startup investment

The Most Important Thing to Do Before Building Your Startup

Virtual reality (VR) has emerged as one of the most exciting and rapidly evolving fields in technology today.

I’m sharing brief points for basic help,, for more details I am available for a chat / call.

Strong Administration

Just, the executives are by a wide margin the main component that brilliant financial backers think about.

VCs put resources into a supervisory group and its capacity to execute on the strategy, as a matter of some importance.

They are not searching for “green” supervisors; they are searching preferably for chiefs who have effectively fabricated organizations that have produced significant yields for the financial backers.

VCs want to see that the startup has a team with a deep understanding of the technology and a track record of success in the industry. A new tech innovation is already an added advantage, like integration of blockchain in VR.

Any option for NFT or alternative ecosystem development in VR world.

Extraordinary Item with Strategic advantage

Financial backers need to put resources into extraordinary items and administrations with an upper hand that is enduring.

They search for items and administrations that clients can’t manage without — on the grounds that it’s such a ton better or in light of the fact that it’s such a ton less expensive than whatever else on the lookout.

VCs want to see that the startup is targeting a large and rapidly growing market and has a clear path to expansion.

This could include developing VR hardware that is more affordable and accessible to a wider range of consumers, or creating VR content that appeals to a broad audience.

In addition to these factors, VCs also look for a strong competitive advantage or unique selling proposition that sets the VR startup apart from its competitors.

VCs want to see that the startup has a clear vision for how it will differentiate itself and establish a foothold in the market.

Finally, VCs want to see evidence of traction and market validation.

VR startups that can demonstrate these qualities are more likely to attract the attention and investment of VCs in the competitive world of virtual reality.

Might administrative or legitimate issues at some point spring up?

Is this the right item for now or 10 years from today?

Is there enough cash in the asset to meet the open door completely?

Is there an inevitable exit from the venture and an opportunity to see a return?

An accelerator program like us, we are looking for strong team and great tech innovation to upscale with.

How to fund your startup things you wished you knew before you started up

Understanding the work involved in starting a business is necessary for a successful launch

The importance of proper planning cannot be understated, as these decisions are core to how your business takes shape

Making good decisions early in can help ensure continued growth

Starting a business can be stressful. It often feels like there are 1,000 things to work on all at the same time. There’s no avoiding this reality for new small business owners, but with a little planning, it’s possible to manage expectations and take actions with a sense of purpose toward building your business.

Beyond giving it your all, it’s important to direct your energy to the right tasks – especially at first. Experts say some good first steps in starting a business are researching competitors, assessing the legal aspects of your industry, considering your personal and business finances, getting realistic about the risk involved, understanding timing, and hiring help.

1. Do your research.
You want to make sure you understand the industry you’ll be involved in so you can dominate. No matter how unique you might think your business idea is, you should be aware of competitors.

“Just because you have a brilliant idea does not mean other people haven’t also had the same idea. If you can’t offer something better and/or cheaper than your competitors, you might want to rethink starting a business in that area.”

Assess the market before opening your doors. Understand the industry you wish to enter, as well as its major players and your future competitors.

2. Determine your audience.
Spend time considering who your target demographic is. This audience will be the driving force in each decision you make. Understanding who needs your product or service can help fine-tune your offerings and ensure your marketing and sales strategies are reaching the right people. Part of this decision is understanding if you are a business-to-consumer (B2C) or business-to-business (B2B) enterprise. Within those parameters are multiple categories, including but certainly not limited to age, gender, income and profession. You can’t earn a profit without your customers, so understand who they are and make them your priority.

“It is crucial to make sure you are delivering what your customer wants, not what you want. This will give you insight into your customer’s buying decision and save you lots of experimenting down the road.”

Know who you’re talking to. A defined target market will help you better acquire new and repeat customers.

3. Have a strong mission.
Standing out is no easy feat, and no one magic formula guarantees results. However, knowing your business’s purpose is central to guiding these decisions. By recognizing your business’s strengths, differences, and purpose, you can make informed choices to expand your services and markets down the line in a way that is harmonious.

Knowing your purpose guides important decisions you’ll make along the way, so be sure that your mission is clearly defined.

4. Choose a structure.
A key initial step to take when starting your business is choosing its legal structure. It will dictate the taxes, paperwork, liability of the owner(s) [and] other legal aspects, as well as whether or not the company can have employees.

