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    To Invest or Not to Invest

    2 min read In the startup world, everyone has a grand idea, but how do you know when to invest? The startup needs more than just goals in the slide deck; they need systems in place to accomplish the goal and show the growth story in progress. As an investor, how do you know which startups can talk the talk and walk the walk? There are characteristics to look out for in a startup that raise either green or red flags. When to Invest After you have applied the traditional investment thesis to the startup’s plans, check for the following positive traits: There should be a strong team with integrity, industry knowledge, and business experience. They should have product validation and market validation, meaning that the product works and people will pay for it. The startup should already have the prospects for high growth and be demonstrating this at some level now. The business needs to be scalable and something that other companies will want to buy into eventually. The potential return needs to be significant to allow you as the investor to reach a 44% IRR or better. Finally, you need to help the startup in some way, such as finding other investors, providing domain knowledge, or making other meaningful connections for the startup. When Not to Invest There are traits you can look for that will tell you not to invest in the startup. Here is a checklist of showstoppers: There’s no business plan, as well as no plan for an exit. There’s no vision for the company. There’s no growth in the target market. The business doesn’t provide enough of a return on investment. The team has too many holes to stand up. The projected growth rate is too high and is unrealistic. There’s no differentiation over the competition. You should also beware of the “Pretend-preneur,” the entrepreneur who likes the idea of running a startup but is not committed to the work required to make it a success. Here are some tell-tale signs to watch out for: They are overly 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. They view this as a “detail to figure 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 the fault of everyone else, and there’s nothing that they can do about it. They don’t know who their customers are, and this doesn’t bother them. They think funding will solve all problems and life will be easier after the raise. They don’t know their numbers, but someone else in their organization does, and that’s good enough. Making The Final Decision The decision to invest or pass is entirely up to you. No one knows what the future may hold. But we can make the most informed, rational, and logical choice possible in this scenario. Taking the positive and negative characteristics lists above into consideration, you can use the process of elimination to remove deals from your potential investment list, allowing you to focus on the ones that can bring success to you and your team. Read more about how TEN Capital can help you find the right deal-flow: https://staging.startupfundingespresso.com/investor-landing/ 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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    COVID-19 Impact on the Cybersecurity Space

    3 min read What do investors see as the COVID-19 Impact on the Cybersecurity Space? The fact that COVID has impacted nearly every aspect of our daily lives is not new information. The way we live, connect, work, and play has been directly impacted. As our lives moved online, the web evolved and adapted to our increasing dependence on it. This led to increased vulnerabilities and therefore increased attacks on personal and corporate information. The cybersecurity sector has been adapting to keep up. In doing so, players in the space have gained new insight on more efficient ways to move forward. COVID-19 Impact During the last year of lockdown, working from home has left the workforce more vulnerable to malicious attacks and created specific challenges in the cybersecurity space. Employees are using their own devices to log into networks, exposing themselves and their personal information more now than ever. Corporate IP is suddenly at risk of invasion, and as a result, there’s new funding, and therefore solutions, aimed at those particular issues. People have become increasingly comfortable working remotely, putting a huge amount of pressure on the IT environment to decentralize. At the same time, in America alone, 300,000 jobs in cybersecurity are currently unfilled. There aren’t enough skilled workers to fill the industry’s current needs. In the next 12 months to 18 months, we will likely see a boom in the space as people recognize this trend, take the time to get the required education, and fill the need. We’ll start seeing more opportunities for the cybersecurity space. We will likely see many of the technologies that depended on the old environment struggle to keep up in the new remote world, leading to consolidation within the industry. Privacy Needs We’re seeing a trend around privacy in cyberspace as people now recognize their data is being used (and misused) overall, and they’re not getting compensated for it. At the same time, the amount of information leaks is increasing exponentially, leading to corporations and individuals demanding better privacy protection. Ten years ago, everything was centralized; employees were in offices and accessing the corporate network through a VPN. COVID flipped this scenario on its head, and now people are not only working remotely but from a variety of places, each with their own unique internet connections. They’re using personal devices, not always their own, that have systems that might be calling out to nefarious servers. The exposure to the opportunity for hackers to take advantage is now rampant, and the understanding of the corporate environment is more confused than ever as they’ve lost some control and understanding of their own systems. Back to Basics The cybersecurity space has experienced a resurgence of “back to the basics”. The industry has been around for about twenty years, but there has been a massive explosion in investment, major acquisitions, and new companies in the last five years. One of the patterns presenting itself in all of this is that we’re going back to a lot of the basics that a good security program is built on. Questions like “Before I think about securing my stuff, where is all of my stuff?” and “What are all the accounts that we have?” or “Where are all of our servers? Our data centers? Our users?” are now back at the forefront. Due to this reverted mindset, more companies focus on fundamentals such as asset management and attack surface, leading to specialization. We’re starting to see more security companies avoiding solving all of the issues, instead simply wanting to make the user more efficient at X or to increase efficiency in generating returns to the user rather than completely claiming to protect the customer from the user cataclysmic breach. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/investor-perspectives-on-the-cybersecurity/. 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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    Investing in Cybersecurity

