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How to Move Your Angel Investor Network Online

Investing, Other /

1 min read As businesses are becoming increasingly more virtual, you should consider moving your angel investor network online as well. In this COVID-19 world, making it challenging to meet in person, meeting online is now the standard. Moving your angel investor network online provides added benefits: More engagement from those who are busy or live/work too far from the meeting place Better fit for today’s angel investor whose primary work centers around a computer rather than in-person meetings Efficiency to the process as online meetings are typically half the time of physical ones Improved research as the investor can look up stats on Crunchbase, search online for competitors, and generally make use of online tools Expanded network range to include investors outside your geographic area Increased member participation through presentation availability anytime and from anywhere More contact with members through various online meetings, screenings, education, and diligence sessions Improved decision making as the investor can access online resources such as deal documents while seeing the pitches TEN Capital Can Help. Online meetings will augment your group rather than replace the physical sessions entirely. Social and networking events can continue for members to meet each other. Read more: https://staging.startupfundingespresso.com/ten-capital-network-for-angel-groups/ 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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A Note on Convertible Notes

Fundraising, Other /

1 min read When launching a raise, you should always be in a position to take funding, and you are likely to meet investors who want to join the deal. However, many investors will not be interested in taking on a lead investor role because of the work and time involved in doing so. Many investors want to take on a more passive position in the deal. For this reason, a convertible note works well during this stage of the raise because it is a debt instrument that converts to equity later, so there is no valuation to negotiate. Here are a few useful things to know about Convertible Notes: Startups can accept investors into the deal with relative ease, given most notes have simple terms, rights, and conditions. You can use the note over several smaller fundraises to gather investor funds. When setting up a convertible note, consider what will happen upon conversion to the cap table. Startups use convertible notes primarily for seed rounds and bridge rounds. They are lower in cost because the documents are simpler than equity terms sheets. Convertible notes avoid setting a price, so they are easier to negotiate. A convertible note keeps the cap table simple as they start in debt form and convert to equity later. The downside to convertible notes is that they have few protective provisions found in equity terms sheets, such as board seats. Valuation is not fixed, which means a later priced round will set it, and there’s little control the investor has over it. 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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How to Close an Investor

Fundraising /

1 min read, from the “Fundraising Process” series As you gather your list of investor prospects and progress them through the funding “funnel”, it will come time to close an investor. But how? Some investors are transactional. They look at the deal, and then make a decision. Most investors, however, are not. They look at the deal and continue to study it for evidence of traction and momentum. Because of this, it is important to provide continuous updates showing progress and reminders that you are still actively raising funds. The lead investment is the hardest to close, so that it will take extra effort. No one wants to go first, and for your fundraise, you are looking for a lead investor who will take that charge. After that, you have the benefit of saying, “we have $150K of our $1M round closed.” This is the first big hurdle to overcome. Once you hit the 50% mark, you’ve achieved your second hurdle. After 50% has been raised, it gets much easier to raise the funding, as the perceived risk that the round will not close goes way down. At some point, it comes time to close an investor. A few techniques include: FOMO: Near the end of your raise, you’ll have some investors who are still on the fence. Scarcity helps motivate people to move along. In closing the round, you can release a statement saying “$850K of our $1M round is closed with only $150K left.” Incentivize: In some situations, you can offer an incentive to investors to move forward. You can offer a better deal to those who close before a certain date. I heard one entrepreneur who offered two warrants if the investors closed in 60 days, one warrant if closed in 30 days, and no warrants thereafter. Investors who wanted to be in the deal would make an effort to get their diligence done and their investment in. 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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Changes in the Wine Space

Other /

2 min read We now live in a time when the internet has disrupted virtually every industry, from retail, to music, publishing, and travel, many agree that the internet has forever changed the way the world works. Yet there remains a relatively untouched industry. The Wine Space has yet to see the disruption that other industries have faced. Only 5% of wine in the United States is currently sold online. Considering we live in a world driven by the internet, this is a strikingly low number. That may be set to change. What we are now seeing in this industry are some massive shifts primarily driven by Millennials. Millennials tend to be at the forefront of new technologies and are responsible for driving a large number of sales. They tend to be much more digital, and their buying habits reflect that, even when it comes to alcohol. Another trend the wine space is currently seeing is due to the seismic shift we’ve experienced because of COVID-19. The pandemic has caused a massive fundamental change in buying habits across all demographics, which spells good news for the industry and points to the potential of having a tremendous social impact. Within the wine space, vineyards and wine stores are predominantly owned and run by immigrants. According to the data provided by Yahyn, a platform that brings together retailers and vineyards with a focus on Amazon-like convenience to purchasing, 60% of both wine stores and vineyards are owned and operated by immigrants. In certain cities that have a higher concentration of immigrants, that number jumps up to 90%. As the industry continues to evolve and more purchases happen online, we’re likely to see an increase in business for these shops and vineyards. While the economic impact is a positive for the industry, the potential social implications could mean great things for these immigrant operated businesses. 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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The Future of Work

