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Aerospace Investing: All You Need to Know

Investing /

2 min read The aerospace sector is a rapidly growing and underfunded space. This makes for profitable investing. But proceed with caution. As always, you need to do your due diligence before diving in. In this article, we share a brief overview of the current aerospace industry and what you need to know before investing. What is the Aerospace Industry? The aerospace industry deals with companies that research, manufacture, and employ flight vehicles. This ranges from commercial use to military use to space travel. This space is currently on the rise in the investing realm due to the large part it plays in US exports and the increased interest in space exploration. Current Trends in the Aerospace Sector Sustainability is a huge area of interest. Two or three years ago the commercial aviation industry was trying to ask the question: “How do we be part of the wide solution space dealing with climate change?”  This refers to creating better outcomes in terms of their carbon footprint and increasing the efficiency and sustainability of their engines, operations, and fuels. Unique challenges exist in certifying aircraft and engines within the existing airspace construct. Being able to understand the nuances wherein small changes can actually yield significant benefits is what will set some manufacturers ahead in this space, making them a valuable investment opportunity.  Besides sustainability, digital twin and digital threat are most certainly areas in both manufacturings and in the maintenance space that are coming a lot more interesting. These concepts revolve around creating not just better safety outcomes in the production and maintenance of these systems, but also increasing efficiencies when it comes to sourcing and assembling these very complex machinery to perform their various transportation outcomes.  Deal Flow in Network VS. Proprietary Deal Flow  Whare are investors in the space currently doing? Do they rely mostly on deal flow based on their network, or do they also have proprietary deal flow? We talked with three experts in the field, and they all shared a similar answer. It turns out, they are engaging in both. Working within their networks, especially with universities, However, they are still incorporating proprietary deal flow. As said by expert Greet Carper- ” We’ll take deal flow where we can find it.” Investing in Aerospace When investing in aerospace, patience is fundamental. From an angel perspective, it’s not simple to make other networks or other partners in our common sport of investing. It can be seen to be difficult to invest in something that does not have that reversal beachhead market. It’s also important for investors to keep in mind when it comes to the space travel niche of the aero investing space that the challenges of space are extremely technically dense. Try to recommend the company you invest in to not go about their journey on their own, but rather to start looking at partnering up. If you see that in order for you to get some solutions out of space, you might need that infrastructure piece, or, you might need other components, or, you might need other things that create that ecosystem. If you can encourage the company to start thinking like a system, you’re more likely to find a way to succeed.  In essence, aerospace investors need patience, an open mind, and a willingness to go the extra mile. 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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Benefits of a Startup Ecosystem

Fundraising /

2min read  Startup ecosystems are growing in popularity and for good reason. If you are in the entrepreneurial space, you have likely heard of this term. You may find yourself wondering what a startup ecosystem is and if you should be involved with one. In this article, we share everything you need to know to make that decision. What Is a Startup Ecosystem? A startup ecosystem is a network of startups, investors, and others who come together to foster startup formation and growth. The network fosters innovation through shared resources such as capital, talent, and mentorship.  At the core of the network are startups led by founders who launch high-growth businesses. Accelerators and incubators provide education around the initial launch of the business. Investors, including angels, venture capitalists, online crowdfunding sites, and grant providers, provide capital. Universities provide the talent for launching and supporting startups. Freelancers provide additional talent in the form of labor. Providers offer support for legal, financial, marketing, and other services. And lastly, mentors provide coaching and guidance on how to grow the business. Events, newsletters, and blogs foster the community through communication. Local corporations may also participate through sponsorship and other support. Look for these elements in building your startup ecosystem. Components of a Startup Ecosystem A startup ecosystem is fueled by talent, funding, and customers. In building your startup community, tap successful serial entrepreneurs to lead. Use their star power to capture attention and draw investors and startups to your area. Focus your efforts on the strengths of the local community and build startups in those domains. Develop clusters of startup activity to create density. It’s the interactions between the startups, investors, and providers that count. Foster collaboration with other startup ecosystems to share resources. Generate publicity for your ecosystem through events and articles. Metric your results by capturing the number of startups formed, funded, and exited. Building a robust startup ecosystem can take up to a decade, but the results will last many more years.  Organizations of a Startup Ecosystem There are several types of organizations that may be involved in a startup ecosystem. These may include: Here’s a list of organizations to look for: universities that provide the founder talent angel groups and other investor networks for funding the startups venture capital funds providing funding incubators and accelerators for coaching the startups service organizations to provide legal, accounting, and financial services coworking spaces to provide spaces for startups government groups providing funding such as grants and loans startup and business plan competitions providing funding for startups event programs that bring the community together news and media companies covering the startup community Startup ecosystems should seek to recruit or build several of these organizations.   Read more on the TEN Capital eGuide: Building Your Startup Ecosystem 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 /

2min read  Creating your pitch deck is an important part of raising funding for your startup. While you may think that you have covered all of your basis there is still always room for improvement. Read below to see if you have made any of these common 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 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, leaves 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 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 on the TEN Capital eGuide: 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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Are They Serious?