Additionally, you must acquire the proper local and state registration required to open your business.

“This means the entrepreneur will need to create the articles of incorporation, obtain an employer identification number and apply for necessary licenses, which will vary by state and industry.

Call on legal help to best advise you on the structure to take and the necessary paperwork that needs to be filed.

5. Map your finances.
Starting a business requires money that you likely won’t have right away. This is why you need to seek out ways to acquire capital.

“Most entrepreneurs start a business with a very limited amount of capital, which is a large hurdle to many. However, there are plenty of options available to a budding business owner. The first and most common place to seek capital is with friends and family. If that is not enough, expand the search to angel investors and venture capitalists. Should these options not provide the amount needed, then apply for business loans through banks and small business associations.”

Make a plan for how you will fund startup costs, whether that’s your own funds, asking friends and family for money or borrowing from a financial institution.

6. Understand your tax burden.
Entrepreneurs should be organized with taxes and fees. There are multiple payments to make, and filing any of them late could result in severe consequences.

“You have to figure out how much your payroll is going to be in order to make your tax payments timely. The timing can vary depending on your payroll. You also have to figure out other business taxes, such as city, county and state.

Understand when, how and to whom you pay taxes and fees.

7. Understand the risk.
Of course, there will always be a level of risk with launching a new business venture. Calculating, understanding and planning for risk is an important step to take before you start working on your business. This means assessing your industry’s risks before moving forward with a business plan.

“Entrepreneurs should know their industry’s risks before purchasing business insurance,” said Jeff Somers, president of Insureon. “For example, accountants will want to consider professional liability insurance in case a client files a lawsuit, claiming there was a costly error on their tax return. Restaurant owners are more likely to need general liability for slip-and-fall accidents and liquor liability insurance, which can pay for lawsuits.”

Be honest with yourself and business partners about the risk involved, as this can help you prepare by obtaining the right types of insurance that can protect your new business.

8. Put together a business plan.
A business plan outlines the steps you need to take for a successful launch and continued growth. This document is important for establishing a focus for your business, attracting C-level professionals to work for you, and seeking and retaining capital. A business plan ensures you put your best foot forward with other professionals who are evaluating your company, so be sure to have this document on the back burner and ready when requested.

Take the time to put together the main components, including:

Your mission statement
A description of your business
A list of your products or services
An analysis of the current market and opportunity
A list of decision-makers in the company, along with their bios
Your financial plan so those who review can understand the opportunity
Even if you don’t think you need it, put together a professional and polished business plan that’s ready to go when it comes time to recruit executives, fundraise or expand.

9. Time it right.
Timing is an important element of building a business. Sure, you want to start your business at a time when the economy is healthy and your prospective industry is expanding, but there’s also a flow to decision-making that’s important to be aware of.

Launching at the wrong time can make it challenging for your new business to succeed. Take the leap when the timing and circumstances suggest it’s right.

10. Look for a mentor or advisor.
Starting a business should not be an independent journey, no matter how tempting that sounds. Finding those who have made this journey before can help set you up for success. Network with other professionals in your industry, attend industry-specific workshops and events, and reach out to thought leaders in your industry to learn their approach. Alternatively, you may want to consider hiring a coach who can give you pointed advice.

Learn directly from someone else who has gone through the process to help you set up your new business for growth.

11. Bring in the professionals.
It’s impossible for entrepreneurs to know everything about running their new venture. Tapping into the experience of seasoned professionals can make sure you’re starting on the right foot.

It’s especially important to have legal assistance to ensure you are protected and going about the process the right way.

“We often make the assumption that legal counsel is for when we get ourselves into trouble, but preventative and proactive legal preparation can be the very best way to set your business on the path to long-term success. “When you call on legal counsel after you’ve run into a problem, it’s often too late or could critically impact your business in both the short and long term. Investing in their insight at the start of your business can pay a huge return later on by keeping you out of trouble before you even get into it.”

Another smart hire is an accountant. It’s nearly impossible for one person to handle every aspect of a company, and above all, your finances should not be put at risk.

Growth vs scaling: What’s the difference and why does it matter?

If you ever decide to forego a “real” job in favor of starting your own company, you’re bound to make at least a few rookie mistakes. If you’re lucky, most are the kind that are easy to fix and learn from.

