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Data Monetization: A Guide for Startups

Data Monetization: A Guide for Startups

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Fundraising, Investing

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    Finding Funding

    March 1, 2021

    2 min read Finding Funding: When and How Your Startup Should Look for Investors. If your startup is beginning to gain traction in your market, yet you feel held back by lack of capital, you may be wondering if it is time to start your first fundraise campaign. In today’s article, we will talk about how to gauge whether or not you are ready to source funding for your organization, and if so, where to look for it. Are You Fundable Yet? I talk with entrepreneurs every day about their fundraise. The most common question I am asked from those running early-stage startups is: “Am I fundable?”. My initial response is always to find out whether or not they have a growth story. For starters, are things clicking forward on sales, team, and product development? If you can answer those questions with substance, then you are in the game to consider funding. It doesn’t matter where you are on the journey; you just need to show you are making consistent and meaningful progress. What’s Your Trigger? When launching your startup, look for a trigger that indicates when to start your fundraise campaign. Common triggers include: Closing a lighthouse customer account or achieving a revenue target Signing up a new team member or advisor Finishing a beta version of your software or an MVP version of your product Closing funding from a lead investor In short, investors look at sales, team, product, and fundraise as the four core areas for progress. When you achieve a milestone in one or more of these areas, it can be considered a trigger to consider launching a fundraise campaign. Remember that when approaching an investor, you should have a milestone completed AND a milestone to accomplish. Where to Look for Funding I’m often asked where startups should look for funding. Luckily, there are many sources. First, start with your family and friends. These are the people who already know you and believe in you. Second, expand the circle to include current and previous coworkers. If accelerators are appropriate for your deal, then consider those not only in your geographical area but also in your sector. Most accelerators take companies from across the country. Many are now offering funding of $150K or more. Third, look for a local network of angel investors or family office investors in your area. These are high-net-worth individuals who have organized their startup investments into a formal process. Finally, you can approach venture capital. This option is only applicable if you have a deal that fits the VC funding model, which looks for a 10X return, scalable business model, healthy growth, and an experienced team. It’s best to start with those you know and use their funding to show support and momentum to those further out in your network. There are tens of thousands of investors in the startup world today. The key is to gain an introduction, make a pitch, and then follow up to close. How Long Will It Take to Raise Funding? I’m often asked how long it will take to raise a round of funding. It will generally take you one calendar year for every million dollars you are raising if you are working on it full-time. If you are only working towards your fundraising goals part-time, then it will take you longer. You’ll need approximately two months to prepare for the raise. This preparation phase includes preparing the company, the investor documents, and the initial investor list. It takes another 2-3 months to engage investors and bring them up to speed on your deal. They’ll want to monitor the startup for a few months to see the traction in motion. Finally, it takes about a month to close. After you close those investors, you’ll need to find another round of investors and repeat the process. For a million-dollar raise, you’ll need to do repeat this process three times on average. Some companies don’t need all of their funding in one go. Companies based on recurring revenue have the option of growing incrementally and can raise funding incrementally as well. Read more in the TEN Capital eGuide: https://staging.startupfundingespresso.com/running-a-fundraise-campaign/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Avoiding Common Pitch Deck Mistakes

