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Mastering Product Management

Mastering Product Management

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Fundraising, Investing

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    Fundraising Basics

    1 min read Fundraising can be an exciting venture, yet it can also be a bit nerve-wracking if you don’t feel secure in your campaign decisions. Learning the basics will help you to raise funds confidently and successfully. In this article, we discuss the basics of fundraising including how to know when it is the right time to start your raise and the basic principles of fundraising. Continue reading below to learn more. When to Start Your Raise In launching your startup, look for a trigger that indicates when to start a fundraise campaign. Common triggers include: closing a lighthouse customer account or achieving a revenue target signing up a new team member or advisor finishing a beta version of your software or an MVP version of your product closing funding from a lead investor In short, investors look at sales, team, product, and fundraise as the four core areas for progress. When you achieve a milestone in one or more of these areas, then it’s a trigger to consider launching a fundraise campaign. In approaching an investor, you should have a milestone completed AND a milestone to accomplish with the funds to be raised.  Principles in Fundraising There are basic principles around fundraising that apply in every situation. The first and most important principle is to build a relationship with the investor. The more you know the investor and the more they know you, the better the outcome. Next is that you’ll need to demonstrate results in every contact. Never show up without a currently relevant result or a proof point. With this said, it is still important that you be honest at all times.  It only takes one deception to ruin the relationship. The next principle to consider is that it’s the number of touches and consistency that counts, not how long the discussion or pitch deck runs. It takes four touches for an investor to understand what you are doing and seven touches before they make a final decision.   Lastly, include the “Why?”: Why are you doing this startup?   Read more on the TEN Capital Network eGuide: Running a Fundraise Campaign 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 You Need to Bring to the Table

    2 min read When you are raising funding, investors want to know what progress the company is making. After the initial presentation, the investor wants to hear about progress in four areas: Sales  Team  Product Fundraise Updates on the market size, growth, and competition status are not of interest. The most important thing to understand is that the investor wants to know what you are doing. Focus your updates on these four core items in each communication with the investor to give them a sense of traction and momentum. Sales Most startups focus on the product first and treat the customer as an after-thought. However, the investor knows that in the long run, customer revenue will make or break your business, not the product. Even before you have a product you should be talking with customers about their needs and relaying that to investors. As you build the product, you want to maintain customer interactions with you and your product and share that with investors. When talking with investors, be sure to highlight the customers’ problems and the solution they would like to see. It’s important to show the investor that customers are with you on your journey and they are not something to be recruited later when the product is done. The Team Investors will look closely at your team since they are a crucial part of your company’s potential success. One of the first things investors will look for is skill and completeness. Your team must have the skills needed to accomplish the work. Investors also want to know that you’re not missing anything important when it comes to the structure of that team. At the seed level, a complete team consists of: An individual who is building An individual who is selling You cannot have a team where everyone is building and no one is selling. Focusing on building without selling is one of the most common mistakes startups make by thinking they must have a product before they can sell it. In reality, you should be selling your product as soon as possible. You may not be generating revenue, but you should be bringing the customer through the process just as you are doing so with the investor. Product Sometimes entrepreneurs spend a large amount of time writing a massive business plan that talks about the startup’s services and the benefits that come from those services. The problem is, it can focus so much on the benefits and services that it becomes hard for an investor to understand exactly what the product is. Investors want to know what your product is; not just your technology or the benefits it offers. You must show the product and define it clearly so investors know how you will approach the market. Make sure the product has a name when you’re going to pitch. This helps establish the product as a tangible thing in the investor’s mind even if the product is still in development. Tell the investor what the product is in 5 words or less so they have an understanding of exactly what it is you are selling. Even if the product is not yet ready for sale treat it like it has form and function now. This helps investors grasp what you are doing. IP When it comes to investing, investors tend to look for protection over the idea they are investing in. Patents and trade secrets can help. The truth is, ½ of the value of a patent is simply for a show because investors want to see it. In practice, it’s difficult to use patents as the sole means of protecting your business from the competition; however, it can still help in the long run. If you have patents, investors want to know: What was filed When it was filed  If it is a provisional patent, design patent, or utility patent Most investors don’t expect you to have awarded patents for utility or design patents since the process typically takes over 3 years to complete. If you don’t have any patents, consider filing a number of provisional patents so you can tell investors that you have a patent-pending technology. One advantage of provisional patents is that it gives you a year to figure out if patents can provide any reasonable protection. If so, then file for a full patent. Keep in mind that you don’t have to pursue patents if it doesn’t make business sense in the long run. Fundraise Investors look for traction in your fundraise just as they look for traction in your core business. During a raise, investors will first express interest and then make a commitment before they invest. You want to capture all 3 levels in your pitch in a fundraise. Add up how many investors have expressed interest. This is often called soft-circled interest. Present that number as investor interest. Take all the committed amounts of investment and add that number to your presentation as well.  Take the amount of funding that has come into your bank account and show that number. Over the course of the campaign, those numbers will change. Make sure you show the prospective investor interest from other investors throughout the campaign.   Read more on the TEN Capital Network eGuide: 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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    Choosing the Right Advisor for Your Startup

