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Understanding the Types of Family Offices: A Guide for Family Businesses

Understanding the Types of Family Offices: A Guide for Family Businesses

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    Running a Corporate VC

    June 1, 2022

    2 min read Running a Corporate VC: Best Practices If you have recently launched a corporate VC or are considering setting one up, consider the following advice and best practices. How to Achieve Success Running a VC Corporate VCs can leverage their position in the industry to sign up good startups with an investment. The corporate VC brings a network of partners, distribution channels, a brand, an existing product line, and more. An investment can leverage their research dollars and achieve more than if they build it themselves. The pharmaceutical industry recognized this advantage years ago and now primarily invests in funding successful biotech startups rather than doing all the research and development themselves. This model works well where R&D is expensive and there are many potential avenues to take. There is a cost associated with setting up a corporate VC arm, but this investment can be spread across many startups. If used extensively, it can become a core competence for the company. To be successful at this, start with a clearly defined set of goals. Gain commitment from the corporation. Align the compensation of the corporate team to that of the performance of the investment. Those companies whose growth has stalled for some time may be more open to committing to it. Those facing a new wave of technologies may find this a better way to engage. Tools for Running a Corporate VC Program There are several tools for the corporate VC to use in a venturing program. Here’s a list to consider: Hackathon: Invite those in the industry or area to participate in a coding challenge to solve a particular problem. Shared resources: Provide the community with a set of tools and data sets and invite open community collaboration. Challenge prize: Offer a cash prize for the winner of a competition. Corporate venture capital: Offer investments into startups that meet specific criteria. Commercial incubators: Set up a partnership with incubators to provide support in exchange for access to deal flow. Internal incubators: Set up an internal incubator and invite employees and partners to participate. Strategic partnership: Set up partner programs with accelerators, venture capitalists, and other groups to provide deal flow. M&A program: Set up a program for acquiring companies and onboarding into the corporation. Consider augmenting your corporate venture fund with these tools and activities. How to Make the Corporate VC Fund Model Work While traditional venture funds increase their fund size over time, corporate VCs should keep their fund size low. Traditional VCs seek higher compensation and can do so by increasing the size of the fund which increases their management fee. Corporate VCs are often compensated as company employees with some upside on successful outcomes that are not necessarily financial exits. Collaboration, partnerships, and pilots are the most often used metrics for funded companies in a corporate VC fund. Therefore, it is important to keep the costs low, especially at the start, and then grow them over time as you prove the program. It will be easier to provide a positive return on investment for a $25M fund rather than a $200M fund. This will reduce the dollar investment into each startup but there again, it’s best to start small and increase the investment per company over time. A large fund may also draw criticism from other departments in the corporation who want that budget for their purposes. A large fund can create a culture of “contracted labor” rather than a culture of collaboration. The final outcome is not a financial return, but successful collaborations and pilots. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/corporate-venturing-2/ 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 MedTech and HealthCare

    May 30, 2022

    2 min read. The rapidly growing MedTech and HealthCare industries currently offer great investment opportunities. Before investing, take the time to prepare by learning more about the industry. Let’s discuss the current trends, how to diligence a MedTech organization, and common mistakes to be aware of. Trends in the Industry The MedTech space is growing rapidly as technology advances. Some trends we currently see in the industry include: There is a movement towards incorporating cutting-edge technology into healthcare, primarily artificial intelligence. This increases health equity, but also the reach of medical care. This is especially important in sectors such as the mental health sector where demand currently far outweighs supply. A lot of health companies are streamlining their payment systems and platforms. There is an increasing emphasis on security and how it relates to medical work in the biotech world and the flow of HIPPA requirements.  Diligencing MedTech What do investors need to analyze when considering investing in a MedTech organization? Old fashioned diligence, the same as with any startup, needs to come first. This includes: the team the vision the values the culture; is it entrepreneurial? management abilities as most MedTech teams are run solely by scientists lacking in this area In addition to the basics, you should pay attention to: intellectual property and patents regulatory pathways to bring products and services to market Common Mistakes in the MedTech Sector Below are some common red flags to be aware of when analyzing organizations in this space. These are red flags in any industry; however, they are especially common in MedTech due to the fact that teams typically consist of nonbusiness individuals who are scientists and IT personnel before they are managers and marketers. Mistakes to watch for include: unrealistic expectations exaggerating the numbers in their pitch deck presentations inability to accept feedback no line of sight through the regulatory pathway Read more on the TEN Capital blogs 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 a VC Fund: What You Need to Know to Succeed