    December 22, 2020

    2 min read Avoiding Common Pitch Deck Mistakes. Mistakes to Avoid Putting the right pitch deck together takes time and practice. It’s not something individuals often get correct on the first try. In developing a pitch deck, there are several mistakes that you can avoid. One of the most common mistakes is explaining how the product or technology works in great detail, but this isn’t necessary. Instead, use the pitch deck to focus on its benefits and what the product does for customers. Save the detailed explanations for later on in the process when you are in diligence. Some other common mistakes to watch out for are as follows: Not identifying the competition or claims there is no competition. Utilizing a font so small that no one beyond the first row can read it. Using too many words; overuse of words can distract the reader. The flow of the slides does not follow a logical story form. Displaying market sizing to distract the audience from the fact that you have no traction. Not having an “investment ask” at the end of the presentation, leaving investors wondering what you want from them. The pitch deck should focus on your: Core product Team Customer Fundraise You can flesh out the more extensive details later. Finally, the biggest mistake you can make with your pitch is not asking questions and not listening. Most startups spend their time talking when they should be listening for objections and concerns. Pay attention and welcome questions from your potential investors. What Your Pitch Deck Should Do A pitch deck is a brief presentation that provides your audience with an overview of your business. Ideally, the deck should answer any questions an investor might have. The primary goal of the pitch deck is to introduce your deal to an investor. Additionally, the pitch deck should serve as a way to show what is essential to an investor who may be considering an investment in your startup. A pitch deck is not is a means to explain the full history of your company. It is also not a means to explain how your product works. Tips for Pitch Deck Success After you’ve made your pitch, be sure to schedule a follow-up meeting with the investor. Good pitch decks show: What you are doing differently within your given sector. How you can grow more with funding. An ideal pitch deck showcases that the business’s proposed outcome will happen with or without the investor. In other words, your pitch deck should show that your future is inevitable. Ideally, you want to use your pitch deck to show potential investors that the results are there. Put those results up for everyone to see and show them what you have accomplished so far. The slides of your deck serve as the presenter, not the other way around. When pitching, avoid discussing multiple scenarios. Investors will find it challenging to keep track of what you’re trying to accomplish. Most importantly, focus on the core message: Product Team Market Fundraise Outcome Remember: You are the presentation; the slides are the presenter. Read more: https://staging.startupfundingespresso.com/the-art-of-pitching Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    How to Show Traction When You Are Pre-Revenue

    December 21, 2020

    2 min read: We know that investors are looking for traction, but how to show traction when you are pre-revenue? Contrary to popular belief, even if you are pre-revenue, you can still show traction with your startup. Traction can be represented by any activity with customers, even without revenue. You can show customer engagement at all phases, even before you have a product. You should have customers coaching you on what product to build. First, when communicating with investors, always include customers in your discussions. Never engage an investor meeting, email, or conference call without new info about your customer and always mention it. If you are pre-revenue, you can still talk about the prospective customers you are working with to build your product and what they are saying. The customer problem is the most important thing because it shows you are close to the revenue source, and you are working towards obtaining it. Be able to name the customers, both the company and your contact. Never talk about the customers as a general group with vague and fuzzy references. Talk specifically about the problem they want to solve and how much it costs them. Next, show how you’re building your product to solve the customer’s problem. Discuss pilots, beta tests, MVP usage, and how the customers are engaging. Once you have a few customers closed, you have enough information to start building the Unit Economics story. Show the cost of acquiring those customers, qualifying them, closing them, and how it’s a profitable business. Place those customers in a sales funnel to show prospects moving through the funnel. Place upcoming prospects at the top of the funnel to show more are on their way. You now have a repeatable, predictable process. The secret here is that most investors don’t look for big revenue; they look for repeatable revenue. In your investor updates, show additional customers coming into the funnel and moving through it. Highlight that the cost and timeframes are the same, emphasizing it’s a repeatable process, and you’re just “turning the crank.” If you’ve decided you’re not going to talk with customers until the product is complete, then you may want to rethink that strategy. Involve customers from the start and get their help on it, and ALWAYS be talking about those interactions with your investors. Read more: https://staging.startupfundingespresso.com/education/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Your Fundraising Growth Story Pt. 2

    December 14, 2020

    1 min read  Your Fundraising Growth Story Pt. 2: What’s Your Story? When founding your startup, it is important to have a growth story. While investors may invest in teams and technology, they’ll still need to see your operating cost model, how you are finding customers and how much they pay for your products and services. If you’re bringing in a lot of money, the investor will assume that you do have a story to tell. These investors will look at your business model to see how much you can grow as well as what challenges you’ll face and at what point. If your company is low revenue or pre-revenue, you can show in economic units the proven and repeat business you have. If you haven’t already, take out $5K and prove the unit economic model. Let’s say you can get a lead paying $1 for a social media ad. You then send follow-up emails which give you one lead out of fifty. Your lead then spends an average of two hundred and fifty dollars for your products or services. You can then take these numbers to come up with a basic financial model. It tells how much it costs to get a customer and the value of the loan. Knowing your numbers and being able to tell investors how you’re growing is a key to fundraising. Read more: https://staging.startupfundingespresso.com/eguide/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Your Fundraising Growth Story Pt. 1