But most entrepreneurs, in hindsight, agree that there are some things you’re better off being prepared for. Hindsight is definitely 20/20—especially when you’re the boss. Consider these lessons you don’t have to learn the hard way.

Changing how we approach and build modern solutions to personal dilemmas and satisfying intrinsic human needs is everyone’s passion.

We’ve picked up many, many useful tips and wanted to pass some knowledge along. Below is a list of 10 things we wish everyone known before creating a startup.

Solve Your Own Problem

Many businesses and failed numerous times. When you finally find success, it is because you created a solution to your own problems and turned that into a business. Many launched many new companies and websites to foster their business and help people.

Do Your Market Research Early On

Like most entrepreneurs, you must be passionate about many ideas and opportunities. Many have also launched and funded many startups only to realize later on, as they learned more about the market, that they should have done more extensive market research early on. It is important to understand the industry you are playing in, your competitors, and the market forces at play. Even more so, it’s important to understand your customers–their behaviours, pain points and decision making processes.

Be Extremely Focused
There is a tendency for entrepreneurs to try to do too much at once. But the key to success in the beginning lies within having laser focus. If your product or service solves a big problem, try to focus on a niche instead. Facebook started out as a social network for college students. Only when they were successful with that niche did they open their service to the general public.

Keep It Simple
One may think that offering customers a large number of choices is the smart thing to do. Yet, more choices lead to decision making paralysis. It is usually the company that provides users with fewer choices that wins. Examples include: In & Out Burger’s simple and limited menu, as well as Apple’s limited number of choices for most of their products. As a startup, resources are limited. Focusing on providing a simple product or service with less choices, less steps, less features may be the way to go.

Bootstrap Whenever Possible
Raising money to launch a startup is very common among entrepreneurs. In doing so, you give up valuable control of your business. When entrepreneurs had to do it all over again with their company, many decided to bootstrap. Writing the software code yourself, hosting the service with a cheap ISP and using free marketing resources at your disposal, you would be able to launch the business with your own money.

Think Carefully Before Taking Money
Whenever possible, venture capital (VC) money should be considered unacceptable except in specific circumstances where VCs can add significant value to your business. Being a young founder in your mid-twenties, you may be asked to take on an experienced CEO. Times are now tough after the dot-com crash when online advertising went from $20 CPM down to under $2 CPM. Instead of sticking with your strategy to revamp the company’s business model. So it’s better to fund your own money and it’s advisable not to be dependent on any third source.

Focus on Intellectual Property Early On
Entrepreneurs may not focus too much on intellectual property in the beginning, but copyright and trademarks are important and will be increasingly crucial in protecting one’s product, service or brand once some success has been achieved. When you launch, one of the first things anyone does was to apply for a trademark. The trademarks which have since acquired secondary meaning, have come in handy as many competitors try to encroach upon our space.

Screen Your Hires Well
Some of the worst hires have been always experienced with first few employees. Back then, people lacked the resources to perform detailed background checks. They have too experienced many fraud degree holders whom we hire unconsciously and later they prove to be a setback for the company.

Leverage Free Marketing Opportunities
As an entrepreneur with a limited budget, spending money on marketing can be a very costly proposition. When launching, many looked into free marketing opportunities. First leveraging free online resources such as Craigslist, then moving onto PR opportunities to get free media coverage for their service. A controversial product or service may shun away investors but it was a gold mine when getting lots of free media coverage.

Have Strong Agreements Up Front
One of the most important lessons to have learned over the years as an entrepreneur, is that whenever there is the possibility for misunderstanding put expectations down clearly in writing. A strong agreement with partners, investors and employees are crucial.

How to Raise Seed Capital and Grow Your Startup

Let’s begin with the most common distinction between these two terms. In general, we think of growth in linear terms: a company adds new resources (capital, people, or technology), and its revenue increases as a result.

By contrast, scaling is when revenue increases without a substantial increase in resources. Processes “that scale” are those that can be done end masse without extra effort – if I send an email to 10 people or 1 million, my effort is essentially the same. Which is why enterprises use email marketing so heavily. It scales so effectively. Or for another example – an insurance company that scaled business operations by simply switching to a cloud business phone system.

But this is just the technical distinction between the two words. Let’s look a little closer at what each looks like in practice.

Growing a business
Generally seen as the definition of a successful company, growth refers to increasing revenue as a result of being in business. It can also refer to other aspects of the enterprise that are growing, like its number of employees, the amount of offices and how many clients it serves — these things are almost always linked to growth of revenue.

