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Understanding Financial Fraud

Understanding Financial Fraud

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Fundraising, Investing

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    Due Diligence Box: What Is It and How to Prepare One

    2min read Due Diligence Box: What is it and How to Prepare One After an investor expresses interest in funding your deal, the first question to ask is: “What is your diligence process?” Having a due diligence box with the standard documents helps a great deal. It shows you are prepared and typically only requires minor additions for each investor.    The Due Diligence Process While most diligence processes follow the same document review and analysis format with a round of follow-up questions, each investor has their own start time, work timeframe, and specific documents they look for. It’s best to ask for their process, and then follow along with it. If the investor does not have a specific process, then presenting the due diligence box should be enough. For new investors who are not sure what to do, you can offer to walk them through the diligence document by showing them all the relevant information. It can be helpful to contact the associate or analyst who will be doing the detailed work and open a direct line of communication with them. By building a rapport, you may contact them directly for progress status and updates. You can also position your calls as opportunities to answer questions and to help the associate find specific pieces of information. Investors are busy and can get drawn away by other deals, so it’s important to be timely with your follow-up. Having a due diligence box with the standard documents greatly helps with this. It shows you are prepared, and typically only requires minor additions for each investor.   Due Diligence Box In preparing a due diligence box, also called a data room, there are basic documents to include. These documents consist of:  Income Statement and Balance Sheet 3-5-year Financial Forecast Cap Table- including shares outstanding Entity Filings including Articles of Incorporation Intellectual Property Filings- including patents, trademarks, etc. C-level Team Resumes  There may be other documents you may need to add based on your situation.   Reps and Warranties Contract One document that is helpful but not required to include in the due diligence box is a reps and warranties contract. Information taken in by investors about a startup’s product, team, financials, revenue, and more can change rapidly during the startup phase of the business. One method of assuring the investor the information provided is true and accurate is for the startup to sign a Reps and Warranties contract. This is often tied to the diligence provided.   This contract states that everything provided in the diligence is true and accurate and that no material has been omitted. If it later turns out that there’s a material difference between the business and the diligence, then the Reps and Warranties contract provides legal recourse to the investor for recovering any damages. For example, if the financial statements indicate there’s no debt in the business, then the investor assumes the business is debt-free. If the startup does in fact have debt, then the investor can take legal action against them.  Some investors demand such a contract to be signed to ensure they have the full picture of the business. Signing a Reps and Warranties Contract can strengthen a startup’s case on the diligence provided.   Read More TEN Capital Education Here 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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    Two Key Elements of a Crowdlending Campaign

    2min read Two Key Elements of a Crowdlending Campaign The key to success is compelling presentations and getting the word out to as many people as possible. Let’s start with the presentation. You need to provide a simple, well-organized explanation of your business. The things that are requested are things you already know – what your business is, how you would use the proceeds of the offering, simple financial information, the people behind your business, and the risks related to the business and the offering. You already know all of this. Your potential investors need to know it, too, so they can make an educated choice on whether or not to invest in your loan. Securities laws also require certain kinds of information since you are essentially issuing “mini securities” under the Texas intrastate crowdfunding exemption.  All this could get somewhat confusing, but a good crowd-lending platform should provide you with organized and straightforward instructions. The second step is getting as many people as possible to look at your project.  This would be time-consuming if you had to make the presentation personally.  But you don’t.  All you need to do is interest people in your project online.  Using personal contacts, email lists, daily customer contacts, social media, or whatever means will get the simple message to as many people as possible.  “You know me and my business. I am raising money to expand.  I am conducting an offering at “Your URL.” Read More TEN Capital Education Here 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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    Two Key Elements of a Crowdlending Campaign

    2min read Two Key Elements of a Crowdlending Campaign The key to success is compelling presentations and getting the word out to as many people as possible. Let’s start with the presentation. You need to provide a simple, well-organized explanation of your business. The things that are requested are things you already know – what your business is, how you would use the proceeds of the offering, simple financial information, the people behind your business, and the risks related to the business and the offering. You already know all of this. Your potential investors need to know it, too, so they can make an educated choice on whether or not to invest in your loan. Securities laws also require certain kinds of information since you are essentially issuing “mini securities” under the Texas intrastate crowdfunding exemption.  All this could get somewhat confusing, but a good crowd-lending platform should provide you with organized and straightforward instructions. The second step is getting as many people as possible to look at your project.  This would be time-consuming if you had to make the presentation personally.  But you don’t.  All you need to do is interest people in your project online.  Using personal contacts, email lists, daily customer contacts, social media, or whatever means will get the simple message to as many people as possible.  “You know me and my business. I am raising money to expand.  I am conducting an offering at “Your URL.” Read More TEN Capital Education Here 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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    Why Should Angels Join More Than One Network?

