Investor Connect Podcast

In this episode, Hall welcomes David Chaplin of Searchdex. SearchDex is a Dallas based SEO Service and Technology company with over 15 years in the eCommerce solutions space. They believe that every search should produce meaningful outcomes. No other company can identify and solve issues as SearchDex does. Today, businesses need a navigator to drive the best outcomes in this dynamic marketplace.

David has been CEO of SearchDex™, since December 2010. He led the efforts in pivoting SearchDex from a managed services company to a technology platform and solutions company.

Before SearchDex, David served as VP of Advanced SearchTechnologies. This position followed Kroll Ontrack’s acquisition of Engenium Corporation, which David founded in 1998. Dave was responsible for integrating Engenium’s advanced search products (AI based) throughout Kroll’s electronic discovery services business while growing outside sales of the Engenium product group. At Engenium, David grew the company from startup to recognized industry leader, earning multiple industry awards as one of the 100 most important companies in knowledge management and a leader in artificial intelligence solutions in the electronic discovery market.

Direct download: David_Chaplin_of_SearchDex.mp3
Category:general -- posted at: 11:41am CST

Figure out what you want to invest in then look for resources to help

Today, we’ll talk about investing in startups

Should you invest in startups?

Startups are very risky and it’s a lot harder than it looks. 

If you have already invested in mutual funds, index funds, stocks, bonds, real estate etc. then you may want to consider investing in startups through either funds or directly in startups.  

How much should you invest in startups?

- Invest no more than 3% of your discretionary income. There are many good deals out there but for the most part the investment is illiquid for a long time. 

Where do you find deals?

- There are many sources including angel groups, networks, syndicates, and MicroVC funds that let you invest directly in the startup as well as the fund.

Should you invest alone or in a group?

- This depends on your investing style. A group can give you access to more deal-flow and due diligence support. On the other hand the group may pursue deals you are not interested in and vice versa.  

How to get started?

- Figure out what you want to invest in and then ask what resources you need to do so successfully. Do you need help with finding the deals, due diligence, or negotiating the terms. If so, then seek investors and groups that can help you achieve your goal. Don’t join groups because they appear to be fun and make investing look easy.

Investing in startups takes time but can be both challenging and rewarding.  

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

 

 

Direct download: Startup_Espresso_--_Should_you_invest_in_startups.mp3
Category: -- posted at: 8:49pm CST

In this episode, Hall welcomes Dr. Scott Augustine, CEO of Augustine Surgical. Augustine Surgical is dedicated to developing innovative products that target surgical safety to improve outcomes.

Dr. Scott Augustine is the inventor of the HotDog Patient Warming technology and is the world’s expert on patient temperature management, having also invented Bair Hugger forced-air warming over 30 years ago. The company is developing several innovative products that fit the focus on making surgery safer. The Augustine Surgical team has over 180 patents issued and many more pending.

Direct download: Scott_Augustine_of_Augustine_Surgical.mp3
Category: -- posted at: 12:56pm CST

Use Metrics to show your progress

Today, we’ll talk about knowing your metrics

Investors look for the metrics in your business so it’s important to know them. There are three levels of metrics you can use:

Activity metrics show the basic activity of the business

Unit economic metrics show the unit economic model including cost of customer acquisition and revenue.

Growth metrics show the growth in the user base and usage of the product.

Activity metrics show number of users, downloads, registrations and the like. They fall short of business results such as closed sales. If nothing else focus on the customer engagement numbers you have.

If your company is pre-revenue you can show how the business model is “profitable” by using  unit economic numbers. At its core, you show the cost and process to generate leads, qualify, and close them for revenue.

In the early days of a business the revenue is small.  Most investors know that and don’t expect large revenue.  What they look for is repeatable and predictable revenue. Showing unit economics demonstrates you have a core business model that is working and with time and funding can improve.

Growth metrics show the number of users increasing and their usage of the product increasing. Daily active or monthly active users should be going up and to the right. If the business has seasons or cycles, then one can use a six month moving average to show your growth rate.

In summary, if you can only show activity metrics then do so.  If you can show unit economic metrics, that will help. The best metrics show  growing users and usage.

Whatever you do, don’t show up empty-handed.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Espresso_--_Know_your_Metrics.mp3
Category: -- posted at: 7:34pm CST

In this episode, Hall welcomes David Blankman of Title3Funds.com. Title 3Funds provides investment opportunities in curated startups and growing businesses. They work with leading incubators to find the next big idea for their subscribed investors to hit home run after home run.

