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    A New Model for Startup Funding- Recurring Funding for Recurring Revenue Businesses

    The rise of the recurring revenue business as a standard business model has implications for financiers. Just as it changed how customers made payment so it changes the way funding providers are changing the way they fund startups. Recurring revenue businesses don’t necessarily need large discrete funding rounds. Today we see funding ongoing throughout the life of the business. As specific business growth needs arise funding steps in to provide the resources. The funding comes in small amounts and when needed.  In this model the fundraise round is never closed – it’s always open. Investors should always be monitoring businesses to see who is reaching an inflection point and for opportune moments to invest in the businesses. I started my company under the name Texas Entrepreneur Networks about ten years ago after launching three angel networks in Austin. I built a network of entrepreneurs and investors now throughout the country using a recurring revenue model instead of a broker model. Building out the business doesn’t require large fund raise all at one time.  It takes some funding to bring on new developers here and provide for a marketing push there. I see a new method of funding for recurring revenue companies in which the companies continually raise small amounts of funding from investors rather than large rounds periodically. This new model works for our entrepreneurs who find it a great way to raise funding. Rather than spend a tremendous amount of time raising funding for six to twelve months, we’ve turned it into an ongoing program in which the raise is always open but doesn’t take too much of the CEO’s time. There are some key things you need to do to enable this model: At heart, it’s an investor relations program. We use email, website, and social media to introduce the deal to the investor and then keep the investor informed of the progress. A campaign is how you tell your story and convince investors you are worthy of investment. Investors are looking for a strong team and consistent traction. Your campaign should demonstrate both. You need to be consistent and persistent about it. The motto is the “Fundraise is always open.” Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies.

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    Closing the Investment

    2 min read How to Raise Funding Step 7: Closing the Investment After initial interest, the investor often proceeds through due diligence and will ask for documents on your business, including legal entity filings, articles of incorporation, patent filings, tax returns, before closing the investment. In any due diligence exercise, ninety-five percent of the documents will come from the startup any way therefore, it makes sense to start building what is called a due diligence box or data room, from the very start. There are many checklists on the web that you can download and use as a guide to building out your list. For early-stage startups, there will be a number of documents that simply don’t exist. For example, if you don’t have a formal board of directors, there are no board of director reports to include in the data room. One final word about due diligence: it’s for serious investors only. A serious investor has had several discussions with you before asking for the due diligence, and there’s at least a soft-circled investment figure on the table. If the investor is not that far along, then it’s premature to hand over data room access. Continue discussing their interests and concerns before proceeding. Read more on the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-raise-funding-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 Engage the Investor

    2 min read How to Raise Funding Step 6: How to Engage Investors for Calls and Meetings In looking at how to raise funding, a crucial step is to engage investors. We can begin by contacting investors online. After several mailers, you should be able to assess who is engaging with your deal and who is not. For those who are opening your mailer and viewing your deck, you now take them to the next level, which is a conference call and later a meeting. The key to setting up a call with an investor is to offer new information that they cannot get through a mailer. This includes confidential information such as actual client results. Detailed information about your customers is not something that most put in mailers, so investors will appreciate the fact that this is for direct offline communication. Investors are seeking new information about their sector and appreciate sources of information that can inform them. Other sources of information to offer the investor include trends in the industry, challenges in the sector, what to look for in startups, new startups coming up that are investor-worthy, competitive information, and takeaways from a recent conference. As a startup operating in the thick of things, you have access to information that is quite valuable. Read more on the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-raise-funding-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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    Developing Rapport with the Investor

