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Investing in Emerging Markets

Investing, Other /

3 minute read Investing in emerging markets can be an incredibly tempting venture. The high risk/ high reward stakes are likely to draw in investors both big and small. So how do you choose? It is essential to analyze both the start-up and the industry they will be operating within. The Industry You can start by defining the niche space and reviewing the evolution thus far of the industry. It is also important to note current challenges in the market and potential future challenges and advancements. The Startup When analyzing the start-up, you should start by examining both the CEO and their team. What are their strengths, weaknesses, and past accomplishments? Next, you should define the problem they are solving and how. You want to be sure they are solving the whole issue, and not only part of it. Their idea must be protected so that other space players do not easily duplicate it. Finally, you want to understand the future aspirations of the company. Are they prepared for upcoming challenges and advancements within the industry to ensure that they are fully prepared and equipped to keep up with the competition? To better understand this process, we are going to look at a company in the MarTech space. We will briefly look at each component listed above to decide whether this is a company worth investing your money in. The Space MarTech, or “Marketing Technology”, refers to marketers’ tools and software to leverage, plan, execute, and track campaign efforts. This technology is used to streamline the marketing process, including customer communications and data entry and analysis. Industry Evolution As the industry evolves, more companies are beginning to position themselves as all-in-one marketing solutions. Traction around areas like conversational chatbots, AI, influencers, and augmented reality is increasing. However, overall growth in the segment will slow down. As companies consolidate, a lot of these point solutions will fall by the wayside. Challenges For early-stage companies, many of the challenges revolve around the way angels and VCs nurture the industry itself. There tends to be a push towards point solutions and the next shiny new thing. In many cases, the problem is a lot broader, and these point solutions are pieces of the whole. Investing The MarTech space is no different than any other niche in that there are some great opportunities, and there are some to avoid. As an investor, it is important to closely analyze the team and the problem that the business is trying to solve. The Company The Company sees itself as an integrated, socially collaborative, intelligent marketing platform. They are an all-in-one system that does social media marketing, content marketing, and email marketing. The CEO realized that marketing in the digital age was becoming increasingly complex due to the overwhelming number of marketing channels, mechanisms, and customer touchpoints. He also noticed that many of the old marketing standbys in advertising had become less and less effective. This inadequacy led him to create The Company. Conclusion Is The Company a smart investment move within the MarTech Space? They provide an all-encompassing solution, solving the whole problem and not just a part of it. The CEO has a successful track record at many reputable companies. It sounds like they have thought about keeping their platform up to date and flexible to compete within the space. It would seem this is a company that is worth investing in, so long as they can show how they will retain customer loyalty and protect their innovative platforms and ideas from duplication by other players in the space. If the company does not have a definite answer to these two potential problems, we would advise not to invest as this can quickly become a startup undoing. Read more in our most recent eGuide: https://staging.startupfundingespresso.com/investing-in-niche-markets/ 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 Last-Mile Delivery Space

Investing, Other /

1 min read Players in the last-mile delivery space fulfill the ‘last mile’ of the transfer of goods from producer or retailer to the final consumer and growing consumer demands have caused this industry to boom. Industry Evolution The age of instant gratification has led to the growing consumer demand for increased home delivery, faster delivery turnaround times, and cheaper services. This is driving the need for change. Companies are now outsourcing the logistics to a third-party organization that is better equipped to fulfill the last leg of delivery at a lower cost to the consumer. This is called white-label logistics and is recognized as the next level for companies. Delivery used to be the most expensive part of the selling process. Now, evolutions in the last-mile space make it possible to obtain items locally and deliver them to the customer at a much lower cost. Should You Invest? What do you need to look for as an investor to be sure a company is worth your down payment? The major question to ask yourself is: How does this company compete with some of the major brands already out there? It is important to know if the company is going to be able to keep up with the major player technologies. Those that can keep up with the larger companies are the ones that are going to succeed therefore worth investing in. Read more in our most recent eGuide: https://staging.startupfundingespresso.com/investing-in-niche-markets/ 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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SAFE Notes vs. Convertible Debt

Fundraising, Investing /

1 min read Many startups use SAFE Notes and Convertible Notes for their early-stage investments. So what’s the difference? A Convertible Note is a debt instrument that converts into equity later upon an event such as raising an equity round or reaching a maturity date. A SAFE Note is a Simple Agreement for Future Equity, a warrant to purchase stock in a future priced round. The SAFE can convert when you raise any equity investment amount and does not give the entrepreneur control of when. You can consider Convertible Notes to be legal debt while SAFEs are warrants. Neither a SAFE or a Convertible Note set the valuation but instead takes the equity round valuation. Convertible Notes include an interest rate while SAFE’s do not. Most Convertible Notes have a maturity date while SAFEs do not. Convertible Notes contain a discount rate that provides additional shares to the investor for investing early. SAFEs have no discount rate. SAFEs are often considered the more straightforward option than a Convertible Note, but as you can see, the Convertible Note provides more opportunities. Take our Convertible Notes vs. SAFE Notes Calculator here: https://staging.startupfundingespresso.com/note-calculator/ 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 Convertible Note: How Does it Work?