David is an experienced serial entrepreneur, bootstrapping five startups in diverse industries. He founded Blankman Asset Management a SEC Registered Investment Adviser managing client investment portfolios. As VP of an institutional client group, he raised over $300 million in funding for private placement securities issuers. He helped launch and co-manage a successful alternative investment mutual fund. David helped lead a successful Title III Equity Crowdfunding campaign in 2018. He refers to this important new capital formation as “Little Wall Street comes to Main Street”. Driven to guide startups and help them grow into thriving businesses. Working to help investors actively invest into online Equity Crowdfunding private placement securities.

Direct download: David_Blankman_of_Title3Funds.com.mp3
Category: -- posted at: 2:28pm CST

In this episode, Hall welcomes Dr. Suri Ganeriwala Founder and President of Spectra Quest Inc. Spectra Quest, Inc. is a leading developer and manufacturer of complete Turn-key Systems for training and diagnosis in Machine Vibration Analysis, Rotor Balancing, and Shaft/Coupling Alignment. The system includes Machinery Fault Simulators, Interactive Training Program, Data Acquisition Hardware/ Software, and Accessories. To accelerate the learning and design process SpectraQuest offers a series of interactive software CDs on Vibration Fundamentals and Calculations, Signal Processing, Alignment and Balancing.

Before founding Spectra Quest, Suri's background includes a bachelor's, master's and Ph.D. in mechanical engineering. He has over thirty years of industrial and academic experience in machinery fault diagnosis, signal processing, vibration analysis and control, and viscoelastic material characterization. Suri has worked for Philip Morris, Firestone, and Martin Marietta Aerospace. He has developed a unique method of instruction using the SpectraQuest machinery fault simulator (MFS), which is his creation from concept to completion.

 

 

 

 

Direct download: Suri_Ganeriwala_of_SpectraQuest.mp3
Category:general -- posted at: 11:28am CST

Six months to build it and six months to sell it.

Today, we’ll talk about what to build first in your startup.

Some startups suffer from what I call the “Vision Problem”. They have a vision in their mind about what the product/service should look like AND they have to have it on the first day they launch their business.

Truly great visions take years to put in place.  

You’ll need to go to market with an initial product and then over time build on it. This first product will not be the full embodiment of your vision.

So what should you build first?

Start with the easy, not hard. Think about what Amazon started with. Their first service was  “We sell books online.“

Over the years they built an empire on top of those humble beginnings.

For software it should take 6 months to build and 6 months to sell. If you can't build it in 6 months you scoped it too large. If you can’t generate sales in 6 months then you built the wrong thing.

You need something that will generate revenue. A cash cow business will greatly help your business down the road. Most cash cows don’t look exciting or appear highly innovative but it can help fund the exciting innovations you have in mind.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: 259_--_Startup_Espresso_--_What_to_build_first.mp3
Category: -- posted at: 8:27pm CST

In this episode, Hall welcomes Henry Liu of Yeoman's Growth Capital. YGC is a venture studio focused on driving enterprise adoption of blockchain. They identify enterprise blockchain needs within Fortune 500 companies, then launch, fund, and staff new ventures to pursue those opportunities. 

Henry was the head of investments for an open-source technology focused family office. He is a sought-after keynote speaker and has been invited as a keynote / panel speaker @ SXSW, Italy, Dubai, Estonia, Lithuania, Seoul, Toronto, Brazil, and Ukraine.

Prior to joining the family office, Henry was a veteran member of the High-Growth team at Facebook managing venture-backed, growth stage companies in North America. He advised founders and CMOs on revenue and distribution channels, strategic positioning, and managed $150M+ in marketing spend and converted over $450M to product sales.

 

Direct download: Henry_Liu_of_YGC.mp3
Category: -- posted at: 2:17pm CST

In this episode, Hall welcomes Robert Morris of TerrAvion. TerrAvion provides high revisit rate aerial imagery for agriculture. Since 2016 they have been the largest volume provider. Robert founded TerrAvion in 2013. His professional mission is to make robotics work for agriculture. Robert led the first drone platoon in Afghanistan, where he realized that drones are not a scalable, cost-effective solution. 

  

Direct download: Robert_Morris_of_TerrAvion.mp3
Category: -- posted at: 11:59am CST

Show the system behind your goals

Today, we’ll talk about establishing a growth story for your startup

Investors fund deals based on the team, the market, or the technology.  While these are popular investment thesis, the investment decision often comes down to what I call “the Growth Story”.  

This is your operational revenue model showing how you acquire customers and how much they pay for your product/service.

If you have substantial revenue say a $1M then the investor assumes you have a growth story.  Growth stage investors will look at the model to see how much you can grow that business and what constraints you will face and when.

For pre-revenue or low revenue companies you can sho  in unit economic numbers the proven repeatable business model you have up and running. 

If you haven’t done so already then take $5K and prove out the unit economic model.

