Investor Connect Podcast

In this episode, Hall welcomes Sergio Paluch of Beta Boom. Beta Boom is a pre-seed fund focusing on startups in emerging tech hubs around the world. They believe that tech innovation has no boundaries and that founders from underserved groups present one of the biggest opportunities of this era for both investors and society. Beta Boom invests in and supports all founders in emerging tech hubs, and focus on reaching female founders, minority founders, younger founders, older founders, and anyone else that does not fit the old pattern.

Before founding Beta Boom, Sergio was the founder and CEO of Boom Factor, a Silicon Valley innovation consultancy where he led numerous product design and development projects for over 50 clients ranging from YC-backed startups to Fortune 500 companies like Bank of America.

In this episode, Hall and Sergio speak about the current state of investing in startups and how it’s evolving. According to Sergio in just the two years Beta Boom has been operating, he’s seen a lot of new, early-stage funds, incubators and accelerators that are opening and targeting underrepresented founders. He thinks that domain expertise, passion, and perseverance are stronger indicators of founder success, than pedigree or qualities that come from privilege, and in addition to that, founders from diverse backgrounds can better address opportunities in huge, and often overlooked markets.

Direct download: Sergio_Paluch_of_Beta_Boom.mp3
Category: -- posted at: 3:18pm CDT

I had a startup the other day approach me about investing. In the discussion it came up that one of the founders recently left and took half the equity with him.

It appears there was no vesting on the founders equity. Vesting means one has to earn the equity by continuing to work in the business over a period of time.

Founders think they don’t have to vest their equity since they founded the company, but it’s important that founders do so.

The primary reason is to make sure the founder stays active in the company for a reasonable period of time.

Other founders and employees will be working for equity so it’s not fair for a founder to stop working and take all their equity with them.

Investors funding a startup often require unvesting founders share and have them earn it back. If a founder leaves then the unvested shares go to those who continue to work in the business.

Even if there’s no investment driving the decision, founders should put an agreement in place that determines what happens if one of the founders leave.

With an agreement in place, a founder can leave at any point and his or her unvested shares will go back into the company.

This protects the founders and the investors.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso--_Why_Founders_equity_requires_vesting.mp3
Category: -- posted at: 10:33pm CDT

In this episode, Hall welcomes Yigit Ihlamur of Vela Partners. Vela Partners is an investment firm, composed of five partners supported by technology, commercial and legal advisors. Their main focus is software companies, with investments spanning from angel to VC stages.

Before Vela, Yigit Ihlamur worked in Google’s Cloud division, at the company’s headquarters in Mountain View, on product strategy, management, and startup partnerships. Yigit’s tenure at Google also included several years spent in the company’s European headquarters in Dublin, where he was initiated into European business and technology working on technical operations for G Suite.

In this episode, Yigit shares his advice to first-time investors in startups, in particular in the machine learning and data sector. According to Yigit, see as many companies as you can. It’s easy to get excited about a good story and dream of what can happen. Visit with at least twenty to thirty companies before deciding so you can benchmark those companies.

Direct download: Yigit_Ihlamur_of_Vela_Partners.mp3
Category: -- posted at: 2:23pm CDT

Who should have access to the cap table in a startup?

The Cap Table which shows the ownership of each investor and those from the company is reserved for investors, board members, the CFO, and the corporate attorneys.

For employees, you want to create a culture of openness.

Employees and other shareholders get visibility into their ownership but in general they cannot see the ownership of others.

You want to discourage employees buying/selling shares with each other or investors as they should receive liquidity with everyone else.

On another note, what is a down round?

A down round is when a startup accepts an equity investment at a valuation lower than the previous established valuation.

This comes from raising too much capital at too high of a valuation previously.

Those who have a burn rate that is too high or have pivoted to a new business model may be subject to down rounds.

This hurts previous investors, founders, and employees whose options are now worth less.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Who_has_access_to_the_Cap_Table__Down_Rounds.mp3
Category: -- posted at: 10:17pm CDT

In this episode, Hall welcomes Greg Baker of Alumni Ventures Group. Alumni Ventures Group (AVG) is a different type of venture capital firm. Designed for individual investors, AVG makes this key asset class available to millions of individuals who previously haven’t had access to a high-quality, diversified venture portfolio.

Greg started his career with an MBA as a mechanical engineer and then moved into corporate strategy, corporate development and a startup before eventually moving into venture capital.

In this episode, Greg shares his thoughts on what excites him most right now. He points to the acceleration of developments in healthcare, biotech, and everything in between. He also shares his advice to first-time investors. Greg says flexibility matters most since, in the end, many startups don't end up where they planned. For startups, he advises entrepreneurs to "get your product out there and find out what the customers really are looking for." In other words, it's vital to know and learn from your customers. Greg talks about the evolution of growth funding, as well as some of the biggest challenges startups typically encounter. Finally, Greg highlights the biotech sector as an area with good opportunities.