    May 22, 2022

    2 min read. If you have a track record for successfully investing, you may consider starting your own fund. At the time of writing, there are over 4,000 micro-VC funds in the US alone. Most of these are funds within the $25M to $50M range. These funds are led by those who ran sidecar angel funds and invested their own money into startups. Some did well, or are experienced VCs who set out to run their own fund. What do you need to know to successfully start your own VC fund? You need to be able to find and screen startups successfully. Let’s take a closer look at how to do this. Analyzing Market Segments In running a fund it’s important to analyze market segments. First, evaluate the leading companies in the market. Are there any leaders that stand out, or are all the companies competing head-to-head with the same approach? Highlight the supply chain to show who has control of the market; is it the producer or the consumer that drives the price? Discuss the introduction of new technology and its impact on the current market equilibrium. Will it shift control from the producer to the consumer, or vice versa? Review the number of companies playing in the segment and discuss the resulting fragmentation. Highlight the total available market for the companies in the segment. Identify companies within the market that stands out for competitive advantages such as network effects, virality, recurring revenue models, etc. Conclude with a proposal to pursue investment in a company in the market segment. Determine Market Size One of the key selling points for a startup is its potential market size. There are several ways to find it for your potential startup investment. The easiest way you can find market size is to buy a market research report. These typically run anywhere from $5K to $20K.  You can also contact the trade association related to your industry. These associations are most often located in Washington D.C. They are located in Washington D.C. as they provide government advocacy in addition to industry support. The association’s website typically provides stats on the industry, including market size and sector breakdowns. These sources require more digging but are often more reliable than market research reports. Analyzing Startups Here’s how to analyze a potential company for investment: First, identify a recent event for the target company, such as entering a new market. Discuss how the company can disrupt the newly-entered market with its expertise and business model. Talk about the positives you see in the company’s financials and market position. Express caution based on any concerns about the business including product/market fit, management team, or cost structures. Discuss macroeconomic issues, both positive and negative. Conclude with a recommendation to pursue an investment based on the positives outweighing the negatives, or to avoid an investment based on the negatives outweighing the positives. Read more on the TEN Capital eGuide: How to Raise a VC Fund 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

    Beyond Due Diligence

    May 19, 2022

    2min read Completing your due diligence with care before investing in a startup is an indisputable rule in the world of investing. However, to ensure that your deal is going to work out as close to your expectations as possible, you need to go beyond due diligence. In today’s article, we will discuss how to do exactly that using three core strategies: finding the full answer, spotting red flags, and scanning for what isn’t being said in the startup’s pitch. Reaching the Full Answer The first strategy is to find the full answer. In talking with startups, I find the investor must always probe for the final answer. A single question rarely reveals the full answer. I spoke with a startup recently who said, “We’re raising a million dollars and we have raised half of it already.” On the surface, it sounded like they had $500K invested in the business. So, I asked, “You have $500K in the bank already from your raise?” They responded, “Well, not exactly. We have several investors telling us they are interested in investing.” After four more questions, it came out that they had $100K in the bank and around $300K in soft-circled commitments. It’s good progress, but not exactly the half a million we heard at the beginning. Never take the first statement as the final answer. It takes at least 5 questions to get down to the real answer, and as an investor, you want to know the real answer. Spotting Red Flags The second strategy is actively scanning for red flags. These indicate something is wrong. Some red flags to beware of include: The founders are not investing any of their own money into the business.  The cap table is crowded with many small investors, meaning the earlier funding was a challenge. The team is incomplete. Either the solo founder wears too many hats, or everyone is a tech developer, meaning no one is outselling the product. The team lacks awareness of the industry, especially the regulatory side. There are no KPIs or operational metrics to review. Plans are generic and lack specific customer names or revenue amounts. They have loads of debt, and previous investors have no further interest in funding or supporting the business. The business appears to be set up to be the CEO’s lifestyle business. They offer hockey-stick projections with no apparent supporting evidence. There’s no board of advisors or directors. The team you see is what you will get. The financials use year 1, and year-2 naming, rather than actual years. What Isn’t Being Said In due diligence, what isn’t being said or shared is as important as what is. When a startup pitches its idea, you should be skeptical of founders that don’t mention potential risks or discuss their experience in the industry or their traction. Here are other key items the investor should look for in a startup’s pitch: what needs to be done and what risks exist in the deal market size and growth rates reflect the market the team is pursuing financial projections show the startup’s understanding of their business information about the founding team including industry experience, commitment to the startup, and no criminal records If a startup leaves any of this information out, it may be an indicator that something is wrong. Use the five-question rule from above to find the true answer. Read more on the TEN Capital eGuide: Due Diligence and Leading the Deal 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