For example, let’s say

-You can generate leads for $1/lead from Facebook ads

-Through a followup email you  can convert 1 out of 50 leads into a paying customer

-Each paying customer buys on average $250 worth of product 

-You can take these numbers and render a basic economic unit model as follows:

CAC: $50

LTV: $250

CAC: LTV is 1:5

-You then add the time it takes for signup and fulfillment and you have a unit economic model. 

The fact you know your numbers will impress investors.  Investors look for the system behind the goals.  This is one way to demonstrate your growth story.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: 258_--_Startup_Espresso_--_the_Growth_Story.mp3
Category: -- posted at: 5:12pm CST

In this episode, Hall welcomes Jason Hull, Cofounder of Broadtree Partners. Broadtree Partners is a group of entrepreneurial investors focused on acquiring businesses where the owners are looking to transition from their current roles. They specialize in providing opportunities for owners to smoothly exit their companies and seamlessly change leadership, while preserving their legacy. As Jason puts it, they help owners who who want someone to help them "really realize the vision....or to allow them to get off the ride." Broadtree focuses on companies in the 1-5M EBITDA range, or what he calls "classically under-matched" companies.

Jason talks about the challenges and upsides, and what investors need to be prepared for should they choose to invest in this space. He also discusses his investment thesis, and explains some of the operational challenges in the acquiring companies that may be stagnant, but with potential.

Direct download: 01_Jason_Hull_of_Broadtree_Partne.mp3
Category: -- posted at: 5:24pm CST

In this episode, Hall welcomes Ronald LeMay CEO of Main Street Data. Main Street Data was formed in 2017 to bring precise data to the agriculture world. While data has improved in many other industries, agriculture remains behind the curve and Main Street Data has set out to change that. Main Street Data enables ag-related organizations to dive deeper than ever before into the data and insights that drive better decisions. They also provide growers with an objective scorecard for farming practices, along with insights for where to invest for a better return.

Before joining Main Street Data, Ronald spent most of his career in communications. He worked with Southwestern Bell, AT&T and retired from Sprint in 2003 as president and COO. He decided to join Main Street Data because it's a portfolio company of OpenAir Equity Partners. Ronald and his son formed OpenAir Equity Partners in 1999 to keep him moving since according to Ronald he would never have the ability to or interest in retiring. So he invested in the predecessor to Main Street Data.

Direct download: Ronald_T_LeMay_of_Main_Street_Data.mp3
Category: -- posted at: 12:14pm CST

Validation -- the Product Works and People will Pay for It

Today, we’ll talk about demonstrating product and market validation

In talking with startup investors the first two questions that come up are Product validation and Market Validation.

The product works and someone will buy it.

Investors look for evidence of this before moving into further diligence so it’s important to show this in your pitch.

Beta users are a great way to show the product works and customer interest.  In many cases, the product is a website providing some value in the form of data storage or analysis.

In today’s world, the chance that you will get the product up and running is fairly high but will someone use it and more importantly pay for it becomes the bigger question.

Customers who pre-pay for it check the market validation box. It demonstrates you are solving a real problem.

If you don’t have anyone paying for it, then you’ll need to resort to pipeline metrics showing the number of downloads, trials, and pilot programs.

While not the same as a paying customer it gives a leading indicator that the customer will most likely buy.

It’s helpful to show the funnel prospects go through in engaging your product.  This includes lead generation, qualification, closing, trials, pilot tests, and signed customers.

Investors look for a consistent signup percentage on the leads going through your program. 

While the absolute number of signups may not by high, the repeatability of your model can be compelling to the investor.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

 

Let’s go startup something today!

Direct download: Startup_Espresso_--_Product_and_Market_Validation.mp3
Category: -- posted at: 8:44pm CST

 In this episode, Hall welcomes back Hélène Thibieroz, founder and senior managing partner of We Grow Green Tech. We Grow Green Tech focuses on accelerating growth for green technology innovation and impact by partnering with early to late-stage companies.

In a previous episode, Hélène talked about shifting her career three years ago to enter the green technology space, combining her passion for the environment and love of technology. She strongly believes technology can be successfully applied to create impactful, practical business solutions while making an impact on our future.

In this episode, Hall and Hélène follow up on their previous discussion about the state of green tech and discuss how We Grow Green Tech is currently progressing.

Direct download: Helene_Thibieroz_of_WeGrowGreentech-_Follow_up.mp3
Category: -- posted at: 3:22pm CST

In this episode, Hall welcomes Christian Garces of Texas ColdWorks. Texas ColdWorks is the first state of the art public cold storage complex being developed in Austin, Texas. With over 280,000 SF, it will house food producers, co-packers, and logistic companies.