    2 min read How to Raise Funding Step 5: Developing Rapport with the Investor When I ran angel networks using the dinner club model, I had entrepreneurs come in to pitch my investors. Ninety percent of them would go away, and we would never hear from them again. We had no idea what happened to them. About ten percent of them, though, would come back and give us updates and reminders about their deal. By and large, those were the startups that raised funding from the group. One of the key steps when considering how to raise funding is building a rapport with someone. This starts with introductions and awareness and continues with ongoing communication to a level of familiarity. In sales, it takes seven touches to close a deal. So too, does it take seven touches to close an investor. For substantial fundraises, it may take even more. The key here is that you must build a relationship with the investor before the funding, not after. If you already have investors, think about how much you know about them. How long did it take to figure those things out? In most cases, it will be the same with your investor prospects. Read more on the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-raise-funding-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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    Research the Investors

    1 min read How to Raise Funding Step 4: Research the Investors for Prospective Fit In fundraising, most startups think it’s the startups who pitch, and it’s the investors who ask questions and run due diligence. The reality is that startups should be asking as many questions as the investors and should also be running due diligence on the investor.  It’s important to research the prospective investors and qualify them for a fit for your deal based on their investment criteria and track record for funding. In your analysis, you should separate them into A, B, and C, investors, with A being the ones that fit best and you want, B are the ones that have some fit, and C’s are the ones that don’t fit. There are many venture capital funds, accelerator programs, and other forms of fundraising on the market. All claim to be “founder friendly,” have a great program, and talk about how they are the best. How do you know who to pursue? The startup should be analyzing the investors for their fit to the startup deal. Do they invest in companies like yours? Do they have expertise in your area? What exactly can they do to help? There are tools available to help understand the funding landscape, such as Crunchbase, which tracks venture funding and makes the results available to subscribers. You can track what companies are getting funded, as well as sectors. You can see which venture groups are active and doing deals and which are not. In your analysis, you should keep track of what investors are funding and what valuations they are providing. This will give you some indication of what valuation you should negotiate for. The operative word here is “negotiate.” As the saying goes, “You don’t get what you deserve; you get what you negotiate.” And knowing what to ask for is the first step to a successful negotiation. Read more on the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-raise-funding-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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    Educate the Investor About Your Deal

    2 min read How to Raise Funding Step 3: Educate the Investor About Your Deal They say it takes seven touches to close a sale – so it takes seven touches to close an investor. Some startups pitch to a group of investors, and if they don’t see checkbooks coming out at the end, then in their mind, it’s a failed meeting. I tell the startup, the investor doesn’t yet know if they are interested or not, they’re still trying to figure out what the deal is all about. It takes several updates before the investor gets a sense of the deal and can start making a decision. In the end, the investor makes a decision based on team and traction.   In the introduction, you can talk about the market size, growth rates of the industry, and the promise of a great outcome.  After that first mailer, the investor doesn’t care to hear about the market or growth rates. They only care about one thing – what are you doing to achieve the promise? Your mailers need to showcase the strength of the team and the progress you are making on sales, product, IP, and fundraise. To make your case, you need to include numbers in your deck and updates. It shows you know your business, your market, and your status. I’m amazed at how many startups don’t know their revenue numbers. Come prepared to share those details with the investors in mailers and follow up conference calls.   One tactic I’ve seen used to good effect is going to your investor prospects six months before launching the campaign, telling them that you will start your raise in six months and then asking if you can keep them informed of your progress. This approach gives you six months to educate the investor about your deal and demonstrate progress, so when you are ready to launch your raise, you have a group of educated investors prepared and ready to go. 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 Raise Funding- The New Normal for Fundraising- It’s Now Online

