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How Artificial Intelligence Is Transforming Venture Capital and Startup Investing

How Artificial Intelligence Is Transforming Venture Capital and Startup Investing

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Fundraising, Investing

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    Five Competitive Advantages: Recurring Revenue

    Competitive advantage increases revenue by 30% over the competition or decreases cost by 30%. Here are five sources of competitive advantage: –Recurring revenue –Channel access –Platform-based solution instead of singular products. –Network effects in action–the value of the product increases with the number of users –Virality (not the same as network effects) (users invite other users) In today’s world, you would think every business has recurring revenue.  Yet, I find most businesses who are raising funding did not structure their business that way. Recurring revenue helps your business in several ways. It opens up your business to new customers who could not afford your product previously because the one-time payment was too high. By breaking the payment into smaller steps, more customers can afford it. It provides a known revenue stream so you can plan your business better as you know how much you will have coming in. Overall this should increase your revenue in the long run by 30%. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    Five Competitive Advantages for Building a Winning Business Model

    When I ask an entrepreneur what their competitive advantage is, most point to their product and say it’s better. Of course, they spend ten minutes citing anecdotal stories to “prove” it. My definition of a competitive advantage is that it increases in revenue by 30% over the competition or a decrease in cost by 30%. Here are five sources of competitive advantage: –Channel access –Recurring revenue –Platform based solution instead of singular products. –Network effects in action–the value of the product increases with the number of users –Virality (not the same as network effects, users invite other users) These advantages give your business the ability to scale. Scale comes from revenue increasing faster than cost. In raising funding, competitive advantages can make the difference in closing an investor. The key is to quantify the effects of the advantage in dollars. If you just say you have it then it will convince no one. You must demonstrate with numbers. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    The Liquidity Challenge in the Startup Funding World

    I remember the last ACA (Angel Capital Association) meeting I attended. The theme was exits and how to achieve them. It seemed like every angel or angel group had a list of the deals they’ve been in for more than ten years. The sessions focused on helping the entrepreneur achieve an exit. More than a few of the sessions talked about how to deal with entrepreneurs who no longer wanted an exit. It appears that if the entrepreneur can gain an above market salary that in many cases they’ll make more if they stay with the business for ten years or more than if they sell the business. One of the key metrics to monitor is salaries of the C-level team of your startup and compare it against market rate. It should be about 70% to 80% of the market rate. If it’s above 100% then you’ve got a problem. First, those are funds that should be growing the business. Second, the startup has most likely given up on a high dollar return on selling the business and is now taking their exit through the payroll plan. Having talked to many an entrepreneur about achieving an exit, I find that about half want an exit but can’t get to one with a large influx of new capital or they don’t want one at all. Either way, it’s a problem. There’s a saying in the financial world, “Getting into the deal is easy. It’s the getting out part that is hard.” Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    Reducing the Fees in Startup Investing

    I’m a big fan of index investing as it’s a great way to reduce the cost of investing in publicly traded stocks and bonds. Index funds have less than 1% fees which compare favorably to some brokerages which charge 1% of assets under management or more. In the startup space the cost of investing is also a big factor. Investing in VC funds often come with hefty fees including 2% for management and 20% of the returns.  I’ve done revenue based funding but found the operational overhead can be expensive. Revenue-based funding requires monthly follow ups to calculate revenue and there’s the ongoing monitoring process.   At TEN we provide low cost tools for investing in early stage companies.  First, we’re not a broker so we don’t charge carry or other fees on the investment. We charge a monthly retainer fee to the company raising funding.   Instead of the traditional revenue-based fund model, TEN employs a redemption right in a convertible note as a means of providing a liquidity event for the investor. This alleviates the bank account monitoring and constant calculation of revenue. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    How Fundraising is Like Fishing

    1 min read I meet a great number of entrepreneurs and have seen numerous approaches to raising funding. Some approach it as an opportunity to meet new people and explore another part of the entrepreneur ecosystem.  Others see it as a chore that distracts from the real business such as product development, selling customers, creating the next unicorn (take your pick).  Some bring their sales skills to the process and are quite good at meeting investors, listening to their concerns, and closing the deal. Others expect the investor to be bowled over by the idea, the pitch deck, the rock-star team (take your pick), or otherwise. When that doesn’t happen they look at it as a failed meeting. The key is to bring your best game to the meeting and treat it as you would fishing. In fishing, you have to set the bait and be patient for the right fish to come along. Just like you can’t rush a fish to take the hook so you can’t rush an investor. If you don’t get a bite in one place you can move to another location or you can stay where you are and change the bait. I see entrepreneurs setting specific time schedules for their raise. This is the same as casting the line and then saying “by 3:25 we will have our first fish”. The fish rarely work on your schedule. Investors won’t do so either. While a fisherman can throw a stick of dynamite into the waters to expedite the process, this is where the analogy ends as you can’t do that with investors, patience is still key. Read more in our TEN Capital eGuides: http://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