Direct download: Greg_Baker_of_Alumni_Ventures_Group.mp3
Category: -- posted at: 4:31pm CDT

One common misconception about fundraising is that you must know an investor before you can approach for funding. 

It’s best to have some validation from your own group before approaching those outside of your core. Start with your current network and work out from there.  

Identify the right type of investor for your deal based on risk and return.  Angels wants three to five times their investment. Venture Capital wants 10x their investment. Family Offices want five times their investment but are often more patient for the return.

Choose the right investor for your raise and then find those investors and initiate a conversation. Later follow up and build a relationship.

Another misconception is that once an investor has said ‘yes’, then it’s a ‘done deal.’

In most cases this is not so. The ‘yes’ marks the start of the diligence phase which in most cases lasts 4 to 8 weeks.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Some_common_misconceptions_about_fundraising.mp3
Category: -- posted at: 9:39pm CDT

In this episode, Hall welcomes Geraldo Melzer of A.B.Seed Ventures. A.B.Seed Ventures focuses on investing in startups that seek seed investment, with a SaaS B2B business model. Their proposal goes beyond capital and network. They support entrepreneurs with the best SaaS marketing and sales practices in areas such as inbound marketing, inside sales, channels and customer success.

In this episode, Hall and Geraldo talk about the quickly growing Brazilian market. According to Geraldo, in 2010 the investment was about 10 million dollars and in 2019 was up to 2.5 billion in venture capital. Latin America, specifically Brazil, is waking up for VC investment and the market is maturing.


Geraldo also shares his advice to investors before writing their first check. If you have uncertainty around the environment, the sector, the segment, and the business model that the company is working on, your capacity to evaluate, analyze, and help will be minimal. So Geraldo suggests investing in something that you can study. This will help you form educated opinions and mitigate the risk.

Direct download: Geraldo_Melzer_of_A.B.Seed_Ventures.mp3
Category:general -- posted at: 1:40pm CDT

In looking at cap tables, there are several red flags to watch out for.
Look for shares that are actually issued and not just verbally promised.
Is the cap table up to date with cancellations and repurchases? Many startups consider their cap table to be a work in progress so don’t be surprised if it contains “what ifs” and other “redos.”
The cap table is typically available in three versions:
First: The capitalization as it currently exists,
Second: The capitalization of the business as a fully-diluted version including any options, warrants, contracts, convertible debt, that could become shares,
Third: A proposed version including new employees, pending lawsuit settlements, or planned raises.
Check to see if there’s an attorney behind the scenes who is following up on the details as the management team is generally distracted by sales, development, and other issues.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Red_Flags_in_a_Cap_Table.mp3
Category: -- posted at: 9:50pm CDT

In this episode, Hall welcomes Atin Batra of Twenty Seven Ventures, a VC firm focusing on education and the future of work technology. Atin is a serial entrepreneur and began his investing career with a corporate accelerator before starting his firm. Atin explains how he came to focus on the Education Technology and Future of Work sectors.

Atin provides valuable advice for both investors and startups looking to get into these sectors. He emphasizes the importance of understanding market dynamics and the nuances of the various business models. Atin also talks about the evolution of the Future of Work sector amid the changing habits and needs of the workforce. Atin discusses some of the challenges specific to the EdTech sector, as well as a few of the technologies he finds particularly promising.

Direct download: Atin_Batra_of_Twenty_Seven_Ventures.mp3
Category: -- posted at: 3:47pm CDT

I was approached by a listener the other day who was contemplating investing in a friend's business.

He was the first money in and was trying to figure out how much equity his investment bought.

There’s an equation for determining equity ownership.

There are three terms in the equation. Pre-money valuation -  how much the company is worth before investing. The investment amount, and post money valuation which is how much the company is worth after the investment.

Pre-money plus investment = post-money

For example, if you had a business with a pre-money valuation of $4M and the investment going is $1M, then the post money valuation is $5M.

The equity ownership by the investor is investment divided by post-money.

In this example $1M divided by $5M is 20%.

Let’s say in another case, the pre-money valuation is $19M, the investment is $1M, so the post-money valuation would be $20M.

The investor would get $1M divided by $20M or 5% in this scenario.

In every valuation discussion, the startup is negotiating the pre-money valuation up and the investor is negotiating it down.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Calculating_Equity_Ownership_in_a_Startup.mp3
Category: -- posted at: 10:09pm CDT

In this episode, Hall is joined by Brian Phillips of The Pearl Fund, an early-stage VC fund specializing in Opportunity Zone (OZ) investments. Brian's background in computer science led to numerous jobs with tech startups. Through these experiences, he developed an interest in entrepreneurship non-profits. Ultimately, he ended up starting a fund to take advantage of the Opportunity Zone laws that promote funding of business in low-income census tracks.