    Overlooked Areas of Investment

    May 15, 2022

    1 min read.  There are a lot of opportunities to invest in early-stage companies, particularly in some of the areas of the country that have been overlooked in the past. We’ve seen areas such as New York City and San Francisco that have essentially turned into startup hubs. As more and more companies spring up in these hubs, investments get poured into these areas. However, we are starting to see a shift outside of these hubs as other, typically overlooked, areas begin to show more and more potential for both startups and investors.  For example, Houston is making tremendous progress in terms of building an ecosystem and creating an environment that will nurture and support startups. The Houston area has positioned itself to keep those startups in the city as they grow. Other cities are beginning to follow suit due to cheaper business costs compared to larger, more expensive cities like San Francisco. Examples of this are Charlotte, NC, and Columbus, OH. As more and more hubs begin to pop up, it’s important to build a culture of early-stage investing. An example of a city doing this today is Houston, TX. The more we continue to pay attention to these previously overlooked areas, the more investment opportunities will arise. Read more blogs at TEN Capital Network 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

    Think Like an Investor: An Inside Perspective

    May 12, 2022

    2min read The best way to successfully land an investor for your startup is to begin thinking like one. Knowing what the investor wants and how they make decisions will aid you in preparing your pitch and pleading with your case. In this article, we provide you with just that- an inside perspective into the mind of an investor to learn what they want out of a deal and how they make the final decision. What Do Investors Really Want? Most investors look for startups in which they can find a return on their investment. In the diligence and funding process, what the investor really wants is to not lose all their money. They want to reduce risk to zero.   As a startup raising funding, you can help the investor find confidence by showing the risk mitigation you have put in place. For each concern, show how you’ve mitigated the risk. For example, the investor may ask: “How do we know the team will execute?” Respond with: “We’ve demonstrated execution so far with these results.” “How do we know we can sell the product?” Respond with: “We’ve sold this much so far, and will continue using the same process.” Remember where the investor is coming from and show how the risk has been reduced, even if it’s not reduced to zero. How Do Investors Make Decisions? Entrepreneurs look at the opportunity in the deal. Investors look at the risk. There are two factors that help the investor decide to invest or not. The first is the worst-case scenario approach. They ask: “What is the worst that can happen?” Oftentimes, the answer is: “You’ll lose all your money.” Sometimes the answer is: “You could be in the deal for the next 10 years with very little return.” If the investor can live with the worst-case scenario, then they move forward. The second factor in the decision-making process is the reputation factor.  If the deal turns out to be a dud or even goes sideways, their reputation takes a ding. Investors care about reputation because it impacts how other investors treat them. In presenting your deal to an investor, consider how the investor will view the deal and its impact on them. How Do Venture Capitalists Make Decisions? Venture Capital investors make investment decisions as a group. After the initial pitch to a VC investor, the startup meets the rest of the investment team and pitches the entire group. The team decides together to pursue diligence. With the diligence results, the team again comes together to make a go/no-go decision. The advocate for the startup makes the case for moving forward with the investment.   It’s best to arm your advocate with enough information to make your case.  The startup should also remember that the advocate is taking a reputation risk as well as a financial risk on the startup and that’s never an easy thing to do.  Read more on the TEN Capital 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