    December 7, 2020

    2 min read  Your Fundraising Growth Story Pt. 1: To raise funding, you must have one. Many entrepreneurs approach me for funding for their startup. The biggest misconception most have is that they must first raise funding, and then they can launch and grow their business. In reality, the ones who raise funding already have a growth story and can communicate it effectively to the investors. Investors funding startups seek market validation and product validation. The product works, and people will pay for it. Some investors fund deals based solely on the team, the space, or the technology, but these are rare examples. Most are seeking what I call the “Growth Story.” They look for an operational revenue model in the business with increasing numbers on sales, team, product, and fundraise. If you have substantial revenues, say $1M, then the investor assumes you have a growth story going at some level and will start looking for the growth story’s limits- how far will it go without funding and how much further it could go with funding. Later stage investors will look at the growth story to see how well you can scale it. If you don’t have substantial revenue, you must validate the business model and use metrics to show how it works on the following levels: Activity: basic activity of the business, which includes leads, downloads, trials, etc. Unit economic metrics: the unit economic model, shows the cost of customer acquisition and revenue. Growth metrics: the user base and usage of the product is growing. Most startups can show activity metrics, but alone it won’t engage the investor. Typically the activity metrics show several users and customer engagement, but since it’s not related to what drives the business, it doesn’t mean much. But I’m pre-revenue! If your company is pre-revenue, you can show how the business model is “profitable” just on the unit economics level.  At the core, you can generate leads, qualify, and close them for revenue that exceeds the cost of acquiring the customer. Over time, you can improve these numbers. In the early days of a business, the revenue is not large. Most investors know that and don’t expect large revenue. What they look for is repeatable and predictable revenue. Showing unit economics at the core of what you are doing will generate interest. The growth metrics show the number of users increasing and the use of the product increasing over time. Daily active or monthly active users should be going up and to the right. If the business has seasons or cycles, one can use six-month moving averages to show the growth rate’s slope. Scott Adams once wrote, “Losers have goals. Winners have systems.” A startup pitch deck filled with forecasts alone is just a set of goals. A startup pitch deck showing how the business model is currently working is a system. It’s best to show up with a pitch deck showing how your system is working today. Read more: https://staging.startupfundingespresso.com/education/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Fundraising Metrics That Matter

    November 30, 2020

    2 min read  Investors look for the specific metrics in your business, so it’s important to know the fundraising metrics that matter. There are three areas that you should focus on: Activity Metrics show the basic activity of the business Unit Economic Metrics show the unit economic model, including the cost of customer acquisition and revenue. Growth Metrics show the growth in the user base and usage of the product. So what to include? Activity metrics can include things like the number of users, downloads, or subscribers. While they fall short of business results such as closed sales, activity metrics can show your customer engagement level. If your company is pre-revenue, you can show your business model’s potential profitability using unit economic metrics. Ultimately, you want to show the cost and process to generate leads, qualify them, and close them for revenue. In the early days of a business, the revenue is small. Luckily, most investors know that and don’t expect large revenue. Instead, they want to see an accurate forecast of repeatable and predictable revenue. Showing unit economics demonstrates that you have a core business model working, and with time and funding, can improve. Growth metrics can demonstrate several things, such as an increase in the number of users, or an increase in the frequency in which customers are using the product. Active users should be going up and to the right. If your business has seasons or cycles, you can use a six-month moving average to show your growth rate. Knowing your metrics is vital when looking for funding, so be prepared, and potential investors will take note. If you can only show activity metrics, then do so. Better yet, validate your business model with unit economic metrics. Ultimately, the fundraising metrics that matter show growth in users and usage. Whatever you do, don’t show up empty-handed. Read more: https://staging.startupfundingespresso.com/education/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    How to Tell A Story

