In the last post, I talked about how revenue-based investments are a lower cost of capital than traditional equity. In this post, as promised, I’ll explain how they also better align the the incentives of investor with the entrepreneur. To start with, always remember to put yourselves in the other person’s shoes when raising money. Investors invest to make a positive return on their...
Revenue-based investments are quite uncommon in startup investing, and as such, few entrepreneurs and few investors understand their benefits. The traditional form of startup capital is equity, with investors expecting a “10x” return on their investment, i.e. they expect that the company will be acquired for a sufficient amount that the investment will earn the investor at least 10...
Just about every post I write comes from a conversation with an entrepreneur or fellow investor. Same with almost every chapter in every one of The Next Step series of books I’ve published. When the same topic keeps coming up, I write it down so I don’t have to explain for the third time to the next entrepreneur who asks. When is the best time to launch your company? Have you...
Sometimes blowing up a dam is the wrong metaphor for tackling a big problem. Sometimes the only way to tackle a big problem is to work on it methodically, bit by bit. The analogy is chopping down a tree. Not some little tree planted by the sidewalk to prettify the neighborhood, but instead like the trees that used to grow here in Seattle. 300 foot tall, 30 feet around (a.k.a. 100 meters tall...
Sometimes the key lessons in life are learned at the oddest moments. One lesson in particular comes back to my mind at least once per week, as I push forward on my entrepreneurial endeavors and help other entrepreneurs do the same. The lesson comes from an obscure movie, Force 10 from Navarone. Harrison Ford’s first lead role, albeit second billing on the credit to Robert Shaw, who was...
How long will it be before entrepreneurs realize and start treating fundraising is a sales process, not as an inalienable right?! Last week I attended my umpteenth Angel group forum. Four formal pitches. Six mini pitches. Plus a few updates from the ecosystem. Not an uncommon pattern for a gathering by an Angel group. The problem… nearly all of these presenters presented facts and figures. Slide...
Winding down the last third of Fledge, my conscious company accelerator, the inevitable topic on the mind of all the fledglings is funding. Who will fund their startups? Where can they meet these people? Given Fledge is not a typical tech accelerator, but instead a program focused on socially and environmentally conscious companies, the answer is complicated. Fundamentally, there is a lot...
Once you realize that it is possible to do good for the world while doing business, you start to think about the scalability of that good. Or the flip side of that thought, that when thinking about the impact of an organization, you think about how to scale up that impact using business practices. Both these thoughts came to my mind as I listened to a recent Planet Money podcast, one that...
In Crossing the Chasm, Geoffrey Moore describes the gap in the adoption curve, where the marketing effort needs to be changed to appeal to the Early Majority, when most of the Early Adopters have been acquired. In talking with one of the older fledglings, I realized that there is a similar gap earlier along the curve, between the initial customers and the bulk of the early adopters. Here’s...
Ah… the proverbial hockey stick in a startup’s financial projections. No one believes it, and yet it must be included in any investor pitch. Why? Two reasons. First and foremost, investors are looking for big opportunities, and if the revenue forecasts grow exponentially, that serves as a proxy to claim a large opportunity exists. Second, investors want their money back (and more), and...