The biggest problem, however, is that it takes a lot of resources to sustain constant growth.

Take for example an advertising agency that currently has five clients, but which is about to take on five more clients. Increasing the number of companies, it sells to will bring in more money, but chances are it won’t be able to get the work done without hiring more people.

Because of this, financial growth can only be achieved while making larger losses, too.

Companies that offer professional services, like the advertising agency above, will always have to deal with this problem. Taking on more clients leads to hiring more people to support them — while it increases revenue by adding clients, it has to increase costs at the same time.

Scaling a business
Because of the costs associated with growth, modern founders have become obsessed with the idea of scaling.

The key difference with growth is that scale is achieved by increasing revenue without incurring significant costs. While adding customers and revenue exponentially, costs should only increase incrementally, if at all.

A great example of a company that’s successfully figured out how to scale is Google, which in recent years has been adding customers (either paying business clients or ad-supported free users), while being able to keep costs at a minimum. As of 2017 it had seven products with over a billion active users each, while only employing about 88,000 people.

The difference between growth and scaling becomes clearest when a company isn’t a startup anymore, but is not a large corporation yet, either. At this critical stage the business will have to decide between growing at a regular rate or switching over to faster company scaling.

If it wants a shot at making a lasting impact on the industry and perhaps even society as a whole, it has to be done without accumulating a high amount of overhead.

Unfortunately there’s no clear-cut path to successful scaling — if there was, it would be much less impressive to build a million-dollar company. There are a couple of things to keep in mind, however.

Startups vs scaleups
Here we have two more terms that are often confused. You probably already have a firm grasp on what a startup is, but how does that compare with a scaleup?

An entrepreneurial venture that has achieved product-market fit and now faces either the ‘second valley of death’ or exponential growth.”

To put that another way, once a startup has proven that it has a product people want, it’s time to take that product to the masses. This usually requires massive investment in new people, offices in different markets, and lots of advertising in the form of hosting educational webinars, attending tradeshows, prospecting and closing leads, and other tactics.

Which actually sounds sort of counter to our earlier definition of “scaling” – increasing revenue without increasing investment. But if successful, a scaleup will add exponential growth with only linear or marginal investment. Essentially, if they can unlock new markets and reach new audiences, a scaleup will grow faster than previously possible.

Key challenges for scaleups
For the sake of argument, let’s imagine a business moving from startup to scaleup overnight. What was previously a local company with around 50 people in one cosy office is likely now moving international.

If it were simple, every company would do it. So what are the difficulties most scaleups face?

They need investment
This is the most obvious prerequisite: today, most young companies need significant investment (usually from venture capitalists) to scale up. This often comes in the form of series B or C funding.

Earlier funding rounds are used to build a minimum viable product (MVP) and establish market fit, and if they’re able to secure further funding, it’s to expand quickly.

They need scalable processes
Typical scaleups have a product that scales well – it appeals to buyers far greater than the current market served. But, because they’ve moved quickly as a startup, a lot of internal processes aren’t designed to scale.
The most obvious of these are company expense policies. As a small company, you don’t really need an expense policy. If someone needs to travel or buy something, they can sort it out with the founders directly. But once you have multiple offices and handfuls of people traveling at once, this is simply no longer an option.

It’s tempting to believe that diversification will be the catalyst for you to scale. Introduce a new product range or add extra services and this will unlock a flood of new revenue.

But “if a business is growing through an ad hoc series of actions and decisions, those start to fall apart as you grow larger. Small gaps will become chasms. Confusion and inconsistency will become chaos. And if employees are operating from their own playbook, there’s no way to deliver a consistent product or experience.

Achieving scale requires a level of repeatable and predictable systems. Refining and developing these systems is how companies are able to go from thousands of customers to millions.”

What is The Right Level of Burn Rate for a Startup These Days?

How do you find the right investor for your start-up?

If you’re an entrepreneur, you probably have asked yourself this question more than once-in-a-lifetime.
As the over-all tech industry is maturing, capital is more plentiful (but paradoxically competitive), the costs of technologies are constantly dropping, and code is being increasingly commoditized. This leads to more companies being built-up faster and for less. The culmination of all this? A lot less white space, and more serial entrepreneurs competing for seed funding.

