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The Cost of Angel Investing

1 min read The Cost of Angel Investing: Where are the Fees? I recently read a discussion forum in which the post’s author had bought a financial instrument and later discovered that the investment advisor who sold it to him actually made a commission on the sale. The author was incensed that someone had made a commission off of selling him something, and to top it off, the investment advisor didn’t disclose his commission. As I read the post, I began to wonder where this guy has been for the last 50 years. Of course people make money selling things, and financial instruments are no different. Where are the Fees? When I sit in pitches from investment advisors promoting their fund, or whatever their financial instrument may be, the first question that nearly always comes up from the audience is how much are the fees and commissions. This number ranges from a fraction of a percent for mutual funds to double-digit percentages in private equity. After reading the aforementioned post, I began to wonder about the cost of angel investing. Where are the fees? In a member-managed group such as the Baylor Angel Network or the Beyond Angel Network, there is a membership fee, but the members review the deals, perform the due diligence and ultimately decide what to invest in individually. The Main Cost Comes in Three Areas: The main cost comes in three areas, and while those costs aren’t paid directly by the angel investor, the business pays the costs, and ultimately the angel investor takes a reduced return based on those costs. So an experienced angel should ask about these costs. The first cost is the Management Salaries. Management salaries are kept low in the early days of a company to give the business every chance of succeeding. I was recently in a deal in which the members asked about the CEO’s salary. He replied it was $300K per year. You could feel the air leaking out of the room. While he was a strong manager, there was no way the business would survive paying salaries of that magnitude. The second cost is that of Consultants, whether they are on the board or as advisors. It’s fair to ask who is getting paid and how much for the work they are providing. There are good consultants out there, but I’m often amazed at how vague their duties are. Oftentimes I hear generalizations such as “they are going to help us,” but there’s no job description, no metrics, no deadlines, and it’s all very nebulous. The third cost and what I consider the most important is the Angel Investor’s Time. If the deal requires a day a month or, worse, a day each week, then the deal must be spectacular to make it worthwhile. The angel investor should figure out upfront what value he can add and if the business runs into trouble, which will help them. Thus, the angel investor’s time becomes the key factor in calculating the cost of angel investing. Read more about the TEN Capital Network for Investors: http://staging.startupfundingespresso.com/investor-landing/ 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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Investing in Consumer Packaged Goods

2 min read Investing in CPG The CPG space is a solid one to invest in, especially in a post-COVID era. There are specific cues that make startups stand out to investors. You should make sure that any company you are considering investing in has a competitive edge and strong customer engagement. And you, as an investor, are going to need the patience to succeed in this sector. Competitive Edge Investors want a considerable market size in the future, and they want to see a competitive edge. If you have a massive market it probably means there are people in it already. Ideally, you want to find a company entering a market that will be meaningful enough with high growth rates that aren’t over-saturated. An example of this is nonalcoholic beer. It isn’t as saturated as the IPA sector, but it’s meaningful and on the rise. Customer Engagement You can measure customer engagement in a variety of ways. Engagement can happen on the company’s social channels, through different marketing activations, and through other methods being used to reach customers outside of digital channels. Omni Distribution Investors should look for companies with omnichannel forms of distribution. Single-channel and single customer models lead to too much concentration. Also, more channels require more brand awareness opportunities. Getting distribution is hard for the CPG producer. The big firms block out the small firms. Look for companies that have found creative ways to bring the product to market. CPG Takes Time Everything in CPG takes longer than you expect. When you’re investing in a CPG company, you have to be patient. Unlike software, the startup cannot go from one to one billion users overnight. It takes a long time to bring the product to market. The company has to prepare its packaging, get production up and running, be ready to ship, acquire distribution, be able to refill orders, and more. As an investor, you have to come in knowing that it’s a longer cycle and it’s a different risk profile. Once the consumers are in that buying cycle, however, it’s a beautiful thing to see it. Read more in the TEN Capital eGuide: http://staging.startupfundingespresso.com/trends-in-cpg/ 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 COVID-19 is Driving the Fintech Sector

