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The Benefits of a Family Office

The Benefits of a Family Office

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    Starting a VC Fund: What You Need to Know to Succeed

    May 22, 2022

    2 min read. If you have a track record for successfully investing, you may consider starting your own fund. At the time of writing, there are over 4,000 micro-VC funds in the US alone. Most of these are funds within the $25M to $50M range. These funds are led by those who ran sidecar angel funds and invested their own money into startups. Some did well, or are experienced VCs who set out to run their own fund. What do you need to know to successfully start your own VC fund? You need to be able to find and screen startups successfully. Let’s take a closer look at how to do this. Analyzing Market Segments In running a fund it’s important to analyze market segments. First, evaluate the leading companies in the market. Are there any leaders that stand out, or are all the companies competing head-to-head with the same approach? Highlight the supply chain to show who has control of the market; is it the producer or the consumer that drives the price? Discuss the introduction of new technology and its impact on the current market equilibrium. Will it shift control from the producer to the consumer, or vice versa? Review the number of companies playing in the segment and discuss the resulting fragmentation. Highlight the total available market for the companies in the segment. Identify companies within the market that stands out for competitive advantages such as network effects, virality, recurring revenue models, etc. Conclude with a proposal to pursue investment in a company in the market segment. Determine Market Size One of the key selling points for a startup is its potential market size. There are several ways to find it for your potential startup investment. The easiest way you can find market size is to buy a market research report. These typically run anywhere from $5K to $20K.  You can also contact the trade association related to your industry. These associations are most often located in Washington D.C. They are located in Washington D.C. as they provide government advocacy in addition to industry support. The association’s website typically provides stats on the industry, including market size and sector breakdowns. These sources require more digging but are often more reliable than market research reports. Analyzing Startups Here’s how to analyze a potential company for investment: First, identify a recent event for the target company, such as entering a new market. Discuss how the company can disrupt the newly-entered market with its expertise and business model. Talk about the positives you see in the company’s financials and market position. Express caution based on any concerns about the business including product/market fit, management team, or cost structures. Discuss macroeconomic issues, both positive and negative. Conclude with a recommendation to pursue an investment based on the positives outweighing the negatives, or to avoid an investment based on the negatives outweighing the positives. Read more on the TEN Capital eGuide: How to Raise a VC Fund 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 do VCs Invest In?

    May 17, 2021

    1 min read  What do VCs Invest In? What do VCs Invest In? I’m often asked what venture capital looks for. When looking to invest, VCs look for emerging tech markets with strong growth projections. These sectors include blockchain, AI, Data Analytics, and other strong growth areas. They do this partly because there’s usually a strong deal flow and it’s easy to explain to limited partners. VCs also look for platform-based businesses, rather than solo products. They look for the following: Recurring revenue, Virality factors, Network effect components, Very large markets, Strong teams, and a scalable business model. Also, traction in your business and exits of other companies in the sector drive interest as well. Are You Venture Fundable? If you want to raise venture capital funding, then check these points to see if you are venture fundable: Do you have the following: Recurring revenue – Do you have recurring revenue in your model? Platform-based approach – Are you taking a platform-based approach to the product/service delivery, or do you sell one-off products? Data-centric – Are you capturing key data elements that improve your process and product? Strong Team – Do you have a strong team? Does each member bring expertise about their field to your business? Fast Growth (>50% YoY) – Are you growing at least 50% YoY? Large Target Market – Are you targeting a market over $1B? Read more from TEN Capital: 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

    Challenges of Being a Venture Capitalist

    April 16, 2020

    1 min read VCs are a form of private equity financing provided by venture capital firms to startups and early-stage companies. Generally, venture capitalists are willing to risk investing in these types of companies because they can earn a large return on their investments. These types of returns make VCs especially attractive. However, an issue that arises is that most individuals are not aware of the challenging dynamics that come along with a VC lifestyle.   Here are a few of those challenges: Raising Funding Like a startup, the Venture Capitalist has to raise funds. Raising funds can take time and a lot of commitment. Additionally, LPs tend to be rear-view mirror oriented rather than being focused on new technologies and markets.  Working with Partners  You’ll rarely have the chance to make the decisions alone. Rather, you’ll be making those decisions with the other partners. This is especially important to keep in mind if you prefer working alone and by your own rules. Often, ego and other agendas are at play which can be stressful especially if you are not used to working with others. Getting Deals Done  In venture capital, deals aren’t always easy and you need to be prepared to see it through to the end. You have to convince others you have a winner on deck, otherwise the deal will fall through. Continue reading in the TEN Capital eGuide: http://staging.startupfundingespresso.com/how-to-raise-a-vc-fund/ 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 We’ve Learned Over the Years- Venture Capitalists Engage in Brand Marketing

    May 1, 2019

    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

    What We’ve Learned Over the Years: Everyone is a VC

    April 17, 2019

    When I look through my LinkedIn network these days it appears every fifth contact is a venture capitalist of one kind or another. When I started in the early stage funding world 20 years ago, the VC was a rare breed since they had access to venture funding. Most of them were in a handful of tech clusters in the US- Silicon Valley, New York, and Boston to be exact and they were few and far between. Types of VCs At that time, a typical VC had a $100M fund or greater which they raised from LPs or limited partners – primarily the pension funds. They operated in ten year funding cycles which means they could run a long ways off one good return. They charged 2% management fees and a 20% carry. In the 2000s, angels grew to prominence because the cost of starting a business came down so much, startups no longer needed $5M to start a web business but could now do the same thing for $500K.  Angels became attractive financiers because they were more numerous and easier to access. Today, MicroVC, NanoVC, Venture Studios and Corporate VCs are coming onto the startup scene with new fund sizes and funding models. MicroVCs raise $25M to $50M fund while NanoVCs raise $10M to $15M funds. Aside from the size of fund, the main difference is that Micro and Nano VCs typically target a narrower criteria – either a specific geography or type of deal. Many use the pledge-fund model which means each deal the MicroVC wants to fund has to go through a screening process by the limited partners. Because the fund size is small most MicroVCs are taking 3% in management fees and a 20% carry. Given the size of the fund, they can only invest in 5-10 deals.  The fund lasts only a few years before it’s time to raise the next one. They raise primarily from family offices and high net-worth individuals. NanoVCs also raise funding from family offices and typically use a pledge fund model. They use a narrow criteria and can run for a year or two before the fund is deployed. They focus on an even more narrow range of deals since the fund size is small and there’s no room in the management fee for a large staff to help with deal flow and diligence. Then there is the Venture Studio model. This type of VC essentially builds a team from which the team then launches a startup usually with an ecosystem of providers as support.  This works well for one stripe zebra startups that provide niche products or services as they can tie into a bigger team and share resources. Finally, there is the strategic or corporate VC which seems to be popping up everywhere. Amazon recently announced their fund.  A venture fund provides a competitive advantage for burnishing the company’s brand and selling its product. They invest for strategic reasons rather than financial ones in most cases. Since there are so many funding options available the primary question today is “where do you start your fundraise?” 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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