    2 min read Advisors can bring many benefits to a startup organization. Advisors bring along experience, networks, and other resources that the startup team can take advantage of. However, this only works if you choose the right advisor for your startup. You’ll need to do your due diligence while recruiting to ensure that their skills and resources match your organization’s needs and interests. Let’s take a look at how to choose the right advisor for you and your team. How to Recruit an Advisor Good advisors bring good value to your startup. Great advisors bring great value. This is why it is important to spend time identifying the right advisor for your startup. In recruiting an advisor, pose specific questions and gauge the response. How does the advisor rank compared to feedback from other sources? The advisor you choose should provide the best or near best of responses. If they advise other startups, you can ask those startups about their experience. How to Select an Advisor Once you decide you need an advisor, you’ll need to find and select one. Here are some key points to consider: Start with your network and expand out from there. Hold several conversations with the candidate advisor before deciding. If you need to raise awareness for your startup, consider a thought leader in the industry. Find a mutual connection who can make an introduction. Look for someone who compliments your skills. If the candidate does not come from a trusted source, consider running a background check. Focus on those who understand your strategic vision and at some level, support it. Discuss their time availability to see if they can commit to your company. See if they can take their experience and apply it to your business. Avoid the war stories advisor who tells about his experience but relates nothing to your company.  Look for an advisor who has some empathy for your work. Does Your Advisor Have What It Takes? In recruiting an advisor, check to see if they have what it takes to succeed: Have they been through the wringer? Those who have been tested, such as nearing bankruptcy or going bankrupt, will have a deeper understanding of the challenges in running a startup. Will their work with you put them in conflict with their current or past employer? Those who want to compete against their previous employer may not be the best to begin a collaboration with. Are they all show and tell but haven’t built a company before? They may not have created a unicorn, but did they stand up a business and grow it? Ask for something that they put together. Are they invested in your business with their money in addition to their time? Where they put their money says a great deal about their interest. Will they learn something from the engagement just as you are learning from them? This will make the project that much more interesting to the prospective advisor. Can they relate to your situation directly? Those who can only rehash past experiences may not appreciate the differences between their past and your needs.   Read more on the TEN Capital Network eGuide: Startup Advising: Best Practices 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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    Pitching Your Startup

    2 min read Pitching your startup is one of the most important aspects of landing new investors. Emphasizing your story, growth, and competitive advantage helps you to make a strong first impression. In this article, we dive deeper into these three components of your pitch. Use this information to help write or revise your investor pitch. Tell Your Story When pitching your business plan, use the story format for greater impact. Start with the problem you faced in the industry. Show how you couldn’t find a solution.  Show how you created your own solution. After you address the issue of not finding a solution, be sure to show others are now coming to you for that solution. Along the way you can talk about how you built the team and chose a go-to-market strategy.  Highlight the challenges you overcame. Show the current business status and your upcoming plans. Each element of the story should highlight one aspect of the business plan. A story format keeps your audience engaged throughout the pitch because it flows smoothly and moves the audience along from point A to point B in a logical manner.  Show Your Growth Most investors look for a growth story. They look for an operational revenue model in the business with increasing numbers on:  sales  team  product fundraise   Many startup entrepreneurs avoid talking about their current revenues because they think the investor wants to hear big numbers. This simply isn’t the case. If your company is pre-revenue, you can show how the business model is successful based on the unit economics level. Show you can generate leads, qualify them, and finally close them for revenue that exceeds the cost of acquiring and fulfilling the customer.  Demonstrate Your Competitive Advantage It’s not enough to say your product is better or your team will execute faster. You must identify your core competitive advantage and show how it gives you at least a 30% cost reduction or a 30% revenue increase over the traditional methods. This could be through:  network effects  virality  channel access monetization If you are concerned about protecting your business idea, then focus on the benefits of your competitive advantage such as:  “Our software reduces cost by 30% through better algorithms.” You don’t have to go into the details; in due diligence, investors can sign NDAs to see the detailed workings of the business.   Read more on the TEN Capital Network 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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    Sourcing Investors: How to Find and Build Relationships