 

Before Texas ColdWorks, he was the founder and CEO of Tableaux. A manufacturer of architectural products, both for residential and commercial use. Christian holds a Bachelor of Arts from St. Edward’s University and a Masters of Business Administration from the University of Texas. He is an entrepreneur with experience investing and managing rental properties going back to the mid-1980s. He was the founder and president of Investors’ Street a securities day trading firm with offices in Austin, Dallas, and Miami. In the late 90s, he was Senior Business Analyst at The Capital Network (Credited with funding 100+ technology companies in central Texas) where he analyzed over 1,000 business ideas and coached hundreds of entrepreneurs and C-Level executives. Since then he has served as Advisor, Mentor & Judge for various organizations including the University of Texas Moot Corp, Texas Venture Labs, Texas Capital Network and Austin Economic Recycling Economic Development Program Reverse Pitch.

Direct download: Christian_Garces_of_Texas_Coldworks.mp3
Category: -- posted at: 10:50am CST

For family and friends funding -- no one is getting paid back

Today, we’ll talk about raising funding from family and friends

Many startups launch their business with family and friends funding.

Some entrepreneurs are often reluctant to take money from their family because -- well Thanksgiving turkey tastes different if things don’t work out.

On the other hand, investors view funding from family and friends as an indicator of support.  After all, if your family and friends don’t believe in you why should they.

My recommendation is to go to family and friends and ask for no more than $5K per person and tell them it’s a donation.  No one is getting paid back.  

Most family and friends funding comes from those who want to support you and don’t look for a return. 

This also alleviates the challenge of valuing the business at such an early stage.

If the business does succeed you may want to give back by offering $5K for one of their projects. 

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Espresso_--_Raising_funds_from_family_and_friends.mp3
Category: -- posted at: 9:27pm CST

In this episode, Hall welcomes back Will Szczerbiak of Greycroft Partners. Greycroft is a leading venture capital firm focused on investments in the Internet and mobile markets. Greycroft leverages an extensive network of media and technology industry connections to help entrepreneurs gain visibility, build strategic relationships, bring their products to market, and build successful businesses. Greycroft manages more than $1 billion and has made over 150 investments since inception.

 

In this episode, Hall and Will catch up from their previous interview and speak about the mobile-app space and where it is now heading. They also speak about what WIll has been up to since they last connected. His growth, new perspective, and lessons learned over the years.

Direct download: Will_Szczerbiak_of_Greycroft_followup_1.mp3
Category: -- posted at: 4:43pm CST

 

In this episode, Hall welcomes Bruce Worrall CEO of IntellaSphere. IntellaSphere is the first Brand Affinity Marketing System. They help businesses/#SMBs market more effectively using a socially collaborative approach. Brand Affinity Marketing builds brand awareness and recognition with prospects and strengthens brand loyalty with customers. It's an all-in-one service that's simple, affordable and effective.

 

Before joining IntellaSphere, Bruce has a background in business development, product development and business operations for several companies. He has worked with Microsoft, Amazon, AT&T. He has also consulted to eBay, Microsoft, Shopping.com, Nuance Communications, and has been at approximately five startups at the VP or C-level, including a company called Fairmarket, which IPO'd. In his career, Bruce has gone full circuit from startup to IPO, to acquisitions.

Direct download: Bruce_Worrall_of_Intellasphere.mp3
Category: -- posted at: 10:02am CST

Find customers to pay for the product before you build it

Today, we’ll talk about product development for startups.

In growing your business you must prioritize what products you develop. In developing a new product it’s helpful to ask ‘who is going to pay for it’ before you spend money on it.

The goal is to match the costs to sources. For existing product upgrades this could be current customers. They are ideal candidates for paying for the upgraded product. By surveying your current customers you’ll get a better idea of what they need.

In building new products you should consider finding anchor clients who will prepay part of the expense of the product development. If you can’t find anyone who will pay for it, then you may want to reconsider building the product.

Most startups avoid pre-selling a product because they think it will be too difficult. In reality it’s about the same amount of work.

There are benefits from working with customers in the product development phase.

You’ll learn the problem to be solved in a much deeper way. You’ll learn what customers will actually pay for and you’ll also gather competitive intelligence.

Matching product development with customer payments keeps you aligned with the market.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Espresso_--_Know_who_is_going_to_pay.mp3
Category: -- posted at: 4:57pm CST

In this episode, Hall welcomes Richard May of Invest in Texas Initiative. The Invest in Texas Initiative is a statewide non-profit industry trade association of economic development officials, attorneys, consultants, developers, business owners, and other related service providers. Their mission is to promote the Texas investment landscape internationally.

Before Invest in Texas Initiative Richard has a long past representing industries through trade associations. After representing public companies on Wall St and finding the space to be very conservative, Richard now enjoys working with VC’s and angels. He finds it is a much more dynamic and exciting area to work in.

 

Direct download: Richard_May_of_Invest_in_Texas.mp3
Category: -- posted at: 12:26pm CST

Look for the right investor to lead your deal, not just the first investor

Today, we’ll talk about finding a lead investor for your deal.

