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The Ins and Outs of Whistleblowing: What You Need to Know

The Ins and Outs of Whistleblowing: What You Need to Know

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Fundraising, Investing

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    Avoiding Common Pitch Deck Mistakes

    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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    How to Achieve an Exit

    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

    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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    Funding from Family and Friends

    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

    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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    What is Debt-Financing?

    2 min read If your startup is raising capital through an alternative funding method, you may want to consider debt financing. As your company grows, and in turn, your equity grows in value, debt-funding may be the more lucrative option for you. There are several forms of debt to consider, each form is used for a different application. Debt-Funding Primary Options Let’s look at some of the primary options available to startups for debt-funding: Traditional Bank Loan: Often used to launch s company and requires a personal guarantee. Line of Credit: Once you have revenue, use it to smooth out the uneven bumps in your cash flow. Equipment Financing: If you need equipment for your business, this is a good way to finance. It reduces your fundraise requirements. Revenue-Based Funding: Once you have a steady flow of revenue, you can use revenue-based funding to accelerate the growth as you pay back out of the revenue stream. Factoring/Accounts Receivable Funding: Once you have a steady book of business, you can borrow against the accounts receivable line. Venture Debt: Once you have substantial revenue, you can raise debt funding rather than equity funding as it will be cheaper in the long run.  If none of these options work for your organization, there are other forms of alternative funding to consider besides debt funding. Alternate sources can include litigation funding, promissory notes, revenue-based funding, and salary-based funding. Evaluate what works best for you and your team, and get started raising capital today.   Read more on the TEN Capital eGuide: Alternate Investing 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 Key Elements to a Startup Story

    2 min read Your story is a critical part of your fundraise pitch. There are five key elements to a startup story and they are the purpose, the hero, the mission, the obstacle, and finally, the plot. Continue reading below to learn more about each of these elements and how to incorporate them into your startup story. Purpose The purpose comes from what inspired your startup. There’s something about the world that you want to change, so you started the company to fix it. Next, connect your theme to a universal principle or truth that everyone recognizes. Now, build your story around that theme. Show how your startup’s mission reflects your core principles and values in your story. Also, avoid common mistakes such as trying to tell the investor how your product works in minute detail. It’s better to focus on the benefits of what your product does rather than the features. Hero The hero is the character whose journey the audience cares about the most. In a startup fundraise story, this is the CEO. Most heroes are trusty and likable. The audience empathizes with them in some way. Your story should focus on the hero and not just the product. Investors are seeking to build a relationship with people. The company takes on the persona of the CEO. If the CEO is trustworthy, then the company will be considered reliable. In your startup fundraise story, think how the CEO fills the role of the hero. Mission The Mission is the job to be done. It’s the goal of the hero both now and beyond the story. For your startup story, focus on what the CEO is trying to accomplish and how they plan to solve it. Outline how complex the problem is for the customer and how it can be easier. Show how the proposed solution will save time and money for the customer. Talk about the steps to accomplish the mission and how you will bring the solution to the market.  Finally, show how the product achieves the customer’s desired outcome. In telling the startup story, use the mission to set the direction. Obstacle The obstacle stands between the hero and the goal. All good stories have a conflict that needs to be overcome. Obstacles could be competitors, lack of knowledge, regulations, and more. The obstacle creates tension which holds the audience’s attention and helps them experience the story for themselves. For your startup story, show the CEO facing the challenge of bringing the product to the market.  Investors will empathize with the plight as they have been there themselves. Show how the CEO overcomes those challenges as the investors look for grit, determination, and persistence. Plot The plot is a series of events that leads to achieving the mission. Plots can be set up in several ways and choosing the right model will help make the story more engaging. You could play the David fighting Goliath, the small startup taking on the big corporation. You could tell a Rags to Riches story- how a small startup hit upon a big idea. Or you can position it as a quest by showing the entrepreneur’s journey and the lessons learned. From the story, the investor should see how you, the CEO, had an idea that changed the world.  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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    The Art of Pitching Q&A with CEO Hall Martin

