Tag Archives: Startup

How to Avoid Startup Burnout?

Startup Burnout from The Startup Garage

How to Avoid Startup Burnout?

Welcome to video Fridays from The Start Up Garage

A place where The Startup Garage’s team, answers questions directly from viewers

Key Take Aways From Video:

1) Force yourself to take breaks. And those breaks are both hour to hour and day-to-day and also longer breaks like vacations.
We address these questions in more in our blog post “Are you Running a Business or is your Business Running You?
“Are you Running a Business or is your Business Running You?

2) Day to day at every hour and fifteen minutes, take a break to stay focused.

3) Take at least a half hour lunch break in the middle of the day just to break things up.

4) Taking a Saturday or Sunday or even a day during the week off when you just check in with yourself and refocus.

Complete Transcript Below:

Question = “How Can I avoid Startup Burnout?”

Well this is a very common issue that most entrepreneurs face. You get all excited about your new company and you just start working, and you work and you work and you work. And sometimes you might have another job and you come home and work on the nights and weekends. Well this could work for a short period of time, but over time you can definitely get burnt out and I know from personal experience. So I found a very easy way to avoid that.

I force myself to take breaks. And those breaks are both hour to hour and day-to-day and also longer breaks like vacations So I found that day to day that every hour and fifteen minutes I need a break and that’s so I can stay focused, I can check in to make sure I haven’t wondered off into some other task that’s not really that important. When I was not taking breaks sometimes I would spend hours down some rabbit hole just wasting my time. So I take a break about every hour and fifteen minutes and also make sure I take at least a half hour lunch break in the middle of the day just to break things up.

And then I have also found that you can’t work but so many days in a row. You need some days off. Or I need some days off and I’ve found that working with other entrepreneurs, most other entrepreneurs need that as well. Taking a Saturday or Sunday or even a day during the week off when you just check in and you’re like “Listen I’m not focused and I really don’t have that energy to do that today.”

Don’t feel bad about taking that time off. So hopefully that helps and continue to take breaks, you can stay focused and make better decisions which will lead to having to work less to accomplish the same goals.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How To Evaluate Your Startups Business Model

How To Business Model

How To Evaluate Your Startups Business Model

The business model is the means by which your company makes money for the value that you deliver to your customers.

It is the strategy for how you monetize your product or service.

Your customer will be the ultimate judge of whether your business model works or not.

As a result, it may take trial and error to figure out the best model for your business.

Nonetheless, there are some important steps you can take to help ensure you get started with the best business model possible.

Step 1: Evaluate Your Competitors

By simply looking at your competition you will learn about the business models that your customers potential currently have to choose from. Whether you replicate a competitors business model or your deliver additional value to the customer by improving their business model, it is important for you to know what your customers’ options are.

Step 2: Understand Your Customer

Are you selling to men, women, or children? Are you selling to the wealthy or the poor? Is your product or service an everyday purchase or a luxury purchase? What drives your customer to purchase your product? Knowing the answer to these questions and truly understanding where your customer is coming from will help you determine the best model for you.

Step 3: Determine Your Cost of Sales

It is extremely difficult to determine your price and business model unless you know your cost of sales, also referred to as Cost of Goods Sold (COGS). Without this information, you won’t know whether your price generates a gross profit or a loss.

Step 4: Determine Your Operating Expenses

Every business has some cost of running the business that is not directly related to the sale or a product or service. For example, office rent, marketing budget, accounting, etc. It is important that you understand this cost structure as well so that you can turn a net profit once these expenses are accounted for as well.

Step 5: Compare Business Models

You will want to take your top 2 or 3 business models and build out a complete set of financial projections for each so that you can test the key variables of the business models and compare them with one another.

 
Below is a list of the most common business models:

  • 1. Brick and mortar
  • Whether you open your own brick and mortar retail store or you sell your product wholesale to a brick and mortar retailer, one of the oldest and most basic business models is a traditional storefront.

  • 2. Direct Sales
  • Direct sales is a method where the company sells directly to the end-user via a sales force. By cutting out the middleman, direct sales usually allows the company to sell the product for less and provide value to the customer via reduced prices.

  • 3. Subscription
  • The most obvious example of a subscription revenue model is a magazine or newspaper. Subscription business model is very popular and lauded among business owners due to its recurring revenue nature where gaining one new customer results in ongoing revenue throughout the lifetime of that customer.

