How to Send Out a Press Release

How to Send Out a Press Release

The following is a recommended workflow for distributing press releases using GlobeNewswire, one of the largest newswire distribution networks, which is used to reach traditional and social media audiences around the world. This kind of platform can also be used to make disclosure filings, boost the visibility of your company news, and also grant access to a suite of premium services.

Although Newchip uses West GlobeNewswire for its company press releases, you are free to use similar platforms like Cision PR Newswire, Business Wire, Newswire, PR Underground, 24-7 Press Release Newswire, and Accesswire, among others.

Quick Steps to Sending out Your Press Release Using West GlobeNewswire

  1. Register on the West GlobeNewswire platform. It’s free to register for a News Release account. You only pay for the press release distribution services you select. 
  2. Once you have created and logged into your account, put your mouse over the “Start a New Job” button at the top right of your screen and select “Self Service” on the drop-down menu. Note: For optimum display, use Chrome as your uploading browser.
  3. The rest of the process is pretty straightforward – select distribution, upload your files, select a schedule for your release, and include any special notes that may be pertinent to your specific press release job.
    1. Since you are likely pushing out this particular press release to announce your involvement (ie, admission, graduation, special achievement, key partnership) with Newchip, we suggest you opt for DIY – Expanded Web distribution, under the Distribution tab with a focus on North America, or your respective region.
    2. Note: The price of your press release will vary depending on the type, scope, and distribution focus you select. This is why we typically opt for the DIY – Expanded Web distribution – it’s cost efficient and effective in getting across the news web.
  4. You are encouraged to add Release Tags to your press release. These are specific keywords associated with your industry and business. We also suggest you include a few Release Tags related to the Newchip Accelerator (ie, Newchip, Accelerator, Startup Funding, Crowdinvesting).
    1. It is also recommended that you include Related Links with your press release, so that your can drive traffic to your company website. As a courtesy, feel free to also include a Related Link to the Newchip Accelerator website (https://launch.newchip.com/)
  5. Before you submit your press release, make sure to format your job correctly using the tools in the platform interface. In the case of West GlobeNewswire, you can remove the City, State – Date component at the start of your actual press release draft that you upload because the New Job interface will prompt you to list the specific City, State, and Date to list. If you don’t remove this info from your .docx file before you upload, you will have double Location/Date signatures at the top of the press release. Similarly, you can upload your company logo through the New Job interface – just remember to remove your logo from the .docx file before uploading the job. The last key formatting component is adding your relevant contact info, in case that a specific news outlet or journalist/reporter wishes to contact you for special coverage. Make sure to Preview your press release job before submitting. Review the formatting, proofread your press release thoroughly, and verify that all website links work correctly. Once you submit a press release, you have a very limited window of time to make any changes. After the platform pushes it out into the public, the only way to make changes is by sending out a new press release with the same content, specific additions/changes, and a heading that states Updated Release. This is why it’s important that you review before submitting.
  6. Once you submit a press release, you will receive a validation code confirming your press release submission. You may receive this code via email, SMS text message or both methods. The press release will be fully executed once you submit the special code. Note: you will, typically, receive a time frame of less than ten minutes to submit this code.
  7. Once your content (ie, press release) is on the wire, out in the public, it is in your best interest to drive its reach through your network. A good best practice here is to post your press releases in a special page on your company website (ie, Media, News, Press, or something to that effect). Doing this establishes credibility with site visitors, namely potential investors, when they see that you have been pushing official statements through a press release. We highly recommend you share on your social networks any press release of yours that is picked up by a third-party. For example, if your press release is picked up and shared by MSNBC, then by all means share a link to the MSNBC article of your press release across all relevant social networks (ie, LinkedIn, Facebook, Twitter, etc.) It is also of great impact and value when you add these third-party articles to your company website – again, to boost your company brand credibility and SEO.If you opt for immediate distribution of your press release, you can expect to see it on the wire within 24-48 hours. Otherwise, you can select a specific date on which to release to the public. Once your press release is on the wire, you can check on your main account page once the release is Live. Most platforms will also give you some extended access to data points and visualizations regarding your distribution making it easy for you to see which specific media sources picked up your release.