I’m often approached by a startup who has several investors interested in their deal but no one wants to lead it.

This is not surprising given how much work goes into leading a deal which includes setting the valuation, selecting the key terms, and performing due diligence.

For those who don’t yet have a lead investor we start with a convertible note. A convertible note is a debt instrument that converts to equity later. This makes it easy for investors to join the deal without having a lead investor package it up for you.

At some point in the round an investor will express interest in investing but only for equity. If that investor will invest at least $100K then they are a lead investor candidate. You pursue that investor to lead your deal.

Those investing smaller amounts such as $25K will most likely not put sufficient time into negotiating the terms – especially the valuation so they are not good candidates to lead your deal.

You want to be in a position to take investments when they are offered. A convertible note works well for this purpose. Investors signed up for the convertible note demonstrate investor interest making your deal more attractive to the lead investor when they appear.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Espresso_--_Finding_a_lead_investor.mp3
Category: -- posted at: 4:12pm CST

In this episode, Hall welcomes Kirk Otis of Merger Partners. Hall and Eric talk about how companies can move their marketing function from a startup stage to a growth stage company. Merger Partners, a mid to lower market Investment bank, focuses on connecting entrepreneurs, business leaders, and management teams with the PE Capital market in order to fund acquisitions and growth initiatives. Kirk has a background in corporate finance at Fortune 100 firms, then 20 years in CorpDev. To date, Kirk has completed 52 transactions, totaling 13.5B, and has done transactions internationally in 10 countries. His deals fill product gaps, acquire customers, gain a position in entirely new markets and open up new market regions.

Direct download: Kirk_Otis_of_Exit_Partners_1.mp3
Category:general -- posted at: 2:49pm CST

Today, we’ll talk about how to value your startup.

Since startups don’t have significant revenue then how do you value your startup when fundraising?

Traditional tools such as discounted cash flow, book value, and other standard accounting techniques don’t work for early stage companies.

For startup valuations we use the rule of 4.

For each value you have built into the business for revenue, team, product, and IP, give your startup $1M in valuation.

So for revenue, if you have 5 enterprise customers with contracts signed then give your startup $1M of valuation. If you have something less than that, then reduce the valuation. Say you have only 1 customer who is paying, then give your startup $200K in valuation. If you have no revenue, then give your startup $0 valuation.

If you have the team in place and working well, then give your startup $1M in valuation. If you only have two in place then give your startup $500K..

If you have the product up and running and ready to ship to the customer then give your startup $1M in valuation. If you have it in beta version then give your startup $400K..

If you have the patents filed and awarded then give your startup a $1M valuation. If instead you have a handful of provisional patents filed, then give your startup say $200K.

You then add up each of the 4 components and that gives you your startup valuation. In this example, the valuation would be $1.3M.

In the end, startup valuation is not a formula but rather a negotiation. No matter, what valuation you put forth, the investor will challenge it.

By using the rule of 4 you can articulate the values in your business which will be much more compelling then the usual response of “well I just think it’s worth that.”

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Espresso_--_How_do_you_value_your_startup.mp3
Category: -- posted at: 7:05pm CST

In this episode, Hall welcomes Gale Bowman of IrishAngels. IrishAngels was formed in 2012 as an angel investment network affiliated with the University of Notre Dame. Investors in the network all have ties to the university and they currently have over 230 investors in their active network. IrishAngels focuses on seed-stage investing. They look at companies that are raising rounds of $1 to $3 million. IrishAngels operates like a venture firm does, in terms of going out to find the deals. Their team screen the deals, do due diligence, and negotiate terms if needed. After the investment is closed, they work with the portfolio company's CEO on an ongoing basis to make sure that their organization is providing valuable help to that entrepreneur and the company, as they continue to grow.

Direct download: Gale_Bowman_of_Irish_Angels.mp3
Category: -- posted at: 1:34pm CST

Today, we’ll talk about the documents you need for your fundraise.

The first document is the pitch deck.This is usually ten to fifteen slides introducing your deal to the prospective investor. It should cover the basics of the business including the problem you are solving, the solution and product you are offering, the competitive advantage, your business model, the team, financial projections, your fundraise amount, and the exit you envision.

You’ll also need a detailed 3 to 5 year financial projections often called the Pro Forma. This gives the investor an idea of what you will do the funds and how you envision the company growing.

In addition, you’ll need a data-room or what some call the due diligence box which contains key documents about your business. These documents include your entity filings, patent filings, articles of incorporation, income statement, balance sheet, and other documents detailing your business. Investors who want to make an investment will look for these documents so they can run their due diligence.

