From my stint at WSGR in Silicon Valley this is dead on. And, thank you for trying to make some sense of valuation for start-ups. The truth is unless you take the money and make big things happen with the valuation is 0. I had a hard time getting entrepreneurs to understand that early stage valuation is like monopoly money. Relax and get cracking on creating profitability. Great job.
kamilburzynski
· 4 months ago
Really great resource.. I am launching my own startup next month and recently have read virtually everything I've found about entrepreneurs/startups.. your text is much better than most of others, I would compare its value to Guy Kawasaki books ;)
Bernard Moon
· 4 months ago
very cool. thanks!
jsimp12
· 4 months ago
Great information. Thanks for taking the time to post this. As someone just creeping into the game, this is great insight!
nileshbabu
· 4 months ago
great list! can make it available as ppt or slideshare?
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sonnyhong
· 4 months ago
Bernard - as always, you are a genius!!! Well put!!!
jaichoi
· 4 months ago
nice little post on the essentials for the entrepreneur!
facebook-6018904
· 4 months ago
Bernard this is a great resource! I will put it in my toolkit...it may come in handy some day...
Name
· 4 months ago
Very nice summary, however having been part of 2 failed very well funded startups ($50M each, a 3-year stint on each), I would argue about the presence of the A people or what is defined as A people.
The lessons learned in those major failures is that an A people can be effectively attractive to get some exposure and 'apparent' credibility, however, these A people are generally high-maintenance and would want a personal assistant, an army of people (the more you manage people, the more you are credible) and tend to confuse the company money with their own and their ego tend to be way bigger than their technical, market or business analysis skills...while they excel in hanging around with the cool kids...
So these A people have a tendency to make it easy to make the company finance slip and make the US military budget for Iraq look amateur in comparison...moreover these A people are *very* difficult to get rid of... when there is a large amount of money available... hard decisions tend to differ and bad people are let to stick around and given somewhat a free pass to do whatever they want and sink company resources into their pet project...
I have found through those experiences that what you really do not want in a startup is someone that is coming from being a VP or product manager or anything like that from a large corporation. Those are generally people that may shine in those corporate environments but are at loss when they dont have a working established product, a prestigious company name, and a large amount of staff to do coffee, buy flight tickets, organize schedule, do some graphics, do some slides...etc...
These profiles I would argue may be suitable when the startup is no more a startup but a well established company with an established product and arrays of customers (or users), and they would take it even further to the next level. Otherwise, those guys are the type of people that will make your startup die, as they are far from appropriate for the product definition phase and are a huge liability.
Bernard Moon
· 4 months ago
good thoughts and experience. i would say this is more of what you define as "A" people. it sounds like the executives you worked with were A people from large corporations, but not A entrepreneurs, which is what i'm referring to at the early stages. i assume you were at a mid-stage startup which still needs more entrepreneurial people vs. intrapreneurs or corporate executives that need a lot of infrastructure and a supporting team.
Yuri Ammosov
· 4 months ago
This is all soooo 2006-2008. In 2009 startups do not get funded in $2-10 M range, and even in $100K range.
Bernard Moon
· 4 months ago
Really? Obviously, you don't read the frontpage of VentureBeat and follow other tech blogs to see that startups are still getting funded. Let's see a quick scan shows just last week:
- Education.com raised $5.3 million - Emergent Game Tech closed $14 million - Fanfare Group raised $7 million - Newscale closed a $2.2 million round - Nexage $4 million - Qik raised $5.5 million - ETC.
Yuri Ammosov
· 4 months ago
Bernard: inasmuch you may wish to believe what you say, these fundings are follow-ups. In other words, investors try to prevent the loss of capital already invested. Try reading TheFunded instead to get the real picture.
Bernard Moon
· 4 months ago
I don't have time to filter the news for you. Nexage is a series A, not a follow on round.
Also I think you're missing the point of my piece. It's not to say that VC funding is as active as the years before. Of course, it a down year of lesser activity as with almost every sector in society. You're stating the obvious.
Yuri Ammosov
· 4 months ago
Bernard: Nexage is anything but a startup. Do you know it was founded in 1999? Sorry, this one was totally off the mark.
Bernard Moon
· 4 months ago
Thanks for the correction. So how are your comments relevant to my piece?
Yuri Ammosov
· 4 months ago
Your piece? Sorry. I did not realize you are an author, I thought you were just another reader. My comments are not intended for you, they are for readers.
Bernard Moon
· 4 months ago
Weak answer. Still don't understand the relevance of your comment on my piece here, which is about the startup process not the venture capital environment.
Yuri Ammosov
· 4 months ago
Sorry, but you do not have to. I do not expect you to agree with me the moment I express my disagreement, and I certainly see no point in telling this over and over again. Furthermore, I really dislike the idea of author trolling in comments to his own text. And author should be able to say all he wanted to say in the text, not in the comments. I have recorded your disagreement, thank you, can we stop here please?
Bernard Moon
· 4 months ago
I believe most people like a discussion with the author from my experience as long as it's fruitful and the comment was insightful. So I would hardly call this "trolling." Thanks.
Tim
· 4 months ago
very weak
prathit
· 4 months ago
Bernard,
I am a start-up entrepreneur bootstrapping a SaaS company with some beta customers. I have been looking for early seed capital from Angels in the $150k to $200k range to reach the near-term milestone.
Your presentation was right on the money and had great insights. One thing I would like to add based on my experience is that building start up into a successful company is a lengthy process requiring insane perseverence..
Any specific leads to angels investors?