2 min read How COVID-19 is Driving the Fintech Sector How COVID-19 is Driving the Fintech Sector As the COVID pandemic passes, we emerge into a new world. The way we bank and exchange money is changing along with many other aspects of our daily life. Digital social trends are shaping our world, and banking along with it, at a much faster pace than ever before. This is especially true during this time of COVID when everybody is on their mobile devices and their tablets as a main means of communication. Due to this trend, the Fintech (financial technology) space is now undergoing tremendous change across the country. COVID has taught all of us how to bank online. Most of us haven’t stepped foot in a bank to deposit a check in months- we all do it all digitally at this point. You are likely going to see banks start to close their doors, and rapidly. A lot of the branches facing imminent closing will try to get more and more of their customers banking digitally through Fintech platforms. Rising Investor Interest There’s been a ton of investment in FinTech recently. There is a tremendous appetite from the venture community and the public markets today for this category of company. The reasoning for this is fundamentally the digitization of their services. COVID has driven us all indoors and away from public spaces. The best solution to continuing business as usual in this restricted atmosphere is to move the business online. Everything is being digitized, including financial services. The difference is that financial services are thriving online because they’re not handling a physical product. They’re perfectly suited to this digitization trend as they’re fundamentally just moving bits and bytes around. And so, the growth in investment in this sector continues. Future Adaptations This success in the implementation of digital platforms also sets up players in the Fintech sector for the next trend-adoption of AI and learning machines. Learning machines will allow the process to improve in terms of efficiency, relevance in product offerings based on the specified customer base, and security of personal information. Implementation of AI will streamline growth. Thanks to current digitization efforts, the Fintech sector is on track for seamless implementation of AI and machine learning when the proper technology is accessible. Why It Matters to Investors? Social trends are driving change across all things business. COVID has worked wonders at putting this fact in the spotlight for all business operators, innovators, and investors to see. As the world moves online to accommodate the health regulations imposed by the pandemic, social trends will only strengthen. Investors should be striving to understand and follow these social trends that are shaping our world at a much faster pace than ever before. People are on their phones and their tablets, they are asking questions and sharing information. And now, they are banking. Read more in the TEN Capital eGuide: http://staging.startupfundingespresso.com/fintech-problem/ 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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Blockchain Technology: Cryptocurrency

1 min read Cryptocurrency in the Fintech Space. Fintech is a giant industry that spans lots of different segments. When you say FinTech, you’re talking about insurance tech, Paymentech, banking tech, lending tech, and data. However, you are also talking about cryptocurrency companies such as Coinbase or Circle. What is Cryptocurrency? A cryptocurrency is a form of currency used for digital transactions. Transactions using cryptocurrency are managed and recorded by a noncentralized technology known as the blockchain. Cryptocurrency and blockchain are not new. In fact, they consist of some of the easiest classes in today’s computer sciences. But while crypto has been around for a long time, it has just begun to make its way into the eye of the general public. Investors Using Bitcoin Bitcoin, a commonly known cryptocurrency, has started to become a legitimate store of value for institutional investors. This move to cryptocurrency by institutional investors is likely due to the degree to which people are worried about large government deficits potentially depreciating the value of the dollar. Using Bitcoin in particular as a store of value acts as a hedge against inflation. Bitcoin is even now being used as an actual transactional currency. This can add real value to cross-border transactions, especially where there are frictions between changing currencies. Resistance to Blockchain Technology Blockchain technology certainly has proven merits. However, there are a lot of regulatory conversations and discussions around the tokenization of some of the companies implementing this technology. As there always is when it comes to changing age-old practices, there is resistance to the widespread implementation of blockchain technology to enhance the use of cryptocurrency in the everyday marketplace. Read more in the TEN Capital eGuide: http://staging.startupfundingespresso.com/fintech-problem/ 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 Future of Digital Communities

