This year's TechPoint Summit was filled with inspiring stories, new
ways to innovate and many developers reaching out with their
product and to others products as well. One positive side that
has arisen in response to the down turn of our economy is
the strong urge for new development and innovation within
the world of Technology. The drive and excitement needed
to fuel this was filling the air
during The TechPoint Summit and events leading up
to it! When
speaking to innovators, developers and...Read More »
When considering entering into a partnership or making a private
investment in an early stage company, beware of the “idea
guy”. This is a title sometimes used by entrepreneurial
minded individuals who don’t contribute to the growth of the
company through development, sales or management but develop
concepts (ideas) for products or services for some market
opportunity.
From my experience, idea guys often have little ability to manage cash flow or people. Without the proper partners in...Read More »
From my experience, idea guys often have little ability to manage cash flow or people. Without the proper partners in...Read More »
As stated in Part 2 of
this series, a business’ capital strategy is both
directed by the market strategy and leadership
team required to carry out the strategy as well as
directing to the market strategy and team. A
solid capital strategy is based on understanding where you are and
where you need to go.
The first step in developing a capital strategy is to know your revenue projections. If you had the money and team you need, what can you sell and when? In developing a market strategy the...Read More »
The first step in developing a capital strategy is to know your revenue projections. If you had the money and team you need, what can you sell and when? In developing a market strategy the...Read More »
Over the last three weeks I have visited the west coast twice and
Toronto once to help clients work through funding rounds and
strategic acquisitions. I also visited with two angel
investment groups which I work with. The primary purpose of
each trip was to help clients develop and realize their capital
strategy for growth. While most of these entrepreneur clients
are in technology fields, others include a tax planning firm and a
Bollywood project out of Toronto.
It does not matter what world...Read More »
It does not matter what world...Read More »
The following is a guest post by a fellow Gravity Ventures member and
friend, Dr. Tony Ratliff:
Learning to Pitch Before You Start Raising Capital
By Dr. Tony Ratliff
It only took about six months of deal flow and a handful of “pitches” before I realized that most entrepreneurs are really, really bad at “selling themselves” and “pitching” their ideas and companies to investors.
I cringe every time I listen to a great start-up idea or read a well-written business plan, and then watch in horror as...Read More »
Learning to Pitch Before You Start Raising Capital
By Dr. Tony Ratliff
It only took about six months of deal flow and a handful of “pitches” before I realized that most entrepreneurs are really, really bad at “selling themselves” and “pitching” their ideas and companies to investors.
I cringe every time I listen to a great start-up idea or read a well-written business plan, and then watch in horror as...Read More »
Determining a valuation for a pre-revenue company is a difficult
process. A Harvard VC formula does not make sense at this
stage as available P/E ratios essentially compare apples to
oranges, cash flow projections are too untrustworthy to use a DCF
method, and there is no such thing as a true market comp.
Investors must rely on qualitative factors in connection to
valuation formulas to determine how much they think the thing is
worth. Some qualitative factors include:
• Is the...
Read More »A tech entrepreneur friend recently told me that the concept of an
“evangelist” in tech companies is all but dead. Honestly I
don’t know if it was ever as alive as people thought, but I liked
where he was going with this. I’ve talked to a number of
aspiring entrepreneurs who view their role in their development
stage company as that of an evangelist. Practically what this
often means is that the person has a entrepreneurial idea but no
ability to either develop it, sell it or run the...Read More »
Last night I lectured on this topic to my entrepreneurial capstone
class at Purdue. It is possibly the most basic question for
any startup looking to raise capital, but it is often not
approached correctly. In my experience most entrepreneurs
take a wild guess at their number.
The correct approach is to look at your cash flow projections and determine it from there. For a new startup the goal is to get to breakeven and beyond. For later stage companies the projections may address strategic...Read More »
The correct approach is to look at your cash flow projections and determine it from there. For a new startup the goal is to get to breakeven and beyond. For later stage companies the projections may address strategic...Read More »
“What are you doing with my money?” No, it’s not your mom or
dad asking or your friend you lost a bet to on a college football
game – it’s your potential investor and they’re asking one of the
most fundamental questions in a capital raise. Why?
Because you forgot to answer it ahead of time! You’re not
alone, though, too often a sources and uses statement is
overlooked. Many entrepreneurs simply rely on the financials,
general statements in the text of the business plan or...Read More »
The last couple of years have been strange. With the change
in the economy, many early stage companies are looking for anybody,
and I mean anybody, to invest in their capital round. As the
economy rebounds (which we are seeing in technology markets)
business owners are again able to be picky when considering angel
investors.
An angel investor (or an angel investor group or private equity firm) should be more than just a liquid wallet. He/she should be a strategic member of your team. They...Read More »
An angel investor (or an angel investor group or private equity firm) should be more than just a liquid wallet. He/she should be a strategic member of your team. They...Read More »
I read many business plans for early stage companies - most of whom
are seeking some sort of seed or early round capital funding from
private equity investors. One of the largest discrepancies
I see in plans is in the expense models regarding allocation
of salaries.