Brian explains the ins and outs of Opportunity Zone investing, how to do it, and why it can be so advantageous for the investor. He also explains why meeting the Opportunity Zone requirement can give startups a leg up when it comes to securing funding. While OZ investing is currently dominated by real estate, The Pearl Fund is part of a small but growing trend of funds focusing on startups. Additionally, Brian details many of the requirements that startups and investors must meet to be OZ qualified. Finally, he highlights some of the sectors that fit best with the OZ asset class.

Direct download: Brian_Phillips_of_The_Pearl_Fund.mp3
Category: -- posted at: 2:21pm CDT

Many investors look for traction in a startup to gauge their progress.

Traction stated as a single number on a pitch deck can be hard to judge as sufficient for an investment.

Many investors tell the startup “nice traction, but we’d like to see more.”

Instead of traction look for momentum.

Momentum demonstrates things are continuing to progress and move forward. Sales, team, product, fundraise are the core four to look at.

Investors look at these four because they represent the results of the startup’s work and not that of the market’s progression.

Momentum must be shown over time in numerous updates by email, phone, or in person.

It takes four touches before an investor gets a sense that there is momentum and it will continue.

Startups should always have some engagement with customers ongoing- such as alpha testing, beta customers, MVP customers, etc so as to have something to talk about with investors.

For startups pursuing the enterprise sale show your momentum through the sales funnel with your large customers. It typically follows the model of interest, qualification, trial negotiations, pilot test, full product launch, ongoing support.

Show how prospects are moving through the funnel and customers are upgrading and expanding seats.

It’s the continuing forward progression that counts.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Traction_v_Momentum.mp3
Category: -- posted at: 11:18pm CDT

In this episode, Hall welcomes Laura Baldwin, Managing Director of Golden Seeds. Golden Seeds is an investment firm dedicated to pursuing market returns through the empowerment of women entrepreneurs and the people who invest in them. The group was founded in 2005 and is headquartered in New York City, with active chapters in Atlanta, Boston, Dallas, Houston, and Silicon Valley – and active members throughout the country.

Golden Seeds’ Angel Network has grown to become one of the largest in the country with over 275 members nationwide. Laura has more than 20 years’ experience in finance, treasury, corporate development, and investor relations roles, with progressive growth in responsibilities.

Laura talks about the increase in women entrepreneurs, in sectors such as FinTech, Cybersecurity, and others. For investors, Laura emphasizes the importance of communication between investors and the entrepreneur. Beyond personal connection and trust, she says it is also critical for entrepreneurs to have a clear value proposition. Laura advises entrepreneurs to make sure that they and the investor are "on the same page [and] want the same things." She explains what Golden Seeds looks for in a startup, and highlights some of the more promising startups they've worked with. According to Laura, capital access remains the biggest challenge for women-led startups. Finally, she points to FinTech as one of the biggest sectors of opportunity now.

Direct download: Laura_Baldwin_of_Golden_Seeds.mp3
Category: -- posted at: 2:57pm CDT

Many enterprise software programs come from service businesses solving a problem for their clients. In searching for a solution on the market, they find none, so they build their own. Later, other clients come ready to buy it.

I call this contractor funding, and it’s one of the most overlooked forms of funding in the startup space.

In this method, you sell a customized version of what you want to build to an anchor customer for a substantial one-time fee, say $250K. Then, you use the funds to build out the platform you envision, to which the customer gets a non-exclusive license.

The advantage here is you have a customer telling you exactly what they need and what they will pay for. They improve the product by testing it and telling you what changes to make. They become a happy customer which you can use to attract prospective customers.

After three more of these engagements, you will have $1M of investment in your platform with zero dilution.

For your raise, consider using contractor funding.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Contractor_funding.mp3
Category: -- posted at: 9:29pm CDT

In this episode, Hall welcomes Jyri Engestrom of Yes VC, a small seed-stage fund focusing on community-driven startups. Jyri started out as an entrepreneur and uses his experiences with successful startup exits to inform his investing philosophy.

Jyri advises investors to look for startups that are part of a larger social movement. Startups that can turn a small community into a global movement are the ones to look for. As Jyri puts it, an idea gets traction when people "realize that it's something that is better for the world and it also works as a business". Jyri talks about his partner, Caterina Fake, and her experience as an early investor with Etsy. Jyri also talks about the partnership dynamic between cofounders, and how important it is to have effective mediation strategies in place in the event of a disagreement at a critical juncture.

Jyri explains Yes VC's strategy of smaller, early-stage investments in companies that show potential for organic growth without requiring huge injections of capital. He highlights a few of the startups they've invested in, and why. Finally, Jyri talks about the importance of attribution in marketing, as well as some of the sectors he finds especially promising.