3 min read The Future of Digital Communities. COVID-19 imported the future that we were planning on for around 2030- a future where everybody is going to be able to see and create a digital community. This digital community is unlike that of present-day social media. These communities will function more like how gamers’ communities do. Gamers are great at having a digital community today. Yet for some reason, the world is taking note. Everyone, individuals and companies alike, is still trying to do live online with the audience they get from Facebook groups and pages. Profitable Digital Community Stuart Kime is the Co-Founder and Chief Future Officer of hOp, a company that builds trust within the community while selling micro-social networks to multifamily apartments and churches. Their venture started by selling private social networks to apartment complexes, giving the residents a quick and easy way to communicate as a whole. The company assumed that the platform would be used for the residents to rent and sell to each other. But what the residents created with this micro-network took them by surprise. People were giving and sharing. They were seeing things pop up on the network such as: “I’m at Chick-fil-A, does anybody want anything?” “I’m making brownies, does anyone have vegetable oil? I’ll give you a beer.” A unique marketplace was unfolding, but hOp was never going to get paid on it. They realized they had created a great feature but had the wrong customer. They switched their sites to property managers and owners- people who would have an interest in sponsoring this community. This essentially turned the micro-social network into a subscription-based SaaS application. They then extended to other potential users in subsects that can benefit from this ease of communication but don’t have the modern tech in place to do it such as churches, schools, and HOAs. The Shift to Micro-Social Networks Giant social networks like Facebook are trying to make everything happen on their platform. Facebook tried to clone Snapchat, eBay, and Letgo but inside of Facebook. Now they’re even doing their Nextdoor clone. They are dealing with these large algorithms that are going to lead to challenges in functionality. They end up taking control away from the end-user and dealing with outrage, an outrage you hardly see on smaller social networks such as LinkedIn for example. With smaller social networks comes smaller audiences, meaning less competition, increased control over information, and more direct reach. These micro-social networks also come with the advantage of increased privacy. Look at the difference between Facebook advertising (a mass social network) versus DuckDuckGo (a smaller enterprise). DuckDuckGo works sort of like a Google, but instead of needing to read your Gmail and Google Docs to know more about you to put the right ads in front of you DuckDuckGo simply uses your search term. Facebook is trying to know about you- to really know about you. Facebook is one of the largest buyers of ovulation data from Maya, which is the largest cycle tracker for women. They are collecting ovulation information to know which ad to put in front of you at which time. It’s a bit ridiculous. Creating privacy-friendly alternatives to these free tools that all of us are using on the internet is going to be probably one of the largest growth sectors in the next five to 10 years, and micro-social networks are prime applications to provide this. Investor Advice It seems like it’s going from Facebook to micro-social networks in the generation because people want more control. How should an investor update their investment thesis to participate in this? The key is to look for those who actually own their audience- not those who are running it through Facebook. Investments should be made in companies that have direct control or connection over their social network. Strong companies moving forward are going to be those that create their own world, so to speak. Another interesting way of positioning is going to be going after the sectors that have already mastered this new kind of digital community. For example, gaming communities are really strong. Companies like Discord are going to be moving us into the future with their digital community applications. In short, it is about looking at deals that deal a lot with owning audiences instead of running audiences. Read more in the TEN Capital eGuide: http://staging.startupfundingespresso.com/ten-capital-eguide-the-future-of-investing-in-saas-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

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How COVID-19 Is Driving the Need for Digital Security

