Posts tagged: startups
For years start-ups have been sending investors and other potential funding sources their business plans. With more and more start-ups pitching these days, and funders having less and less time to review them all, a new trend is emerging about how to approach funders. It’s the one-page pitch. Get to the point immediately. Here are some basic questions the answers to which should be included:
· What’s the problem?
· How are you solving it?
· Who’s your customer?
· How will your solution make money (your business model)?
· What stage is your company in right now?
· How much money are you looking for?
· What are you going to do with the funds?
· What’s the payback horizon and how much return will the funder get on their investment?
What’s really good about the one-page pitch is that it can be a significant way to force you to clarify, condense and articulate your ideas.
John Ason, an angel investor, often speaks about the one-page pitch: he has approximately 1-3 minutes to look at your idea. And it had all better be on that one page. And not single spaced with no white space on the page. If it’s not visually inviting, he won’t read it. John always offers very pointed and amusing illustrations of how he wants to invest. When asked what John looks for in a management team, his answer includes passion but he also says the combined age of the two principals should not be more than his age. Another, related to return on investment, is that the payout should not extend past his lifetime – his event horizon (as is that of many investors) is a 10x earnings return on his investment in a reasonable time frame (usually less than five years).
To learn more about John, how he works, what he looks for when investing, what he’s invested in etc.
Check out Martin Zwilling’s post on pitching angel investors – BTW these points hold true for VC and other pitches as well.
Here’s a first time funder’s story
How to maintain integrity in the creative and entertainment industries is a central question to the new and struggling creative entrepreneur. What you’re willing to compromise can define your career.
In this digital age of increased transparency, consumers want to know what to expect from a business and they readily share that information to broad social networks. This is why it’s important to set a precedent and maintain it; still, there are certain moments that call for flexibility.
Is responding to these calls necessary every time, and if so how flexible should one be? While the answers to these questions depend on the situation, overall one should be able to respond to these moments in a way that is consistent with the company’s and one’s own moral and social values. Set aside time to figure out what you and/or your company stands for as a creative and professional enterprise. Outlining these values now may help you maintain your integrity as your business grows.
Read more to gain insight on recognizing precarious compromises and get tips on maintaining integrity in your business:
Be mindful of the triple C’s at all times:
Your Company, Your Customer and Your Competition.
It’s important to have a 360 view of your business universe so that you are prepared to never be caught by surprise and never miss an opportunity. At the point where the three overlap, you’re in the zone.
· You’re focused on their needs and wants
· At the same time, you’re keeping up with the trends, not just current, but anticipating and maybe even creating future ones
· You’re always staying in touch with them
· Where are they weak
· Where are they vulnerable
· What aren’t they doing that you can do
· What are they doing that you can do better
· What skills do you have in house – are you maximizing them
· What are your assets (especially intellectual property and capital – this means your employees)
· What kind of culture have you created that everyone lives in – internally and externally
For more on the subject, check out some strategic insight offered by the Harvard Review
The Design Entrepreneurs NYC (http://www.designentrepreneursnyc.com/) program is in full swing. One of the programs’ many offerings is an open classroom “mentoring” evening, where designers in the program can swing by and ask questions of instructors who are there for that purpose. It’s a great and informal way to get multiple opinions, points-of-view and advice on the designers’ company, business plan (which they write as part of the program) etc.
This recent Wednesday evening I was co-mentoring with Shawn Grain Carter, who teaches Fashion Merchandising and Marketing at FIT. The subject, as often happens, was brought up of designers negotiating with big companies – this could mean, contracts, licenses, royalties, intellectual property, employment, or all of the above. Many design entrepreneurs do these negotiations alone. Sometimes they feel they have enough knowledge to negotiate well for themselves. Sometimes they don’t know any better. Sometimes they don’t have the money to pay an attorney to go with them to help and advocate for them (and to keep them out of trouble). We discussed this in class and Shawn and I agreed that an entrepreneur absolutely needs an attorney to accompany them to such negotiation meetings. Or a business person, like an accountant. Or both. And Shawn advised everyone, and I agree, that they should have double A’s – an accountant and an attorney. They both keep you safe in any kind of business negotiation.