Fundraising, Investing /

1 min read A commonly used investment tool for funding startups is the Convertible Note. What is a Convertible Note? A short-term debt instrument that converts into equity later. If the issuer wants a debt instrument without conversion to equity, a promissory note would be a better option. With a convertible note, the investor receives accruing interest while holding the note. Why Use a Convertible Note? It works well for seed-stage startups as it removes the burden of a complex equity-based terms sheet which requires details on control and boards, and avoids issues of dilution and taxes. It’s easy to set up compared to most equity terms sheets which can be quite costly to develop since valuation must be negotiated and set at the time of signing. The convertible note also works well for investors who want to invest relatively small amounts. Investors seeking to make large investments typically want valuation set, board seats determined, and control provisions set which often requires an equity terms sheet. The convertible note is a useful tool for early-stage startups where there are still many unknowns about the deal. The Three Components: A Convertible Note has three components: the interest rate, discount rate, and cap rate. The interest rate determines the annual interest that will accrue. The interest is not meant to be paid out monthly or quarterly like a bank loan but will convert to equity later along with the principle. The discount rate is the amount of additional equity the investor will receive when the note converts to equity as compensation for investing early. The cap rate determines how much equity the investor will receive upon conversion. How Does it Work? The conversion from debt to equity is usually based on a future financing round. If there is no follow-on financing round, then the note often sets a time limit (say 5 years) at which point it will convert at the cap rate. The interest rate is typically a simple interest rate. If the price per share is $4 and the interest rate is 10%, then the investor receives $4*.10= $0.40/share in the form of interest. The discount rate gives a reduced price to the convertible note holder. If the price per share is $4 and the discount is 15%, then the note holder receives their share at a price of ($4 * (1-.15)) = $3.40. The cap rate sets a maximum limit at which the convertible note can convert to equity. For example, if the cap rate is $3M and the next round of financing comes in at $5M, and the share price is $4.  Then the price per share to the convertible note holder is $2.40. (3/5=.6; $4*.6=$2.4). Read more about Convertible Notes and take our Note Calculator here: https://staging.startupfundingespresso.com/note-calculator/ 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 2020: Year in Review