2 min read How COVID-19 Is Driving the Need for Digital Security COVID-19 is driving rapid adopting of SaaS technology in sectors ranging from telehealth, remote management, virtual conferences, and more. As the world and with it the workplace moves online, we are seeing great leaps in efficiency. However, we are also seeing weaknesses emerge. One of these weaknesses, the reason the virtual work realm hasn’t emerged sooner, is trust in the security of the system. Privacy and security of data, both personal and business, are becoming imperative needs. And when there is a need, there is an innovative company that will emerge to fill it. Why Is Digital Security Suddenly Such A Concern? Covid has driven the vast majority of companies to transition to an online workspace. This means every employee is working from their homes, using their own computer and their own WiFi network. When people work from home in this way, there are more endpoints. Essentially, every employee becomes a potential access point of possibly confidential information. Because of this, companies are suddenly more vulnerable to hacks and intrusions. The increased scalability of cloud infrastructure and the widely distributed workforce add to this susceptibility, making impactful solutions to the issue of data security now even more impactful and valuable. We also are seeing critical societal services being forced for the first time into the virtual workspace that require high-level security. Accountants and lawyers who typically pass paper hand to hand are now working remotely and needing to find ways to manage the security of document transfers and sensitive client information. This shift is leading to innovation and the adoption of new tools in the digital security sector. Investing in the Digital Security Sector Again, when there is a demand or a need, there is always a company that will step up and fill that space. These are the companies you should be looking for as an investor. For example, companies like Zoom had a large increase in their user base and had to build out new security features on their platforms. In the beginning, there were mishaps like the one dubbed the Zoom bomb. People were randomly popping into meetings and sharing things they shouldn’t be sharing within the webinar or group meeting taking place. In response to this, Zoom added new security features to enable waiting rooms. They also required a supervisor to approve everyone that came into the virtual meeting. There is a shift towards companies filling new needs in the marketplace. This includes everything from e-commerce to tools for increased efficiency in the manufacturing and supply chains of businesses during mass crises. And of course, this includes companies offering innovative and effective means of ensuring digital security. So What’s the Takeaway? The adoption of this technology, while rapid, is still in an early phase. A lot of data will be gathered from this time and applied to the next iteration of applied software or service applications. As an investor, you want to look for a company in this sector that can gather the incoming data, process it, and ultimately make it actionable. Read more in the TEN Capital eGuide:  The Future of Investing in SaaS 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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Healthcare Trends in a Post COVID-19 World

2 min read Covid is going to be a long story, but the silver lining is the positive changes we will see in the healthcare sector. These changes point to lofty opportunities for investment. Let’s look at the foreseeable healthcare trends post-COVID. What do current experts in the field see coming up, what sectors have COVID-19 accelerated, and what future trends and changes in the healthcare industry should the investor look for? Bottom-Up Budgeting In pharma and the medical device space, we see that companies cannot spend as much money as they have been able to in the past. They cannot get into hospitals and operating rooms or conduct clinical trials as they were able to before COVID because of the amount of space and resources required to manage the disease. These restrictions also cause the spending lifecycle of a medical company to change. Typically, the most considerable output of resources happens in the middle of their life when they reach clinical trials. However, companies now cannot use the planned funds in this way, which means that they need to rethink and strategize their budget. By doing this, they can cut between 20 and 30% of the G&A budget, which allows them to at least a few more months, which hopefully can get them out of COVID and raise money easier again. As an investor, this means that you should be looking at a medical company’s bottom line. The new environment being created in the healthcare sector calls for bottom-up budgeting. Companies need to understand the cost, their time to market, and what they need to succeed. Re-evaluation of Orphan Drugs A hugely positive trend we see resulting from COVID is the re-evaluation of orphan drugs. Orphan drugs are government-funded pharmaceutical agents used to treat rare diseases. They are typically easier to get through the FDA, and pharma companies can sell them at high prices. But due to changes in the U.S. government, the cost of orphan drugs is going to be re-evaluated. This is a significant shift, which we have already begun to see and will continue to become even more substantial. This shift means two things. One is that orphan drugs won’t be as valuable to invest in. The other would be a redirection of funds to other circuits such as cancer drugs. Increased Government Investing in Medical Infrastructure The world is seeing that the medical infrastructure is globally underfinanced. We are experiencing the missing number of beds, doctors, nurses, and more. Over the next decade or two, the government will be investing more capital in infrastructure in medical systems- good news for the big med-tech companies, and this increased funding will put pressure on hospitals to turn out much better results. We’ll likely see hospitals shift towards using home treatment digital health monitoring at designated clinics to shorten the required length of stay a patient has to go to the hospital for care. These things can only be done with technology. Read more in the TEN Capital eGuide: TEN Capital eGuide: Investor Perspectives on Chronic Pain 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 Effects of COVID-19 on the Healthcare and Chronic Pain Markets