Direct download: Jyri_Engestrom_of_Yes_VC.mp3
Category: -- posted at: 2:55pm CDT

It’s best to play nice with others in the startup community. While it may seem diverse and diffused, I’ve found word travels fast.

The startup world is transparent and highly viral.

So much of what happens regarding deal-flow and investing  is based on reputation and trust.  It takes a long time to build but can be destroyed in seconds. 

While some play the rough game, it’s not the norm. Those who do are just protecting their time as requests for help are practically endless. 

Always treat everyone with respect and give as much as you take.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Treat_Others_Nice.mp3
Category: -- posted at: 10:06pm CDT

In this episode, Hall welcomes GreenBar founder Larry Cynkin. Larry ​is a serial entrepreneur who has been CTO or VP Engineering at five startups, with experience in industries ranging from health care to personalized e-commerce to ed-tech.

Larry started his career as a software developer, with a degree in Computer Science from Brown University. He eventually moved into software management and has always had an affection for startup companies. After working with several startups he eventually moved into being CTO.

In this episode, you’ll hear more about his path in helping startups and investors. According to Larry, he helps non-technical or not-so-technical executives and founders run, manage or plan for software development and software product development. From an investor perspective, he helps mitigate the risks of software execution.

Direct download: Larry_Cynkin_of_GreenBar.mp3
Category: -- posted at: 1:48pm CDT

Before the fundraise, startups should spend time with the investor first. It’s less about the amount of face time and more about the number of interactions over the phone, email, in person, and otherwise.

It’s best to connect with investors before you start your fundraise so you have a basic relationship established.  

You can use the approach “I’m not raising funding now, but I will be in six months” to open the dialog. Then, spend the next few months getting to know them and updating them on you and your deal.

Investors are interested in knowing about not just the product you are building, but also the team you will assemble.
With most VCs, their diligence process focuses heavily on the team. So, you want to use your time showcasing what great things they can do. 

The more that investors see you making good decisions in this phase, the faster your fundraise will go in the next one.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Spend_time_with_them_first.mp3
Category: -- posted at: 10:13pm CDT

In this episode, Hall is joined by Sid Mookerji of Silicon Road, an early-stage fund, accelerator, and advisory group focused on retail and eCommerce. After founding a custom application development firm for eCommerce and retail, Sid saw the opportunity for a good exit and entered the world of venture capital.


Sid talks about what excites him in retail today and provides advice for investors looking to get into eCommerce and retail. For startups, Sid advises focusing on customer and market fit. Sid also discusses how the changing landscape of retail has exposed needs and led to innovations in both eCommerce and brick-and-mortar retailers.


In addition, Sid highlights a few of the startups Silicon Road has invested in, and why. He points to change management as one of the biggest hurdles for larger retailers, and he explains how startup innovation can help. Finally, Hall and Sid discuss two areas of technology currently disrupting the space: Last-Mile Delivery and Augmented Reality.

Direct download: Sid_Mookerji_of_Silicon_Road.mp3
Category: -- posted at: 2:22pm CDT

It’s About Execution

Some startups think their business will succeed based on the idea, the technology, the market or something else. They think their technology will win the day, or that their idea is so great, or the market is growing so fast that they will succeed based on that alone.

For the investor, all of these are important, but in the end it’s execution that matters most. Execution turns the technology, idea, or market into a winning business.

In your pitch, demonstrate your past execution successes and talk about how you will execute on the idea. Show how you will execute on your technology and how you will execute to penetrate the market.

Investors determine investments based on the startup's proven ability to execute.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Its_a_question_of_execution.mp3
Category: -- posted at: 9:58pm CDT

In this episode, Hall is joined by Pierre Rogers of PuroTrader, an online cigar-trading platform. Purotrader was created by two aficionados to bring more transparency and access to the global cigar market. The site aims to educate connoisseurs, stimulate conversation and more importantly monitor market trends within the industry.

In this episode, Pierre shares exciting developments in non-traditional business models. He offers advice to investors interested in the libation space (fine beverages, cigars, etc.), pointing out the importance of leveraging industry relationships. For startups in the space, Pierre emphasizes how finding your niche is critical. He highlights some of the challenges in the space and explains how PuroTrader has approached the market using data analytics. Finally, Pierre talks about some of the future applications of the platform, and how he sees the space evolving.

Direct download: Pierre_Rogers_of_PuroTrader.mp3
Category: -- posted at: 3:25pm CDT

Most startup pitches focus on their future.

It’s bright. The numbers are growing fast and will be big. The sky’s the limit.

Just how much do investors put behind those startup forecasts.

The answer: It depends on the historical numbers the forecast is based on.

If there’s a consistent track record of historical growth, then the forecast has credibility.

If there’s no historical record, then the forecast does not.

Always show your historical numbers to establish a baseline and show how you can move from the historical to achieve the forecast and the systems that will take you there.

