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The Benefits of a Family Office

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    Four Competitive Advantages in Startup Fundraising

    2min read My definition of competitive advantage is that it increases revenue by 30% over the competition or is a decrease in cost by 30%. Four sources of competitive advantage include recurring revenue, platform-based solution, network effects in action, and virality. These advantages give your business the ability to scale.  The scale comes from revenue increasing faster than cost. Let’s take a closer look at each of these.  Recurring Revenue In today’s world, you would think every business has recurring revenue.  Yet, I find most businesses that are raising funding did not structure their business for recurring revenue. 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 will be able to afford it. It also provides an ongoing revenue stream so you can plan your business better as you know how much you will have coming in. It helps you maintain engagement with the customer and gives you the opportunity to find new opportunities to serve the customer. Overall, it should increase your revenue in the long run by at least 30%. Platform-Based Solution A platform-based solution is a competitive advantage over a single product company as a platform brings an inherent cost advantage. Platforms reuse the research, design, architecture, and product packaging. Customer support is also reused. Consider adopting a platform-based approach to your business.  Network Effects in Action Most businesses increase in value as the customer base grows as it validates the product/service.  Users encourage others to join the platform. This is called Network Effects. As the number of users grows the value of the platform grows as well. If a business can harness that customer base and turn it into a community that more aggressively attracts other users then it’s a competitive advantage. Virality A key competitive advantage is virality, in which users invite other users to join your platform. Virality reduces your cost of customer acquisition. I once had a CEO tell me, “I wish I had designed for virality rather than revenue.” If you build virality into your product, you will have a larger pool of prospects to monetize as well as a lower cost of customer acquisition. For your next project, consider designing for virality.   Read more on the TEN Capital eGuide: How to Craft a Startup Story 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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    Funding from Family and Friends

    1min read Should you raise funding from family and friends? Funding is a massive hurdle for any new business. In the beginning, it may be difficult to convince a traditional investor to see your vision and join your initial funding round. For this reason, many startups raise funding from family and friends to get the business up and running during their first round. There are pros and cons to funding your business with money from the people you know. You’ll need to approach the right people and keep it professional. The problem is, that many startups are reluctant to take family and friends’ funding because they fear the awkwardness of what happens if things don’t work out. The glaring question is always: Should I take money from family and friends to fund the business? The answer is: Yes. Outside investors will look at family and friends’ funding as a sign of support for your business. This is a good thing. It is a major plus to have this support when you’re seeking additional funding later on. Consider it from the investor’s perspective: If your family and friends won’t invest, why should the outside investor invest? So, don’t be afraid to approach your family and friends for funding. In the long run, it can help you with additional funding in the future.   Read more on the TEN Capital eGuide: Family, Friends, and Other Funding Sources 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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    How to Write a Startup Story

    2 min read Storytelling is a key skill for any startup raising funding. In the early days of a startup, the product and team aren’t fully developed, and customers are typically not fully engaged. The investors look to the founders to understand the potential of the business. The founder who can articulate a clear vision of the company and fill in the gaps can win over the investor. Such a skill demonstrates to investors the ability to win over potential employees, future customers, and critical partners to make the business. Let’s discuss how to use storytelling more.  Crafting a Good Startup Story To pitch an investor, you’ll need a carefully crafted startup story. Tell the story in your own words as if you’re talking with a friend at a bar. Show how the story is relevant to those in the audience, something everyone can relate to. Keep the story simple. It needs to be tight and keep the audience engaged. Instead of starting at the beginning, start from the first big event whether it be a disaster or a success.  Show the mistakes you made that others can learn from. Talk about your values and those of the company. Demonstrate authenticity along the way. Finally, have a message about your company’s brand that you want to communicate and use the story to build up to it. Three Key Startup Stories to Tell Your Investor There are three stories every startup should be able to tell to investors. The first is your origin story which tells why you started the business to begin with and how you got to where you are today. This story answers the question, “Why are you doing this?” which usually comes from the storyline, “I had a problem. I couldn’t find a solution, so I created my own.”  The second story is that of your customer and the problem they have. This story starts with a day in the life of a customer. It describes what they do, how they work, and what problems they face. The customer has this problem, it costs them this much each year, and they are motivated to find a solution. You then drop your product in as the ideal solution. The third story is: We can make the world a better place. In this story, you paint a big vision of a bold future where everything is better. It states, “Imagine if we had this problem solved, how much better off everyone would be.” You then show how your solution gives everyone that better world.  Write out your version for each of these three stories and practice it before talking with an investor. Read more on the TEN Capital eGuide: How to Craft a Startup Story 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 is Debt-Financing?