4 min read What will be the COVID impact on Healthcare and Chronic Pain Markets? Effects on The Healthcare Sector The current focus on COVID-19 and things around it will eventually run its course. But the post COVID impact on healthcare-investment opportunities is going to be tremendous. Changes and advancements in healthcare technology are predicted to skyrocket, from non-touch transactions and telehealth advancements to AI-enabled procedures. Hopefully, there will be fair outcomes for the patients, providers, the healthcare system, insurers, and investors because when everything works in balance, it’s a win for everyone. In the beginning, there was also a lot of uncertainty related to investments in companies in therapeutics or MedTech because no one knew how COVID-19 would affect their clinical trials. Overall, however, the pandemic has had a positive impact on investment in the healthcare sector. For example, diagnostics is a field that does not get reimbursed very well and is therefore presents a risk for investors. Since diagnostics plays such an essential role in COVID-19 procedures, there have been a lot of financing of new diagnostic tools and an increase in reimbursement, especially in infectious diseases. The other sector that is seeing an increase in funding is digital health. Not all sectors have been so lucky, however. Their highest margin of loss is on optional procedures and non-critical procedures. Many of the hospitals’ cash flow has been severely hurt by COVID, causing them to rethink, and a lot of them are cutting back on things like adding new facilities. Bringing healthcare to the top of the mind on all fronts has highlighted and made transparent some of the inequities in the developing markets and the developed healthcare markets. This has worked to charge subsectors of the industry such as telemedicine, remote-patient monitoring, and point-of-care diagnostic. One of the most significant changes COVID has had on the industry is the way we view healthcare. A good analogy is the way our views on phones have adapted to the technology. In the past, when you would think of a phone, you would think of a physical location. When you had someone’s phone number, you were calling a place. Through cellular phones, they’ve changed the way we view this process. Your phone number is you now, no matter where you are. And that’s what we’re seeing happen in healthcare. One area that is changing in this way is triage. Triage is how you determine who should be seen and when. We can now add to that equation how. Positive things are happening in the healthcare industry. We’re getting better utilization of our resources and hopefully will provide the best healthcare solutions for people at a more reasonable price point. Changes in Business Operations Everyone is aware of how the all-hands-on-deck routine went when COVID first broke out. Many current business activities were shut down, and in turn, many new activities such as massive refocusing on vaccines and personal protective equipment. There was enormous redirection involved, moving assets and money from one effort to another, which always creates a disruption. The shutdown has disrupted our country’s economic health as well, meaning companies even unrelated to COVID-19 have been massively affected along with venture investment, venture capital, and investors. Stressors across all industries are leading to change, especially in the healthcare sector. The changing of regulations that have been overdue for revisiting, such as those restricting the Medicare programs from reimbursing anything related to telehealth, are being accelerated. Even the FDA has been pressured to accelerate the deployment of reviewing technology, policies, processes, and procedures. Hopefully, these items that the FDA was forced to expedite will stick after the pandemic is over. Some of the most prevalent changes we see as a result of COVID is companies going remote and digitizing their processes. The ability to change in these ways is an excellent indicator of how flexible and agile some of the larger companies in an industry are or are not. Any startup has to be nimble on its feet and ready for a surprise at any time. They rarely, if ever, have funding to throw money at problems. They need to be creative and reactive in their response to opportunities as well as negative surprises. COVID has made this all the more relevant. Companies need to be able to adapt quickly to customer changes, even if it’s a matter of them being able to access them differently and with separation. The reality of the situation is that some business practices are not available to us now, and companies have to be agile and react to them to survive. Changes in Production COVID had the impact of accelerating some parts of an industry and de-accelerating other parts. In the healthcare space, vaccine development, manufacturing, and clinical trials were vastly scaled-up along with an unusual amount of business opportunities for otherwise commodity products. There is significant opportunity in hand sanitizer, face masks, gloves, office cleaning, and sanitizing services. It’s remarkable how many commodity products and services that have not been historically tremendous growth opportunities are now a lucrative direction for some businesses. We see some companies pivoting to fill that gap, while other companies are doing it to overcome loss of traction on their core business. At some point, this is all going to come to an end. There will be warehouses and warehouses full of hand sanitizer from 50-500 companies that never existed before. It will be interesting to see how that is set aside, ignored, or disposed of when companies redirect back to business as usual. One thing we have already seen as an effect of these changes is the redirection to bring manufacturing and other operations back to the U.S. Even if a factory in Shanghai can ramp up production to provide double or triple the assets in a short time, that doesn’t mean we can physically get it here quickly. This has led to a trend in onshoring manufacturing capacity that will likely remain. The pandemic has also