  • 4. Multi-Level Marketing
  • Multi-level market, or network marketing, is a model where independent marketers buy a company’s products and sells them to consumers directly as well as to other “downline” marketers who in turn do the same. Each marketer in the “downline” receive a commission on that sale.

  • 5. Auction
  • The auction business model is free-market capitalism at its finest where the customer who is willing to pay the most gets the product.

  • 6. Service
  • The service industry is very broad and includes many sub-models but at its core, consumers pay a flat rate or an hourly rate for services rendered.

     

    Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    San Diego Startup Events July Wrap-Up

    San Diego Startup Events July From The Startup Garage

    San Diego Startup Events July Wrap-Up

    CyberTech & CyberHive — IoT Pitch Night

    Monthly

    Free monthly event hosted by CyberHive, an incubator and shared working space dedicated to cyber security and high tech companies — this “pitchfest” gave 7 different companies the floor to present for 3 minutes (and not a second longer) in front of a panel of judges and other like-minded individuals.

    It was an interesting range of companies pitching from a variety of disciplines including: Cybersecurity, Internet of Things, Big Data, Analytics, sustainable technology, software and apps. Afterwards the judges and the audience gave valuable, and constructive feedback and awarded the top 3 companies with prizes as well as a free trial using their shared office.

    My personal favorite was Cause Based Solutions (3rd place), which has created a debit card system that nonprofit organizations can offer to the supporters. Basically it rounds up every purchase consumers make to the nearest dollar and donates the difference back to the non-profit.


    1Million Cups at Co-Merge

    Weekly

    This hour long, weekly event hosted at Co-Merge, the co-working space in downtown San Diego, offers 2 entrepreneurs the opportunity to present their company for 6 minutes, followed by a 20 minute feedback and a Q& A session.

    Before starting it is emphasized that the forum is not intended as a chance to seek investment, but instead as a way to practice their delivery/ pitch and gather feedback from the startup community, so they are better prepared when an investment opportunity occurs in the future.

    During this event in particular Price Patrol, one of The Startup Garage’s clients, presented their sample pitch that they intended to use for angel investment. The slogan was “what you want at the price you want.”

    They are developing an app that will allow consumers the ability to find out where specific products are available at the most affordable price in their local region. With the app, consumers will also be able to reserve items so that they are available once they arrive at the brick and mortar storefront, as well as receive notifications when the products reach a certain price point that they set up beforehand.


    3D Printing Meetup @ FabLabSd

    Monthly

    This is a must-attend, monthly event for forward thinkers. Perfect for those with experience in the new 3D printing field and anyone who just wants to learn more.

    Much to my surprise, San Diego is actually one of the leading areas for 3D printing startups. Allen McAffee, the event organizer, created the event in an open forum style, allowing everyone to mingle and network.

    It was an eye-opener to learn about how 3D printing can be used as a means of social entrepreneurship. McAffee is currently involved in a project to create prosthetic limbs for kids — with production costs of less than $20 and the ability to print each one in 5-10 hours.


    Marketing Mondays @ EvoNexus

    Bi-Weekly

    Hosted by 2 marketing experts with several decades of experience, Randy Gerson and Chris d’Eon, these bi-weekly meetups at the EvoNexus Incubator office in downtown are the perfect event for anyone looking to advance their knowledge in the ever-changing digital marketing world, discuss strategies with other industry professionals and make connections before and after the event. (The free pizza/ refreshments are a nice perk too)

    The discussion turned to finding leads, giving me an overview of tools out there that can be used to gather potential client information. As unsettling as it seems that most of our personal information is readily available to those with enough energy or cash to gather it through the internet, the fact of the matter is that it’s there, it’s not going away anytime soon, and you can either ignore it or use it to your advantage.


    Obrary Launch Event @ PreFabSD

    Hosted at PreFabSD, a co-working space for creatives and designers in non-tech industries, Obrary (A play on words of “Object” and “Library”) introduced some of their newest products that they have a kickstarter campaign for. Many of the products they introduced were modified using high-powered laser cutters that allows a single piece of plywood to be bent into a box.

    Their long-term strategy is to become an open marketplace for product collaboration. What this means is that members will be able to use design files from their database, tweak them for their own preference, then submit the modified design back into the database for others to use.

    This “outside the box” approach seems to have unlimited potential in regards for what it can be applied to and it puts the power of design into the consumers hands.

    Overall, the month of July offered a variety of Startup events well worth attending.