    3 min read Investing in Cybersecurity Cybersecurity resulted from the expanded exposure of people’s critical information on the web, including personal data, identifiable information, healthcare information, and more. The industry is horizontal, crossing many other industries such as energy, consumer products, government services, media, and more. Cybersecurity is central to the functioning of these sectors, as well as our economy as a whole. There has been a significant increase in the “bad side” of cybersecurity. Whereas cyberattacks may have referred to petty theft, we now see massive attacks on both personal and national levels. Economically, there’s an entire industry on the wrong side which creates an explosive industry on the good side. The minute a cybersecurity capability that can block hackers’ tactics is found, the bad guys figure out a way around it, creating a continuous lifecycle for the cybersecurity industry. Why Cybersecurity? Unfortunately, there is a lot of cyber-crime happening. You can’t help but pick up the newspaper or turn on the TV and hear about another breach, another ransomware attack, or something else to be afraid of. And you only hear about the tip of the iceberg. There’s a lot of issues at work, and there are several different solutions. The growth in cybersecurity is an asset class, and from an investor’s perspective, everything is on the table. From traditional venture capital investments to early-stage seed investing, late-stage pre-IPO growth, and even buyouts, there is a full spectrum of investment opportunities in the cybersecurity space at this time. What Makes a Company Successful? What makes a successful cybersecurity company is the same as in any other sector- good timing, a strong team, the right technologies, and traction. Specific to cybersecurity is the understanding of the history and evolution of the industry. Cybersecurity is a relatively new field, and in the last 20 years, it’s grown to be more sophisticated than ever. Being in the know about mergers and acquisitions, technology adoption, company name-changes, and how this evolved is crucial to see opportunity in the space and avoid getting run over by the traditional tech companies. What Do Investors Want to See? Solid Management: Is the management team made up of solid leaders that understand the domain? Do they have the experience and skillsets to be understood in that particular domain? Market Share: Investors want a return on their investment. Is the market big enough not to be pushed out? Funding: What kind of money is backing the organization? In cybersecurity, it takes funding to get technologies to market. It’s not as extensive as pharmaceuticals or medical devices, which have many FDA regulations. Still, the technology itself takes some time to get done, meaning you need to have pockets with enough depth to bring you the runway you need. Culture: The culture of a company and the investor backing it has to be synergistic. When there are inevitable discussions, debates, and challenging situations, people aligned on the philosophies of life and management and structure and returns end up getting through together. In contrast, when it’s not aligned, you see scenarios that can destroy the organization, such as powerplays, struggles, and people not getting fair shakes. Distinctive Technologies: Technologies addressing significant and large problems are going to go further. Investors tend to be turned off by companies who claim to do or solve it all because it is improbable they do. Investors in this space look for companies that do one thing and do them well, especially when funding small or young companies. And for Extra Credit Quantification and Defensible Metrics: Very few companies are quantifying cyber risk or have a defensible set of algorithms that look at cybersecurity in the digital asset context. Today, 85% of businesses are run digitally. The explosion to digitization is parallel to the explosion in cybercrime, and this is what the cyber-criminal attacks. When you can quantify this, many use cases come out of it, including prioritization and insurance limits that aid in prioritizing your cyber program. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/investor-perspectives-on-the-cybersecurity/ 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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    Challenges in Angel Investing

