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The Benefits of a Family Office

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    Should You Start an Angel Network?

    January 7, 2024

    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? Do 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 in your community that currently fund those deals 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 TEN Capital Education Here Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Raising Funding for Startups

    March 3, 2022

    2 min read Most startup organizations are running on limited resources, a vital one being funding. Successfully raising rounds of funding for your organization can make or break the business, therefore it is important you know how to do it well. Part of successful fundraising includes knowing how much capital to aim for and when to begin your raise. In this article, we provide some insight to help your organization better decide on these two factors. How Much Funding Should You Raise? Every day I ask entrepreneurs how much they are raising. Most begin with the big number; the full and complete raise they anticipate running. This ranges usually between $1M and $10M. It’s good to have the big picture in mind, but some entrepreneurs are anticipating to raise this big number all at once because “they want to get the fundraising out of the way.” I remind them that raising too much money around will cost you the equity you don’t have to give up. Your valuation is low at the beginning. It’s best to raise only the funding you need to reach the next milestone and no more. As you grow the business, your valuation will go up and you’ll give away less equity. With this in mind, it can be helpful to consider breaking your fundraise into tranches.  This approach will save you time as well as make each fundraise easier. When Should You Raise Funding? When considering how much funding to raise, consider your funding requirements. To start, calculate your cash burn and estimate the need for new cash. Next, consider the preparation and timing issues. Start your preparation six months in front of the launch. Launch you’re fundraise six months before you need the funding. Use this six-month preparation time to introduce the deal to the investors and educate them on your current status. Finally, there are seasonal issues to consider. I wouldn’t start in early June, but rather wait until late August to kick off a campaign.   Read more on the TEN Capital Guide: How to Prepare for a Fundraise 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

    The Structure of Angel Groups

    February 27, 2022

    2 min read Angel investor groups require diligent administrative attention. There is a lot of required structure and organization. If you are managing or considering starting an angel investor group, it is important to keep the following structural considerations in mind. Investment Structure In setting up an angel network, you need to choose an investment structure. Here are some structures to consider:  Individual investments: The members can each decide if they want to invest and how much to invest in each deal. This allows for maximum flexibility for the members to invest in the deals they want. The drawback is the administration is high, as you must work with each investor in determining their amount of investment and signing of the documents. Group investments: The members invest as a group. In this structure, the investors can create a pledge fund to allow the group to decide which deals to pursue. Members have some decision-making control over the investment decisions. This reduces the administrative overhead. The group can choose to create a fund in which a screening committee or manager determines which investments are made. This requires the least amount of administration as the manager or committee makes the decisions on their own. Lastly, the group can choose to create a sidecar fund that invests from a fund into deals the members have funded individually. The sidecar fund provides members diversification on top of their individual investments. This is also a low-cost administrative structure as the sidecar investment is typically a calculation based on the members’ investment and does not require a manager to run it. Legal Structure There are several legal structures to use when setting up your angel network. Most angel networks form a Limited Liability Company (LLC). This gives the angel network a legal entity with which it can conduct business. The members often pay an annual fee to fund the operational activities of the company. Angel networks form in association with a university. Since the university is a non-profit organization, the angel group can work inside the university for its mentoring, networking, and other non-financial activities. For running a fund or making investments, the angel network inside the university must set up an entity outside the university, since non-profit organizations cannot engage in investment activities. Some angel networks form a not-for-profit LLC and then apply for non-profit status 501(c)3 with the IRS. Again, mentoring, education and other non-financial aspects can be done within the organization, but the financial aspects such as investing must be done outside. Finally, there are angel networks that form a not-for-profit LLC and then apply for trade organization status or 501(c)6. This structure allows the organization to engage in political activities. Those angel networks choosing a non-profit or trade organization structure must set up a separate legal entity for any funds they want to raise and deploy. Organization Structure There are two ways to organize your angel network: member-led or manager-led. Member-led groups let the member’s source deals, lead the investments, and recruit the members. They hire staff members to handle the administrative tasks. Alternatively, manager-led groups hire experienced professionals to perform key functions such as determining which startups to fund.   Managers work on screening the deals so only the fundable ones go through to the members. They prepare the founders to ensure that their documents and presentations are ready. They maintain communication with the startup throughout the process. They lead the diligence process and produce the diligence report.  Some angel groups partner with incubators, accelerators, universities, and other groups. The partner provides meeting space and shares the operational cost of the group. Some partners provide administrative support. The choice of member-led versus manager-led often comes down to the availability of someone to take the role of the manager.  Meeting Structure In setting up your angel network you’ll need to set up the meetings. Here are some key points to consider: How many deal flow cycles are you planning? Are you online, in person, or conducting both at the same time? How will you set up the screening meeting, the presentation meeting, and the diligence follow-up? Will there be time between the meetings? Do you include a meal, appetizers, or drinks? Where will you meet? How much time will the meeting take? What is the number of companies that will be pitching? How much time is set aside for networking? What are the duties to be done before, during, and after the meetings? How often will the board meet and when? Where do sponsors fit into the meeting agenda? Will there be education sessions? What are the needs of the members and how best to facilitate the education? Who is the best to provide the training? Consider these points in setting up the meetings as it’s a key decision set for the group. Read more on the TEN Capital eGuide: Leading an Angel Group 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