    The Startup Summer scene in San Diego is just heating up. If you have an event you’d like for us to attend or spread the word on please Tweet us @Startup_garage

    How To Create a Revenue Model

    How to Create a Revenue Model from The Startup Garage

    How To Create a Revenue Model

    The first step to building the Financial Projections for a startup company is to build out the revenue model.

    The revenue model answers one of the most important questions about a new business: ‘how does it make money?’

    The revenue model is important for several reasons:

    1. It provides the top-line of the profit and loss statement (total revenue)

    2. It also provides gross or operating revenue

    3. It allows us to understand marketing, personnel, and operating budgets

    4. It helps us to determine the valuation of the company and the potential returns an investor can expect on their investment.

    There are several types of revenue models that businesses can choose from.

    In this blog post, we’ll discuss some of the most common revenue models.

    Before we can chose the best revenue model for the business, we need to understand the cost to produce our product or service (also known as the cost of goods sold or COGS) as well as the price of our product or service.

    Determining the Cost of Goods Sold

    COGS are the direct costs that relate to the production or purchase of the product or service.

    Potential direct costs include:

    – Cost to purchase the merchandise for resale

    – Cost of raw materials

    – Packaging costs

    – Cost of inventory of finished products

    COGS or direct costs can be thought of as the marginal cost or the added costs of producing one more unit of your product or service. This is opposed to the indirect costs that include labor salaries, equipment used in the manufacturing process, etc.

    Determining the Price

    When determining the price of your product or service there are several aspects that you need to consider:

    – What are my competitors pricing their product or service at?

    – What is my target market willing and able to pay?

    – What do I need to price this at in order to turn a profit?

    There is no right answer or formula for determining the price of your product but by taking the questions above into consideration you should be able to identify a reasonable price for your product or solution.

    Determining the Revenue Growth Model

    All revenue growth models are created using a growth driver.

    A growth driver is a key assumption or set of assumptions that determine the number of units the company will sell.

    Below are some of the most common revenue growth models and growth drivers:

    1. Sales Growth Model
    The sales growth model is the most basic revenue growth model as the growth driver is simply a percent increase on sales every month. For example, we will sell 10,000 units in year 1 growing 50% per year to 22,500 units by year 3.

    2. Sales Rep / Distributor Model
    The sales rep growth model is best used for companies with a salesforce that is responsible for wholesale or retail sales. There are two key growth drivers for this model: the total number of sales reps and the total number of sales per rep.

    3. Website Traffic Model
    The website traffic model is used for websites whose revenue is directly tied to the amount of traffic visiting the site. The key growth driver for this model is the rate at which traffic will grow overtime.

    Additionally, depending on the type of website (e-commerce or software as a service) additional growth drivers will be important.

    For example, for e-commerce sites, you’ll need to convert traffic to purchased items.
    Similarly, for software as a service sites, you’ll need to project the free trial conversion rate, paid subscriber conversion rate, and churn rate.

    4. Mobile App Download Model
    The mobile app download model relies on two key growth drivers: customer acquisition spend and customer acquisition cost. The customer acquisition spend is basically the marketing budget allocated to acquiring new customers through advertisement.

    The customer acquisition cost depicts how much it costs to acquire one new customer. If a company has a customer acquisition cost of $1 and they spend $1,000 per month of customer acquisition, they can expect 1,000 new users per month.

    Mobile apps often have additional assumptions such as registration rate if the mobile app requires the user to register an account after downloading the app.

    5. Online Advertisement Model
    Many websites and apps generate revenue through advertisements. The key growth drivers for this model are the number of impressions (which is derived from the number of ads per page and the number of page views) as well as the CPM (cost per million page views).

    Whether you have a question about your startup revenue model or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    Is San Diego Poised To Be The Next Silicon Valley?

    San Diego Next Silicon Valley? From The Startup Garage

    Is San Diego Poised To Be The Next Silicon Valley?

    Since the 1980’s Silicon Valley has dominated the startup scene, a place to call home to many of the world’s largest technology corporations, as well as thousands of small Startups.

    San Diego, although only a few hundred miles from the Silicon Valley, it is a vastly different world, full of sun, surf, and laid-back dispositions.

    However, that might all be about to change…

    New Entrepreneurial Ecosystems

    A conglomeration of a number of economic conditions and consumer trends has launched a new entrepreneurial ecosystem in the U.S, specifically in San Diego.

