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The Due Diligence Process

The Due Diligence Process

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    TEN Capital Early Exit Deal Structure is Pure Alpha

    1 min read TEN Capital Early Exit Deal Structure is Pure Alpha In the financial world of investment, there’s alpha and beta. Alpha is a measure of return on investment with a comparison to the market. Beta is a measure of volatility and how the investment moves relative to the rest of the market. In short, alpha is how well your investment performed on its own while beta is how well your investment performed as a function of the entire market moving in one direction or the other. At TEN Capital we work with early-stage startups and use an investor redemption right to provide early exits from startup investments. This tool provides pure alpha as there is no liquid market for early-stage companies. Later stage companies can be bought out or go public but that takes many years and only a small fraction of those companies make it there. As an early-stage investor, you can still participate in the startup funding world by using the TEN Capitals’ early exit structure. We’ve recently opened an online platform to post early exit investment opportunities, including a pitch deck, deal terms, diligence documents, and updates about the company. The platform uses a Special Purpose Vehicle (SPV) to collect investor interest for a fundraise. You can read more about and request access to the TEN Capital Early Exit Syndicate Platform here: https://staging.startupfundingespresso.com/spv/ 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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    5 More Reasons you Should Join a TEN Capital Network Investor Reverse Pitch and Startup Pitch

    This year as TEN Capital Group turns 10 we’ve decided to branch out and hold events across the US. This year we’ve had events in Austin, New York City, San Francisco, Dallas, Houston, Seattle and upcoming in Chicago, Orange County, Sunnyvale and Washington DC. We’ll also be circling back to Houston, San Francisco, New York and Dallas before the year ends. We are passionate about what we do and these events are a great way to keep the startup community connected. Find out what’s new in the startup space Identify new business models that can help your business Meet great people who can join your team Learn new investment structures that can improve your IRR Remind the community that you are still there

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    How Does the TEN Capital Funding Program Compare to Revenue-Based Funding?

    Revenue-based funding provides a return from the revenue rather than from equity ownership. It works well for businesses where there’s no anticipated sale of the business and investors receive a return in the form of a revenue share. It works well for companies with uneven revenue as it provides a payout based on a monthly or quarterly revenues. It requires ongoing operations to calculate the revenue for payouts and monitor the business for progress. To reduce the cost of revenue-based funding, TEN Capital uses a 3X in 3 year redemption right at “Investor only  discretion”. The redemption right gives the investor the right to ask the company to buy them out at 3X their original investment at the 3 year mark. The investor can choose the redemption right or forego the right and become an equity investor and wait for the IPO or acquisition exit.   It removes the burden of ongoing monitoring and cash collections and leaves more cash in the business to help it grow. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    The Liquidity Challenge in the Startup Funding World

    I remember the last ACA (Angel Capital Association) meeting I attended. The theme was exits and how to achieve them. It seemed like every angel or angel group had a list of the deals they’ve been in for more than ten years. The sessions focused on helping the entrepreneur achieve an exit. More than a few of the sessions talked about how to deal with entrepreneurs who no longer wanted an exit. It appears that if the entrepreneur can gain an above market salary that in many cases they’ll make more if they stay with the business for ten years or more than if they sell the business. One of the key metrics to monitor is salaries of the C-level team of your startup and compare it against market rate. It should be about 70% to 80% of the market rate. If it’s above 100% then you’ve got a problem. First, those are funds that should be growing the business. Second, the startup has most likely given up on a high dollar return on selling the business and is now taking their exit through the payroll plan. Having talked to many an entrepreneur about achieving an exit, I find that about half want an exit but can’t get to one with a large influx of new capital or they don’t want one at all. Either way, it’s a problem. There’s a saying in the financial world, “Getting into the deal is easy. It’s the getting out part that is hard.” Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    Reducing the Fees in Startup Investing

    I’m a big fan of index investing as it’s a great way to reduce the cost of investing in publicly traded stocks and bonds. Index funds have less than 1% fees which compare favorably to some brokerages which charge 1% of assets under management or more. In the startup space the cost of investing is also a big factor. Investing in VC funds often come with hefty fees including 2% for management and 20% of the returns.  I’ve done revenue based funding but found the operational overhead can be expensive. Revenue-based funding requires monthly follow ups to calculate revenue and there’s the ongoing monitoring process.   At TEN we provide low cost tools for investing in early stage companies.  First, we’re not a broker so we don’t charge carry or other fees on the investment. We charge a monthly retainer fee to the company raising funding.   Instead of the traditional revenue-based fund model, TEN employs a redemption right in a convertible note as a means of providing a liquidity event for the investor. This alleviates the bank account monitoring and constant calculation of revenue. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    Top 5 Reasons You Should Join a TEN Capital Network Investor Reverse Pitch and Startup Pitch Event