    1 min read Investing Challenges in Angel Investing. Angel investing can be fun and financially rewarding to the investor as well as helpful to the startup. It can also be challenging. Before considering becoming an angel investor, there are some challenges to consider: It’s Hands-On Angel investing requires hands-on work with the startups in funding and supporting them after the investment. Angels often fill in the gaps left by the local incubators and accelerator programs in coaching them into a place where they can raise funding. First-time angels can find it time-consuming and expensive to learn the process. It Requires Continuing Education New market segments require the angel investor to learn new industries and business models continually. It’s Risky There’s no collateral for the investment, and it can all go to zero as it’s a risky investment class. One out of ten investments will be a home run, two or three will provide a small return on investment, and the rest will fail. But it Can be Worth it Angel investing is not without its challenges, but it can truly be a rewarding endeavor. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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 Benefits of an Angel Network

    1 min read An angel investor will find many benefits in joining an angel network. The angel network can build resources to share with the angel, such as due diligence. This is time-intensive work, so it helps to share the load. Angel networks provide more and better deal flow than individual investors can find on their own. The bigger the angel network, the more likely there will be knowledgeable investors about the market segments and startup business models. This lets the angel investor pursue deals outside their core expertise. Angel groups can write bigger checks than individual angels and thus command better terms with the startup. Experienced angel investors can share their knowledge with new angels. This is particularly helpful in setting valuations, defining term sheets, and supporting the company. Angel investors can find diversification through the angel network and its deal flow. An angel network will have more influence over its startup scene than an individual investor. Consider joining an angel network. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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    Should You Start an Angel Network?

    1 min read Should You Start an Angel Network? Before making that decision, there are several questions you will need to ask yourself. Before launching an angel network, assess your community as follows: Do you have accredited investors interested in startup investing? Do you have any investors who will take the lead on diligence and investing for each deal? Are you, or do you have a champion who will organize and lead the angel group for the first two to three years? Do you have a flow of startups seeking funding that you can access? Is there a resource for incubating and educating those startups in the area? Are there local service providers such as attorneys, accountants, financial advisors, and others who can support the startups? Are there other investor groups that currently fund those deals in your community to support syndication? Is there access to follow-on funding for startups? Research your community to see what currently exists and what must be built. Check with the local entrepreneur groups to assess and get their potential support for starting an angel group. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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 Cost of Angel Investing

    1 min read The Cost of Angel Investing: Where are the Fees? I recently read a discussion forum in which the post’s author had bought a financial instrument and later discovered that the investment advisor who sold it to him actually made a commission on the sale. The author was incensed that someone had made a commission off of selling him something, and to top it off, the investment advisor didn’t disclose his commission. As I read the post, I began to wonder where this guy has been for the last 50 years. Of course people make money selling things, and financial instruments are no different. Where are the Fees? When I sit in pitches from investment advisors promoting their fund, or whatever their financial instrument may be, the first question that nearly always comes up from the audience is how much are the fees and commissions. This number ranges from a fraction of a percent for mutual funds to double-digit percentages in private equity. After reading the aforementioned post, I began to wonder about the cost of angel investing. Where are the fees? In a member-managed group such as the Baylor Angel Network or the Beyond Angel Network, there is a membership fee, but the members review the deals, perform the due diligence and ultimately decide what to invest in individually. The Main Cost Comes in Three Areas: The main cost comes in three areas, and while those costs aren’t paid directly by the angel investor, the business pays the costs, and ultimately the angel investor takes a reduced return based on those costs. So an experienced angel should ask about these costs. The first cost is the Management Salaries. Management salaries are kept low in the early days of a company to give the business every chance of succeeding. I was recently in a deal in which the members asked about the CEO’s salary. He replied it was $300K per year. You could feel the air leaking out of the room. While he was a strong manager, there was no way the business would survive paying salaries of that magnitude. The second cost is that of Consultants, whether they are on the board or as advisors. It’s fair to ask who is getting paid and how much for the work they are providing. There are good consultants out there, but I’m often amazed at how vague their duties are. Oftentimes I hear generalizations such as “they are going to help us,” but there’s no job description, no metrics, no deadlines, and it’s all very nebulous. The third cost and what I consider the most important is the Angel Investor’s Time. If the deal requires a day a month or, worse, a day each week, then the deal must be spectacular to make it worthwhile. The angel investor should figure out upfront what value he can add and if the business runs into trouble, which will help them. Thus, the angel investor’s time becomes the key factor in calculating the cost of angel investing. Read more about the TEN Capital Network for Investors: https://staging.startupfundingespresso.com/investor-landing/ 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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    Investing in Consumer Packaged Goods