    How to Build a Startup Ecosystem

    May 12, 2022

    2min read Considering launching a startup ecosystem? Consider this your crash course. In this article, we share everything you need to know to develop your own startup ecosystem. We cover the basics of getting started, how to achieve growth, and challenges you may face along the way. How to Launch a Startup Ecosystem For those who want to launch a startup ecosystem, follow these steps: Start with a group interested in startups and meet regularly. Encourage startups to share their projects and invite others to support them through coaching and making introductions. Set up a blog and publish a newsletter each week on startup activities in the area. Interview startups and investors. Build a resource list for all startups to use. Recruit lawyers, accountants, and other professionals to join the meetings. This provides support to early-stage companies. Set up events such as pitch sessions and happy hours to expand the network and recruit more people into the community. Put the group on website lists for startup communities to generate awareness. Set up a coworking space to give startups a place to work. Recruit startup programs to your area, such as the 3-Day Startup, to provide additional programming. Start small and grow your startup community through regular meetings and consistent newsletter mailings. Growing Your Startup Ecosystem In building out your startup ecosystem, follow these steps: Choose five successful serial entrepreneurs.  Identify their sector and type of business. Interview them on how to multiply those businesses.  Target their sector for growing new businesses.  Figure out what additional resources are needed. Set up leadership resources to carry the program over a sustained period of time, such as two five-year programs. Recruit other startups to join through meetups, events, and communications. Bring in programs and speakers from outside the area to foster the community. Cater to the non-technical skills as well as the technical ones. Identify sponsorship support from the local service providers and engage them in the programming. Showcase the core serial entrepreneurs throughout the program. Take care of the administrative and tactical support. Grow your startup community on those strengths and resources. Put the entrepreneurs at the foundation of your program. Challenges You’ll Face There are challenges in building a startup community. It doesn’t happen by accident; it takes a focused effort over a period of time. Here are some challenges and potential pitfalls to watch for and overcome: Choosing another community’s strategy instead of your own. It’s common for startup communities to look to Silicon Valley and adapt their strategy. Silicon Valley has a unique set of skills, resources, and conditions. Instead of adopting the Silicon Valley strategy, it’s best to review your community’s unique skills and resources and then choose your own strategy. While your startup ecosystem should be inclusive to all who want to join, startup builders should focus on the ones with the highest potential for scale-up success. Focus on the needs of the high-performing startups with your resources.  Apathy or lack of leadership can slow the formation of a startup ecosystem. Rally the stakeholders around the startup community cause. Identify the limitations and recruit the area leadership to help remove those barriers. Recruit founders who have achieved success to give back and help foster the effort. Reach out to the local university to gain their support as well. Build collaborative relationships among the various parties involved. It takes several years and a great deal of community building to create a startup ecosystem.   Read more on the TEN Capital eGuide: Building Your Startup Ecosystem 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