Finally, you’ll need a terms sheet which outlines the terms of the investment. Most investors will want this document as part of their diligence so they know exactly what they will be signing.

Thank you for joining us for the Startup Espresso.

Let’s go startup something today!

Direct download: Startup_Espresso_--_What_documents_do_you_need_for_your_fundraise.mp3
Category: -- posted at: 7:14pm CST

In this episode, Hall welcomes Ed Pearce of Paragon Digital. Before investing in early-stage companies, Ed was an attorney for many years. He was general counsel of two publicly-traded companies. When both companies sold, he went to work for a venture capital firm in Dallas. Ed has a love for starting companies and coaching people through the process. He’s been with different companies that made deep use of venture capital, and then five years ago he bought Paragon Digital, to continue the process of investing and operating a technology-leveraged business.

Direct download: Ed_Pearce_of_Paragon_Legal.mp3
Category: -- posted at: 2:27pm CST

Today, we’ll talk about the different type of investors you will find in the startup world.

There are four type of investors for your startup -- Venture Capital, Angel Investors, Family Offices and High Networth Individuals. There are lenders who provide debt financing but that’s a topic for another day.

Venture Capitalists are professionals with experience in the startup world coming from either the financial space or have run a startup in the past.
- They invest funds from limited partners such as family offices and pension funds.
- They invest for homeruns and seek a 10X return on every investment.
- They invest $150K to $500K on first rounds for seed and Series fundings and usually set aside funds for follow on rounds.

Angels are typically successful business people who invest their own money as a side project from their day job.
- They look for a 3 to 5 times return on their investment.
- Angels invest $50K to $100K on first rounds and sometimes set aside funds for follow on rounds.
- There’s a saying that angels want “to do a little good, have a little fun, and make a little money.”

Family offices are businesses set up to invest their own funds for a return and often have impact investing as part of their investment thesis.
- They invest $250K on first rounds and $500K or more on follow on rounds.
- They tend to be patient money.

High Networth Individuals (HNI) are similar to angels who operate at a higher level of funding writing checks of $100K to $250K for first rounds.

You can also raise money from family and friends, but I recommend raising small amounts below $10K each as Thanksgiving turkey tastes different if things don’t work out.

All of these investors meet the accredited investors criteria. Accredited investors are those the SEC deems high networth and can afford the risk that comes with early stage funding. You can learn more about the criteria to be an accredited investor by looking on the SEC website. In short, it’s anyone who has a networth of $1M or more not counting the house you live in.

Thank you for joining us for the Startup Espresso.

Let’s go startup something today!

Direct download: Startup_Espresso_--_What_type_of_investor.mp3
Category: -- posted at: 6:22pm CST

In this episode, Hall is joined by Eric Bielke with GE Ventures. After working with one of the early firms in Data Science, and a foray as an entrepreneur in the solar energy space, Eric joined the VC space focusing initially on energy investments.

 

More recently, Eric has been focusing on aerospace and space tech. He talks about some of the latest developments in aerospace, as well as provides advice for investors looking to get into that sector. In addition, Eric provides some advice for aerospace startups, talks about a few that he's worked with, and highlights some of the subsectors he finds particularly promising.

Direct download: Eric_Bielke_of_GE_Ventures.mp3
Category: -- posted at: 3:28pm CST

Today, we’ll talk about the deal structure you should use for your fundraise.

There’s equity, and then there are convertible notes and SAFE notes. If you want a straight loan, then you should use a promissory note.

Equity agreements set the valuation for the company and various terms of governance, preferences, voting rights and more.

A convertible note is debt that is intended to convert to equity. A convertible note has three terms: the interest rate, discount rate, and cap rate. The interest rate is how much interest is earned while the investment is in the note form. The interest is not paid out but rather accumulated and converted to equity later. The discount rate is how many additional shares the holder will receive when it converts to equity. The convertible note holder came in early to the deal and should receive more than those who come later. Finally, there’s the cap rate which determines how the note converts to equity. The conversion will depend on the valuation set in the next round.

SAFE notes are similar to convertible notes, but often leave out one or more of the key terms. Convertible notes typically convert on a timeframe such as 3 to 5 years or on an event such as a major equity funding.

Thank you for joining us for the Startup Espresso.

Let’s go startup something today!

Direct download: Startup_Espresso_--_Deal_Structures.mp3
Category: -- posted at: 5:18pm CST

On this episode, Hall welcomes Jeff Canin of E8 Angels and Element 8 Venture Fund. Element 8 Ventures is focused on entrepreneurial ideation, experimentation, research and education. They are investing in entrepreneurs that are tackling grand challenges, pushing the boundaries of innovation, and disrupting age-old practices, whilst creating new industries to drive socio-economic development.