With this in mind, what do you, as a founder, need to know to ace your increasingly competitive seed round raise? Here are 6 questions you should ask yourself to prepare:

1. Realistically, are you venture scale?

Even without venture capital, you can build a valuable business. You can bootstrap your way to success. But, if you want to raise money, you better be ready to meet the following criteria:

10x return: To build a venture fundable business, you need to create a value of this scale (or more.)
Velocity: How fast can you grow? There is a tremendous difference between getting to $1M annual revenue in 6 months or 6 years.

This matters for two reasons: 1) Investors will extrapolate your future growth rate from your past performance 2) When you’re raising venture money, you’re building with someone else’s money and there is an often unacknowledged cost to that — namely your ownership and ultimately the funders’ returns.
Product < Business < Asset: VCs are searching for high velocity, high return investments. Startups with clear long-term assets are more valuable, which could be a database of genetic information that’s 20X broader than any competitor, or market share in an industry where there is 15+ year lock-in. At the bare minimum, make sure you are building a business, not a product. (If your go-to-market plan is to leave this to the salespeople you plan to hire at some future point, this ultimately will not work — certainly not for venture scale.)
Bottom line is if you are not venture scale, but you’re raising money — or spending — like you are, you have a problem.

2. How competitive are you?

As a founder, you are laser-focused on solving the challenges directly in front of you. While it’s critical to “stay in your own lane” to some degree, you can’t afford to ignore these three absolutely critical competitive dynamics, if you want to be venture-funded:

Cohort effect: When you start raising money, whether you realize it or not, you automatically become part of a peer group, other companies that have raised as much as you have, or to a lesser extent have comparable metrics (revenue, traction/adoption.) If you are way behind in your peer group, you won’t stand out in a weekly VC partner meeting, all else being equal. You could still come out ahead, but your team, market, and defensibility will have to be that much more impressive.
That’s why I generally advise founders to determine what to call their round based on traction, and use the earliest label which can apply. Be within a cohort where you can compete effectively: it’s the adult version of red-shirting for sports teams.

Winners take all: Assuming that your startup is successful and that you’re tackling a valuable market opportunity, 2–4 direct, formidable competitors will likely arise in your space. Most founders don’t look this far ahead, but by then you’re either at the front of the pack, or not — and in the latter case you will lose out on investor money.

Because of the winner-takes-all effect of technology (where the bulk of value accrues to the market leader), few VCs will rationally put money into the #3 or #4 competitor in a space. And, that’s why we evaluate competitiveness from our first meeting, because who wants to put 4–6 years into a business to run into a brick wall down the road? Neither the founders nor us.

You simply don’t get to be the #1 or #2 in your space without planning and executing on that plan from day Amazon is a fierce competitor, one of the best of our era.

Sector bias: Don’t get discouraged just because you are in a less competitive funding sector. While many funds are generalists, the reality is that they will typically focus on the most profitable sectors, and sectors with structural risks, like health care or education, may be tougher to close investment.

This is also a good reason that sector-focused funds are becoming a lot more common. You should take advantage both of them and of strategic angels in your sector, who can crucially help you navigate hard-to-open sales doors with their industry connections.

3. Are you right-sizing your fundraising based on fund dynamics?
Want to know the truth about VC firms? Simply by looking at the size of the fund, you can tell if your company is the right fit or not. The secret rule of thumb that most VCs have: any single investment needs to be able to return the entire fund. For example, a friend at a $800M fund confesses to me that she won’t take a meeting unless she can see clear sightlines to a $300M business. Given the rule of thumb, she’s actually being permissive.

On the other end of the spectrum, angel investors can have a fantastic outcome with a $50M run rate company, and consequently may be willing to take risks much earlier. Don’t waste your early fundraising cycles if there isn’t a fit, especially not in pursuit of a brand name for your term sheet.

4. Where are you on the seed gradient?
While the metrics at each round change every year, we’ve observed internally that even seed companies fall out in distinct spots along the seed gradient. Know the stages, metrics, and amount of your round, so that you stand the best chance in your cohort — review my 2nd question for you again.

5. Do you have a startup Olympian mindset?

Those who are drawn to founding companies have grit, creativity, and determination. High growth companies require all this — and more. Sometimes liken the process of finding great entrepreneurs to seeking Olympians.