Most startups hang their forecast on market potential alone. You need to also show how you can execute to obtain it.

This could be a new team member, another product, or a new market segment.

Help the investor connect the dots and don’t expect anyone to take a flying leap without a good reason.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Importance_of_historical_numbers.mp3
Category: -- posted at: 7:46pm CDT

In this episode, Hall welcomes Dr. Orrin Ailloni-Charas of RedCrow, a healthcare-focused, early-stage startup investing network. Orrin's background in medicine led to consulting roles with various healthcare startups. He received his MBA from Columbia, and now has a career straddling both the business world and medial and clinical world.

Orrin explains how RedCrow incorporates crown-based evaluation and analysis to fully validate startups. Orrin talks about the environment of innovation in healthcare. He explains some of the advantages and challenges of investing in healthcare, and the importance of understanding the startup's competitive, regulatory, and capital risks. For healthcare startups, Orrin emphasizes the importance of good IP with strong protections. He also talks about the advantages of good partners, and how capital risk is a particular risk in the healthcare industry.

Direct download: Orrin_Ailloni-Charas_of_RedCrow.mp3
Category: -- posted at: 4:32pm CDT

I’m often asked when you should raise funding.

There are funding requirements to consider. Calculate your cash burn and estimate the need for new cash.

There are also preparation and timing issues.

Start your preparation six months in front of the launch

Launch your fundraise six months before you need the funding.

Use the six month preparation time to introduce the deal to the investors and educate them on your current status.

There are seasonal issues to consider. I wouldn’t start in early June but rather wait till late August to kick off a campaign.

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

Let’s go startup something today!


Direct download: Startup_Funding_Espresso_--_When_should_you_raise_funding.mp3
Category: -- posted at: 7:55pm CDT

In this episode, Hall welcomes Tracy DeForge of The Players' Impact, a group that connects professional athletes with the world of startups and investing. Tracy has worked in the sports industry for her entire career. At The Players' Impact, she is focused not just on involving athletes as brand ambassadors, but also in bringing startups to market.

Tracy advises entrepreneurs to keep in touch with both their market, as well as potential future investors. Tracy and Hall also talk about the blurring of the lines between the traditional funding stages, and what that means for startups. In addition, Tracy talks about how The Players' Impact works as a group of investors making early-stage investments, rather than a fund. Finally, Tracy talks about the number one challenge for startups - finding the right funding partners - and highlights some of the most promising sectors.

Direct download: Tracy_Deforge_of_The_Players_Impact.mp3
Category: -- posted at: 3:37pm CDT

There are truisms in the startup world you can always count on. A few that come to mind are:

  • All software has bugs.
  • All startups take longer than expected (to generate revenue, finish the product, fill in your favorite one here).

And my newest one is:

The only startup without glitches is the one that is already dead.

If the business is up and running and especially if it’s growing there will be glitches. Some call them hiccups.

You should expect things will not always go as planned and be prepared to deal with it. If things are running without a glitch then most likely you’ve stopped doing new things that will grow your business.

Glitches are an indicator that you are stretching your business in new ways. And that’s a good thing.

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

Let’s go startup something today!

In this episode, Hall welcomes Karthee Madasamy of MFV Partners. MFV Partners' approach is to back visionary entrepreneurs developing deep technologies and solutions that disrupt traditional verticals and ecosystems across automotive, manufacturing, retail, agriculture and knowledge services. Karthee has been a VC investor for 15 years, following a career as an entrepreneur with an electrical engineering background.

Karthee talks about how technology is disrupting some of the established traditional industries like automotive and agriculture and provides great advice for investors interested in the deep tech space. He discusses the pitfalls of commercialization, and how important it is to think through before you dive in. Karthee emphasizes that startups and investors need to understand how solving a problem in science or engineering will ultimately lead to a product and customer.

In addition, Karthee talks about the evolution of investing in the deep tech space, and how it is often focused on the later stages. He also talks about some of the companies that MFV has worked with, as well as some of the challenges particular to the deep tech space. Finally, Hall and Karthee discuss the state of capital availability in a general sense, and what that might mean for future innovation.

Direct download: Karthee_Madasamy_of_MFV_Partners.mp3
Category: -- posted at: 4:36pm CDT

While unforeseen events can overtake a startup, many CEOs simply don’t plan ahead when it comes to fundraising. For every $1M you want to raise, it will take you one calendar year to raise it.

Most of the time, an entrepreneur who approaches me is raising funding today and is looking for a check now. In some cases, they need their funding within the next thirty to sixty days or something bad is going to happen.

Most startups end up educating their investors during the fundraise. But there is another approach one can take.

I once had an entrepreneur come to me saying, “I’m not raising funding now, but in six months I will be. May I keep you informed of our progress?”

Of course, I said yes, because I wanted to see how it turned out.