Other /

2 min read The US workforce has faced a tough time amid the COVID-19 pandemic. Currently, the United States is recording over 43 million people unemployed across the country. As the US struggles to find normalcy, many people are wondering: So what is the future of work? The truth is, there’s a lot of exceptional talent out there looking to get back to work and struggling to find the means to do so. The US previously had a problem with employers struggling to find the right talent; this is no longer the case as the scales have shifted. We now have employers struggling to find the right talent amidst thousands of resumes. There are an overwhelming number of qualified applicants to sift through to find the person who is the right fit for both the job and the company. Since so many people are looking for work, there has been a massive uptick in opportunities for upskilling. These people are essentially looking at how they can reskill themselves to get back into the workforce. As a result, online learning platforms like Udemy and Coursera have exploded in popularity, especially considering the current restrictions placed on traditional learning. As businesses attempt to get back to productivity, there has been a significant rise in remote work as both employers and employees adjust to a new working way. While remote work has been rising in popularity, what we see happening is a shift from popular to essential. As we look towards the future of work, we’re going to see continued changes away from what has long been considered the traditional workforce. Remote work, upskilling, and online learning are becoming the “new normal” and providing the building blocks to shift work as we know it altogether. 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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Yes, You Can Define an Early Exit

Investing /

2 min read At TEN Capital, we see several startups that are strong candidates for early exits. In looking at the history of angel groups and startup investing, a typical portfolio yields the following: the top 10% are big winners, 15% are medium winners, the bottom 10% go out of business, and the remaining 65% turn into lifestyle businesses that may be providing a nice income for the founders but will never provide a return for the investors. As an investor, I found it irksome to fund someone else’s lifestyle business. The startup often envisioned a high growth company but couldn’t find the growth rates or additional funding to achieve it. It was then that I decided to introduce the redemption right into the negotiations. It’s a convertible note structure that provides a 3X in 3 years (terms vary for some deals) redemption right at ‘investor sole discretion’, which means the investor has the right to ask for 3X the investment at the 3-year mark. So $100K investment would return $300K. These terms work well for startups with revenue and strong growth rates, but doesn’t make sense for pre-revenue startups or companies still looking for traction. If the startup is growing well at year 3, the investor can forego the redemption and stay for the equity exit. If the startup has turned into the “lifestyle” business discussed earlier, then the investor has an exit path. When I talk with startups about their exit plan (IPO, M&A, etc.), it’s frequently a vague and fuzzy conversation. When I put a 3X in 3 years on the table, it turns into a real and focused discussion. Those on the growth path can pursue it; those that aren’t typically won’t. Read more: https://staging.startupfundingespresso.com/3xin3/ 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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Launching Your Own Podcast Program

Investing /

Podcasting is a continually growing medium through which to tell your story and build your brand in your own words. We at TEN Capital have been producing our successful podcast for over six years called Investor Connect, and are now opening up our expertise to other firms looking to begin their own series. But why produce your own podcast? Podcasting builds your brand. There are more than 850,000 podcasts active today. Podcasting continues to grow exponentially as it’s a great medium to tell your story and build your brand. People like it because they can hear the real you rather than just read about your company on a website or email. You can use podcasts to connect with your audience. Podcasts give you a channel through which to tell your story. Your podcast can reflect your personality and brand through the various show formats and styles. TEN can show you how to set up your podcast and position you for success. Podcasting tells your story. Everyone has a unique story. You can write it out on the website, but there’s nothing like hearing the story told in person. The podcast lets you tell your story in your own words. It communicates who you are and what is important to you. It takes the words on a website and gives them life. Consider using podcasts to get your message out to a greater audience. Podcasting attracts more startups to your fund. Podcasting takes your fund to the broader market and brings more deal-flow. Startups looking for funding also seek testimonials and references from other startups. In the podcast, you can showcase the deals you have done and the startups you have helped. You can bring startups you’ve helped onto the podcast to tell their story about working with you and your fund. Startups discussing their experience with your fund provides the best testimonials. You can repurpose the podcast into blog posts, youtube videos, and more to distribute through various channels, including social media. TEN Capital can help you set up your podcast program or even record a series of episodes you can use in a marketing campaign. Podcasting positions you as a thought leader to the Limited Partners Podcasting raises awareness for your fund with Limited Partners. LPs look for validation of your network and activities. Podcasting is an excellent way to capture your interaction with startups and other investors. You can showcase the deals you have done in the podcast and the startups you have helped. You can discuss your investment thesis and how it plays out as you predicted and discuss what changes came up. Discussing your experience with the fund provides the best testimonials. You can repurpose the podcast into blog posts, youtube videos, and more to send prospective LPs. TEN Capital can help you set up your podcast program or even record a series of episodes you can use in a marketing campaign. Read more: https://investorconnect.org/ 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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Finding the Exit

