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

Many startups use equity to fund their business. 

Equity is an ownership stake in a company. 

Equity aligns everyone’s interest in the startup. It preserves cash since it’s only paid upon the exit of the business, which is usually an acquisition by another company.

Startup valuations are noted in pre and post-money figures and helps determine the investors’ equity ownership.

Pre-money -- what the company is worth before the investment

Investment -- how much the investors are putting in

Post-money -- pre-money plus investment

Investors own an equity percentage equal to the investment, divided by the post-money.

You can also calculate ownership by using share prices.  

The share register of the startup should log how many shares have been issued to investors and other stakeholders. 

To determine your percentage ownership for your startup, divide the number of shares you own by the total shares issued.

You can ignore authorized shares for now.

There are preferred shares and there are common shares

“Preferred” means that the holder receives certain rights or preferences with their shares. These rights provide the preferred shareholder protections, such as getting paid back first before common stock shareholders.

Common shares come with no special rights.


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.

Another source of funding is supplier funding.

Supplier funding comes from those who provide services to your company such as contract manufacturing, software development, legal, accounting services, and more.

Suppliers provide their services in exchange not only for cash but also for equity. This reduces the amount of equity funding you need to raise from investors.

Contract manufacturers will invest in your business and in exchange they look for the startup to use their manufacturing services. 

Software development firms invest in startups by taking a portion of their software development fee in the form of equity. 

There are other examples, including lawyers and accountants who provide services in return for equity.

This aligns their interest with your interest as the business must succeed for the equity to be worth something. 


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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For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
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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 a line of credit.

A line of credit is a short-term loan from the bank to help smooth out cash-flow cycles.

Unlike a bank loan in which you receive an injection of funds, a line of credit lets you draw upon it when you need and pay it back when you can.  

The interest rate on a line of credit is substantially lower than credit cards and offer a higher borrowing limit than most credit cards.

However, the interest rates are often variable and not fixed.

A secured line of credit is backed by an asset, while an unsecured line of credit is not. An unsecured line of credit will come with a higher interest rate.

There are both personal and business lines of credit. Personal lines of credit are often secured by personal property.

For a business line of credit, the bank determines your credit limit based on the business assets and cash flow.

The bank determines the interest rate by adding the interest to a margin which is affected by your credit history, profitability, and business risk.

The line of credit is a useful tool for early-stage businesses to help with cash-flow 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.
-----
For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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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 bootstrapping and barter.

Bootstrapping is using your own funds and that of initial customers to launch your business. 

Investors find this a great test to see how much skin in the game you are bringing to it in addition to sweat equity.

If you can find prospective customers who will prepay at least some part of the price, then it demonstrates market validation.

When you spend your own money you’ll find you spend less of it. 

Also, barter is a useful tool to reduce cash expenditures.  

Consider providing your services to businesses that can provide you with something you need in return for services such as bookkeeping, accounting, legal, and financial work.

For investors, this demonstrates resourcefulness and ability to negotiate.

When you barter you’ll find yourself negotiating the price you pay for non-barter goods and services. 

Bootstrapping and bartering build skills that will help you throughout the life of your business as you’ll start with a lower cost basis, spend more carefully, and negotiate better throughout.


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.
-----
For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
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Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In today’s startup world it seems everyone is a startup investor in some form or fashion.

Startup investors call me to discuss deal structures, valuations, or serial entrepreneurs.

I can tell the difference between a serious investor and a pretend startup investor. A pretend startup investor likes the title of investor, but won't commit the time or money to make it successful.

Here are some telltale signs of a pretend startup investor:

-- the investor is not interested enough to visit the team’s HQ or meet with the team.

-- the investor asks about the price first, and then figures out the values in the business later, if at all.

-- the investor wants reports but doesn’t read them.

-- the investor talks about helping the business but never finds a way to contribute.

-- the investor glances at the due diligence documents but doesn’t dive deep enough to understand the business.

-- there’s no investment thesis or guiding criteria for their investment choices.

-- they have no network in the target industry or startup world and can do little to help the startup post-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.
-----
For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

This is Investor Perspectives, I’m the host of Investor Connect, Hall T Martin, where we connect startups and investors for funding. 

In today’s show, you’ll hear about healthcare and its impact on startups.

COVID-19 has changed the landscape for startups giving us a new normal. During the pandemic, it became clear the need for changes in our healthcare system.

We have joining us, Thomas Hawes of Blue Venture Fund - an investor in the healthcare space. 

Tom is a member of the BlueCross BlueShield Fund Management team at Sandbox Industries and serves on the Sandbox Management Committee. He is the Board Chairman for Patientco, serves on the Board of Directors of Verata Health, Upward Health (fka BehaveCare), Octave Bioscience, Oncology Analytics, and AbleTo and is a board observer of HeartFlow, Thrive Earlier Detection, Phreesia, and Healthify. Tom holds a BA from Brigham Young University, an M.D. from New York Medical College, medical residency training at Yale, and an MBA from Harvard Business School. He is also a Kauffman Fellow. 

You can visit Blue Venture Fund at www.blueventurefund.com/.

Thomas can be contacted via LinkedIn at www.linkedin.com/in/thomas-c-hawes-m-d-mba-b729522/, via Twitter at www.twitter.com/ThomasHawes, and via email at tom@sandboxindustries.com.

I hope you enjoy this episode.