    2 min read The first step in securing funding can often be the most difficult. How do you source potential investors, and when you find them, how do you build a relationship? While there is no one way to do either of these tasks, there are tips and tricks of the trade you can follow. Below, we discuss some of the options your startup has for finding and creating relationships with potential investors. How to Contact Investors In running a fundraise campaign, you’ll need to set up calls and meetings with investors who are busy and may struggle to find time to give you. How do you initiate these calls and meetings? One option is to have a mutual contact make an introduction. Another way to get a call/meeting is to do some meaningful research in a trend, company, or market and offer to share the results with the prospective investor. Investors love to be educated about the market and companies and appreciate gaining relevant information that informs their decision process. In your outreach, show the time and effort you’ve put into researching an area and some of the findings to pique their interest. Then ask for a call/coffee to review the rest of the findings. Investors are much more likely to find time for a meeting in which they will gain something rather than just give something.  How to Build a Relationship with Investors To pitch your deal, you must first start with a prospective list of investors. Include your contacts who are angels, family offices, and VCs. Canvas your network for those who know angels, family offices, and VCs. This is two degrees of separation which means warm introductions can work. When it goes to three degrees of separation or more, then warm introductions no longer work. Include local venture capital and formal angel network groups you have heard about. Capture the names and emails of all the prospects and plan your approach for each one.  After you’ve made contact and given the initial pitch, you want to keep those investors up to date on your progress with monthly mailers that are short and to the point. Focus the mailers on core results related to sales, team, product, and fundraise.  Avoid long stories as most investors want to know there are real results at play and will listen to the full story later. Through a series of mailer updates, you can start to build a relationship with the investor. It starts with a prospective list and it’s important to take the investors on the journey with you. How to Meet Investors in Person When building a relationship with a potential investor through email, start with an introduction of who you are and what you’re all about. Share how it is relevant to them- bring something to the investor in addition to the ask for funding. If you have a contact-making email introduction, provide them with a short two-paragraph summary. Include the following: Who you are: Demonstrate experience and credibility. What you are doing: Make it interesting. Why did you want to connect: Is the connection about an investment, advice, feedback, or something else? When you do finally meet the potential investor in person, bring something interesting to the discussion such as new information about a sector, company, or group that may be useful to them. It could also be the latest research you have done on a topic of interest. Keep the dialogue going until you build a rapport with the investor.   Read more on the TEN Capital Network eGuide: Closing the Investor 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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    Startups: Do You Need an Advisor?