    Angel Investing: The Deal Process

    February 20, 2022

    2 min read The aim of every angel investor is to profit, and this is done by closing successful deals. In this article, we take a closer look at the deal process discussing topics such as stages of the deal, performing due diligence, and how to effectively lead the deal as an angel investor. Stages of the Deal Process A startup investment goes through a series of stages. It starts with the pitch presentation in which the startup introduces the deal to the investors. Then there’s the first follow-up meeting in which the investors dig into the deal to learn the details. Investors want to think about it and also want to see the startup continue to make progress. Then comes the Due Diligence phase in which the investors perform a more rigid review of the startup’s documents, team, and market. If the terms sheet has been established by other investors, then the investors review those documents. If not, the investor must negotiate the terms including valuation. Investors then check with their network to see who else may want to invest or put it out to other investors for syndication. Finally, there’s the closing of the round with the signing of documents. Not every startup makes it all the way through the process. Here are some key challenges: When the investors come together to dig into the deal, it must have enough traction and value propositions to maintain the investors’ interest before the investors commit significant time to it.  Deals may stall because the diligence process didn’t continue because the investors were distracted. Some deals stall because the startup and the investors cannot agree on valuation. Deals can stall out or come up with a lower investment amount because investors fell out at the closing stage.  It’s important to keep the momentum going throughout the process both on the investor side and the startup side. Deal Diligence Below are some tips on how an investor group can make the diligence process manageable: standardize the diligence process break it down into subtasks and define the process for each task assign the tasks to team members set target dates for completion and have periodic check-ins with each team member  focus on the key risks and not every aspect of the deal make clear to the startup how the diligence process works keep the startup apprised of the progress and status of their deal In most cases, the startup will find the process manageable if they understand how it works and if they see consistent progress to the goal. A good diligence process often provides new information and insight to the startup. Reducing time, making it efficient, and helping the startup, are the signs of a good diligence process. Leading the Deal In early-stage investing, someone needs to take the lead and screen the deals, diligence selected ones, and negotiate the valuation with the chosen ones. In most cases, the lead investor doesn’t want to be the only one in the deal and promotes other investors to join. This promotion process is called syndication. Most investors are looking for someone else to take the lead and actively follow the deal as it progresses. As a deal lead, make sure you do the following: Setup a strong process for diligence and bring legal, accounting, and other resources that can help in the process. Know the deal economics such as valuation, investor rights, control terms, and the path to an exit.  Keep other investors informed to attract them to the deal. Invest enough of your own funds to show commitment to the startup. Coach the startup on fundraising, especially for first-time founders. Move the funding process forward consistently without stalling out. Set aside time to join the board of directors. Add value to the startup where you can. Move to Close After the diligence is complete and the open questions answered, the team must decide whether or not to invest. It’s important to identify the risks and write them out in the report. The team should articulate an investment thesis that includes the opportunity in the deal such as how big it could become. The team should include the potential exit value and how long it will take to reach it. The team should also clarify their assumptions around the deal and write it out as well. To decide to go forward, take the temperature of the team. It’s either heating up or cooling off. Monitor the company’s progress to see if it continues to demonstrate a growth story. If enough investors want to move forward, then the investors should pursue it. If not enough investors want to move forward, then it’s a pass. It’s important to make a timely decision as the entrepreneur needs to know the group’s position.   Read more on the TEN Capital eGuide: Leading an Angel Group 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