Over the next six months, the CEO sent me monthly updates about his progress. When he launched his fundraise formally, he was able to close it in just a few months. He used those six months to educate the prospective investors about his deal.

This is a great technique for introducing your deal to a prospective investor. More investors sign up to track along since there’s no pressure to engage in the fundraise.

It takes four touches or more to introduce your deal and educate the investor about it. It’s a good idea to start that process sooner rather than later in your fundraise.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Im_not_raising_funding_now.mp3
Category: -- posted at: 9:36pm CDT

In this episode, Hall welcomes Amy Salzhauer of Good Growth Capital. Good Growth Capital is a venture capital platform focused on early-stage technology companies. Good Growth Capital's General Fund focuses on the east coast, filling the gap with early-stage technology investing, with partners located in Charleston SC, Boston and NY. The fund leverages proximity to closely support founders and connect portfolio companies.

In this episode, Amy shares her background before investing. Initially, she began working with scientists to get data for her doctoral dissertation at MIT. She was interested in why certain technologies successfully leave or don't leave the lab, even if they might have either a positive economic impact or a positive social impact. This then led to a Master's at Cambridge University in Plant Sciences with a focus on Molecular Biology, followed by an MBA at the Sloan School of Management at MIT. Writing her dissertation, she thought about how she enjoyed the work, and ended up starting multiple companies and becoming CEO of Ignition Ventures.

Direct download: Amy_Salzhauer_of_Good_Growth_Capital.mp3
Category: -- posted at: 4:39pm CDT

I recently saw a pitch deck from a seed stage startup which had a small amount of revenue. The deck claimed a valuation of $50M because a similar company exited at that valuation. I asked about his valuation, and he said he claimed $50M because “that’s what my company will be worth.”    

I reminded him that the example company who exited with a $50M valuation had $15M in revenue at the time of exit. He said, “I’ll have that too.”

I often see entrepreneurs calculating valuations for today's fundraise using tomorrow’s revenue.

Today’s revenue determines today’s valuation. Your business tomorrow determines your valuation tomorrow.

Investors match investments with the current state of the business. As you increase sales, team, product, and IP, your valuation goes up.

The takeaway here is raise only as much as you need to get to the next level. Otherwise, you’ll be raising more funding on a lower valuation, which means you’re giving up more equity than necessary.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Tomorrows_Valuation_for_Todays_Fundraise.mp3
Category: -- posted at: 9:20pm CDT

In this episode, Hall welcomes Joe Jesuele of HomeJab, a nationwide real estate media production company. HomeJab applies innovative technology and user-friendly customer experience to make on-demand, professional-quality media services available to the real estate market. HomeJab’s professional videos, HDR photography, aerials, and immersive 3D virtual tour services are the most comprehensive offering of immersive digital media in the marketplace. Using HomeJab, Customers can schedule shoots with a professional photographer or filmmaker within the day. After shooting, HomeJab delivers edited products online within 24 hours, making it one of the fastest and most efficient media services available.

Joe has a long-standing background in the real estate industry, working as a broker, lender, and builder. While building houses, Joe saw an opportunity and founded HomeJab. Wanting to give himself the best chance of selling properties in a tough market, Joe produced 3D models, walk-through videos, and drone videos. This resulted in property sales in less than 30 days. He realized the good visual content that he was creating led to success. With no one else was doing this in the market, HomeJab was born.

Direct download: Joe_Jesuele_of_HomeJab.mp3
Category: -- posted at: 4:42pm CDT

In this episode, Hall welcomes Gil Hernandez of GXH Capital. GXH Capital is a minority-owned venture capital firm to alter the diversity landscape in tech. They invest in startups with missions that will help the world. Their goal is to invest in diverse founders and founders that are committed to helping the underrepresented.

Hall and Gil speak about his background and what led him to GXH. Gil has an extensive background in finance, and accounting and has worked at both Apple and PwC. This has given him experience working in large corporations and working with start-ups. Gil also shares his advice to investors before writing their first check. According to Gil, the key is diversity. Look beyond your immediate circle because if you only invest in companies with warm intros and first connections you’ll miss out on amazing opportunities.

Direct download: Gil_Hernandez_of_GXH_Capital.mp3
Category:general -- posted at: 11:45pm CDT

Many entrepreneurs approach me for funding. I find the biggest misconception is that you must first raise funding before you can launch and grow your business. In reality, the ones who raise funding have a growth story and can communicate it effectively to investors.

Investors funding startups look for market validation and product validation - the product works and people will pay for it. There are some investors who fund deals based solely on the team, the space, or the technology, but these are rare examples.

Most look for what I call the “Growth Story”. They look for an operational revenue model in the business with increasing numbers on sales, team, product and fundraise.