    November 24, 2020

    2 min read How to tell a story. What makes a story? At its core, a story consists of a beginning, middle, and end. If it’s a good story, that beginning, middle, and end will take you on a journey. If it’s a great story, it’s likely one you will never forget. So, what does the art of storytelling have to do with your startup? The ability to tell a story gives you the means to make your company memorable. When pitching your business plan, use the story format for a more significant impact and as a way to connect with investors. Start with the problem you faced in the industry (the beginning). Show how you couldn’t find a solution (the middle). Show how you created your solution (the middle). Highlight the challenges you overcame (the end). Show the current business status and your upcoming plans (the end). After you address the issue of not finding a solution, be sure to show how others are now coming to you for that solution. Along the way, you can talk about how you built the team and chose a go-to-market strategy. Remember, it’s about taking the investor on a journey, so make it as memorable as possible. Each element of the story should highlight one aspect of the business plan. When contemplating how to tell a story to your investors, remember to keep your audience engaged throughout the pitch. Make sure your presentation has direction and that there’s a beginning and an ending. This makes the journey worth it. Read more: https://staging.startupfundingespresso.com/education/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    What is the Real Due Diligence Process?

    November 1, 2020

    2 min read, I’m always surprised by how many investors say the team is the most important element of a startup, but how little the due diligence process focuses on the team. I can look back on successes and failures in my startup investing career, and almost all failures can be traced back to the “team wasn’t up to the task.” I recognize that I often underestimated the challenge at hand, but in all cases, failure was due to the team lacking skills or focused commitment. In running the due diligence process, it’s not about the product; it’s about the team. There are standard checklists, and the investor should verify the basics such as legal entities, tax filings, patent filings, etc., but the real due diligence comes when you go to the startup’s office and meet the team. I had a new angel investor ask me the other day how he should diligence a startup. I encouraged him to set up a meeting in the startups’ office and meet the team and interview each one. The first person you want to meet if you haven’t already is the CEO. You are assessing leadership, communication, strategy, and other key skills. If this interaction isn’t stellar, there’s no need to continue further with the potential investment. In reviewing the rest of the team, you want to check to see those on the team’s skill levels. If there are advisors or mentors, you want to meet with them to see how much time commitment they have for the project. In the end, time, skills, and focus will need to be applied, and you are looking to see if the team can do that. You can learn a great deal about a company when you go to their workplace. I had a friend who worked for IBM and considered investing in a startup by some of his former coworkers and set up a meeting at their office. When he followed the address, it led him to a skyscraper in the downtown area. There he found the team had rented out the entire 12th floor of the building. Needless to say, the startup ran out of cash in just 6 months. Walking through their office, you’ll get a much deeper sense of who they are and what they are doing. Products come and go, markets shift, and change, but the team is a constant. Read more: https://staging.startupfundingespresso.com/education/ Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Investing in Cannabis: Understanding the Cannabis Industry as an Investor

    June 16, 2020

    The cannabis industry has become a nest of investment opportunities. However, investing in cannabis differs from other sectors in a lot of ways. One of the main things that sets this space apart is the fact that it is still in its creation phase. Cannabusiness is an actively developing space. With that comes no historicals to reference; no previous data on which to base investments. For investors to enter this space, there must be an effort to dig in and figure out a way to it. It’s about understanding the industry on a ground-up basis because the information flow and data sets are limited. You have to live in it, to be a part of it genuinely. Part-time investors beware: it’s hard to be in this space part-time if you’re looking to gain exposure. If you want to invest in the industry, you have two ways to go about it.   You find and invest with managers that live and breathe this industry every day, or   You live and breathe it yourself. It’s also essential to understand that this industry is a microcosm of the world in terms of it covering nearly all the verticals that exist. Cannabis can bring opportunities in: Agtech SAS tech   Supply chain  Data  Advertising, media and marketing  Real estate  Cultivation  Manufacturing Retail If you want to begin investing in cannabis, you just have to know where to look. Once you spend the time to understand this industry, you’ll then have to familiarize yourself with the various subsequent verticals. For the individual investor, it is a multipronged process of diving in fully to understand the industry as a whole, and all moving parts to uncover the best opportunities. Read more from our recent eGuide: https://staging.startupfundingespresso.com/how-we-invest-vol-vii/  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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