Other /

2 min read As we take a look at the 2020 year in review, we see a year of change, uncertainty, and challenges. It was a transformational year when business shifted online, everyone spent more time with their family, commuting to work became a thing of the past, and much more. At TEN Capital Network, we overcame the challenges through the strength of our team working together. Here are a few highlights from our 2020: TEN Capital in 2020 Since January of this year, we gained 71 new Clients out of 560 Startup pitches. We started the year with 9,700 investors and are heading into 2021 with over 12,000. Our investor network includes VCs, Angels, and Family Offices, each investing in the Tech, Healthcare, CPG, Energy, and a variety of other spaces. Events Moving Online We started 2020 with 7 successful in-person events but shifted quickly online to round out the year with a total of 53 events, hosting 447 total attendees. We also began a brand new series called “Why I Invested.” In each virtually recorded interview, we speak to investors who have previously invested in one or more of our client’s deals. We hear their perspective on what they like about the deal and why they decided to invest. To date, we have had 23 episodes recorded with 27 participating investors and counting. NEW! TEN Capital Partner Program In 2020, we launched theTEN Capital Partner Program. Our Partners have become a big part of our startups’ success through Alternative Funding, Crowdfunding, Accounting, Back Office Services, and so many more.   Inaugural partners include Arora Project, Investable Mastermind, Kickfurther, Title3Funds, INNP Consulting, CrowdVision Advisors, LLC, and Wiss Early Stage. NEW! Podcast Series From Investor Connect In May of 2020, TEN Capital’s Podcast series Investor Connect introduced a brand new show: Investor Perspectives. In each episode of this informative series, Host Hall Martin discusses a chosen, relevant topic with experienced investors from the TEN Capital network. This year we have published a total of 240 Investor Connect episodes and 270 Startup Funding Espressos. In the fall, our Startup Funding Espresso podcast program became a #DailyShot newsletter, delivered daily, directly to your inbox. Each weekday we send out tips and advice for investors and startups alike, each based on our popular podcast series (you can sign up for the #DailyShot newsletter here). Top 10 Investor Connect Episodes of 2020: 10. Episode 319 – Jyri Engestrom of Yes VC 9. Episode 341 – Manuk Hergnyan of Granatus Ventures 8. Episode 442 – Sarah Jennings of Beyond Angels Network Yellow Jacket Fund 7. Episode 367 – Xavier Segura of Tessera Venture Partners 6. Episode 358 – Samy Eissa of Hit Ventures 5. Episode 373 – Charles Sidman of ECS Capital Partners 4. Episode 347 – Maggie Sprenger of Green Cow Venture Capital 3. Episode 388 – David Wadler of Vendorful, Inc. 2. Episode 383 – Randy Myer of Carolina Angel Network 1. Episode 404 – Chelsea Burns of Escaladora Ventures From the TEN Marketing Department While we had a lot of great content in 2020, there were a few standouts based on feedback from the network: Top 10 Blog Posts for 2020: 10. Team Due Diligence 9. The Importance of Non-Financial Factors in Setting Valuation 8.  The Due Diligence Process 7. Technical Due Diilgence 6. Building Investor Engagement 5. Fundraising Metrics That Matter 4. Your Fundraising Growth Story Pt. 1 3.  A Note on Convertible Notes 2. What is the Real Due Diligence Process? 1. How to Close an Investor Top 5 eGuides of 2020: 5. How to Build a Pitch Deck 4. The Impact of Covid on Cannabis Market 3. The Types of Raises 2.  Term Sheets 1. Investor Perspectives on Healthcare Trends post-COVID From all of us at TEN Capital (Sam, Ashley, Lilia, Caitlin, and Hall), we hope you have a healthy, happy, and prosperous 2021. 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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Avoiding Common Pitch Deck Mistakes

Fundraising /

2 min read Avoiding Common Pitch Deck Mistakes. Mistakes to Avoid Putting the right pitch deck together takes time and practice. It’s not something individuals often get correct on the first try. In developing a pitch deck, there are several mistakes that you can avoid. One of the most common mistakes is explaining how the product or technology works in great detail, but this isn’t necessary. Instead, use the pitch deck to focus on its benefits and what the product does for customers. Save the detailed explanations for later on in the process when you are in diligence. Some other common mistakes to watch out for are as follows: Not identifying the competition or claims there is no competition. Utilizing a font so small that no one beyond the first row can read it. Using too many words; overuse of words can distract the reader. The flow of the slides does not follow a logical story form. Displaying market sizing to distract the audience from the fact that you have no traction. Not having an “investment ask” at the end of the presentation, leaving investors wondering what you want from them. The pitch deck should focus on your: Core product Team Customer Fundraise You can flesh out the more extensive details later. Finally, the biggest mistake you can make with your pitch is not asking questions and not listening. Most startups spend their time talking when they should be listening for objections and concerns. Pay attention and welcome questions from your potential investors. What Your Pitch Deck Should Do A pitch deck is a brief presentation that provides your audience with an overview of your business. Ideally, the deck should answer any questions an investor might have. The primary goal of the pitch deck is to introduce your deal to an investor. Additionally, the pitch deck should serve as a way to show what is essential to an investor who may be considering an investment in your startup. A pitch deck is not is a means to explain the full history of your company. It is also not a means to explain how your product works. Tips for Pitch Deck Success After you’ve made your pitch, be sure to schedule a follow-up meeting with the investor. Good pitch decks show: What you are doing differently within your given sector. How you can grow more with funding. An ideal pitch deck showcases that the business’s proposed outcome will happen with or without the investor. In other words, your pitch deck should show that your future is inevitable. Ideally, you want to use your pitch deck to show potential investors that the results are there. Put those results up for everyone to see and show them what you have accomplished so far. The slides of your deck serve as the presenter, not the other way around. When pitching, avoid discussing multiple scenarios. Investors will find it challenging to keep track of what you’re trying to accomplish. Most importantly, focus on the core message: Product Team Market Fundraise Outcome Remember: You are the presentation; the slides are the presenter. Read more: https://staging.startupfundingespresso.com/the-art-of-pitching 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 Show Traction When You Are Pre-Revenue