It’s a necessity in the fashion business but also in every sector. At the very least, there’s a second pair of ears listening to what’s going on and picking out important points that the entrepreneur might miss. At the very most, your A-team keeps you from making costly, and sometimes business-ending, mistakes. The world is littered with stories of failure because the entrepreneurs couldn’t or wouldn’t bring an attorney or accountant into a crucial negotiation (and, let’s face it, every negotiation when you’re a small business is crucial) with them.
I know you’ve heard me say this before…but repeating it never hurts…always use an attorney and/or accountant in contract reviews, negotiations, any business matter. The fees you pay your Double A-Team are minor compared with the money they save or help you get in the long run.
Creating a new business structure around a partnership or multiple founders is one of the most single important aspects of starting a new business. Like a business plan, your corporate structure, how you allocate shares, profits and control of the new business will help determine the fate of your company as well as the company culture (anywhere from hostile to win-win). This is a relationship, or more accurately, a marriage (so the culture would be more like dysfunctional to loving). Like a marriage, I highly recommend looking to the end of the company or partnership as you create the beginning – like a pre-nup. Seriously. Have everything worked out to cover the end and you will be good to go in the beginning. Because you never know how the relationship(s), or company, will end – will you be bought out? Go public? Be taken over? Get investment? Change direction to one that not everyone wants to buy into? Dissolve? Will founders or partners or you have a change of circumstances that lead to a desire to end the relationship? Will someone die and you are suddenly stuck with a spouse as a partner? All this needs to be spelled out upfront, because once the horse has left the barn…well, you all know how that one ends.
When I speak to multiple stakeholders at the start of their company, I go around the room and point out a scenario where one person decides they want to take more control of the company – maybe because they feel they are doing more work, or contributing more value or whatever. And ultimately that leads to someone else being screwed. I’ve had co-founders come back to me later and tell me that the scenario I played out in the meeting was exactly what happened. So protect yourself and your partners BEFORE YOU BEGIN.
George Deeb in Alley Watch provides some helpful hints and considerations that should be taken into account about how to split up equity in a startup.
I just saw Janet Falk’s blog on how she managed a placement for one of her clients and it made me mad and sad. Not about Janet. She does a great job. But about a company that I ran into a few years back that has an amazing story and results from a new kind of toothpaste. I’ve used the product (the company was smart enough to hand out, nicely packaged I might add, samples at a bootcamp/pitch fest). The “toothpaste” stops bleeding gums, actually heals gums, and stops all other kinds of gum and related ills. So why has no one ever heard of it? Because senior management of the company doesn’t believe in marketing or PR. Marketing directors come and go but can’t get senior management to invest in their own success. So many startups don’t understand the $$$ ROI power of marketing and PR. And if they manage to stay on the market at all, it’s because of a tiny amount of traction they’ve built. Most companies fold. Companies with good ideas and great products, like this toothpaste. Make sure you’re not one of them.
This is the title of an article just published in The New York Law Journal (I’m one of the authors). It’s a cautionary tale about fundraising. It gives relevant details about the JOBS act and how that applies to fundraising – and it’s not the panacea many are mistakenly making it out to be.
It’s also about losing focus on the prize – moving your business forward – while distracted by the dazzle – the allure or promise of raising capital any way you can. The article details what’s legal and not legal in the world of raising money for your company. I hope you use it as a guide to do your fundraising the correct way so you can avoid the fate and outcomes (jail time?) of this unfortunate company.
Showcasing past enrolled and current adult student pet product designs. See our doggie models strut the runway in true fashionista style. BARK-à-Porter is also a charitable endeavor, held in partnership with the New York City Mayor’s Alliance and Animal Care and Control of NYC. We promise an experience worthy of market week in Paris.
Get your tickets before they sell out!
Date: May 3, Friday