    2 min read Strong pitching skills are imperative when trying to communicate your idea and capabilities to an investor. The art of pitching goes beyond presenting the standard deck. It includes crafting a story through the intentional use of language, tailoring the pitch to each interested investor, and emphasizing how your current systems will lead to long-term success. The Craft of Writing When pitching investors, sometimes we need to condense our pitch deck into an elevator pitch. Instead of thinking about this as a rushed version of the pitch deck, you should think of it as presenting the information in story format. Instead of talking faster to cram more words into the allotted time, choose your words carefully and craft a meaningful anecdote about your organization and its mission. Think about keywords and phrases that communicate the value of your deal. Choose only one or two key financial numbers to share at this time. The key here is this: anecdotes tell and numbers sell. Tell your story, and then top it off with the crucial financial elements. Tailor the Pitch When pitching your deal to an investor, it helps to know your investor first. You’ll find you can make a much better presentation by customizing it a little bit. There are different kinds of investors out there that you may be pitching: venture capital, angels, and high net worth. The key is that they each have different care. And so, you want to think about the whereabouts and concerns are of the investor that you’re working with, and cater to those in your pitch.  Venture capital investors want a 10x return.  You need to prove there is a very large market and a very high growth rate. Angels have some capital preservation and therefore look for initial traction and revenue. They want to see some of the risks coming out of the deal. High net worth investors are also looking for very good returns, but there tend to be risk-averse. Emphasize Long-Term Success Most startups don’t have a lot of revenue- almost no one does as an early-stage startup. What investors care about more is predictable revenue. Use your pitch deck to show investors that you have systems running in your startup behind the scenes that are generating leads, closing sales, keeping the customers happy, and retaining those customers. Even if the numbers are small now, you can show that with these systems in place, the numbers will grow over time in a predictable manner. A scalable, growable organization is a real value proposition for the investor.   Read more on the TEN Capital Fundraise Launch Program 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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    Alternate Startup Funding Options

    2 min read There are several ways for startups to gain capital. At times, the most common methods, for example, securing investors, aren’t the most beneficial. If your startup is looking for alternative funding options, consider one or more of the methods below. Promissory Notes A promissory note is likely used to set up a loan it is for friends or family. Here are some key points to consider in reading a promissory note: The ‘Note Summary’ section establishes the relationship between the borrower and the lender, the date of the note, the total loan amount, and the agreed-upon interest rate.  The ‘Terms of Repayment’ section defines how the loan will be repaid. The ‘Late Fee’ clause typically includes a late fee penalty. This clause documents either a fixed amount, such as $100 in addition to the current payment due, or a percentage of the payment due such as 1% per week. There is an option to include a prepayment option, which may help the lender as well as the startup. For example, follow-on accredited investors might prefer a loan to be paid off prior to closing their investment deal. Family and friend loans are intended to be more supportive, so you may choose a language that allows time to remedy the default within a predetermined number of days or weeks.  Revenue-Based Funding Revenue-based funding makes a startup investment and pays back the investor at the rate of top-line revenue. This aligns the investor and founder to the same goal, to create a business and grow sales. The higher the sales, the faster the payback to the investors and the higher the compensation to the founders. Revenue-based funding typically sets the payback rate at 1-3% of top-line revenue. In revenue-based funding, the investors receive a revenue share until they reach a predetermined payback amount. This is different from a loan which sets the payout rate regardless of the seasons or cycles within the business.  Revenue-based funding keeps early-stage investors off the cap table so it’s clean for future investors. Once the payback amount is reached, the investors are finished and are no longer in the picture. It works well for businesses that have recurring revenue and healthy margins and is a good way to reduce dilution for the founders. Salary-Based Funding Salary-based funding makes a startup investment and pays back the investor at the rate of compensation the founders take. This aligns the investor and founder on the same goal: to create a business that can sustain itself and pay the team. The investors receive an agreed-upon percentage of any salary or profit the business takes in. In salary-based funding, the investors receive payback until they reach a predetermined payback amount. This is different from revenue-based funding which is a debt instrument that pays out based on a percentage of top-line revenue. This keeps early-stage investors off the cap table so it’s clean for future investors. The investor can choose to take their payback in cash, or they could convert it to equity. This is a good way to run an initial raise when it’s not clear if additional funding will be required.   Read more on the TEN Capital Network eGuide: Alternate Investing 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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