    2 min read Investing in CPG The CPG space is a solid one to invest in, especially in a post-COVID era. There are specific cues that make startups stand out to investors. You should make sure that any company you are considering investing in has a competitive edge and strong customer engagement. And you, as an investor, are going to need the patience to succeed in this sector. Competitive Edge Investors want a considerable market size in the future, and they want to see a competitive edge. If you have a massive market it probably means there are people in it already. Ideally, you want to find a company entering a market that will be meaningful enough with high growth rates that aren’t over-saturated. An example of this is nonalcoholic beer. It isn’t as saturated as the IPA sector, but it’s meaningful and on the rise. Customer Engagement You can measure customer engagement in a variety of ways. Engagement can happen on the company’s social channels, through different marketing activations, and through other methods being used to reach customers outside of digital channels. Omni Distribution Investors should look for companies with omnichannel forms of distribution. Single-channel and single customer models lead to too much concentration. Also, more channels require more brand awareness opportunities. Getting distribution is hard for the CPG producer. The big firms block out the small firms. Look for companies that have found creative ways to bring the product to market. CPG Takes Time Everything in CPG takes longer than you expect. When you’re investing in a CPG company, you have to be patient. Unlike software, the startup cannot go from one to one billion users overnight. It takes a long time to bring the product to market. The company has to prepare its packaging, get production up and running, be ready to ship, acquire distribution, be able to refill orders, and more. As an investor, you have to come in knowing that it’s a longer cycle and it’s a different risk profile. Once the consumers are in that buying cycle, however, it’s a beautiful thing to see it. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/trends-in-cpg/ 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 COVID-19 is Driving the Fintech Sector

    2 min read How COVID-19 is Driving the Fintech Sector How COVID-19 is Driving the Fintech Sector As the COVID pandemic passes, we emerge into a new world. The way we bank and exchange money is changing along with many other aspects of our daily life. Digital social trends are shaping our world, and banking along with it, at a much faster pace than ever before. This is especially true during this time of COVID when everybody is on their mobile devices and their tablets as a main means of communication. Due to this trend, the Fintech (financial technology) space is now undergoing tremendous change across the country. COVID has taught all of us how to bank online. Most of us haven’t stepped foot in a bank to deposit a check in months- we all do it all digitally at this point. You are likely going to see banks start to close their doors, and rapidly. A lot of the branches facing imminent closing will try to get more and more of their customers banking digitally through Fintech platforms. Rising Investor Interest There’s been a ton of investment in FinTech recently. There is a tremendous appetite from the venture community and the public markets today for this category of company. The reasoning for this is fundamentally the digitization of their services. COVID has driven us all indoors and away from public spaces. The best solution to continuing business as usual in this restricted atmosphere is to move the business online. Everything is being digitized, including financial services. The difference is that financial services are thriving online because they’re not handling a physical product. They’re perfectly suited to this digitization trend as they’re fundamentally just moving bits and bytes around. And so, the growth in investment in this sector continues. Future Adaptations This success in the implementation of digital platforms also sets up players in the Fintech sector for the next trend-adoption of AI and learning machines. Learning machines will allow the process to improve in terms of efficiency, relevance in product offerings based on the specified customer base, and security of personal information. Implementation of AI will streamline growth. Thanks to current digitization efforts, the Fintech sector is on track for seamless implementation of AI and machine learning when the proper technology is accessible. Why It Matters to Investors? Social trends are driving change across all things business. COVID has worked wonders at putting this fact in the spotlight for all business operators, innovators, and investors to see. As the world moves online to accommodate the health regulations imposed by the pandemic, social trends will only strengthen. Investors should be striving to understand and follow these social trends that are shaping our world at a much faster pace than ever before. People are on their phones and their tablets, they are asking questions and sharing information. And now, they are banking. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/fintech-problem/ 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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