Startup Funding

Menu
Subscribe
Search
Startup Investing: What You Need to Know

Startup Investing: What You Need to Know

•
Investing

Related Guides

    Search Startupfunding above or view our

    Don’t Show Up Empty Handed

    1 min read  Don’t Show Up Empty Handed Bring more to the table than an idea. Before setting out to raise funding make sure of one thing- Don’t show up empty handed. I often read “How I raised it” stories from entrepreneurs who recently raised their funding. Most are filled with a (journey to hell and back) saga about persevering against all odds. The entrepreneur’s journey is hard but it doesn’t have to be a fiery march through hell and back. There are steps you can take to avoid such a journey. Bring more to the table than an idea. After talking with thousands of investors over the years, investing in startups comes down to two things: team and execution. Show up with both of those in whatever manner you can. Bring execution results to the table. Bring execution results to the table – not just promises for the future. Sales, team, product, IP, and fundraising are the core operational goals you need to show. Sales can come in the form of leads, LOIs, pipeline sales, and more. The team can include partners, distribution channels, advisors, and mentors. IP can be provisional patents or trade secrets. Fundraise can include soft circled interest, committed funds as well as invested funds. I’m amazed at how many startups take the strategic decision to not sell their product so they can focus on building it. With no revenue in hand, they’ve lopped off 80% of their potential investor prospects. Strategic decisions should expand your investor prospect list not shrink it. Start taking steps that make it easier to raise funding, not easier to live your lifestyle. And whatever you do – don’t show up empty-handed. Read more from TEN Capital: 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

    Read More »

    How Fast Do You Have to Grow to be Fundable?

    Startups ask me daily if they are fundable and I tell them one of the key factors is their growth rate. To raise funding you must be able to tell a growth story to the investors. Seed stage companies are growing from $0 to $1M in revenue proving product/market fit. Series A companies are growing from $1 to $10M in revenue proving consistent, repeatable growth. Series B companies are growing from $10M to $100M in revenue proving consistent, repeatable scaling. You are fundable: For the seed and Series A stage you should be doubling revenue year over year. For Series B stage there’s the rule of 40. The rule of 40 says your growth rate plus your profit margin should be greater than 40. For example, if you have a 50% growth rate and you’re not profitable (most venture companies don’t have profit), then  (50 + 0 = 50 total), means you’re fundable. A company that is growing 20% annually and has a 10% profit margin (then 20+10=30 total) means you’re not fundable. Here’s a blog post on the rule of 40 by Tomasz Tunguz showing growth metrics on a sample of companies In summary, if you want to raise funding then bring the message that you are doubling revenue year over year. 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.

    Read More »

    The TEN Consumer Product Goods (CPG) Syndicate

    At TEN Capital we continue to see a strong flow of consumer product good investments. The shifting landscape in the food and beverage industry brings new opportunities for investors. Food and beverage predominate but health and beauty products and other categories continue to raise funding. Investors give some sectors more attention than others. The move to “healthier” alcohol is an interesting one in which all natural juices and herbs/spices added to the alcohol command higher exit valuations. Alternatives to meat and dairy also receive quite a bit of interest from the investors—in particular the strategic corporate investors. Exits in these areas come at 3X to 5X multiples which is in the same league as SAAS-based tech businesses. I find the CPG space fits the angel investor well. When I led the Central Texas Angel Network for its first two years, I found that almost half the funded deals came from CPG. Investors often found the tech deals were too often “smoke and mirrors” so they had to spend a great deal of technical due diligence to figure out what was real. With CPG, the product is more easily understood and the business model is straightforward. When I helped launched Incubation Station (now called SKU), I found CPG deals held up longer than most tech startups. Half of the tech startups in an accelerator are dead within a year. CPG companies with a product in the market can carry on for many years as a loyal customer base is the same as a recurring revenue SaaS product. The key to investing in CPG is being in the right vertical and its ability to build a brand. It’s not hard to check interest with the strategic buyers to see what sectors they are looking for. Brand building can be taught and learned. In the Tech space, branding is an afterthought. In CPG it’s the primary skill. The basic criteria for most CPG deals is at least a 40% gross margin and a category growth rate of double digits. If the startup seeking funding doesn’t know what a category growth rate is then it probably should be a pass for the investor. There are many CPG deals to choose from but as the rule of startup investing says – the top 10% will return good money, the next 15% will return some money, and the rest will return no money.  It’s best to start with the right sectors and then explore for the best teams from there. You can learn more about CPG investing with TEN at this link: https://staging.startupfundingespresso.com/ten-cpg-syndicate  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.