Post-revenue, most businesses will find salaries (including benefits) falling somewhere between 30% and 55% of their net revenue. But what about pre-revenue companies that are looking to use early capital to launch? I read a...Read More »
Post-revenue, most businesses will find salaries (including benefits) falling somewhere between 30% and 55% of their net revenue. But what about pre-revenue companies that are looking to use early capital to launch? I read a...Read More »
Some B2B business models do well in targeting early stage customers
(e.g., less than $5MM revenue) but have trouble scaling with
customers as they grow. Other B2B models cannot hit a price
point for early stage customers and must target customers at later
business stages.
I recently saw a business model that concerned me on this point. The SaaS application in the model was not cost effective for early stage customers – there are market alternatives that are offered for free that do just about...Read More »
I recently saw a business model that concerned me on this point. The SaaS application in the model was not cost effective for early stage customers – there are market alternatives that are offered for free that do just about...Read More »
If you are a founder of an emerging company looking to do your
first capital raise, consider talking to angel investors BEFORE
having your private equity attorney draft the organizational and
exempt securities documents for your private placement
offering. I meet a lot of business owners at this stage who
make guesses as to what investors are looking for and what the
market will bear. What pre-money valuation should we use?
What preferences (if any) should we include in the private
placement...Read More »
This is the forth post in a series on developing a good business
model for an early stage company.
Here are some additional points to consider when structuring a management team:
c. Beware of Scientist Syndrome. This is a business model killer. It is especially apparent in technology and science based businesses, but you see it in all types of professions and industries. Is the goal of the key leader to advance the technology or to develop a profitable business model? Is the goal of the...
Read More »
Here are some additional points to consider when structuring a management team:
c. Beware of Scientist Syndrome. This is a business model killer. It is especially apparent in technology and science based businesses, but you see it in all types of professions and industries. Is the goal of the key leader to advance the technology or to develop a profitable business model? Is the goal of the...
This is the third post in a series on developing a good business
model for an early stage company.
2. Solid Management Team
I have heard it said that more businesses fail due to cash flow than anything else. I completely disagree. I say that more businesses fail due to management team issues than any other reason. If a company dies because of cash flow, it is usually because the wrong person was at the helm and poorly planning and/or making bad decisions – either market opportunity was not...Read More »
2. Solid Management Team
I have heard it said that more businesses fail due to cash flow than anything else. I completely disagree. I say that more businesses fail due to management team issues than any other reason. If a company dies because of cash flow, it is usually because the wrong person was at the helm and poorly planning and/or making bad decisions – either market opportunity was not...Read More »
This is the second post in a series on developing a good business
model for an early stage company.
Proof of Scale and Proof of Commercialization (at Profit)
Following POC, you want to prove that your concept can scale under a viable business model. Proof of Scale and Proof of Commercialization (at profit) work hand in hand as each is often dependant on the other. POS refers to the ability for a concept to scale in terms of sellable units in the marketplace and business growth requirements....Read More »
Proof of Scale and Proof of Commercialization (at Profit)
Following POC, you want to prove that your concept can scale under a viable business model. Proof of Scale and Proof of Commercialization (at profit) work hand in hand as each is often dependant on the other. POS refers to the ability for a concept to scale in terms of sellable units in the marketplace and business growth requirements....Read More »
New technology businesses usually face two hurdles to get their
product to market. The first is proof of concept. The
second is proof of scale.
Both are intended to solve the “Ability” stage of the business plan process and move the business into the "Meeting" stage:
Proof of concept is simply the proof that the business can develop a working prototype that...Read More »
Both are intended to solve the “Ability” stage of the business plan process and move the business into the "Meeting" stage:
Recognition of Market ->
Recognition of Market Opportunity -> Ability to Meet Market
Opportunity -> Meeting Market Opportunity at Profit
Proof of concept is simply the proof that the business can develop a working prototype that...Read More »
I saw
a great article awhile back in Entrepreneur and thought
I should post the article for those in the formation stages of
their next business venture.
I can't stress enough how much time and energy it takes to launch a
start-up, and just how
much the success or failure of a budding new company rests on the
people involved. I see it everyday as an Indiana
technology lawyer involved in Indiana entrepreneurial law.
You can count on spending hours upon hours of the day with your
business...
I had a meeting with an Indiana
technology client this week who is interested in pursuing
US private equity funding for a roll out of a new SaaS product
(actually a 7 year old successful software product converted to a
new SaaS model). The capital will be used primarily for
additional sales staff with a small portion being used to hire an
additional developer.I am always happy with this structure – focus investors’ money on revenue generating activities rather than product development. I see...Read More »
The TechPoint
Innovation Summit 2009 is finally here. I have been
looking forward to this event this year (which has not necessarily
been the case in past years). This year's focus is more tailored to helping seed and emerging stage Indiana technology companies pursue excellence in developing their innovation, marketing their innovation and seeking funding for their innovation. As an Indiana tech lawyer these topics hit right at heart of the needs I have wrestled through with my clients.
I...Read More »
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