Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In fundraising, milestones are specific goals you have accomplished.

In crafting your fundraise story, focus on key milestones both those you just hit and those you are striving for.

This demonstrates you are making progress.

There are four types of milestones to consider:

1. Team: Hiring key people that can help you grow the business. 

2. Product: Bringing the product to a new level of completeness.

3. Sales: Achieving sales traction such as reaching $50K MRR.

4. Fundraise: Landing a big investor with a specific commitment or investment.

While you may not always hit the milestones you planned for, you will most likely find success along the way which demonstrates accomplishment to showcase to 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.
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup. There are many others such as licensing.

You may be able to reduce the amount of funding needed to grow your business by licensing your technology to others. 

Instead of building and selling a product, you can license to others who will build and sell a product.

In licensing, you must have a patent to protect your technology and oftentimes a series of supporting tools to help those who license your technology for using it. 

Licensing brings the following benefits:

• It reduces the amount of capital you need to raise
• It can generate a substantial return given the costs are low
• The risk of product failure is shifted to the licensee

The disadvantages are:

• You don’t control how it is used
• Your licensee may later compete with you
• You don’t receive the full revenue as if you had built and sold the product yourself.

Licensees can also bring you new ideas for improvements on the technology.

For applications requiring high capital expenditures for building and selling the product, licensing is a good fit.

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.
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup.  There are many others such as factoring.

Factoring is selling your accounts receivables to a finance company at a discounted rate.  

It’s not a loan, so you are not taking on debt but rather selling your invoices for cash, albeit at a discount. 

A typical factoring arrangement gives the business 85% of the value of the invoices and keeps 15%.

The factoring company often charges a processing fee and a fee for however many days it takes the customer to pay the invoice. 

These two costs add up to be the discount the business is paying for the receipt of cash. 

Factoring works well for the company as it comes with long payment terms. 

Businesses with a cash flow shortage often use factoring as it’s a fast way to access capital without taking on debt. 

The factoring company will look at the credit history of the customer paying the invoice rather than the startup providing the product. 

The cost is giving up a portion of the profits which makes fast cash expensive.  

Your customers will know you are factoring, as the invoice will be retitled into the name of the factoring company. 

Slow-paying customers will become more expensive as the cost of collecting their payment will take longer. 

Factoring works best for short-term cash flow management when you have predictable payments from customers that take some time. 

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.
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

When you sell a physical product and invoice the customer, it can take 30, 45, 60 days or more before they pay.  

Factoring provides funding by reducing your accounts receivable by selling the invoice. 

The factoring company gives you cash immediately when you sell and takes a transaction fee on the use of their funds.

The factoring company is now at risk for non-payment.

Factoring works well for consumer product companies that have cash-flow challenges as the business requires capital to build the product, sell, and ship the product only to collect payment later. 

Factoring reduces the amount of working capital needed and may reduce the amount of funding you need from equity capital raises. 


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.
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup. There are many others such as loans.

Loans are debt instruments that must be repaid.

Startups can find it difficult to get a traditional loan from a bank.

The Small Business Administration offers several loan types for early-stage companies. 

These loans come with personal guarantees and cannot be closed out with the dissolution of the business.

There’s also debt through the use of credit cards and microloans.

It’s difficult to use debt to pay for your core product development. 

Debt makes sense when you have some revenue coming in to pay for the loan. 

There are other types of debt including accounts receivable factoring in which you raise money on what customers owe you.

There’s also equipment financing in which the equipment collateralizes the debt.

Factoring works when you have paying customers and want to shrink the cash float from the time you build the product till the time you receive payment.

Equipment financing works well if you need machinery to build your product or run your business.

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.
-----
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup. There are many others such as accelerators and incubators.

Accelerators and incubators provide startups with workspace, mentorship, pitch practice and in some cases funding. 

They are sponsored by universities, companies, and entrepreneur collectives. 

Accelerators provide an intensive program to help the entrepreneur prepare their business and product for an initial investment.  

The classes are usually small, around 5-10 companies.  

At the end of the program, the participants pitch to investors for funding. 

Incubators offer a physical workplace with offices, administration, and meeting rooms.

Universities offer accelerators and incubators for students and faculty who want to commercialize research.

The accelerator or incubator may have a fund from which it invests in startups who complete the initial program. 

This often takes the form of equity funding but some programs structure it as a grant.

They often sponsor demo days in which you pitch to prospective 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.
-----
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

So how do Venture Capitalists make money?

VCs charge the limited partners a management fee on the funds raised. This is traditionally 2% which is paid out every year for the life of the fund.  

Some funds stop the management fee around year six or seven as proceeds from the investments start coming in.

MicroVCs often charge 2.5 or 3% of the funds raised since the amount of funds is lower than standard. 

The second source is called “carry” and is a percentage of any proceeds going back to the investor from the investments.

This is traditionally 20%.   

Some funds start taking carry at the beginning of the investment returns, while other funds start this after the investor receives their initial investment.


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.
-----
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