Investing /

1 min read The startup world is full of big ideas. Entrepreneurs have grand plans to make these big ideas a reality. It is the venture world, so you better have large ideas. However, the talk about the idea is often full of overstatements and amplification. It paints a picture of a future so bright that it’s blinding. So blinding that all they see are the possibilities, not how serious it is to follow through and do the work.  The problem is some entrepreneurs are full of big ideas and nothing more. The startup world is open to anybody. Since the space is so open, it seems like everybody comes through it at some point in time. Unfortunately, this leads to some individuals passing through who are not serious enough to propel a startup toward success.  What to Look For Here are a few signs that an entrepreneur may not take the business seriously enough to be successful: Job titles are overly important to them. They are generally more concerned with receiving titles and credit for the work than they are about the actual work. They are not focused on the customer. In fact, they may not even have a clear understanding of who their customer is or what that customer wants. They don’t take responsibility for problems the startup may have. They blame others for the issues and may claim there is nothing they can do to fix the problem.  Know your entrepreneur. An entrepreneur who isn’t committed to the cause will raise funding and ultimately waste it. You do not want to invest money in those who aren’t going to see it through. 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 Achieve an Exit

Fundraising /

2min 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 of 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 in 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 that 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.    Read more on the TEN Capital eGuide: How to achieve an exit 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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Four Competitive Advantages in Startup Fundraising

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2min read My definition of competitive advantage is that it increases revenue by 30% over the competition or is a decrease in cost by 30%. Four sources of competitive advantage include recurring revenue, platform-based solution, network effects in action, and virality. These advantages give your business the ability to scale.  The scale comes from revenue increasing faster than cost. Let’s take a closer look at each of these.  Recurring Revenue In today’s world, you would think every business has recurring revenue.  Yet, I find most businesses that are raising funding did not structure their business for recurring revenue. Recurring revenue helps your business in several ways. It opens up your business to new customers who could not afford your product previously because the one-time payment was too high. By breaking the payment into smaller steps, more customers will be able to afford it. It also provides an ongoing revenue stream so you can plan your business better as you know how much you will have coming in. It helps you maintain engagement with the customer and gives you the opportunity to find new opportunities to serve the customer. Overall, it should increase your revenue in the long run by at least 30%. Platform-Based Solution A platform-based solution is a competitive advantage over a single product company as a platform brings an inherent cost advantage. Platforms reuse the research, design, architecture, and product packaging. Customer support is also reused. Consider adopting a platform-based approach to your business.  Network Effects in Action Most businesses increase in value as the customer base grows as it validates the product/service.  Users encourage others to join the platform. This is called Network Effects. As the number of users grows the value of the platform grows as well. If a business can harness that customer base and turn it into a community that more aggressively attracts other users then it’s a competitive advantage. Virality A key competitive advantage is virality, in which users invite other users to join your platform. Virality reduces your cost of customer acquisition. I once had a CEO tell me, “I wish I had designed for virality rather than revenue.” If you build virality into your product, you will have a larger pool of prospects to monetize as well as a lower cost of customer acquisition. For your next project, consider designing for virality.   Read more on the TEN Capital eGuide: 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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How do VCs Make Money?