Fundraising /

2 min read: We know that investors are looking for traction, but how to show traction when you are pre-revenue? Contrary to popular belief, even if you are pre-revenue, you can still show traction with your startup. Traction can be represented by any activity with customers, even without revenue. You can show customer engagement at all phases, even before you have a product. You should have customers coaching you on what product to build. First, when communicating with investors, always include customers in your discussions. Never engage an investor meeting, email, or conference call without new info about your customer and always mention it. If you are pre-revenue, you can still talk about the prospective customers you are working with to build your product and what they are saying. The customer problem is the most important thing because it shows you are close to the revenue source, and you are working towards obtaining it. Be able to name the customers, both the company and your contact. Never talk about the customers as a general group with vague and fuzzy references. Talk specifically about the problem they want to solve and how much it costs them. Next, show how you’re building your product to solve the customer’s problem. Discuss pilots, beta tests, MVP usage, and how the customers are engaging. Once you have a few customers closed, you have enough information to start building the Unit Economics story. Show the cost of acquiring those customers, qualifying them, closing them, and how it’s a profitable business. Place those customers in a sales funnel to show prospects moving through the funnel. Place upcoming prospects at the top of the funnel to show more are on their way. You now have a repeatable, predictable process. The secret here is that most investors don’t look for big revenue; they look for repeatable revenue. In your investor updates, show additional customers coming into the funnel and moving through it. Highlight that the cost and timeframes are the same, emphasizing it’s a repeatable process, and you’re just “turning the crank.” If you’ve decided you’re not going to talk with customers until the product is complete, then you may want to rethink that strategy. Involve customers from the start and get their help on it, and ALWAYS be talking about those interactions with your investors. 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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How to Keep Your Investors Happy

Fundraising /

2 min read  How do you keep your investors happy? Keep them informed. I remember my first angel investment back in the 1990s. This was before I knew you were supposed to set up an agreement with the entrepreneur on how, how often, and what they would communicate to the investors. After several months of hearing nothing, I finally called the President of the company and asked for a written update, including financials. A week later he sent me a short two-paragraph email along with a spreadsheet attached showing the financials. And so came the red flags. There are several items to point out here: The two paragraphs by no means filled in the details of the business. To this date, there are holes in their explanation of what went on in the business. The financials of any company should not be in an Excel spreadsheet. They should be in Quick Books. Excel has no audit trails, no security or validation. Anyone can change the formulas. In fact, several of the columns of financial data didn’t add up in the bottom row. I only received this after I demanded it and I never received another one. After that experience, the entrepreneur wanted to discuss over the phone and found excuses to not send out the financials again. These are all red flags indicating that things are not going well. Later the company went bust. It is crucial for the entrepreneur should send regular, informational updates to the investors. Be transparent about the results and share both bad news as well as good news. Stick to facts about the current state of the business and not just forecasts and plans. Provide short status updates about major initiatives, milestones missed or hit, and major customers or partnership opportunities. Share the status of product development including test results, beta tests, and setbacks or breakthroughs. Cover the key financial metrics, including actual versus forecasted revenues, cash on hand, current burn rate, and monthly and year-to-date revenues. If additional fundraising rounds are underway, provide the status of fundraising goals. Share details about new employees, finding a great co-founder, or securing an experienced advisor. Detail key customers landed, important opportunities, and major marketing initiatives. Keeping your investors informed also maintains the relationship, leaving the opportunity open to ask for follow-on funding later. 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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Your Fundraising Growth Story Pt. 2

Fundraising /

1 min read  Your Fundraising Growth Story Pt. 2: What’s Your Story? When founding your startup, it is important to have a growth story. While investors may invest in teams and technology, they’ll still need to see your operating cost model, how you are finding customers and how much they pay for your products and services. If you’re bringing in a lot of money, the investor will assume that you do have a story to tell. These investors will look at your business model to see how much you can grow as well as what challenges you’ll face and at what point. If your company is low revenue or pre-revenue, you can show in economic units the proven and repeat business you have. If you haven’t already, take out $5K and prove the unit economic model. Let’s say you can get a lead paying $1 for a social media ad. You then send follow-up emails which give you one lead out of fifty. Your lead then spends an average of two hundred and fifty dollars for your products or services. You can then take these numbers to come up with a basic financial model. It tells how much it costs to get a customer and the value of the loan. Knowing your numbers and being able to tell investors how you’re growing is a key to fundraising. Read more: https://staging.startupfundingespresso.com/eguide/ 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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