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Investing in Emerging Markets

3 minute read Investing in emerging markets can be an incredibly tempting venture. The high risk/ high reward stakes are likely to draw in investors both big and small. So how do you choose? It is essential to analyze both the start-up and the industry they will be operating within. The Industry You can start by defining the niche space and reviewing the evolution thus far of the industry. It is also important to note current challenges in the market and potential future challenges and advancements. The Startup When analyzing the start-up, you should start by examining both the CEO and their team. What are their strengths, weaknesses, and past accomplishments? Next, you should define the problem they are solving and how. You want to be sure they are solving the whole issue, and not only part of it. Their idea must be protected so that other space players do not easily duplicate it. Finally, you want to understand the future aspirations of the company. Are they prepared for upcoming challenges and advancements within the industry to ensure that they are fully prepared and equipped to keep up with the competition? To better understand this process, we are going to look at a company in the MarTech space. We will briefly look at each component listed above to decide whether this is a company worth investing your money in. The Space MarTech, or “Marketing Technology”, refers to marketers’ tools and software to leverage, plan, execute, and track campaign efforts. This technology is used to streamline the marketing process, including customer communications and data entry and analysis. Industry Evolution As the industry evolves, more companies are beginning to position themselves as all-in-one marketing solutions. Traction around areas like conversational chatbots, AI, influencers, and augmented reality is increasing. However, overall growth in the segment will slow down. As companies consolidate, a lot of these point solutions will fall by the wayside. Challenges For early-stage companies, many of the challenges revolve around the way angels and VCs nurture the industry itself. There tends to be a push towards point solutions and the next shiny new thing. In many cases, the problem is a lot broader, and these point solutions are pieces of the whole. Investing The MarTech space is no different than any other niche in that there are some great opportunities, and there are some to avoid. As an investor, it is important to closely analyze the team and the problem that the business is trying to solve. The Company The Company sees itself as an integrated, socially collaborative, intelligent marketing platform. They are an all-in-one system that does social media marketing, content marketing, and email marketing. The CEO realized that marketing in the digital age was becoming increasingly complex due to the overwhelming number of marketing channels, mechanisms, and customer touchpoints. He also noticed that many of the old marketing standbys in advertising had become less and less effective. This inadequacy led him to create The Company. Conclusion Is The Company a smart investment move within the MarTech Space? They provide an all-encompassing solution, solving the whole problem and not just a part of it. The CEO has a successful track record at many reputable companies. It sounds like they have thought about keeping their platform up to date and flexible to compete within the space. It would seem this is a company that is worth investing in, so long as they can show how they will retain customer loyalty and protect their innovative platforms and ideas from duplication by other players in the space. If the company does not have a definite answer to these two potential problems, we would advise not to invest as this can quickly become a startup undoing. Read more in our most recent eGuide: http://staging.startupfundingespresso.com/investing-in-niche-markets/ 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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