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    What We’ve Learned Over the Years: How to Tell if Your Investor is Really Invested

    In today’s startup world every fifth person is an investor in some form or fashion. Startup investors call to discuss deal structures, valuations, or serial entrepreneurs. I can tell the difference between a serious investor and  a not so serious investor. A pretend-startup-investor likes the title of startup investment but won’t commit the time or money to make it successful. An investor that is not serious can waste a startups time. Here are some telltale signs of a pretend-startup investor the investor is not interested enough to visit the team’s HQ or meet with the team. the investor asks about the price first and then figures out the values in the business later if at all. the investor wants reports but doesn’t read them. the investor talks about helping the business but never finds a way to contribute. the investor glances at the due diligence documents but doesn’t dive deep enough to understand the business. there’s no investment thesis or guiding criteria for their investment choices they have no network in the target industry or startup world and can do little to help the startup post-funding. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    What We’ve Learned Over the Years- How You Can Tell you are Talking to a Pretend-preneur

    The startup world is open to anybody, and it seems like everybody comes through it at some time or another. I receive calls daily from entrepreneurs seeking to start a business, raise funding, or hire a team member. I can always tell who is the serious entrepreneur and pretend-preneur – someone who likes the idea of running a startup but is not committed to the work required to make it a success. That’s important because a pretend-preneur who raises funding will ultimately waste it, and there are too many good startups to spend money on those who don’t see it through. Here are some telltale signs of a Pretendpreneur –They are more worried about job titles and credit for the work. –They don’t seem too focused on the customer and what it will take to make them happy with the product, as that’s a detail to be figured out later. –They focus on the superficialities of the business and not the core functions of building the product and selling it. –They look for ways around the hard work rather than working their way through it. — Problems are everyone else’s fault, and nothing can be done about it. –They don’t know who their customers are, and it doesn’t bother them. –They think funding will solve all problems and make life easier after the raise. –They don’t know their numbers, but someone else in their organization does, and that’s good enough. Everyone dreams of a successful startup and fundraise, but it takes more than a dream to be successful. Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    What We’ve Learned Over the Years- Venture Capitalists Engage in Brand Marketing

    In the past Venture Capitalists stood in the shadows of their successful portfolio companies. Venture Capitalists would hint about their contribution and use veiled wording in Twitter posts. Today we see VCs stepping up to take more credit for their contribution. There are numerous examples of VCs using successful exits to validate their investment thesis. With the explosion of the number of venture capital providers comes the need for VCs to engage in brand marketing. A list of successful portfolio companies burnishes their brand. It helps them gain new deal flow and limited partners and investors. Just having a fund is no longer a source of attraction for the best deals — there are too many other funds out there. Today, VCs have to position themselves as unique in expertise, deal flow, support, and connections. The startup has more choices to consider as venture capital becomes more abundant. VCs will have to promote their programs and experience more actively. VCs need to gain market exposure on their unique value proposition to generate deal flow which is the lifeblood of the VC business model. They are now brand managers who often have a business development and marketing team driving the awareness around their fund.     Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies

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    What We’ve Learned Over the Years: In the Startup World Everyone Talks a Big Game

    In the startup world, everyone talks a big game and investors are looking for those who can do it. I love startup stories. In the startup world everyone has a grand idea and big plans to make it happen. It’s the venture world so you better have an idea that can be big. The talk around the ideas is large and full of hyperbole. The future is going to be so bright that you find yourself reaching for your shades. But then the startup has to actually build it and show the growth story in progress. Scott Adams once wrote- “Losers have goals. Winners have systems.” If the startup has some revenue traction then you probably have some systems behind it that you can grow. But what if they don’t have any meaningful revenue yet? One technique is to ask questions that go to the systems they will put in place such as: Tell me about your system for generating leads. Exactly how will it work? Tell me about your sales process.   Exactly how do you find the right prospect and close them? In other words, the startup needs to do more than just tell you their goals in your PowerPoint slide deck. They need to describe the systems they can put into place to do so. If the answers are vague and fuzzy, then it’s going to be a long, slow climb. If the answers show expertise and experience around it, then this one has potential for investment. Read more: http://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

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