    2 min read Many startups collaborate with an advisor at some point in the process of their development. Advisors can aid startups in many ways, yet always come at a cost. In this article, we discuss how to know if your startup is in need of an advisor, what roles an advisor can play, and how to select the right one for you and your team. Do You Need an Advisor? Advisors can be helpful to your startup. Here are some key points to consider when determining if you need one: If you haven’t run a startup before you’ll most likely need an advisor. You plan to raise funding, you’ll find advisors add gravitas to the team as well as potential contacts. If you have holes in your team, then advisors can help you close them. You are in a domain you have not worked in before, then an advisor can be helpful. If the business technology has changed dramatically, then an advisor can be useful to guide in the implementation of the latest tech. You find yourself asking anyone and everyone questions about your business decisions, then an advisor may be the answer. If you have a team that always agrees with you, then you may benefit from an advisor who will be more honest with you. If you need help for your own growth, then look for a mentor.  Remember that mentors are different from advisors. Mentors typically help the individual grow, while advisors help grow the business. Advisor Roles In addition to there being many types of advisors, advisors also take many roles in their work with startups. For example, some advisors’ role is simply to fill gaps in the early stage of the startup. Advisors can be signed on as formal advisors, or some may provide support as informal advisors. In this scenario, there are no set goals, meetings, or formal advisor agreements. This is the most common way startups work with advisors. Some advisors take the role of a mentor in providing guidance. These mentors tend to focus their efforts on the founder. Some advisors take the role of consultant in performing very specific tasks for the company while others take on general responsibilities. Others may take on the role of a board of directors. This can be helpful in early-stage companies that are not yet ready to form a board of their own. Advisors here can provide oversight to the company and help the founder keep the broader picture in mind. Regardless of the role, you choose to fill, as an advisor, you will aim to bring experience, contacts, and networking to the startups you work with. Advisors can help startups achieve higher growth, avoid problems along the way, and give the founder confidence. Here are some key points in choosing an advisor for your startup: Avoid the dabbler: These advisors want to dabble with startups but don’t have any substantial experience to share. Avoid “Yes” men.: These advisors confirm everything you say because they don’t want to go through the heavy lifting of explaining better ways of doing things. Stay clear of generalists: Generalists have general business experience but know very little about your specific industry or growth strategy. Look for advisors who know your industry and space very well.  Seek advisors who are well connected.  Look for advisors who challenge you and remind you of the goals you have set. You may want to recruit a group of advisors and have them meet both individually and as a group to discuss key issues. Remember the time commitment that comes with advisors and set aside time for it.   Read more on the TEN Capital Network eGuide: Startup Advising: Best Practices 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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    Sharing The Business: Selecting and Repaying Cofounders

    2 min read Many times, investors choose to take equity in return for their investment, earning them the title of cofounder in the startup. This can be a lucrative route for many startups, especially those in need of additional guidance and/or a hands-on deck. Choosing the correct cofounder for your startup and negotiating a fair deal is key to success. Continue reading below to learn more about what makes a good cofounder and what equity negotiation consists of. What Makes a Good Cofounder? You need a complete team, meaning you need somebody building it and somebody selling it. If you’re building it, then you need to find a co-founder who can sell it. If you are selling it then your cofounder needs to be able to build it.  A good cofounder has valuable skills that match your needs. They need the skills to get your MVP out, get it built, and sell. This may be design skills, a solid network, marketing expertise, etc. based upon your unique situation and needs.  Lastly, take the dynamic of your team into consideration. A cofounder should meld well with your current dynamic. They are going to be a strong player on the team; choose someone you will enjoy and value having around.  The Equity Negotiation In return for their investment, cofounders will expect a percentage of equity in the business. This allows them to profit when the startup begins pulling in revenue. How much equity you should offer to a cofounder depends on your startup’s valuation. The higher the valuation, the less equity you are giving away. Pre-money valuation (what the business is worth before an investment is made) plus the investment amount gives you the post-money valuation amount. If your pre-money valuation is $4-million and you’re raising $1-million, the post-money valuation is $5-million. Equity is typically based on the post-money valuation, so as an entrepreneur you’re pushing the pre-money valuation up while the investor is pushing the pre-money value down. That’s the basis of your equity negotiation. You can help sway this negotiation in your favor by showing a positive market rate. You need to show the going rate and convince the investor they are going to get a good deal.   Read more on the TEN Capital Network education: Click 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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    Educate the Investor About Your Deal

    2 min read 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 about. It takes four updates before the investor gets a sense of the deal and can start to form a decision. In the end, the investor makes a decision based on team and traction. The Introduction 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 any more about the market or growth rates. They only care about one thing – what are you doing to achieve the promise? Revenue Numbers 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 to go to your investor prospects six months before launching the campaign. Tell them you will start your raise in six months and then ask if you can keep them informed of your progress. This gives you six months to educate the investor about your deal and demonstrate progress so when you are ready to launch your fundraise; you have a group of educated investors prepared to go. Read more in 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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    The New Normal for Fundraising (It’s All Online)

    2 min read Fundraising like everything else has moved 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 provided enough information to the investor that one could see momentum and traction in play. The Present 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. Tools to Raise Funding 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 offices, 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.   Read more on the TEN Capital Network education: 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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