After joining a large California-based VC firm, Jeff ended up in Bellevue, Washington working as a startup advisor. He then joined as a board member of E8 Angels, focusing on clean tech startups. Jeff gives advice for those looking to invest in the clean tech space and explains where he sees that industry evolving. He also discusses some of the challenges in the space, as well as highlights a few of the subsectors he feels are particularly promising.

Direct download: Jeffrey_Canin_of_Element_8_Venture_Fund.mp3
Category:general -- posted at: 5:17pm CST

Today, we’ll talk about should you raise funding and if so, how much should you seek.

- Funding accelerates what you already have going in your business today. You should have a core process for acquiring customers and providing a service. If you don't have it then funding at this stage will only hurt your business. It's best to continue testing your core business model till you know it works. It's important to find the best channel for acquiring customers and at the most efficient cost. By stating your core business in numbers, you now know what it costs to grow your business.

- What is the best source of funding for your business?
In addition to equity funding, you may consider debt financing, self-funding, or bootstrapping. Debt financing requires you to pay back the loan but after you do so, you own the business outright. You could self-finance, which means you put in your own money, or you could bootstrap it, which is another way of saying ‘find a customer who will pay for your product/service’. I call this customer funding. For this you may need to offer additional services at a higher price to cover the startup costs but is a great way to grow your business as it keeps you focused on your product and customer.

So, if you decide to raise equity funding, how much should you raise?

- Raise enough so that it will take your business to the next level. Think about the position you need to achieve in order to raise the next round of funding. Your fundraise should take you there and set you up for the next raise. Your valuation in any startup is low at the beginning. Raising too much money at a low valuation will end up giving away too much equity. For those with larger fund raises you may want to break it down into several milestone steps in which case you can raise your valuation for each step as you achieve more revenue.

Thank you for joining us for the Startup Espresso.

Let’s go startup something today!

Direct download: 246_--_Startup_Espresso_--_Should_you_raise_funding.mp3
Category: -- posted at: 1:10pm CST

On this episode, Hall welcomes Ben Faubion of Reactive Canvas, and Austin-based digital design firm specializing in startups. He talks about how design has evolved over the years into a more strategic, problem-solving service. He explains how design is often becoming more and more integrated into a startup's vision, and a focus throughout the various stages of product delivery.
Ben relates that, while the impact of good design itself is difficult to put into hard metrics, design can be 'guidance and insight'. As Ben puts it, "If [startups are] seeing questions being answered, if they're seeing problems being solved, then that's where they can say, 'Hey, design is making an impact on our company'." Ben goes on to talk about companies large and small, and how good design impacts their branding and growth.

Direct download: 271_--_Ben_Faubion_of_Reactive_Canvas.mp3
Category: -- posted at: 1:06pm CST

In this episode, Hall welcomes Jonathan Olsen of Unorthodox Ventures. Unorthodox Ventures partners with founders who demonstrate disruption and discipline. Dreamers who do something. Tinkerers who create solutions to real-world problems. Jonathan has focused his career on tackling problems that are too quirky to fit into an existing mold. As an investor Jonathan has now been set free to help develop disruptive companies.

Direct download: Jonathan_Olsen_of_Unorthodox_Ventures.mp3
Category: -- posted at: 2:54pm CST

In this episode, Hall welcomes Gabriel Jarrosson, founder of Leonis Investment. Gabriel was an entrepreneur at an early age, creating his first company while in engineering school. He then created his second company, Le Vin de France, a community marketplace for French winemakers, after leaving school. When he began investing, Gabriel quickly realized the benefits of working with syndicates and started one of the first in France.

Gabriel talks about some of the advantages of joining syndicates, such as deal flow and the ability to make smaller investments. He explains how syndicates work, some of the challenges they present, as well as some of the pitfalls of over-diversification. Gabriel invests exclusively in software, so you'll also hear about some of the software sectors he feels are the most promising.

Direct download: _Gabriel_Jarrosson_of_Leonis_Investment.mp3
Category: -- posted at: 3:56pm CST

In this episode, Hall welcomes Kevin Van Eekeren, Founder and CEO of Fulcrum Investing. Fulcrum Investing is a private investment group focused on making seed to Series B investments in startups across the United States. Kevin is not only an investor but also an entrepreneur and a farmer.

Before Fulcrum, Kevin worked as a civilian logistics officer in a SWAT team. Through his experience there, he started a charity-turned-for profit company Fulcrum Tactical. Kevin also started Fulcrum Farms, a Chicago-area sustainable farm. He provides his unique viewpoint on early-stage investing. Kevin relates his agnostic philosophy of investing, with a focus on companies with great teams and solid business platforms, rather than ones that fit with his interests and biases.