    Read More »

    The TEN ICO Syndicate –Search for the Proven and Dealing with the SEC

    In 2017, two guys with a whitepaper could raise substantial funding through Initial Coin Offerings. As the dust settles on those days we now find over 40% of the ICOs from 2017 are already dead. As the ICO market matures, investors in ICOs demand a great deal more than just a whitepaper. They look for proven teams and substantial technology already built before they will engage. Today, investors are still very interested in the blockchain and the ICO space. Blockchain technology will underpin the next generation of the internet and solves many of the basic issues including security, identify, and trust. Investor interest skews to the proven – as they ultimately do with every new technology. For those running ICOs, the SEC has determined (for now) that all ICOs (regardless of their use case) are securities and must be treated as such. There are efforts to appease the SEC who looks upon tokens not for what they were intended but for how they could be used. Even if you declare your token to be a utility, the SEC will consider it a security if a user can treat it as such – i.e. sell it on an exchange for a gain. Most ICOs are choosing a Reg D raise while some are considering Reg A+ for their fundraise. The Reg D has no limit on how much you can raise but all the investors must be accredited. The Reg A+ is limited to $50M but you can raise from anyone. One can also use Reg CF but this limits the raise to $1M so it may not make sense to use for an ICO. The TEN ICO Syndicate consists of angels, venture capital, crypto hedge funds and others seeking blockchain-based solutions. For most of the investors the token usage is a secondary consideration. The primary care about is the team and the technology. The investors look for deals with a domain-experienced team and a substantial platform that can solve big problems and can scale. The Emerge ICO Summit scheduled for October 10, 2018, will be a gathering of the ICO Syndicate and those raising ICO funds. To learn more please check out https://staging.startupfundingespresso.com/txvf17/ 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.

    Read More »

    TEN Investors- The Healthcare Syndicate

    I receive calls daily about the TEN Investor Syndicates- in particular the healthcare syndicate. For those raising funding or interested in investing in healthcare startups and growth companies, here’s more information about their investing criteria. Revenue- The company needs to have more than a $500K annual revenue run rate. Typically, the investors want $1M revenue but the exits in the healthcare space tend to outstrip everything else that the investors will engage earlier than usual. Growth is king- you must have a growth story. The investors monitor the progress of the startup over two to three months to see the momentum and traction. As the saying goes, investors don’t invest in “dots”, they invest in “lines.” Huge forecasts don’t count for much unless they are grounded in some historical reality. Proven team- if this is your first go-around it’s going to be tough. They want someone on the team who has been there and done that at least once. Competitive Advantage- They are going to ask about your competitive advantage and a handful of patents will not suffice. You’ll need a competitive advantage that either gives you a 30% increase in revenue over the competition or a 30% reduction in cost. Many of the members of the healthcare syndicate are physicians so they understand the applications and the space very well. They evaluate deals from the physician’s point of view and ask how does this make the physician’s life easier and how does it profit the physician. In summary, the TEN Investors look for a growth story underway and: $500K revenue run rate Strong growth rates Proven team Competitive advantage If you meet these criteria, please contact TEN Capital, and let’s start a discussion.   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.

    Read More »

    No Answer Means Zero

    In funding, it’s important to answer the investor’s question. For example, when I ask a startup what their revenue is, I often get their story instead. That’s okay-I like stories. But when the story ends and there’s no indication of revenue, I often ask again. If I still don’t get the answer, I ask one more time. If no number is forthcoming I consider the revenue to be zero- which means they haven’t validated the market or product fit yet. Likewise, with investment managers approaching me for their fundraise, I ask ‘what are the returns on the previous funds?’ If I don’t get a numerical answer, then it’s a zero- the past investors lost their money. No answer means zero. If you’re a startup make sure you sell something so you don’t have to give a story instead. Also, you’ll find that forecasts will mean more if you base it on some evidence of historical reality.     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.     If you are interested in tracking a startup, you can sign up for TEN Capital’s Monitoring service which tracks key startups and provides information about their revenue, earnings, and other key financial information.  The first 3 companies are free for 6 months. Signing up as an investor with TEN is easy and free. Visit our Investor Page and sign up now! If you have any questions, please contact us at info@tencapital.group.