    2 min read If your startup is raising capital through an alternative funding method, you may want to consider debt financing. As your company grows, and in turn, your equity grows in value, debt-funding may be the more lucrative option for you. There are several forms of debt to consider, each form is used for a different application. Debt-Funding Primary Options Let’s look at some of the primary options available to startups for debt-funding: Traditional Bank Loan: Often used to launch s company and requires a personal guarantee. Line of Credit: Once you have revenue, use it to smooth out the uneven bumps in your cash flow. Equipment Financing: If you need equipment for your business, this is a good way to finance. It reduces your fundraise requirements. Revenue-Based Funding: Once you have a steady flow of revenue, you can use revenue-based funding to accelerate the growth as you pay back out of the revenue stream. Factoring/Accounts Receivable Funding: Once you have a steady book of business, you can borrow against the accounts receivable line. Venture Debt: Once you have substantial revenue, you can raise debt funding rather than equity funding as it will be cheaper in the long run.  If none of these options work for your organization, there are other forms of alternative funding to consider besides debt funding. Alternate sources can include litigation funding, promissory notes, revenue-based funding, and salary-based funding. Evaluate what works best for you and your team, and get started raising capital today.   Read more on the TEN Capital eGuide: Alternate Investing 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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    Five Key Elements to a Startup Story

    2 min read Your story is a critical part of your fundraise pitch. There are five key elements to a startup story and they are the purpose, the hero, the mission, the obstacle, and finally, the plot. Continue reading below to learn more about each of these elements and how to incorporate them into your startup story. Purpose The purpose comes from what inspired your startup. There’s something about the world that you want to change, so you started the company to fix it. Next, connect your theme to a universal principle or truth that everyone recognizes. Now, build your story around that theme. Show how your startup’s mission reflects your core principles and values in your story. Also, avoid common mistakes such as trying to tell the investor how your product works in minute detail. It’s better to focus on the benefits of what your product does rather than the features. Hero The hero is the character whose journey the audience cares about the most. In a startup fundraise story, this is the CEO. Most heroes are trusty and likable. The audience empathizes with them in some way. Your story should focus on the hero and not just the product. Investors are seeking to build a relationship with people. The company takes on the persona of the CEO. If the CEO is trustworthy, then the company will be considered reliable. In your startup fundraise story, think how the CEO fills the role of the hero. Mission The Mission is the job to be done. It’s the goal of the hero both now and beyond the story. For your startup story, focus on what the CEO is trying to accomplish and how they plan to solve it. Outline how complex the problem is for the customer and how it can be easier. Show how the proposed solution will save time and money for the customer. Talk about the steps to accomplish the mission and how you will bring the solution to the market.  Finally, show how the product achieves the customer’s desired outcome. In telling the startup story, use the mission to set the direction. Obstacle The obstacle stands between the hero and the goal. All good stories have a conflict that needs to be overcome. Obstacles could be competitors, lack of knowledge, regulations, and more. The obstacle creates tension which holds the audience’s attention and helps them experience the story for themselves. For your startup story, show the CEO facing the challenge of bringing the product to the market.  Investors will empathize with the plight as they have been there themselves. Show how the CEO overcomes those challenges as the investors look for grit, determination, and persistence. Plot The plot is a series of events that leads to achieving the mission. Plots can be set up in several ways and choosing the right model will help make the story more engaging. You could play the David fighting Goliath, the small startup taking on the big corporation. You could tell a Rags to Riches story- how a small startup hit upon a big idea. Or you can position it as a quest by showing the entrepreneur’s journey and the lessons learned. From the story, the investor should see how you, the CEO, had an idea that changed the world.  Read more on the TEN Capital eGuide: How to Craft a Startup Story 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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    The Art of Pitching Q&A with CEO Hall Martin