    Joining an Angel Group

    February 14, 2022

    2 min read You may find yourself contemplating joining an angel investment group. As with all investment decisions, there are both benefits and drawbacks to joining an investment group. Familiarize yourself with both before making the final decision. Benefits 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. The bigger the angel network, the more likely there will be investors that are knowledgeable 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.  Challenges Here are some challenges related to angel investment groups to consider: Angel investing requires hands-on work with the startups, not only in funding but also in supporting them after the investment. They are often left filling 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. Newmarket segments require the angel investor to continually learn new industries and business models.  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.  Angel investing can be a rewarding endeavor but it’s not without its challenges. Read more on the TEN Capital eGuide: Leading an Angel Group 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

    Starting an Angel Investor Group

    February 7, 2022

    2 min read Starting an angel investment group can be a tempting option for some investors. It can definitely be a rewarding and lucrative process. Keep in mind however that this does not come without its difficulties. If you are considering starting an angel investor group, consider the information below before getting started. Should You Start an Angel Network? Next, before launching an angel network, assess your community as follows: Do you have accredited investors interested in startup investing? You have any investors who will take the lead on diligence and investing for each deal? 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 make this assessment and get their potential support for starting an angel group. Considering Service Providers In setting up an angel network, it’s important to have support from services providers such as lawyers, accountants, and financial advisors. Startups will need legal, accounting, and financial support. Review your community for current service providers who are already helping the startups. Assess the skills of the providers to see if they are a fit for early-stage companies. Some providers only work with more mature companies, but the angel network will be dealing with very early ones. Discuss with local entrepreneur groups and professional organizations about their experience with the providers. Identify the ones who provide the best experience for their clients. Reach out and develop a relationship with them as potential speakers, sponsors, or even members. For those services missing from the community, reach out online to other organizations that can provide the support virtually. If the demand is big enough, providers will move to the area to support the community. This often occurs in entrepreneur hubs that are growing fast. Liabilities and Disclosures There’s risk in startup investing as most investments don’t pay a return to the investor. In running an angel network, one must take steps to mitigate liability. It’s a best practice to have all members sign liability waivers stating they understand the risk of startup investing and take responsibility for it. The waiver should indicate that each member makes their own investment decisions and the angel group is not recommending any startup for investment. Members in the group should provide full disclosure. If the member has any relationship with a proposed startup such as advising, consulting, or otherwise, the member should disclose this to the other members. Each member can decide for themselves how that impacts their investment decision. In syndicating deals to other groups, an angel network should have those groups sign liability waivers indicating that each investor is responsible for their due diligence. Most startups are raising capital from angel investors who are doing so under an SEC exemption. The angel group should have written confirmation from the members indicating that they are accredited investors. Take care to cover these areas of liability for your angel network.   Read more on the TEN Capital Network eGuide: Leading an Angel Group 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

    COVID-19 Impact on the Cybersecurity Space

    August 3, 2021

    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

    Investing in Cybersecurity

    July 27, 2021

    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

    Challenges in Angel Investing

    July 21, 2021

    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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