    Read More »

    The DAICO- ​An ICO Version of Milestone Funding

    The DAICO is a combination of a DAO (Distributed Autonomous Organization) and an ICO (Initial Coin Offering). In this variation on an ICO, a development team setups a DAICO contract and lets investors contribute funds to the contract in exchange for tokens. Once the contribution phase stops, the token balances are fixed and at that point the tokens are tradable. The contributors of tokens decide how much of the funds are applied to the project. It’s called the “tap” which determines how much of the funds the development team can draw out. The contributors maintain the right to raise the tap, lower the tap, or shut down the system altogether and get their funds back. The intention is to fund a team with an initial amount of tokens and then raise it over time as the team proves itself. It reminds me of the traditional practice among venture capitalists to provide their funding in stages.  Oftentimes a company will announce a fundraise of $5M. In practice, the VC didn’t write a check for $5M, but rather gave the team an initial amount such as $100,000, to begin work. If the funds were spent well and progress achieved, then more funds from the $5M would be allocated. If the funds were not spent well and little progress was achieved, then no further funds would be forthcoming. In the DAICO each investor votes independently, so it is up to the developers to convince some portion of the investors to increase the tap. Other issues to figure out include how to handle the voting process- how often, what duration, what interval?   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.     If you are interested in tracking a startup, you can sign up for TEN Capital’s Monitoring service which tracks key startups and provides information about their revenue, earnings, and other key financial information.  The first 3 companies are free for 6 months. Signing up as an investor with TEN is easy and free. Visit our Investor Page and sign up now! If you have any questions, please contact us at info@tencapital.group.

    Read More »

    ICO Valuations Merit Higher Valuation for Their Integrated Ecosystems

    Valuing cryptocurrencies is quite difficult. There are numerous articles demonstrating how token valuations are coming up short. Tokens don’t follow traditional valuation metrics such as discounted cash flows or net asset value. The startup world faced the same problem in pricing seed stage startups. For those companies we looked at the team, the status of the product, the presence of IP, customers and revenue traction (if any), and valued it based on how much of each was already built into the startup. It was a “funny money” valuation because as the startup grew and eventually shifted from the startup valuation metric to a traditional discounted cash flow metric, the valuation would usually drop by 30%. The drop was due to the fact that we were moving from a value of the business prospects to a stricter value of the cash flow. In tokenomics, we are trying to price the token in an ICO according to the value it will provide. Here again, discounted cash flows and hard asset valuation techniques do not apply. We have to again look at the values built into the business or in the case of an ICO – the digital eco-system you are building.  If there is a strong team behind it with a great track record, that token will be valued higher. Team, product, users and intellectual property are the core four to consider. For ICOs, I propose a fifth component- the value of an ecosystem that digitally integrates all the components. A digital ecosystem built around a core platform or set of standards will provide more value than a disparate group of companies who have a loose association and few if any data linkages. Digitally integrated ecosystems merit a higher valuation than non-digital ecosystems.  Gartner defines these new systems as one of strong interoperability. Companies which share information through integrated data networks will be able to move faster and provide better service than two separate companies that have to manually share information through APIs. ICOs through their tokens will have not only the valuation of a company but also of an integrated digital ecosystem.   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.     If you are interested in tracking a startup, you can sign up for TEN Capital’s Monitoring service which tracks key startups and provides information about their revenue, earnings, and other key financial information.  The first 3 companies are free for 6 months. Signing up as an investor with TEN is easy and free. Visit our Investor Page and sign up now! If you have any questions, please contact us at info@tencapital.group.

    Read More »

    The GOOSE Society Transitions to a Formal Organization

    The GOOSE Society has been funding startups since 2005 when it was formed by Jack Gill, a legendary Silicon Valley venture capitalist, and Rod Canion, the founder and CEO of Compaq computers.   GOOSE stands for the Grand Order of Successful Entrepreneurs and every member has either started or ran a highly successful business.  The Rice Business Plan Competition (RBPC) is the largest and richest student business plan competition in the world.  The GOOSE Society has been awarding prizes to the winner of the RBPC program since its inception. The grand prize is now an investment prize of $300,000 from the GOOSE Society with potential for much more.The group is comprised of twenty members including five MBAs, one MD, four PhDs, and one JD. GOOSE has invested over $30 million in startups with four exits of 5-10x and has 16 current investments.  The net worth of GOOSE membership in aggregate is in the billions and the members thrive on rolling up their sleeves to help their portfolio companies. They have now opened an office at the Rice Alliance office on Rice campus to continue funding startups from the Rice Business Plan competition, the Texas Medical Center, Station Houston, and other sources.  Although based in Houston, TX GOOSE sources and invests in deals from all over the country. [SL2] They currently are invested in deals across industries from life sciences, energy, IT, and green tech.   Entrepreneurs who want to pitch the GOOSE society can send their executive summary and pitch deck to samantha@goosesocietyoftexas.com. Their website is https://goosesocietyoftexas.com/ If you are interested in tracking a startup, you can sign up for TEN Capital’s Monitoring service which tracks key startups and provides information about their revenue, earnings, and other key financial information.  The first 3 companies are free for 6 months. Signing up as an investor with TEN is easy and free. Visit our Investor Page and sign up now! If you have any questions, please contact us at info@tencapital.group.

    Read More »

    Site Map

    Scroll to Top