    On March 2014 San Diego, was recognized as Forbes Best Places To Launch A Startup in 2014

    Forbes prides itself on providing world business leaders with strategic insight and information, and is perhaps best known for its lists and rankings. This list is certainly worth paying attention to, especially as a startup entrepreneur.

    How exactly did “America’s Finest City” for surfing and sun come out on top?

    “San Diego managed to come on top for launching a startup because of its “heavy concentration in projected high growth industries, as well as a high likelihood of accepting credit cards and adopting social media. San Diego is home to the fifth-best rated business community in the country.” ~ Tom Post, Forbes Writer

    As the 5th best rated business community, it’s San Diego’s unique combination of wireless, digital medicine, bioscience, action sports, and military contracting.

    In the Startup world, where innovation means everything, diversity of interests and resources are key ingredients.

    Kevin Faulconer, San Diego’s newly appointed mayor, among others is very optimistic for the city’s startup future;“We have great intellectual capital and great creative ideas. We are one of the most innovative cities in the country.”

    Silicon Valley has shown the world how to build a vibrate, flourishing, startup ecosystem.

    It now up to the entrepreneurial community with San Diego to actively build, demonstrate, and evolve a greater level of startup sophistication.

    A great example of possibilities for the city is 3D Robotics, which based in San Diego. It is here that, former Wired Magazine editor in chief Chris Anderson’s drone manufacturing startup raised a $30 million Series B round of venture capital, as the company prepares to market its autonomous flying robots.

    List of Notable SD Startups

    Regardless of potential, it is fair to say San Diego is not going to surpass the Bay Area’s success over night. A thriving entrepreneurial ecosystem takes time to mature. There isn’t a mobile application to instantly fuel a community of startups into billion dollar tech giants.

    2014 marks a tipping point for San Diego, a notable time of reshaping the technology startup scene both locally and globally.

    San Diego is no longer simply a vacation destination. It is a destination for dynamic startup businesses, which are invested in assembling and transforming a community of entrepreneurs.

    Our team at The Startup Garage are committed to serving our Startup Community of San Diego.

    We are dedicated to helping make San Diego a better place to live, work, and play.


    Whether you have a question about your startup or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    Ten Deadly Sins of Writing a Business Plan to Raise Capital

    Deadly Sins of Business Plan Writing from The Startup Garage

    Ten Deadly Sins of Writing a Business Plan to Raise Capital

    In order to launch a successful business and raise the capital needed to do so, a startup needs to consider several aspects of the business including the management team, the size of the opportunity, the product/service/technology, the market/sales/distribution channels, the competitive environment and several other factors.  Another key factor is how these business concepts are portrayed in the startup’s business plan.  Below is a list of the 10 most common mistakes, or sins, that we have encountered with entrepreneurs and past clients when trying to raise capital.

    1. Focusing on Technology

    The technology behind your startup’s product and service (especially for tech-based startups) is certainly important to investors.  They need to understand the technology and why/how it is better than that of your competitors.  Speaking towards your competitive advantages, it will take more than a patent to attract seasoned investors.  They want to see competitive sustainable advantages — aspects about the company that are not easily copied/implemented by your competition.  Once you have succinctly presented the technology and convincingly demonstrated your sustainable competitive advantages, move on to other sections of the business plan.  Many first-time entrepreneurs or entrepreneurs with strong tech backgrounds waste too much business plan real estate on the technology section and only manage confusing the reader as a result.

    2. Missing the Mark on Assessing the Opportunity

    If your target market is so broad that a 1% adoption rate will make for a successful business, then your target market definition is likely way too broad.  Investors want to see that you have a narrowly defined market with sales and market strategies tailored to target this specific market.  You can have a large addressable market that you hope buys your product, but it is important to demonstrate that you understand the importance of launching a business with clear and actionable target market.

    3. Ignoring the Competition

    All good business plans put considerable attention on the competition for several reasons.  1) Understanding the competition can help you understand your position/niche in the market and how to tailor your product, target market, pricing, marketing, etc.  2) Demonstrating the strengths and weaknesses of your competition allows you to contextualize your positioning in the market while demonstrating your competitive advantages.  3) A detailed competitive analysis shows investors that you are a thorough entrepreneur when it comes to business planning and that you are confident enough in your product that you aren’t afraid to discuss your competition.