In talking with startup entrepreneurs, I find they avoid discussing their current revenues because they think the investor wants to hear big numbers. I tell them that investors don’t expect startups to have big numbers. Instead, the investor looks for repeatable and predictable numbers.

If your company is pre-revenue, then you can show how the business model is successful based on the unit economics level. At the core, this shows that you can generate leads, qualify, and close them for revenue that exceeds the cost of acquiring and fulfilling the customer. Over time, you can improve these numbers.

Scott Adams once wrote “Losers have goals. Winners have systems.”

A startup pitch deck filled with forecasts alone is just a set of goals. A pitch deck showing how the business model currently works is a system.

It’s best to show up with a pitch deck showing how your system is working today.

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

Let’s go startup something today!

Direct download: 287_--_Startup_Funding_Espresso_--_The_Growth_Story_--_You_must_have_one.mp3
Category: -- posted at: 11:16pm CDT

In this episode, Hall welcomes Wenyi Cai of Polymath Ventures. Polymath is a company builder focused on emerging markets, with offices in Mexico City and Bogota. They are specifically interested in sectors experiencing global disruption enabled by technology in an emerging market setting. Wenyi's background gave him experience with emerging markets, and he applies this familiarity to Polymath's approach to startups and investing.

Wenyi discusses the exciting state of venture capital in Latin America, as well as her advice to those wanting to invest in emerging markets. Wenyi also talks about some of the differences and similarities between established and emerging markets. Wenyi points out that, for many industries in emerging markets, there can be numerous problems throughout the value chain. She urges startups in emerging markets to stay focused on their core competencies, and not try to tackle a whole value chain at once. In addition, Wenyi explains venture-studio model, and how it works. Finally, she highlights fin-tech and ecommerce as areas of growth potential in emerging markets.



Direct download: 01_Wenyi_Cai_of_Polymath_Ventures.mp3
Category:general -- posted at: 4:40pm CDT

Today, we’ll talk about Impact Investing.

There’s an old saying about angel investors: “They want to make a little money, have a little fun, and do a little good.”

The ‘do a little good’ talks about how investors want to make a contribution to the community with their investment.

Some do it through Impact Investing, which means the startup provides a community service beyond generating revenue and providing jobs. Impact investing is one way to narrow the field of startups to consider for investing.

Each investor has their own set of things they care about, so if you are an impact startup beware -- the definition of impact is in the eye of the beholder. Or, as they say, ‘To each his own’.

If you want to invest in impact startups, look for their impact metrics and not just their financial metrics. Financial metrics include cost of customer acquisition and lifetime value of customers, among others. Impact metrics, on the other hand, focus on the community benefit, such as how many students graduated, or a reduction in carbon footprint, or the number of rhinos saved from destruction.

A good impact startup will have some evidence of the benefits they are generating for the community.

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_Funding_Espresso_--_Impact_Investing.mp3
Category: -- posted at: 9:35pm CDT

Today, we’ll talk about whether you should be raising a Seed+ round.

In startup funding, you raise funding in stages. There’s the seed stage, when you have developed the product to some level and potentially have some users. Startups typically raise $500K to $750K for this round. You don’t want to raise more at this stage if you can help it, as you’ll be giving away too much equity due to your low valuation.

The next raise is the Series A raise, where you typically have an annual revenue run rate of $500K or more. At this point, you can raise $1.5M to $2M - or perhaps more if your growth rate justifies it.

If you find your startup has raised a Seed round but is not quite ready for a Series A, then you may want to consider a Seed+ round. A Seed+ round is essentially another raise at the Seed level, usually with the same terms.

The key to remember here is that each round of fundraising brings dilution, and too much fundraising will become a problem later.

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_Funding_Espresso_--_Should_You_Raise_a_Seed_Round.mp3
Category:general -- posted at: 10:34pm CDT

In this episode, Hall welcomes Bá Minuzzi of San Francisco-based UMANA. After starting as an entrepreneur at an early age in Brazil, Bá became interested in capital and joined an investment firm, before starting her own investment boutique focused on real estate. She later moved to the U.S., diversifying her portfolio and expanding into the wealth management space. She recently launched UMANA, which is built as a multi-family office of self-made high net worth individuals. UMANA skews towards tech sectors, with an emphasis on impact investing as well.

Bá emphasizes how important it is for founders to get a deep understanding their industry and market. As she points out, this is the best way to understand how your brand and company will get the traction. Bá talks about the confluence of the entertainment and investment worlds, and how celebrity endorsement is a game-changer when building traction. In addition, she illuminates her role as a "matchmaker" between high net worth individuals and promising startups, and what that process involves. For startups, she emphasizes how fundraising isn't always easy, and that you shouldn't take past success for granted. As Bá points out, staying in touch with investors and having a strategy for follow-on fundraising before the money starts to run out is critical for the long-term success of a startup.