    2 min read Strong pitching skills are imperative when trying to communicate your idea and capabilities to an investor. The art of pitching goes beyond presenting the standard deck. It includes crafting a story through the intentional use of language, tailoring the pitch to each interested investor, and emphasizing how your current systems will lead to long-term success. The Craft of Writing When pitching investors, sometimes we need to condense our pitch deck into an elevator pitch. Instead of thinking about this as a rushed version of the pitch deck, you should think of it as presenting the information in story format. Instead of talking faster to cram more words into the allotted time, choose your words carefully and craft a meaningful anecdote about your organization and its mission. Think about keywords and phrases that communicate the value of your deal. Choose only one or two key financial numbers to share at this time. The key here is this: anecdotes tell and numbers sell. Tell your story, and then top it off with the crucial financial elements. Tailor the Pitch When pitching your deal to an investor, it helps to know your investor first. You’ll find you can make a much better presentation by customizing it a little bit. There are different kinds of investors out there that you may be pitching: venture capital, angels, and high net worth. The key is that they each have different care. And so, you want to think about the whereabouts and concerns are of the investor that you’re working with, and cater to those in your pitch.  Venture capital investors want a 10x return.  You need to prove there is a very large market and a very high growth rate. Angels have some capital preservation and therefore look for initial traction and revenue. They want to see some of the risks coming out of the deal. High net worth investors are also looking for very good returns, but there tend to be risk-averse. Emphasize Long-Term Success Most startups don’t have a lot of revenue- almost no one does as an early-stage startup. What investors care about more is predictable revenue. Use your pitch deck to show investors that you have systems running in your startup behind the scenes that are generating leads, closing sales, keeping the customers happy, and retaining those customers. Even if the numbers are small now, you can show that with these systems in place, the numbers will grow over time in a predictable manner. A scalable, growable organization is a real value proposition for the investor.   Read more on the TEN Capital Fundraise Launch Program 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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    Alternate Startup Funding Options

    2 min read There are several ways for startups to gain capital. At times, the most common methods, for example, securing investors, aren’t the most beneficial. If your startup is looking for alternative funding options, consider one or more of the methods below. Promissory Notes A promissory note is likely used to set up a loan it is for friends or family. Here are some key points to consider in reading a promissory note: The ‘Note Summary’ section establishes the relationship between the borrower and the lender, the date of the note, the total loan amount, and the agreed-upon interest rate.  The ‘Terms of Repayment’ section defines how the loan will be repaid. The ‘Late Fee’ clause typically includes a late fee penalty. This clause documents either a fixed amount, such as $100 in addition to the current payment due, or a percentage of the payment due such as 1% per week. There is an option to include a prepayment option, which may help the lender as well as the startup. For example, follow-on accredited investors might prefer a loan to be paid off prior to closing their investment deal. Family and friend loans are intended to be more supportive, so you may choose a language that allows time to remedy the default within a predetermined number of days or weeks.  Revenue-Based Funding Revenue-based funding makes a startup investment and pays back the investor at the rate of top-line revenue. This aligns the investor and founder to the same goal, to create a business and grow sales. The higher the sales, the faster the payback to the investors and the higher the compensation to the founders. Revenue-based funding typically sets the payback rate at 1-3% of top-line revenue. In revenue-based funding, the investors receive a revenue share until they reach a predetermined payback amount. This is different from a loan which sets the payout rate regardless of the seasons or cycles within the business.  Revenue-based funding keeps early-stage investors off the cap table so it’s clean for future investors. Once the payback amount is reached, the investors are finished and are no longer in the picture. It works well for businesses that have recurring revenue and healthy margins and is a good way to reduce dilution for the founders. Salary-Based Funding Salary-based funding makes a startup investment and pays back the investor at the rate of compensation the founders take. This aligns the investor and founder on the same goal: to create a business that can sustain itself and pay the team. The investors receive an agreed-upon percentage of any salary or profit the business takes in. In salary-based funding, the investors receive payback until they reach a predetermined payback amount. This is different from revenue-based funding which is a debt instrument that pays out based on a percentage of top-line revenue. This keeps early-stage investors off the cap table so it’s clean for future investors. The investor can choose to take their payback in cash, or they could convert it to equity. This is a good way to run an initial raise when it’s not clear if additional funding will be required.   Read more on the TEN Capital Network eGuide: Alternate Investing 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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    Fundraising Basics