    4. Ignoring Market Need/Traction

    Demonstrating market need and/or market traction will vary depending on the stage of your startup.  If you are pre-revenue then it will be difficult to portray market traction unless you have the budget to conduct customer surveys.  However, you can still demonstrate market need by highlighting comparable products or services.  You should also demonstrate the problem in the market that your product solves.  For startups with past sales it is important to demonstrate current sales and sales growth since launching.

    5. Practicing Top-Down Sales Forecasting

    Top-down sales looks at the overall market and uses this information to identify your company’s  projected sales, typically as a percentage of the market.  It is important to know the market size and the percentage of the market that you are projecting to capture in order to validate your model.  However, your model should not be based on a percentage of the market and will raise red flags for sophisticated investors.  Investors want to see a growth/revenue model that uses sales data and assumptions that predict sales by product and region.  They also want to see a ‘growth driver’ upon which your sales are generated.  This may be the number of sales representatives, website traffic and conversion rates, size of email lists, number of licensees, etc.

    6. Unrealistic Exit Strategy and Multiple

    “We expect to be acquired by Microsoft for a 50X EBITDA multiple” is not a good exit strategy.  Rather, provide some statistics of recent exits from comparable firms and provide data such as sale price, revenue at time of sale, revenue/EBITDA multiple.  Provide a range in the multiple size that you anticipate being able to attract based on these statistics and provide a description of key milestones that will demonstrate when you think the startup is likely to be acquired.

    7. Unrealistic Valuation

    First and foremost, investors may lose interest if your startup is offered at an unreasonable price as this poses an obstacle for negotiations before they even begin.  Additionally, if/when you need to raise the next round of capital, you dont want to risk taking in money in a down round because you overvalued the company early on.

    8. Ignoring Milestones

    Milestones are discussed in other sections of this blog but it is important to highlight them on their own as well.  Milestones, both past and projected, help to build value, establish credibility and project goals.  They show investors what you have accomplished to date (this also gives you legs to stand on when defending your valuation).  They show investors how you will spend their money.  They show investors that you are a sophisticated entrepreneur and that you understand what it is going to take to build a successful business.

    9. Junk and Fluff

    If the sentence, picture or graph does not, in some way or another, tell investors why they should invest in your business then leave it out.  Investors are busy and you’ll be lucky if you can get them to read half of your business plan in their first read through.  Don’t ruin your chances by including unnecessary junk or fluff as chances are these will be the choice lines that the investor decides to read.

    10. NDA Insistence

    In short, investors don’t sign NDAs.  Asking them to do so will make you look like you don’t know what you’re doing.  Investors are more interested in finding good entrepreneurs, not good ideas.  Investors know that anyone can come up with a good idea but that very few have the ability to actually pull them off.  Good ideas come down their pipeline all the time and they will not be afraid to overlook yours because of an NDA.

    Investors look at hundreds of deals a month.  You are competing for their time.  Don’t waste precious minutes of their attention or risk not getting their attention because of an NDA that provides little to no benefit.  That’s right, an NDA provides little to no benefit.  If your idea is so easily stolen that justh earing the concept is enough to allow anyone to replicate it, then the investor likely wont be interested in the first place.  In any case, your business plan does not need to include the secret sauce and you should be able to openly share the concept of the idea of anyone.  Lastly, the power of any legal agreement is tied to your ability to enforce it.  Unless you are prepared to sue investors if you feel they stole your idea, why waste having them sign an NDA?

     

    Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    Building a High-Tech Startup Team

    Building a Tech Startup Team from The Startup Garage

    Building a High-Tech Startup Team

    Aligning the Startup Team Strategy with the Capitalization Strategy

    The single most important factor to raising capital for any tech startup is the management team.  This is true for early stage funding as well as venture capital funding.  A bonafide team is the assurance that the idea can be executed and that the business can scale when the time is right.  Furthermore, when faced with adversity only great teams can respond to competitors, markets, funding environments, staff departures, PR disasters and the like.