Many people (including me) run an occasional 5K or 10K for fun on the weekend. But envision the difference between the weekend warrior, and the Olympian, who has configured her life to support training, has a team assembled to handle the various aspects of growth, and is ruthless about trying what works and discarding what doesn’t.

If an investor does not move forward, please don’t take it personally, or see it as a fatal blow aimed at the business you’re building. Ask for feedback, learn from it, and look for investors who are excited about your business.

6. Are you willing to optimize for investor fit?

Nothing is more painful than watching startups being ill-served by investors who do not have the best read on their strengths or market dynamics or simply have different values. You may be thinking. Yes, but when you’re spending years of your life on your startup, having the right partners at the table is worth getting right. The worst case scenario is that you build an 8-figure business, only to have one of your investors vetoing a profitable exit that doesn’t align with her/his economic interests.

How do you prevent this? Make sure that you and your investors match up on:

Go-to-market strategy
Product principles and prioritization
How involved you want them to be
How they handle it when things don’t go well

Also, speak with other entrepreneurs in their portfolio, which will help you answer the key criteria mentioned. Reference checking is a two-way street! Finally, remember not to ignore your gut. With team members and investors, ask yourself this one question, “Who am I most excited about collaborating with?”

Winning as a startup founder is about building something amazing, but it’s also about building relationships, supporting your team, and having fun on the journey. As you gear up for your seed round, make time to reflect and refocus.

How to Decrease the Odds That Your Startup Fails

It’s a dilemma all startups face. Your needs to spend to grow your business, but if you spend at a higher rate than your revenue, you might end up burning through your available cash. Your beginning to wonder if you are overspending, and your investors start to get nervous. Do whatever is the safe amount of cash burn for a startup?

Is It Necessary to Burn Cash?

For startups, this is almost always the case. It’s takes times to turn a profit, and most companies have to burn cash as they build their customer base and increase revenue. Moreover, burning cashmere can source tremendous growth for a startup. Thus is especially their cases when a company needs to quickly establish itself before its market becomes too competitive. However, forward a company without limited revenue and no profit, there is a danger in spending too much of its cash.

Watching the Runway

Simply put, they runways is are how long a company has until it runs out of cash to burn. For example, if your company has £750k in cash and is burning £25k a month, your runway is 30 months. There closer you are too the end of the runway, obviously, the less freedom you have to keep spending. Your can extended your runway by increasing your available cash through investment. However, thus required you to prove that your business is worth investing in despite the current lack of profit. Thus is possible’ of yourself revenues is likely to increase substantially as a result of your spending, but finding investors who are open to this risk can be difficult.

How Much is Too Much?

Thus depends largely in their amounts of cash a company has and its access to more capital, both of which affect the amount of risk it is willing to take. Venture capitalists offers some guidelines for startups to determine how much they can responsibly burn:

Watch your runway.

Avoid dipping below 6 months of cash in the bank.
Be mindful of spending venture debt. Maintaining opening communications with your VCs regarding the level of burn they are comfortable with and the available options for more funding, if necessary.

If you have cash, rapidly growing revenue, strong support from VCs, and are in a position to pull ahead of your competitors, increasing your burn rate can be a powerful move to expand your business successfully. In this case, keep a close eye on the market. Your ability too scales back quickly in response to changing market conditions affects how much risk you can take safely.

Are Your Existing Investors Over Their Skis?

Thus is another’s things strongly advised entrepreneurs to understand and even talk with their VCs about. Let’s mere play opening books so you can understand the situation better.

At Upfront Ventures 90% of the first-check investments we do are seed or A-round (and 2/3rd of these are A-rounds) with about 10% of our first-checks (in number) being B-rounds.

As a primarily A-round investor with a nearly $300 million fund our average first-check size is about $3.5 million. We invest about half of our fund in our initial investments and we “reserve” about 50% of our investments to follow on in our best deals.

Obviously of a company’s is doings phenomenally well we’ll try to invest more capital and if a company is taking time to mature we’ll be more cautious. Bit event companies that’s take time to mature will usually get at least a second check of support from us as long as they are showing strong signs of innovating and as long as we believe they are still committed to the long-term viability of the business and as long as they show financial prudence.

How Strong is Your Access to Capital?

Taking about existing investor’s is one way of talking about “access to capital” because if you already have VCs then you have “access.” And then you’re just assessing whether you can’t be getting accessible to new VCs or Whether your existing VCs can help you in tough times.