    2min read Why Should Angels Join More Than One Network? Angel investors are high-net-worth individuals who want to invest in startups. This is often a part of a diversified investment strategy. Angel investors should join an angel group to maximize their returns on investments. The process of investing in startups is time-consuming and often challenging. Angel investors can overcome this challenge by joining angel groups. Angels join angel groups for the following reasons: Share the deal flow Share the due-diligence work Reduce the amount of investment required to participate  Engage better startups  Access investment tools, resources, and experience Negotiate better terms Build a brand  Promote a cause Angels join angel groups and networks to share the deal flow. The more investors in the group, the more deal flow is generated. Diligence requires expertise, research, and analysis. By joining an angel group, investors can benefit from the collective due diligence process, which can help them make more informed decisions about potential investments. An individual angel investor can invest small amounts through an angel network as the collective funding of the group meets the startup’s minimum requirements. This lets the angel investor fund more startups. The more investors in the group, the more attractive that group is to a prospective startup. Angel groups can provide investors access to a network of experienced entrepreneurs and other investors who can provide valuable advice and guidance. By pooling their members, angel groups have more access to experience and better investment tools and resources. The network leverages the collective knowledge and experience of the group. The larger the group, the greater the funding can be applied to a startup. This attracts better startups who may have their ‘pick of the litter’ among investors. Size also helps negotiate better terms with the startup as their check size weighs in on the negotiations of the terms. An angel group can build a brand that attracts more investors and more startups, whereas individual angels may not have a brand. Finally, an angel group can foster a collective cause, such as providing a better education experience for university students. This is the primary reason university angel networks exist. Angels should join more than one angel network.  Here are the reasons why: Access to a more significant number of deals Exposure to a wider variety of deals Engagement with more investor types and experience Access to new sectors and applications Increased network reach Joining multiple angel networks provides a greater variety of deals as most angel groups are siloed into specific geographic or sector niches. Additional angel groups provide access to other angel investors’ experience through their questions, diligence, and follow-up work. Join other angel networks to learn how to invest in different sectors and applications. Increase the angel member’s network reach by joining other groups. Consider joining additional angel networks to find new investment opportunities and networking connections.   Read More TEN Capital Education Here 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 »

    Why Should Angels Join More Than One Network?

    2min read Why Should Angels Join More Than One Network? Angel investors are high-net-worth individuals who want to invest in startups. This is often a part of a diversified investment strategy. Angel investors should join an angel group to maximize their returns on investments. The process of investing in startups is time-consuming and often challenging. Angel investors can overcome this challenge by joining angel groups. Angels join angel groups for the following reasons: Share the deal flow Share the due-diligence work Reduce the amount of investment required to participate  Engage better startups  Access investment tools, resources, and experience Negotiate better terms Build a brand  Promote a cause Angels join angel groups and networks to share the deal flow. The more investors in the group, the more deal flow is generated. Diligence requires expertise, research, and analysis. By joining an angel group, investors can benefit from the collective due diligence process, which can help them make more informed decisions about potential investments. An individual angel investor can invest small amounts through an angel network as the collective funding of the group meets the startup’s minimum requirements. This lets the angel investor fund more startups. The more investors in the group, the more attractive that group is to a prospective startup. Angel groups can provide investors access to a network of experienced entrepreneurs and other investors who can provide valuable advice and guidance. By pooling their members, angel groups have more access to experience and better investment tools and resources. The network leverages the collective knowledge and experience of the group. The larger the group, the greater the funding can be applied to a startup. This attracts better startups who may have their ‘pick of the litter’ among investors. Size also helps negotiate better terms with the startup as their check size weighs in on the negotiations of the terms. An angel group can build a brand that attracts more investors and more startups, whereas individual angels may not have a brand. Finally, an angel group can foster a collective cause, such as providing a better education experience for university students. This is the primary reason university angel networks exist. Angels should join more than one angel network.  Here are the reasons why: Access to a more significant number of deals Exposure to a wider variety of deals Engagement with more investor types and experience Access to new sectors and applications Increased network reach Joining multiple angel networks provides a greater variety of deals as most angel groups are siloed into specific geographic or sector niches. Additional angel groups provide access to other angel investors’ experience through their questions, diligence, and follow-up work. Join other angel networks to learn how to invest in different sectors and applications. Increase the angel member’s network reach by joining other groups. Consider joining additional angel networks to find new investment opportunities and networking connections.   Read More TEN Capital Education Here 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 Analytics–How it helps you raise funding