    Importance of the startup team from The Startup Garage

    When building the team, avoid these common myths and mistakes:

    • A team is not one person and investors rarely want to invest in one-man shows.  While some investors will be willing to help you build your team, they will not be willing to invest in your startup if you are not willing to distribute responsibility and bring on diversified expertise.
    • Never confuse the number of years worked with experience.  Credibility is based on accomplishments and relevant experience.  Furthermore, a startup works differently than a large corporation.  Try to build a team with startup experience as these individuals will be far more likely to understand the importance of flexibility, perseverance, collective success and team playing.
    • Have a diversified team.  One recipe for failure (business failure and capital raising failure) is building a lopsided team weighted to one function of the business.  Don’t hire people with skills and qualifications similar to yours.  If you have a technical background and you are focused on product development, consider a co-founder with a sales and marketing background that can focus on selling your world class product.
    • Hire based on functionality and avoid having too many C’s.  Rather, give titles such as VP of Engineering, Product/Technology, Sales, Marketing, Finance, etc.  This helps to better divide the work, make people accountable, and show investors just why each founder/hire is key to the organization.
    • Don’t make everyone a founder.  Be sure to leave plenty of equity for investors.  You will likely need to raise more rounds of capital than you originally anticipated.  Having too many co-founders will only lead to your eventual dilution.
    • Hiring the right people at the right time is key.  You shouldn’t hire a senior executive from an established company for an early stage startup.  On the flip side, when it comes time to scale the company, the founder and CEO may need to relinquish their CEO title and hire a CEO with the ability to drive efficiency, make incremental process improvements and expand on the established market presence.  Below are some tips for aligning the startup team with the capitalization strategy.

    Early Stage

    With little to no revenue, many early stage entrepreneurs turn to the Co-Founder model to build credibility for their startup when raising seed capital.  This is not a bad strategy when done correctly.  The reality is that over time most founders will have their differences.  While you should be prepared to give up a large portion of the company’s equity to a co-founder, it is important that one founder maintains a majority share and creative control.

    Additionally, be sure your co-founder is well diversified from your skill sets and traits.  Investors understand that you wont have all the pieces to the puzzle at this early stage.  But, the more business functions that you can divide among the original team the better.

    Seed to Series A

    For most tech startups, the Series A round allows the team to expand by making some key hires.  Typically, these hires fall into 2 buckets: product development and sales.  The CEO of the company will be in charge of leading the company by making these key hires, product managing, driving sales and understanding the companies financial situation.  This leaves the CTO / Senior Architect to focus on product development and managing the recently hired engineers.  On that note, it is important for high-tech companies to keep tech development inhouse.

    Series A to Series B

    Series B capital signifies that the company is ready to scale.  Key hires at this stage should reflect this strategy.  First, hire an office manager that can double as an admin assistant thereby allowing founders to not get bogged down in minutiae and focus on growing the business.  Hire a VP of Finance that can increase profitability by monitoring operations, legal fees, HR expenses, office space and the like.  Hire a diversified base of sales reps.  While consultative reps are key to building new business with big accounts, relationship managers are key to retaining those accounts.

     

    Whether you have a question about your management team or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    VCs Bet on Mobile App Development

    Venture Capital Bet on Mobile App from The Startup Garage

    VCs Bet on Mobile App Development

    Mobile is the Rage & VCs are Taking Note

    Corporations from banks to fast food to software firms are turning to mobile app developers to build mobile app devices for their customers.  Given the popularity of mobile devices and the apps that make them great, venture capital investors are chomping at the bit to get a piece of the pie.  Since the beginning of 2012, mobile app development startups have raised $262M across 36 deals.  This represents 59% of the $446M that mobile app development firms have raised overall!

    M&A Spurring Growth

    In addition to the increasing popularity of mobile apps and enterprises deploying mobile apps as a result, M&A activity has helped to make investors bullish in the sector.  Notable recent exits that have caught the interest from strategic investors include:

    • Facebook’s $85M acquisition of Parse; and
    • IBM’s $70M acquisition of Worklight

    On a broader note, VC funding to the developer tools category as a while hit $646M in the last year, an increase of 77% over the previous year.  The following chart outlines VC funding to the mobile app development since 2011:

    VC Funding To Mobile App Development from The Startup Garage

    All data and graphs thanks to CB Insights.

     

    Whether you have a question about venture capital financing or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    Seed and Series A Technology Funding Report

    Capital Raising Trend Report from The Startup Garage

    Seed and Series A Technology Funding Report

    Tech Seed and Series A Medians and Averages Show Little Change

    Despite some notable early-stage Juiced and Jumbo Series A round investments in tech firms such as GitHub and Clinkle, the average and median Seed and Series A transactions are showing little change.

    Juiced Series A deals typically range between $8M and $15M.  Companies raising this type of capital typically have substantial market traction and boast teams of 20+ professionals.  These deals resemble traditional Series B investments.