    This year as TEN Capital Network turns 10 we’ve decided to branch out and hold events across the US. This year we’ve had events in Austin, New York City, San Francisco, Dallas, Houston and upcoming in Seattle and Chicago. We are passionate about what we do and these events are a great way to keep the startup community connected. INVEST: Find a great startup to back – all startups at TEN events are pre-screened for fundability. PITCH: Let the community know what makes you a valuable asset as an investor. Come out and speak about your fund, yourself or even what makes you tick as an investor! SHARE: Share your investing experience and give back to the community with your feedback. Use your voice to set out a challenge you’d like to see a startup overcome to be successful. LEARN: Learn the ins and outs of new industry sectors and expand your horizons. The industry is constantly moving and evolving- come out and learn more about the possibilities. NETWORK: Grow your network and meet investors and up-and-coming founders. There is nothing better than having an extensive network of peers and colleagues. Come out and meet and greet! View a full list of TEN Capital Events

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    What We’ve Learned Over the Years: How to Tell if Your Investor is Really Invested

    In today’s startup world every fifth person is an investor in some form or fashion. Startup investors call to discuss deal structures, valuations, or serial entrepreneurs. I can tell the difference between a serious investor and  a not so serious investor. A pretend-startup-investor likes the title of startup investment but won’t commit the time or money to make it successful. An investor that is not serious can waste a startups time. Here are some telltale signs of a pretend-startup investor the investor is not interested enough to visit the team’s HQ or meet with the team. the investor asks about the price first and then figures out the values in the business later if at all. the investor wants reports but doesn’t read them. the investor talks about helping the business but never finds a way to contribute. the investor glances at the due diligence documents but doesn’t dive deep enough to understand the business. there’s no investment thesis or guiding criteria for their investment choices they have no network in the target industry or startup world and can do little to help the startup post-funding. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    What We’ve Learned Over the Years- How You Can Tell you are Talking to a Pretend-preneur

    The startup world is open to anybody, and it seems like everybody comes through it at some time or another. I receive calls daily from entrepreneurs seeking to start a business, raise funding, or hire a team member. I can always tell who is the serious entrepreneur and pretend-preneur – someone who likes the idea of running a startup but is not committed to the work required to make it a success. That’s important because a pretend-preneur who raises funding will ultimately waste it, and there are too many good startups to spend money on those who don’t see it through. Here are some telltale signs of a Pretendpreneur –They are more worried about job titles and credit for the work. –They don’t seem too focused on the customer and what it will take to make them happy with the product, as that’s a detail to be figured out later. –They focus on the superficialities of the business and not the core functions of building the product and selling it. –They look for ways around the hard work rather than working their way through it. — Problems are everyone else’s fault, and nothing can be done about it. –They don’t know who their customers are, and it doesn’t bother them. –They think funding will solve all problems and make life easier after the raise. –They don’t know their numbers, but someone else in their organization does, and that’s good enough. Everyone dreams of a successful startup and fundraise, but it takes more than a dream to be successful. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    What We’ve Learned Over the Years- Venture Capitalists Engage in Brand Marketing

    In the past Venture Capitalists stood in the shadows of their successful portfolio companies. Venture Capitalists would hint about their contribution and use veiled wording in Twitter posts. Today we see VCs stepping up to take more credit for their contribution. There are numerous examples of VCs using successful exits to validate their investment thesis. With the explosion of the number of venture capital providers comes the need for VCs to engage in brand marketing. A list of successful portfolio companies burnishes their brand. It helps them gain new deal flow and limited partners and investors. Just having a fund is no longer a source of attraction for the best deals — there are too many other funds out there. Today, VCs have to position themselves as unique in expertise, deal flow, support, and connections. The startup has more choices to consider as venture capital becomes more abundant. VCs will have to promote their programs and experience more actively. VCs need to gain market exposure on their unique value proposition to generate deal flow which is the lifeblood of the VC business model. They are now brand managers who often have a business development and marketing team driving the awareness around their fund.     Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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