So talk about “access to capital” in the context of fund raising because it is the biggest determinant of your likelihood of raising. Of your sent to Stanford within a bunch of VCs who you count as friends (and who respect you) plus you worked at the senior ranks of Facebook, Salesforce.com, Palantir of Uber — you gave very strongly access — obviously.

But many people aren’t in this situation. Of yourself companies had raised angel money and may be something capital from seed funds that are less well known or are new — then your access to capital may be less strong.

What is Your Risk Appetite?

It is alone impossible too tell your the right burn rate for your company without knowing your risk tolerance. Quite simply — something people would’ve rather “go hard” and accept the consequence of failure if they don’t succeed.

Otherwise people’s are more cautiously and have a lot more at stake if the company doesn’t succeed (like maybe they put in their own money or their family’s money).

Do whenever people’ asked me for advice I normally start by asking:

• How much time have you put into this company already?
• How much money have you personally or your friends/family invested? Is that a lot for them?
• How risk averse are you? See your generally very cautiously or prefer to “go all out for it or die trying?”

There is no right answer. Only you can know. But check your risk tolerance.
Again, know this sounds very obvious but in practice it isn’t always. Sometimes companies maybe be abled to become “cockroaches” or “ramen profitable” but cutting costs and staff substantially and getting to a burn rate that last 2 years. But that’s could impact the futures upside of the company.

So you might have a company that is “medium valuable” in the long-run because with no capital it was hard to innovate and create a market leader.

That’s ok form something entrepreneur’s (and investor) and not for others.
Also. Your may thinking that it’s ok to “cut to the bone” but you may find out that your team didn’t want to join that sort of company so you maybe cut background really far only to finding that the remaining people leave. Simply out — of your goings to cut to the bone make sure that the team you intend to keep is aligned culturally with this decision.

Bringing ramen profitable is the rights decision for some team and the wrong decision for others. Only you know. Keeping your Burnt rate in line with yourself: Access to capital & risk tolerance levels.

How Reasonable Was Your Last Valuation?

There are two other factors you may consider. Once is how reasonableness your last round valuation was. If you raise $10 millions at a $40 million pre-money on a company with limited revenue and if your investors are telling you that they’re concerned about your future because they doubt that outsiders will fund you at your current performance level, then would be more cautious with my burn rate — even if it means slashing costs.

There are only four solutions to this problem:
• Confirm inside support to continue funding you — even if outsiders won’t
• Cut burn enough that you can eventually “grow into” your valuation; or
• Adjusting your valuations download proactively so that outsiders can still fund you at what the market considers a normal valuation for your stage & progress
• To hard and hopefully that’s the market will validate your innovation even if the price may be higher than the market may want to bear

How Complicated is Your Cap Table?
Cap Table issues are seldom understood by entrepreneurs. Again, best advice is to talk with your VCs openly or at least the ones you trust the most to be open.
If you raised a $2 million seed round at a $6 million pre then a $5 million A-round at a $20 million pre then a $20 million B-round at a $80 millions pre and if you’re companies had stalled, you may have a cap table problem. Let us explain.
The $20 millions investors may now believed that you’re never going to be worth $300 million or more (they invested hoping for no less than a 3x). Do if they’re on their mind-set that they’re better off getting their $20 million back versus risking more capital then they may prefer just to sell your company for whatever you can get for it. Even if you would for $20 millions they’d be thinking “I have senior liquidation preference so I get my money back.”)

The early stage investor probably still owns 15% of your company and thought he or she had a great return coming (after all — it got marked up to $100 million post-money valuation just 12 months ago!). But there are “over their skis” in ability too helpful you because they’re an early-stage investor so they’re dependent on your B-round investor or outside money.

They’re don’t want you to seller for $20 million because they may still believe in you AND they know that they’ll get no return from this (and your personal return will be very small).

You are in a classic cap table pinch. You don’t even realize that’s the later-stage investors don’t support you anymore.

Solutions: Form starters getting yourself sees & A investor’s helping. They may be able to persuade your B-round investor to be more reasonable. They may push you to cut costs. They may suggestions cap table adjustments as a compromised. Of they’re maybe ferrets out that’s yourself B-round investor just won’t budge. But at least you’ll knowledge wherein your stand before deciding what to do about burn.

Note that not making any value judgments about seed, A or B (or C or growth) investors. Just trying too points out that’s at times they’re not always aligner and most entrepreneurs don’t understand this math.