Direct download: Kevin_Van_Eekeren_of_FulcrumInvesting.mp3
Category: -- posted at: 2:59pm CST


In this episode, Hall welcomes Kevin Koym Founder & CEO of Tech Ranch. Austin based Tech Ranch provides accelerators for pre-seed and seed-stage technology companies of Central Texas entrepreneurs. Kevin has developed a combination of training and web-based systems designed to create a local culture of success and entrepreneurship. 

Kevin’s mission is to help solve world problems through entrepreneurship. He wanted to help entrepreneurs that are solving these problems and develop their business to then connect them to the opportunity to help them scale. He’s now worked with more than 65 to a hundred entrepreneurs, from 42 countries, and across the US.

Direct download: Kevin_Koym_of_Tech_Ranch_Austin.mp3
Category: -- posted at: 12:48pm CST

In this episode, Hall welcomes Phil Nadel Founder and Managing Director of Forefront Venture Partners. Phil is an angel investor, author, and frequent speaker at industry conferences and events. Before early-stage investing, Phil was a serial entrepreneur. He started and sold several companies which led to friends and family looking for advice. He then began to invest in those as well as advising. He has now invested in more than 100 startups with several exits.

Direct download: Phil_Nadel_of_Forefront_Venture_Partners.mp3
Category: -- posted at: 2:24pm CST

In this episode, Hall welcomes Emlyn Scott, Managing Partner of CP Ventures. Emlyn has over 25 years of financial and business development experience in Australia and Europe. He has made 15 early-stage investments personally since 2012. CP Ventures has built high growth businesses and has invested in over 100 startups. They look to invest in the world’s best companies in their domain and then help primarily via tech advice, human resources, and networks.

Emlyn provides his advice to startup investors, emphasizing a working knowledge of the sector, partnering with knowledgeable investors, and diversification. Also, Emlyn talks about the state of the startup investing space in Australia, some of the startups he's worked with, and some of the challenges startups need to consider.

Direct download: Emlyn_Scott_of_CP_Ventures.mp3
Category: -- posted at: 3:38pm CST

In this episode, Hall welcomes Namek Zu'bi Co-Founder and Managing Partner of Silicon Badia. Before investing in early-stage companies, Namek has always been fascinated with technology. He moved to the US to pursue a degree in computer science at Carnegie Mellon in Pittsburgh PA and fell into the general tech landscape. He eventually went into financial services and wanted to work with big banks to see how they use tech to solve their big problems including trading technologies. Namek worked at Deutsche Bank on enterprise B2B applications. In 2009, he was introduced to the Co-founder of Clove Hitch Partners and helped launch. Since then, Namek has personally led investments in over 70 different technology companies globally in over 15 different industries across all stages. He has worked with hundreds of entrepreneurs and has been involved in every step of the life cycle of a startup from launch to exit.

Direct download: Namek_Zubi_of_Siliconbadia.mp3
Category:general -- posted at: 11:51am CST

In this episode, Hall welcomes Cole Harmonson, the President and co-founder of Far West Capital. Before Far West Capital, Cole was the founder and senior vice president of State Bank’s Working Capital Finance Group (WCFG), the asset-based lending and factoring division of State Bank. In 1996, Cole joined State Bank to start the WCFG, where he managed the business until the sale to Prosperity Bank in February 2007. Before joining State Bank, he was a vice president at The National Bank of Texas in Fort Worth.

On this episode, you’ll learn about Far West’s unique approach. Far West Capital delivers far more than working capital to growing entrepreneurs. Their people and their processes are uniquely built to craft tailored financial and business solutions. Expertly serving a variety of industries nationwide, they provide financing for needs from $50,000 to $10,000,000 by purchasing or lending on accounts receivable, inventory or purchase orders.

Direct download: Cole_Harmonson_of_Far_West_Capital.mp3
Category: -- posted at: 3:31pm CST

In this episode, Hall welcomes Gina Luna of Luna Strategies. GIna is a recognized leader with invaluable business insight. She is a trusted advisor to CEOs and business owners. As CEO of Luna Strategies, Gina counsels companies and their leaders on complex strategic issues and growth initiatives. She has established a reputation for partnering with owners, boards, and management from a broad spectrum of industries to deliver solutions and drive results.

In this episode, you’ll learn more about Gina’s background before joining the HX Venture Fund. She spent over 22 years with JP Morgan in various roles before becoming a founding chairperson of the HX Venture Fund. Started in Houston, this fund focuses on building the innovation ecosystem. The goal was to bring more early-stage capital to invest in Houston companies. Gina also shares her advice to those who are just now starting to invest in early-stage startups. According to Gina, you should find great management teams and great entrepreneurs in the very earliest stage. She also advises to spread your investments and diversify your risk. As you gain experience and those companies continue to mature, then you can invest more as they develop.

Direct download: Gina_Luna_of_Luna_Strategies.mp3
Category: -- posted at: 10:35am CST

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