost of Angel Investing

Investing /

1 min read The Cost of Angel Investing: Where are the Fees? I recently read a discussion forum in which the post’s author had bought a financial instrument and later discovered that the investment advisor who sold it to him actually made a commission on the sale. The author was incensed that someone had made a commission off of selling him something, and to top it off, the investment advisor didn’t disclose his commission. As I read the post, I began to wonder where this guy has been for the last 50 years. Of course people make money selling things, and financial instruments are no different. Where are the Fees? When I sit in pitches from investment advisors promoting their fund, or whatever their financial instrument may be, the first question that nearly always comes up from the audience is how much are the fees and commissions. This number ranges from a fraction of a percent for mutual funds to double-digit percentages in private equity. After reading the aforementioned post, I began to wonder about the cost of angel investing. Where are the fees? In a member-managed group such as the Baylor Angel Network or the Beyond Angel Network, there is a membership fee, but the members review the deals, perform the due diligence and ultimately decide what to invest in individually. The Main Cost Comes in Three Areas: The main cost comes in three areas, and while those costs aren’t paid directly by the angel investor, the business pays the costs, and ultimately the angel investor takes a reduced return based on those costs. So an experienced angel should ask about these costs. The first cost is the Management Salaries. Management salaries are kept low in the early days of a company to give the business every chance of succeeding. I was recently in a deal in which the members asked about the CEO’s salary. He replied it was $300K per year. You could feel the air leaking out of the room. While he was a strong manager, there was no way the business would survive paying salaries of that magnitude. The second cost is that of Consultants, whether they are on the board or as advisors. It’s fair to ask who is getting paid and how much for the work they are providing. There are good consultants out there, but I’m often amazed at how vague their duties are. Oftentimes I hear generalizations such as “they are going to help us,” but there’s no job description, no metrics, no deadlines, and it’s all very nebulous. The third cost and what I consider the most important is the Angel Investor’s Time. If the deal requires a day a month or, worse, a day each week, then the deal must be spectacular to make it worthwhile. The angel investor should figure out upfront what value he can add and if the business runs into trouble, which will help them. Thus, the angel investor’s time becomes the key factor in calculating the cost of angel investing. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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