    Jumbo Series A deals typically range between $15M and $60M.  Companies raising this type of capital typically have been bootstrapped for quite some time, boasting revenues of $10M+ and looking for institutional capital to grow fast with goal of reaching a not too long term IPO.

    Average and Media Seed and Series A Deals

    The average tech Seed deal has stayed consisted at $800K with the media at $50K as outlined in the graph below:

    Average and Median Tech Seed Deal Size from The Startup Garage

     

    The average tech Series A deal reaches $5.1M with the median at $3.35M as outlined in the graph below:

    Average and median tech Series A deal size from The Startup Garage

     

     

    Looking at these early-stage deals by sector we see that Internet Seed deal averages declined to $770K while medians increased slightly to $530K.  Meanwhile, mobile Seed deal averages grew to $830K with medians also increasing to $520K.

    Average and median Internet Seen deal size from The Startup Garage

    Average and median mobile Seed deal size from The Startup Garage

    Within Series A, median deal sizes in the mobile sector are also growing faster than the internet sector:

    Average and median Internet Series A deal size from The Startup Garage

    Average and median mobile Series A deal size from The Startup Garage

    All data and graphs thanks to CB Insights.

     

    Whether you have a question about early-stage tech financing or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

    7 Critical Steps for Attracting Venture Funding

    7 Steps to Attracting Venture Capital from The Startup Garage

    7 Critical Steps for Attracting Venture Funding

    First and foremost, venture capital firms want to see an entrepreneur with passion and vision.  Unfortunately, this usually isn’t enough to get them opening their pocket books.  Some venture capital firms will have narrow criteria for the types of companies that they invest in while other will adopt a more broad portfolio and invest across many sectors.

    In any case, nearly every venture capital firm is looking to see if you’ve made signification traction for each of the following critical steps.

     

    1. Team

    Investors may think that you have a great idea and that the market poses a significant opportunity, but if they have confidence in your team’s ability to seize the opportunity you will be dead in your tracks.  Your team is perhaps the single biggest factor that investors consider when they are evaluating the attractiveness of the investment.   Your management team does not have to be fully built out, but the founders must possess the credibility to launch the company and built a world-class team.
     

    2. Stellar Idea

    Every entrepreneur gets attached to their idea.  However, the reality is that very few start-ups present an idea that is actually unique.  What makes an idea compelling to an investor is 2 fold: 1) does the idea offer a solution to a big problem or opportunity, and 2) is the idea protected via intellectual property or some other barrier to entry.
     

    3. Technology

    Technology is similar to the stellar idea.  Your technology needs to be broad enough to to solve a problem for a large group of people but focused enough to solve a problem that is not currently being solved.  Similarly, good technology needs to be protected.  Patents alone are not enough; you need talent to assure investors that you will stay ahead of the game.
     

    4. Market Opportunity

    A good market opportunity is more than just a large market size.  It is a market that is not over crowded with competition.  It is a market with an opportunity that has yet to be exploited.  It’s a market that has a lot of potential for you to continually create value down the road.  Truly innovative companies discover ways to create big markets.
     

    5. (Sustainable) Competitive Advantage

    Most entrepreneurs understand the need to have strategic advantages (both product/service advantages as well as business strategy advantages), but what many fail to understand is that venture capitalists want to know just how sustainable that advantage is.  If your competitor can reverse engineer your idea, hire new personnel, implement a new sales/marketing strategy or lower their costs to match your price point then your competitive advantage is not very sustainable.  Sustainable competitive advantages are not easily copied and generally stem from one or more of the following: vendor relations, product sourcing advantages, prime location, unique products / services, customer loyalty, customer service reputation, or distribution channel advantages.
     

    6. Credible Financial Projections

    Every investor knows that your financial projections are dependent on assumptions and that those assumptions will undoubtedly change.  But, financial projections are extremely valuable in explaining the business to the investor – they show what drives your growth, how profitable you can be, and where the company can go over the next 3 to 5 years.  They also show your ability to turn a business concept into a realistic, attractive business model.

     

    7. Proof of Concept

    Lastly, we have proof of concept, or market validation.  Behind the management team, this is one of the other more influencing factors.  Venture capitalists want to know, are people buying this?  Have businesses signed letters of intent?  Is there evidence that your solution will be adopted by the masses?  The more credibility and market traction that you have, the more attractive your startup will be to venture capitalists.

     

    Whether you have a question about raising capital or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!