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Equity is the most expensive way to fund a business. In the success case, a healthy chunk of the company has disappeared. In the failure case, the founders have forfeited their time. To make matters worse, at the earliest stages, only a tiny handful of companies get funded. In 2019, only 4556 companies received Angel and Seed funding according to Pitchbook. Despite these challenges, there are cases where outside capital is a necessity for a startup. Companies that fit one of these 3 categories will need raise money at some point to be successful:

1) To survive the sales cycle — When selling to enterprise customers, the sales cycle can last over 12 months and span 6 different decision makers. In an environment like this, a company must have the sales, product, and customer support staff to operate during that time period with little earned revenue. There is still a revenue flywheel, but there is a substantially delayed reaction to the push. Impact of time and money invested now don’t create results for over a year. And even once the sale materializes, to continue to grow, the company will have to weather ongoing cycles of delayed return on investment. In this case, capital is necessary to bridge the company from sale initiation to revenue. …


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Recently, WeWork announced the appointment of Sandeep Mathrani as its new CEO. As much as this change appears to be the culmination of a chaotic series of events for a troubled startup, this type of change is pretty typical among startups. In the life of a company, it’s common for the leadership change from builders, to managers, to fixers. As founder, it’s important to understand these archetypal roles in order to ensure the right people are on the team at the right time.

In most companies, the founders are the builder archetype. Builders are obsessed with creating solutions or solving problems. Builders have intense creativity and an innate need to act on it. For example, Bill Gates had an early vision of a PC on every desk. Even today, he’s focused on solving some of the world’s most challenging problems from sanitation to vaccination. As featured in the Netflix documentary, Inside Bill’s Brain, Gates has always focused on creating the future. The ability to envision the next iteration of an industry or an experience and then craft solutions to deliver that vision is at the core of most builders. …


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For those that wonder why airlines and event ticketers always add extra fees to the listed price, a technique called drip pricing, it’s because of incentives. A Columba University research study found that consumers, despite a dislike of the practice, will ultimately pay more when prices are “dripped.” Because of customer behaviors, sellers have no motivation to change transaction processes. There is a hidden reward system at play causing these merchants to maintain an undesirable experience. …


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Every company has to be able to tell its story to potential customers and investors, and it’d better be compelling and engaging. In established industries, or ones that simply seem mundane, storytelling can be a difficult task. But, if you know how to find and present your story, any business can, and should, have a compelling story to tell.

Not every company can be a Snapchat or Instagram which, by sheer breadth of adoption, creates its own story. Most businesses, according to the e-Myth by Michael Gerber, are started by people that are really good at their craft and suffer an “entrepreneurial seizure.” …


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When 4-hour workweek author and investor, Tim Ferriss, decided a traditional MBA wouldn’t work for him, he decided to use the $120k he would have spent on an MBA to invest in startups. Similar to business school, his plan was to “To learn as much as possible about startup finance, deal structuring, rapid product design, initiating acquisition conversations, etc.” While that plan may work for an already successful entrepreneur and author, there’s a cost effective option to get the same information: read. Among the great business books, there are 8 that every startup founder should read:

1) On StartupsThe Lean Startup by Eric Ries — Most founders have heard of it, almost all quote concepts like Minimum Viable Product (MVP), but not all have read it. Lean Startup is the core playbook for optimizing the use of scarce time and resources to build a product. …


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Around the globe, we just finished celebrating another orbit around the sun. While these events seem arbitrary, temporal landmarks, like New Years, Birthdays, and Anniversaries are important times for reflection on the past and looking to the future. As an entrepreneur, these markers are opportunities to refresh, or create, periodic planning processes. Here are 4 must-haves to kick off the new year:

1) Create a one page strategic plan — For small businesses, strategic planning is about creating a decision-making north star, a reference point for decisions throughout the year. For example, if a prospect presses on adding a new set of features, the strategic plan is a framework for deciding if the request fits within the company’s objectives for the year. In addition to being a litmus test for decisions, a one page strategic plan distills the what, why and how of execution into a concise framework. …


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In 2015 alone, there were over 13,000 conferences in the US and Canada plus hundreds of thousands of meetups. As an entrepreneur, it’s easy just hunker down and never leave the office rather than decide among all of these. Conferences can provide an opportunity to hone your craft or grow your network that doesn’t happen from behind a desk. In order for an event to create value, it must fit in one of 3 basic categories:

  • Educational — In just a few days, an education event creates a chance to find a new skill, concept, or tool that can be deployed into the business. Because of the compressed timeline and broad audience, content is often genericized or repetitive, so, finding a true learning event can be hard. Before signing up, understand the agenda, the speakers, and the exhibitors to determine if attending will deliver actionable outcomes for the company. …

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After watching the Washington Nationals jump out to an early lead in the World Series, then drop 3 games in a row, and then win the series, it’s reminiscent of the rollercoaster ride that startups endure during early funding rounds. The elation of launching a product with friends and family money is stymied by almost running out of cash only to be saved by outside investment. Beyond the emotional elements, the similarities between baseball, a game of averages, and raising capital don’t end with the word “pitch.”

For example, fundraising, like hitting a baseball, starts with the number of plate appearances you get. Of the over 19,000 major league baseball players in history, only 30 have hit a home run on the first pitch of their first at bat. That 0.1% success rate is similar to the number of first-time founders that will get funded on their first investor pitch. While there is no direct correlative data on the number of meetings required to raise money, a founder can expect it will take dozens, even hundreds, of investor pitches to raise a round. Similarly, baseball players are judged on their average across 500 or more attempts, not just on any single plate appearance. …


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Three-minute pitch events are everywhere. Audience members get to see a lot of companies in a short period of time. For investors, it’s just enough to figure out if a company is a fit and to follow up later. For startups, it’s a ticking time bomb. Most that attempt a 3-minute pitch fail miserably. The few that do it well have a handful of common attributes:

  • Don’t go over time — It seems obvious, but apparently, it’s not. Nothing kills a pitch like going too long. You miss key details or don’t do enough to generate interest. If anything, start with the important information and leave the supporting information for last. …

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Much is made of understanding the end user of a product. But to sell it, it’s not always the end user that’s buying, so a startup must understand who has the financial authority to approve and purchase. But even before getting into the details of who makes the buying decision, it’s important to know which direction a product penetrates an organization. Typically, there are 4 ways customers adopt products:

  • Top Down — In a top down sale, the product has a large financial commitment and impacts multiple operating units. Products like Salesforce can cost well into the six figures to implement and can have an impact on sales, customer service, and marketing. To sell a product like this, executive sponsorship is crucial because of the amount of dollars invested and the number of parties impacted.

About

David Evans

A compulsive entrepreneur and technologist, I started my first business at 19, and have spent my career working in, investing in, and advising startups.

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