Thanks
Bernard Moon
· 4 months ago
Hi Prathit,
I listed some in the presentation slide, but you can email me at bernard.moon[at]gmail.com and I can try to direct you to some.
prathit
· 4 months ago
Sent you an email earlier.. Thanks Bernard
Bernard Moon
· 4 months ago
My friend Jimmy (http://www.web2expo.com/webexsf2008/public/sche...) that I mentioned above pinged me about a critical point I forgot to list, which is NEVER ASSUME a funding deal is closed until money is in the bank.
We experienced and know of verbal commitments that went south, signed terms sheets that went south, and other situations. So even a signed document wasn't good enough for us until MONEY WAS IN THE BANK.
Carl
· 4 months ago
While this article is aimed at tech startups, the general concepts can be applied to other businesses as well. I'm involved in a start-up beer brewery (http://www.manchesterbrewing.com), and the same business and market principles apply.
-- Make sure you have enough money to operate for a year without any income. It'll always cost a lot more than you think. Government regulators throw unexpected costs and traps at you all the time; equipment breaks down; vendors and customers behave in their own way (sometimes with dubious rationality) and not the way you'd like.
-- Don't be afraid to ask for advice; tho be wary of accepting help.
-- Hire people who are competent, and not just your friends. Business relationships can ruin friendships when people who might be good friends find out their limitations when money is at stake.
-- Bonds can be an effective way to raise capital; but beware overpromising on rate of return.
Eduardo
· 4 months ago
Great one Bernard!
Blake Robbins
· 4 months ago
Excellent advice for Entrepreneurs raising Angel and or Venture Capital Funding. I must echo what was said regarding hiring friends as employees:
Be Careful.
In fact if you have a solid buy/sell agreement (if they are partners) or a contractor agreement, make sure that everyone understands COMPLETELY what their role is. Never play favorites, and never assume they know what you are talking about! Ask the difficult questions!
As to the comment regarding celebration before success:
Be Careful.
This is another slippery slope that can get you into trouble in many areas. When the funding is secured and in the bank - celebrate. When you are profitable and growing - celebrate. Try not to rob yourself by giving rewards for being "close". You are a leader, and those following you will see this.
I dont think its a very good idea. There are many pluses to hiring friends as employees, however, I feel the cons out way the pros. Its a bad idea to mix friendship and business especially when there is money involved, you could end up broke and friendless in the end.
All Comments
http://www.slideshare.net/bernardmoon/startup-f...
thanks!
http://www.globalsecuritychallenge.com/gsc_comp...
The lessons learned in those major failures is that an A people can be effectively attractive to get some exposure and 'apparent' credibility, however, these A people are generally high-maintenance and would want a personal assistant, an army of people (the more you manage people, the more you are credible) and tend to confuse the company money with their own and their ego tend to be way bigger than their technical, market or business analysis skills...while they excel in hanging around with the cool kids...
So these A people have a tendency to make it easy to make the company finance slip and make the US military budget for Iraq look amateur in comparison...moreover these A people are *very* difficult to get rid of... when there is a large amount of money available... hard decisions tend to differ and bad people are let to stick around and given somewhat a free pass to do whatever they want and sink company resources into their pet project...
I have found through those experiences that what you really do not want in a startup is someone that is coming from being a VP or product manager or anything like that from a large corporation. Those are generally people that may shine in those corporate environments but are at loss when they dont have a working established product, a prestigious company name, and a large amount of staff to do coffee, buy flight tickets, organize schedule, do some graphics, do some slides...etc...
These profiles I would argue may be suitable when the startup is no more a startup but a well established company with an established product and arrays of customers (or users), and they would take it even further to the next level. Otherwise, those guys are the type of people that will make your startup die, as they are far from appropriate for the product definition phase and are a huge liability.
- Education.com raised $5.3 million
- Emergent Game Tech closed $14 million
- Fanfare Group raised $7 million
- Newscale closed a $2.2 million round
- Nexage $4 million
- Qik raised $5.5 million
- ETC.
Also I think you're missing the point of my piece. It's not to say that VC funding is as active as the years before. Of course, it a down year of lesser activity as with almost every sector in society. You're stating the obvious.
I am a start-up entrepreneur bootstrapping a SaaS company with some beta customers. I have been looking for early seed capital from Angels in the $150k to $200k range to reach the near-term milestone.
Your presentation was right on the money and had great insights. One thing I would like to add based on my experience is that building start up into a successful company is a lengthy process requiring insane perseverence..
Any specific leads to angels investors?
Thanks
I listed some in the presentation slide, but you can email me at bernard.moon[at]gmail.com and I can try to direct you to some.
Thanks Bernard
We experienced and know of verbal commitments that went south, signed terms sheets that went south, and other situations. So even a signed document wasn't good enough for us until MONEY WAS IN THE BANK.
-- Make sure you have enough money to operate for a year without any income. It'll always cost a lot more than you think. Government regulators throw unexpected costs and traps at you all the time; equipment breaks down; vendors and customers behave in their own way (sometimes with dubious rationality) and not the way you'd like.
-- Don't be afraid to ask for advice; tho be wary of accepting help.
-- Hire people who are competent, and not just your friends. Business relationships can ruin friendships when people who might be good friends find out their limitations when money is at stake.
-- Bonds can be an effective way to raise capital; but beware overpromising on rate of return.
Be Careful.
In fact if you have a solid buy/sell agreement (if they are partners) or a contractor agreement, make sure that everyone understands COMPLETELY what their role is. Never play favorites, and never assume they know what you are talking about! Ask the difficult questions!
As to the comment regarding celebration before success:
Be Careful.
This is another slippery slope that can get you into trouble in many areas. When the funding is secured and in the bank - celebrate. When you are profitable and growing - celebrate. Try not to rob yourself by giving rewards for being "close". You are a leader, and those following you will see this.
Your best days are ahead,
Blake Robbins
http://empoweryourbest.com
http://empoweryourbest.wordpress.com
Financial Planner Minnesosta