Investing /

2 min read Many individuals looking to enter the investor realm will consider becoming a venture capitalist. This can be a profitable endeavor, however, it does come with unique challenges and obstacles to overcome. In this article, we discuss some of the challenges of being a VC as well as how VCs raise money and venture funding. Challenges of Being a VC Many people want to work for a VC especially those straight out of college. Most are not aware of the challenging dynamics that come with the VC life.  Here are a few: Raising Funding: Just like startups, the VC has to raise funds too.  LPs tend to be rear-view-mirror oriented and not focused on the cutting edge of new technologies and markets.  Working With Partners: You rarely make the decisions alone, but rather with the other partners.  Ego and other agendas are often at play. Getting Deals Done: You have to convince others you have a winner on deck and sell it all the way through the process.  Managing the Deal Flow: Untold numbers of startups want to talk with you and only a small fraction are meeting your funds’ criteria. Dealing with Co-Investors:  It’s rare for a fund to take the entire round. There’re usually other investors in the deal.  Who gets how much of the deal and what board seats, are often an issue.The rollercoaster ride that is the startup life- things often don’t go well at the portfolio companies and this weighs heavily on the VCs who invest in them. How VCs Make Money VCs charge the limited partners a management fee on the funds raised. This is traditionally 2% paid out every year for the life of the fund. Some funds stop the management fee around year six or seven as proceeds from the investments start coming in. MicroVCs often charge 2.5 or 3% of the funds raised since the number of funds is lower than standard.  The second source is called “carry” and is a percentage of any proceeds going back to the investor from the investments. This is traditionally 20%. Some funds start taking carry at the beginning of the investment returns, while other funds start this after the investor receives their initial investment. How VCs Raise Venture Funding VCs raise funding from limited partners which include family offices, high-net-worth individuals, foundations, pension funds, and other sources. Institutional investors, such as pension funds, require a track record. Due to this, first-time VCs tend to focus on family offices and high-net-worth individuals.  The VC develops an investment thesis which is a reason why their approach to selecting and funding deals will be successful. They build out their investment prospectus which includes the investment thesis, how it’s unique, the fees the limited partners will pay, and how the profits will be distributed. The VC then meets with limited partners to pitch the investment thesis, track record, and view of the market. Limited partners look to fund VCs who have a unique investment thesis and access to deal flow they do not. You can read more in our TEN Capital Network eGuide: How to Raise a VC Fund 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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Funding from Family and Friends

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1min read Should you raise funding from family and friends? Funding is a massive hurdle for any new business. In the beginning, it may be difficult to convince a traditional investor to see your vision and join your initial funding round. For this reason, many startups raise funding from family and friends to get the business up and running during their first round. There are pros and cons to funding your business with money from the people you know. You’ll need to approach the right people and keep it professional. The problem is, that many startups are reluctant to take family and friends’ funding because they fear the awkwardness of what happens if things don’t work out. The glaring question is always: Should I take money from family and friends to fund the business? The answer is: Yes. Outside investors will look at family and friends’ funding as a sign of support for your business. This is a good thing. It is a major plus to have this support when you’re seeking additional funding later on. Consider it from the investor’s perspective: If your family and friends won’t invest, why should the outside investor invest? So, don’t be afraid to approach your family and friends for funding. In the long run, it can help you with additional funding in the future.   Read more on the TEN Capital eGuide: Family, Friends, and Other Funding Sources 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 Write a Startup Story

Fundraising /

2 min read Storytelling is a key skill for any startup raising funding. In the early days of a startup, the product and team aren’t fully developed, and customers are typically not fully engaged. The investors look to the founders to understand the potential of the business. The founder who can articulate a clear vision of the company and fill in the gaps can win over the investor. Such a skill demonstrates to investors the ability to win over potential employees, future customers, and critical partners to make the business. Let’s discuss how to use storytelling more.  Crafting a Good Startup Story To pitch an investor, you’ll need a carefully crafted startup story. Tell the story in your own words as if you’re talking with a friend at a bar. Show how the story is relevant to those in the audience, something everyone can relate to. Keep the story simple. It needs to be tight and keep the audience engaged. Instead of starting at the beginning, start from the first big event whether it be a disaster or a success.  Show the mistakes you made that others can learn from. Talk about your values and those of the company. Demonstrate authenticity along the way. Finally, have a message about your company’s brand that you want to communicate and use the story to build up to it. Three Key Startup Stories to Tell Your Investor There are three stories every startup should be able to tell to investors. The first is your origin story which tells why you started the business to begin with and how you got to where you are today. This story answers the question, “Why are you doing this?” which usually comes from the storyline, “I had a problem. I couldn’t find a solution, so I created my own.”  The second story is that of your customer and the problem they have. This story starts with a day in the life of a customer. It describes what they do, how they work, and what problems they face. The customer has this problem, it costs them this much each year, and they are motivated to find a solution. You then drop your product in as the ideal solution. The third story is: We can make the world a better place. In this story, you paint a big vision of a bold future where everything is better. It states, “Imagine if we had this problem solved, how much better off everyone would be.” You then show how your solution gives everyone that better world.  Write out your version for each of these three stories and practice it before talking with an investor. Read more on the TEN Capital eGuide: 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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