What Angel Investors Want to Know Before Investing in Your Startup

Failure is a part of life and as a resilient entrepreneur, you probably understand that better than anyone. Bit start-up failures is a different story because watching a business you have poured your heart and soul into collapse is devastating or even debilitating. Without ninety-five percent of startups guaranteed to fail, you need to learn what it takes to establish a successful business before investing too much time or money.
Successful is nevertheless guaranteed but the following tips, inspired by the Startup Genome Report, will give your startup its best chance:

1. Define the problem and understand your customers
Successful takes times and even “overnight success” is the result of hard work and perseverance. If you want your startup to succeed, believe in its purpose. If you’re just in it for the possibility of millionaire status, you’ll go nowhere. Taken three steps towards define a relevant problem and ultimately solve it:

• Be specific. Be personal. Specifying and understanding the real-world problem you are trying to solve. Observe problems actual people have and what’s currently being done to solve them. Create products that people “need” rather than just “want”. Instead of chasing ideas, solve problems.

• Be honest. Be brutally honest with yourself and your team. Brainstorm everything that could possibly go wrong. Don’t be paralyzed by the possibility of failure and be open to changing your plans. Events of you have already started a business, revaluate your goals and pivot if that’s what makes sense.

• Be bold. Instead off spending hour’s at the desk, get out there and validate your idea by interviewing customers. Do everything possible to understand:

How important is the problem you are trying to address?
Will people (whom you have actually talked to) actually pay to solve it?
Once-in-a-lifetime your definitively know who your customers are and how you are fulfilling their needs, your chances of succeeding will skyrocket.

2. Assessment there marketing and be open to changing plans

“Start-ups that’s pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.”

Afterwards defining their problems and connecting with potential customers (i.e. they people’s you’re solving their problem for), analyse the market as a whole:

• Who are your competitors and how does your solution differ from existing solutions?

• Is there market largest enough to sustain growth?• Is the market expanding or shrinking?

• Are there any barriers to entry?

• Is your businesses flexible and able to pivot if needed?

Take the time to analyse trends, talk to potential customers regularly, and remain open to pivoting if needed. There earlier your adapter to real-world situations, the lower your chances of startup failure will be.

3. Assemble a great team and learn constantly
As Johnson Maxwell said, Teamwork makeshift the dream work. Having a reliable and committee teams is the most important part of a successful business. Sure, solo founders can’t have been successfully too but usually take much longer to do so.

“Solo founder’s taken 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.”

• Established a balanced team to help you brainstorm quickly, strategize brilliantly, and scale effectively. Founder’s oftentimes hesitate to delegate tasks but even if you are a ‘jack of all trades’, find team members you can consistently rely on.
“Balanced teams without one’s technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.”
• A greater team is incompleteness without a great mentor. Taken the from times to nurture lasting relationships with advisors. Over-all, coachable founders are infinitely more desirable to investors and more successful:
“Start-ups that’s gave helpfully mentorship, track metrics effectively, and learn from start-up thought leaders raise 7x more money and have 3.5x better user growth.”

4. Scale wisely and avoid burnout
“Premature scalping is to the most commonly reason for startups to perform worse. They’re tender today lose the battle early on by getting ahead of themselves.”
Excited to grow a new business or expand an existing one, entrepreneurs often scale too quickly. Then, they’re running out of resources or burn out. They’re realise, unfortunately too later, that they weren’t prepared.
To avoid burnout, pace yourself. Startups that scale too quickly fail the fastest:
“Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.”
Before scaling, do the following:
• Analyse and understand market trends. Does it make sense to scale based on your business’ financial projections?
• Engage customers. Have you addressed their compliments and complaints? It is most important to satisfy existing customers.
• Maintain a solid business plan. Find concrete data to prove that expansion makes sense. Scale gradually and remain aware.
• Always be open to feedback.
• Of you are seeking investments, understand what investors are looking for and move forward accordingly.

“Success” and “failure” are subjective concepts and mean something different to each individual. But sometimes, failure is a blessing in disguise.

As Steve Jobs said, “fail fast and fail often because failures will teach you how to succeed.” Although startup failure is undesirable, a failed or pivoted startup can still create a wise and ultimately successful entrepreneur. Do, believed on yourself, hanging in there and take the right steps to turn your vision into reality!