    1 min read Fundraising can be an exciting venture, yet it can also be a bit nerve-wracking if you don’t feel secure in your campaign decisions. Learning the basics will help you to raise funds confidently and successfully. In this article, we discuss the basics of fundraising including how to know when it is the right time to start your raise and the basic principles of fundraising. Continue reading below to learn more. When to Start Your Raise In launching your startup, look for a trigger that indicates when to start a 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, then it’s a trigger to consider launching a fundraise campaign. In approaching an investor, you should have a milestone completed AND a milestone to accomplish with the funds to be raised.  Principles in Fundraising There are basic principles around fundraising that apply in every situation. The first and most important principle is to build a relationship with the investor. The more you know the investor and the more they know you, the better the outcome. Next is that you’ll need to demonstrate results in every contact. Never show up without a currently relevant result or a proof point. With this said, it is still important that you be honest at all times.  It only takes one deception to ruin the relationship. The next principle to consider is that it’s the number of touches and consistency that counts, not how long the discussion or pitch deck runs. It takes four touches for an investor to understand what you are doing and seven touches before they make a final decision.   Lastly, include the “Why?”: Why are you doing this startup?   Read more on the TEN Capital Network eGuide: 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

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    What You Need to Bring to the Table

    2 min read When you are raising funding, investors want to know what progress the company is making. After the initial presentation, the investor wants to hear about progress in four areas: Sales  Team  Product Fundraise Updates on the market size, growth, and competition status are not of interest. The most important thing to understand is that the investor wants to know what you are doing. Focus your updates on these four core items in each communication with the investor to give them a sense of traction and momentum. Sales Most startups focus on the product first and treat the customer as an after-thought. However, the investor knows that in the long run, customer revenue will make or break your business, not the product. Even before you have a product you should be talking with customers about their needs and relaying that to investors. As you build the product, you want to maintain customer interactions with you and your product and share that with investors. When talking with investors, be sure to highlight the customers’ problems and the solution they would like to see. It’s important to show the investor that customers are with you on your journey and they are not something to be recruited later when the product is done. The Team Investors will look closely at your team since they are a crucial part of your company’s potential success. One of the first things investors will look for is skill and completeness. Your team must have the skills needed to accomplish the work. Investors also want to know that you’re not missing anything important when it comes to the structure of that team. At the seed level, a complete team consists of: An individual who is building An individual who is selling You cannot have a team where everyone is building and no one is selling. Focusing on building without selling is one of the most common mistakes startups make by thinking they must have a product before they can sell it. In reality, you should be selling your product as soon as possible. You may not be generating revenue, but you should be bringing the customer through the process just as you are doing so with the investor. Product Sometimes entrepreneurs spend a large amount of time writing a massive business plan that talks about the startup’s services and the benefits that come from those services. The problem is, it can focus so much on the benefits and services that it becomes hard for an investor to understand exactly what the product is. Investors want to know what your product is; not just your technology or the benefits it offers. You must show the product and define it clearly so investors know how you will approach the market. Make sure the product has a name when you’re going to pitch. This helps establish the product as a tangible thing in the investor’s mind even if the product is still in development. Tell the investor what the product is in 5 words or less so they have an understanding of exactly what it is you are selling. Even if the product is not yet ready for sale treat it like it has form and function now. This helps investors grasp what you are doing. IP When it comes to investing, investors tend to look for protection over the idea they are investing in. Patents and trade secrets can help. The truth is, ½ of the value of a patent is simply for a show because investors want to see it. In practice, it’s difficult to use patents as the sole means of protecting your business from the competition; however, it can still help in the long run. If you have patents, investors want to know: What was filed When it was filed  If it is a provisional patent, design patent, or utility patent Most investors don’t expect you to have awarded patents for utility or design patents since the process typically takes over 3 years to complete. If you don’t have any patents, consider filing a number of provisional patents so you can tell investors that you have a patent-pending technology. One advantage of provisional patents is that it gives you a year to figure out if patents can provide any reasonable protection. If so, then file for a full patent. Keep in mind that you don’t have to pursue patents if it doesn’t make business sense in the long run. Fundraise Investors look for traction in your fundraise just as they look for traction in your core business. During a raise, investors will first express interest and then make a commitment before they invest. You want to capture all 3 levels in your pitch in a fundraise. Add up how many investors have expressed interest. This is often called soft-circled interest. Present that number as investor interest. Take all the committed amounts of investment and add that number to your presentation as well.  Take the amount of funding that has come into your bank account and show that number. Over the course of the campaign, those numbers will change. Make sure you show the prospective investor interest from other investors throughout the campaign.   Read more on the TEN Capital Network eGuide: 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

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