    Aerospace Investing: All You Need to Know

    May 8, 2022

    2 min read The aerospace sector is a rapidly growing and underfunded space. This makes for profitable investing. But proceed with caution. As always, you need to do your due diligence before diving in. In this article, we share a brief overview of the current aerospace industry and what you need to know before investing. What is the Aerospace Industry? The aerospace industry deals with companies that research, manufacture, and employ flight vehicles. This ranges from commercial use to military use to space travel. This space is currently on the rise in the investing realm due to the large part it plays in US exports and the increased interest in space exploration. Current Trends in the Aerospace Sector Sustainability is a huge area of interest. Two or three years ago the commercial aviation industry was trying to ask the question: “How do we be part of the wide solution space dealing with climate change?”  This refers to creating better outcomes in terms of their carbon footprint and increasing the efficiency and sustainability of their engines, operations, and fuels. Unique challenges exist in certifying aircraft and engines within the existing airspace construct. Being able to understand the nuances wherein small changes can actually yield significant benefits is what will set some manufacturers ahead in this space, making them a valuable investment opportunity.  Besides sustainability, digital twin and digital threat are most certainly areas in both manufacturings and in the maintenance space that are coming a lot more interesting. These concepts revolve around creating not just better safety outcomes in the production and maintenance of these systems, but also increasing efficiencies when it comes to sourcing and assembling these very complex machinery to perform their various transportation outcomes.  Deal Flow in Network VS. Proprietary Deal Flow  Whare are investors in the space currently doing? Do they rely mostly on deal flow based on their network, or do they also have proprietary deal flow? We talked with three experts in the field, and they all shared a similar answer. It turns out, they are engaging in both. Working within their networks, especially with universities, However, they are still incorporating proprietary deal flow. As said by expert Greet Carper- ” We’ll take deal flow where we can find it.” Investing in Aerospace When investing in aerospace, patience is fundamental. From an angel perspective, it’s not simple to make other networks or other partners in our common sport of investing. It can be seen to be difficult to invest in something that does not have that reversal beachhead market. It’s also important for investors to keep in mind when it comes to the space travel niche of the aero investing space that the challenges of space are extremely technically dense. Try to recommend the company you invest in to not go about their journey on their own, but rather to start looking at partnering up. If you see that in order for you to get some solutions out of space, you might need that infrastructure piece, or, you might need other components, or, you might need other things that create that ecosystem. If you can encourage the company to start thinking like a system, you’re more likely to find a way to succeed.  In essence, aerospace investors need patience, an open mind, and a willingness to go the extra mile. 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

    Benefits of a Startup Ecosystem

    May 5, 2022

    2min read  Startup ecosystems are growing in popularity and for good reason. If you are in the entrepreneurial space, you have likely heard of this term. You may find yourself wondering what a startup ecosystem is and if you should be involved with one. In this article, we share everything you need to know to make that decision. What Is a Startup Ecosystem? A startup ecosystem is a network of startups, investors, and others who come together to foster startup formation and growth. The network fosters innovation through shared resources such as capital, talent, and mentorship.  At the core of the network are startups led by founders who launch high-growth businesses. Accelerators and incubators provide education around the initial launch of the business. Investors, including angels, venture capitalists, online crowdfunding sites, and grant providers, provide capital. Universities provide the talent for launching and supporting startups. Freelancers provide additional talent in the form of labor. Providers offer support for legal, financial, marketing, and other services. And lastly, mentors provide coaching and guidance on how to grow the business. Events, newsletters, and blogs foster the community through communication. Local corporations may also participate through sponsorship and other support. Look for these elements in building your startup ecosystem. Components of a Startup Ecosystem A startup ecosystem is fueled by talent, funding, and customers. In building your startup community, tap successful serial entrepreneurs to lead. Use their star power to capture attention and draw investors and startups to your area. Focus your efforts on the strengths of the local community and build startups in those domains. Develop clusters of startup activity to create density. It’s the interactions between the startups, investors, and providers that count. Foster collaboration with other startup ecosystems to share resources. Generate publicity for your ecosystem through events and articles. Metric your results by capturing the number of startups formed, funded, and exited. Building a robust startup ecosystem can take up to a decade, but the results will last many more years.  Organizations of a Startup Ecosystem There are several types of organizations that may be involved in a startup ecosystem. These may include: Here’s a list of organizations to look for: universities that provide the founder talent angel groups and other investor networks for funding the startups venture capital funds providing funding incubators and accelerators for coaching the startups service organizations to provide legal, accounting, and financial services coworking spaces to provide spaces for startups government groups providing funding such as grants and loans startup and business plan competitions providing funding for startups event programs that bring the community together news and media companies covering the startup community Startup ecosystems should seek to recruit or build several of these organizations.   Read more on the TEN Capital eGuide: Building Your Startup Ecosystem 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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