    A New Model for Startup Funding. Fundraising like everything else is moving online, almost all of it. Traditionally, those who wanted to raise funding would meet everyone in their local area. You would pitch to the local angel network or investment group, meet with the local venture capitalist, and of course canvas all your family and friends. It was something the CEO had to do because investors wanted to meet with the CEO of the company. It was time consuming. You had to get introductions to investors you didn’t know and you had to keep the investors up to date with your progress. It was not uncommon to hear about 50+ pitch sessions before receiving the first investment. The investor side was equally difficult. I ran an angel network in the 2000s and I had many startups pitch to my investors in a dinner club setting. Ninety percent of the startups would go away and we would never hear from them again. We had no idea what happened to them. Only about ten percent would come back and give us updates, reminders, and show some semblance of progress. Those are the startups we funded. Those CEOs built a relationship with the investor and gave enough information to the investor that one could see momentum and traction in play. Today, there is a better way. You can use online tools to help raise funding for your business. The key to fundraising is to build an investor prospect list and update them on your progress.  It takes seven touches to close a sale – so it takes seven touches to close an investor To raise funding you need to: Access a large number of investors.  You need to think worldwide-not just citywide. Use analytics to find the right investor. Understand the different investor types – angels, VCs, family office, etc. Engage and maintain contact with investors.  You have to demonstrate progress not just state forecasts and make promises. Prepare investor documents—you need to come prepared with your pitch deck, due diligence box, and other key documents for investors. Prepare the campaign – know what are you are going to tell the investor about your deal. The rule of pitching is- if you don’t articulate it – it doesn’t exist.  If you have revenue but don’t mention it, you get no credit for it with the investors. This is an investor relations process using online tools.  In this blog series, we’ll layout the steps you need to go through and the process you need to deploy to achieve your fundraise.  Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more Connect with him about fundraising, business growth, and emerging technologies

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    ICO Funding is No Doubt a Security Offering

    Last year ICO promoters focused on how to get around the SEC by calling their offering a “utility token” maintaining it was not a security. As I’ve written before the SEC views tokens for what one can do with them, rather than how the promoter intended them to be used.  The SEC appears to have won the battle against startups who didn’t want to register their token as most ICOs I see today are now doing so. That means we’re right back where we began – in Reg D land. It’s déjà vu, all over again. Most ICOs I’ve encountered are running a Reg D offering as the accredited investors are familiar with it but some ICOs are turning to other security offering methods such as CF (crowdfunding), Reg A+ (which lets you raise up to $50M), and others. The token sale is now a funding stage just like raising a seed round from an angel or a series A from a venture investor. The token sale is no longer the solo shot to raise funding for your company. For most ICOs, the promoters raise a pre-ICO round of $500K to build out the MVP and the basic tokenomics. Then in a private sale the promoters raise funding from accredited investors to establish the platform and prepare for the token crowd-sale.  For the private sale, promoters offer a 30% to 50% discount off the tokens. As the private sale winds down with a diminishing discount, the promoters prepare for a crowd-sale of their token to the general market. The token sale is one more tool for the fundraise toolbox. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more Connect with him about fundraising, business growth, and emerging technologies

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    Even More Startup Pitch Exercises

    2 min read Entrepreneurs know the importance of the startup pitch. Many blog posts explain tips and techniques on how to communicate your vision, passion, and story to the investor. Most pitches tell a story. Most pitches tell a story, and some entrepreneurs use their entrepreneurial journey as the format, which goes something like this: I had a problem I couldn’t find a solution So I created my own solution Others started asking me for it So I started a business Walkthrough the Executive Summary Another approach is the “Walk through the Executive Summary,” which takes the audience through an Executive Summary section. Here’s the problem and how much it costs the world This is my solution to the problem This is the product I came up with for the first version Here’s the advantage of it Here’s how the business model works For a useful exercise in building your pitch, try the following: Give your pitch in numbers Give your entire pitch in 10 words or less. Give your pitch from your customer’s point of view (i.e., how would your customer describe your business; what value you offer the customer). Give your pitch from the investor’s point of view (i.e., how would the investor describe your pitch; how your business makes money, etc.) Give your pitch from your employee’s point of view. (ie. how would your employee describe your business, what your business does on a day-to-day basis, etc.). Give your pitch from your competitor’s point of view (how would your competitor describe your business; what is unique about your business, etc.). Read more from the TEN Capital Blog Post: https://staging.startupfundingespresso.com/startup-pitch-exercises/ 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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