Investing /

2 min read After investing in startups for twenty years and talking with thousands of angel, venture capital, and other startup investors, I’ve seen the biggest challenge is finding the exit. If you have invested as a startup investor, you know how easy it is to get into these deals and how hard it is to get out. If you are new to startup investing, you will soon learn how much it takes to grow a business. It’s not for the faint of heart. In funding startups, remember, not every startup should receive funding. If the company is not ready for funding, they will not only waste the money but also hurt their reputation in the community. Angel Investors look for a 44% IRR. IRR is the Internal Rate of Return and represents the return on investment concerning time, unlike ROI, which is return on investment without regard to time. The time value of money is important and should be part of your investment metrics. Also, there are many sources of funding for startups, of which angel investing is only one. There are venture capitalists, family offices, and more. Angel investors occupy a unique place in the startup funding ecosystem. It’s typically the first money in after family and friends funding is over. Angel funding is limited compared to venture capital or family office funding, which has deeper pockets. The longer you stay in the deal, the greater your risk for dilution by these follow on funders. Also, make sure you understand the value of your investment. While the absolute dollar amounts may not be as large as a venture capital fund, angel funding helps the startup cross the funding gap. To achieve an exit, you must define it yourself as the vast majority of startups will not do so. The key to a successful exit is a deal structure that gives you some control after signing the check. Equity only term sheets give investors little say in the future of the company or how to exit. You must have it in writing before you sign the check. Trying to come to an agreement after the signing is almost impossible as the gap between the startup and the investor is too significant to close. The deal structure is a Convertible Note with a redemption right for 3X your investment to be returned at year 3 of the investment at ‘Investor Sole Discretion.’ I call it the ‘3x in 3’ term sheet. On the third anniversary of signing the note, the investor has the option to convert the original investment to a three-times return ($100K in is $300K out) or to go on the cap table as an equity investor. In reality, there are many choices. In most cases, the startup is motivated to keep your funds in the deal and will negotiate terms to achieve it. As an investor, you must keep in mind what is suitable for the startup and yourself. In most cases, you will have ample opportunity to structure the 3X into a range of choices, including debt, equity, and cash. If you want to provide advisory services, then set it out up front with a clear definition of the work to be done and the compensation paid. At the very least, include a clause that gives you an advisory fee for work done with a stated hourly rate if the opportunity arises in the future. Read more: 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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The Due Diligence Process

Investing /

2 min read When embarking on a new investment, it’s essential to have a Due Diligence process in place to check the basics. This process will vary from deal to deal based on the risks associated with each one. Start by making a list of your concerns. In most cases, you’ll sign a terms sheet with funding contingent on due diligence. It helps to tell the company about your diligence process, such as what documents are required, what steps you take, and how long it will be, thereby eliminating the “how is it going” calls. There are three phases to diligence: Documentation Diligence, Team Diligence, and Domain Diligence. Documentation Diligence Ask the startup for a list of critical documents. If they are not all in one spot, ask the team to put them into a Google Drive folder, or create a more secure Box.com account. It’s common for startups to continually add to their diligence boxes and have many people view them simultaneously, so keeping everything in one place is very helpful. The primary documents should be: Entity filings and articles of incorporation Patent filings Income statement Balance sheet statement 3-5 year financial projections Cap table Other documents related to the business, such as lawsuits, product breakdowns, customer breakdowns, etc. should be requested. Read each document and check to see if it matches what you understood about the deal. Note any differences and ask for clarification. You must review the diligence documents so you understand the business. You may need to sign a Non Disclosure Agreement (NDA) for sensitive information. It’s standard practice to do so as the documentation should be kept confidential, even without an NDA in place. Team Diligence Thoroughly researching the startup’s team is the most critical part of the Due Diligence process. Meet with the team and assess their skills. In almost every startup failure, the investor can trace it back to the team not being up to the task. It may be the task was under-estimated by all upfront, but with the right team, the company can succeed. Gather references for the CEO and call them up to hear what they have to say about the founder, including management style, how they pivot, and their team dynamics. In most cases, you’ve heard the CEO pitch, but it’s essential to understand the CEO skills set, including what is there and what is not. The rest of the team needs to bring the necessary skills to succeed. Domain Diligence Let’s break this process down into steps: Research the competition to determine the company’s position in the marketplace Check the positioning of the company in the marketplace Identify the value proposition and how well it resonates with customers Look at their pricing compared to the competition Check the industry to see the conditions in which it will grow or decline Once you finish diligence and have your questions answered, ask for their wiring instructions Remember, break it down into baby steps Finally, use the model of “fast no’s and slow yes’s” in reviewing a deal, so the entrepreneur is not chasing you for a response. 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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