    2min read Funding Analytics–How it helps you raise funding Fundraising is moving from a local exercise to a global one.  One can still get a loan from a local bank or an equity investment from a local angel group, but the availability of capital throughout the world awaits those who know where to find it. Investment Analytics shows investors how to make better investment decisions.  Funding Analytics shows entrepreneurs how to find better investors.  By researching the track record and criteria of venture capital funds, private equity funds, and angel group portfolios, entrepreneurs can more accurately target the right investor group for their deals. Funding Analytics includes the current market rate for valuations — always a key decision in negotiation with investors. Analytics shows the best way to approach investors and keep them informed of your progress. Funding Analytics shows which investors have funds ready to deploy versus those who are still raising their next fund. Funding Analytics shows the required due diligence documents and how to build them. Total capital investment throughout the world is over $100 Trillion. The funding is there — to find it you’ll need Funding Analytics. Read More TEN Capital Education Here 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 Contractor Startup: Why it gives the investor pause

    2min read The Contractor Startup: Why it gives the investor pause I hear many entrepreneur pitches, and the one point that stops the conversation cold comes when the entrepreneur says he can start building the business just as soon as he raises funding.  He explains why he can’t do anything unless he has funding. An investor hears that the entrepreneur and his team can’t (won’t?) build the product unless someone is paying them, and there are no customers to pay the team.  Again, the team can’t (won’t?) sell the product unless someone is paying them. I call this type of business– the “salaried startup.”  They only work when money is available to fund the process.  Bootstrapping, sweat equity, and doing it for the passion isn’t in the mix.  If the investor asks for traction or other evidence of progress, the excuses fly fast and furious–a thousand reasons why that’s not possible.  The investor imagines this conversation at a post-investment meeting and hears, “I can’t grow sales unless you give me more money to hire more people,” or “I can’t build more product unless you give me more funding.” At scale, this is certainly true. In a seed-stage startup, this is certainly not true. The investor is looking for team building and growing the business now.  It may grow slowly, but it is moving forward.  In the early days, the founders built it and sold it.  They’re not waiting for someone to pay them to do so.  Those who take that path are “contractors,” not “entrepreneurs”. You can start building your startup now.  You can grow it with or without funding. If the fully funded startup is your only path forward, you’ll find fewer investors willing to climb aboard. Read More TEN Capital Education Here 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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    Five Universal Principles for Startups

    2min read Five Universal Principles for Startups Startups are great.  They provide new careers.  Will constitute new jobs.  They are the path to the next generation, but it’s not for the fainthearted.  There are five universal principles in the world of startups:   1. It always takes longer than you think — this goes for building the product, closing the sale, and growing the market.    2. It costs more than you thought — most entrepreneurs are off by a factor of 10 when it comes to estimating the time to complete the software, the work required to raise funding, and the effort needed to close the sale.   3. There’s always a better idea — no matter how great your idea is, there’s always a better one — it’s called progress.   4. The journey is the reward — in retrospect, building the company is the best part of having a company.   5. The team is what you will remember — products come and go, and markets go up and down, but the team and the relationships you build will stay with you in the long run.    Read More TEN Capital Education Here 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 Invest in Startups: Learn From Other Investors

    2min read How to Invest in Startups: Learn From Other Investors As an investor, I helped launch three angel networks in Texas. In the process, I set up training programs, attended conferences, and talked with many other investors. Hearing and speaking to other investors was a wonderful learning tool. One of the best resources I found was a podcast by Frank Peters. Frank was an angel investor from the Tech Coast Angels in southern California. The Frank Peters Show Frank interviewed every angel, VC, and startup in the southern California community. After that, he later ran interviews across the US and worldwide. He ultimately recorded over 450 episodes which he posted on the web. As I drove my car, I listened to many podcasts and heard from angel investors about how they invested, their investment thesis, and the lessons they learned from the process. I recommend listening to podcasts that focus on startup funding. Podcasts are an excellent tool for learning from experts in the field. Some of my favorites are Jason Calacanis: Angel Podcast, Patrick O’Shaughnessy: Invest like the Best, and my podcast, Investor Connect.   Read more on the TEN Capital eGuide: https://staging.startupfundingespresso.com/how-to-invest-in-a-startup 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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