Direct download: Ba_Minuzzi_of_UMANA.mp3
Category: -- posted at: 4:55pm CDT


To launch your startup, identify a large market then target a small segment of that market to attack first. Choose your first segment based on ease of access and a close fit to your initial product. In other words, focus on your most ideal customer, and then grow your business from there.

Most startups want to take on the world but their efforts are easily diffused. It can be difficult to be all things to all people in the early days of your startup.

You’re looking for wins, testimonials, and proof that customers will buy your product. Start with the ones who are the best fit and then expand the circle from there.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Focus_on_your_Ideal_Customer.mp3
Category: -- posted at: 12:02am CDT

In this episode, Hall welcomes Martin Mulvihill of Safer Made, a VC firm specializing in early-stage companies that bring safer products and technologies to market and protect our health and the natural world. With a background in chemistry, Martin has brought his passion for sustainable, environment-friendly chemistry to investing.

For prospective investors in the health and wellness sector, Martin advises getting to know the leaders in the space. Martin also emphasizes the need to understand, at a high level, each of the product components. This might include branding, food packaging, formulated goods, and more. For founders, Martin talks about how they must have a clear idea about things like inventory management, channel approach, and supply chain. When looking at potential investments, Safer Made focuses on companies with a competitive advantage in terms of their product, and a consumer-targeted approach. Martin elaborates on their investment thesis and highlights how the challenges can vary widely depending on the specific product being made. Martin also highlights the packaging sector as a particularly robust area with room for growth.

Direct download: Martin_Mulvihill_of_Safer_Made.mp3
Category: -- posted at: 2:00pm CDT

As soon as your startup establishes a stock incentive plan and issues stock options to employees or other stakeholders, it’s time to work on a 409A valuation.

This is a valuation of your startup for assigning a cost basis to the stock options.

The U.S. tax code in section 409A requires private companies to show that their common stock options are issued at fair market value.

This is similar to the property tax on your house in which the government assigns a valuation to your house for tax purposes.

The 409A valuation does not mean your firm is actually worth that valuation. It’s only used to calculate your taxes.

The market value goes up and down based on the state of the market and what value you have built into the business which increases every day for some companies.

Employees, founders, and other investors are taxed on the value of the stock options they own and to avoid potential tax penalties, the startup must get a formal valuation opinion at least once every 12 months.

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_409A_Valuations.mp3
Category: -- posted at: 8:32pm CDT

Changing the product, the price or the promotion? Today, we’ll talk about What to do when the investor says no.

In raising funding you’ll hear “no” quite often. There are many reasons why investors do not invest. Sometimes, they are busy with other deals. Other times, they are looking for a deal in another sector or stage.

If they are saying no because they are interested in investing and want to invest in your sector and stage, but not your deal, then what should you do?

There’s an old saying in sales, “No good salesperson takes no for an answer.” Naive salespeople take this the wrong way and basically put their foot in the door till the customer buys something. A better salesperson pursues the opportunity by changing the pitch, the product or the price.

If investors are saying no and it’s not for reasons of timing or a good fit, then you could change the price, which in this case is the terms of the deal. Offer a better valuation, additional warrants, or other incentives.

You can also change the product by improving the business with increased sales, a higher-level team, or a better product.

You could also change the promotion by repositioning the deal from one type of business to another. For example, you could reposition a deal from the EdTech sector to the impact sector.

In summary, don’t take no for an answer but don’t just put your foot in the door and harangue the investor. Give them a better deal to invest in.

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_Funding_Espresso_--_What_to_do_when_the_investor_says_No.mp3
Category:general -- posted at: 11:00pm CDT

It’s important for a startup to have regular communication with investors during the fundraise. It keeps the investor up to date on your progress and helps build the relationship.

For updates, find  a cadence that fits your business. For fundraising, every two weeks is a good pace. After funding move to monthly or quarterly updates.

In your communication in person, over the phone or in email talk about sales first. If you’re pre-revenue talk about activity with  beta customers and prospective. Always have some engagement ongoing with the customer - no engagement means no traction.  No traction means no funding. If you don’t have customers then start engaging with customers in some manner.

Call out team members who did something great. Show what team members are doing to increase your customer engagement. This provides another angle for showing the progress you are making.

Talk about how the product is moving forward. Highlight customer usage and the customer ROI which is what the customer is getting from the use of the product. Use anecdotes till you have numbers but get to numbers fast.  For example, take one customer and calculate their ROI from their usage of the product.

Show all three levels of the fundraise and include interest, committed, and invested numbers. If the investor indicates they are considering a $50K investment, that’s interest.  If the investor commits to investing, that’s committed. If the investor funds are in your bank account, that’s invested.  

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

Let’s go startup something today!

Direct download: Startup_Funding_Espresso_--_Communication_with_an_Investor.mp3
Category: -- posted at: 8:36am CDT