Partnerships = Investor $’s: How Partners Drive Revenue and Funding Results

Partnerships = Investor $’s: How Partners Drive Revenue and Funding Results

High-profile partnerships can make a difference. Big names can create desire and new momentum, opening doors that would otherwise stay closed. By letting people know about high-profile partnerships, you can spark new interest in your venture–and much more. Be strategic about pursuing a high-profile partnership. When you know what motivates, you can create your own opportunities in a business sense.

Consider the following story as an example to make the bigger point. 

A father goes to his son and says, “Son, I want you to marry a girl whom I choose for you.”  

Shocked, the son responds, “No way.”  

Then his father says, “The girl is Bill Gates’ daughter.” In the blink of an eye, his son replies, “Then ok.”  

The father goes to Bill Gates and says, “I want your daughter to marry my son.” Gates says, “No.”  

Then the father informs Gates, “My son is the CEO of the World Bank.” Gates changes his mind and says, “Then ok.”

Subsequently, the father goes to the president of the World Bank and says, “Appoint my son to be the CEO of your bank.”  The president says, “No, are you kidding me?” He had never heard of such a thing.

Then the father says, “He is the son-in-law of Bill Gates.” The president of the World Bank says, “Then ok.”

This is BUSINESS.

It’s the way business is done–high-profile partners get together and get involved to make things happen due to the nature of their fame, fortune, influence, position, leverage or relationship. It’s a win-win situation, driven by a person telling a story to create a desire for a certain outcome.

The same is true for a startup forming a “partnership” with a high-profile investor.

Partnerships with investors who are famous, such as the “sharks” on Shark Tank (i.e. Mark Cuban, Robert Herjavec, Kevin O’Leary, Daymond John, Lori Greiner, etc) can lead to other high-profile investors coming on board to invest in your company. You need not go on Shark Tank (see our “Shark Tank” article), but the point is to attract an investor with name recognition and a track record of success in your market.

Don’t seek random celebrities to invest in your business. (An actor or actress from your favorite Netflix series may not be the best investor in your company.) It is best to partner with heavyweights in your industry or in adjacent markets. An investor who can provide industry insights is so much better. Once you lock in a high-profile investor, it is important that you publicize it, leveraging it to raise money from other investors.

Why VCs and Accelerators Do Not Sign Non-Disclosure Agreements

Why VCs and Accelerators Do Not Sign Non-Disclosure Agreements

Founders of startup companies often ask why VCs and Accelerators do not sign Non-Disclosure Agreements (NDAs). Founders see NDAs as legal protection for their ideas that fuel their startups. They do not want a VC or an Accelerator to go off and tell competitors (or would-be competitors) about their idea. Sounds reasonable, right? Well, not to VCs and Accelerators. They do not want to sign an NDA.

The reality for VCs and Accelerators is different. For example, VCs are usually looking at any given time at multiple deals that are similar to each other. The founder/CEO of one startup does not know what the founder/CEO of another startup is saying. It could very well be very similar. However, if the VC chooses to invest in one company, but not the other, then the founder who was passed over will likely believe the VC stole his idea, even though it was not the case at all. As you can imagine, this misunderstanding can result in a big problem.

Simply put, a VC does not want to create a legal issue by signing an NDA. Neither does an Accelerator, which is hearing the ideas and pitches of many startups. VCs and Accelerators spend hours every day listening to new ideas and startup pitches. Many of these ideas can be somewhat similar to those of other applicants. To this end, while the founder of a startup may think his idea is so innovative and “no one else has ever thought of this,” it is entirely possible that someone else has thought of it and is already far more advanced with the idea.

In any case, a VC does not want to be held back by a legally-binding, enforceable contract that can hamper their ability to invest in new companies. Remember that VCs are in the business of making money for their investors by investing their money into promising startups. The last thing a VC want is a limited deal flow as a result of an NDA for this can negatively impact their business prospects.

This is not meant to be discouraging for you. It is just meant to point out that many startups can be similar, so what is ultimately important is what differentiates them. Yet, an NDA is not going to make a startup more differentiated. The quality of the pitch, the sound financials and the traction are what count. Moreover, ideas are cheap; they’re a dime in the dozen. Odds are that there are several other people or startups in the world that already thought of your idea. What always separates these companies chasing the same idea is execution!

If you are adamant in asking a VC to sign an NDA, it shows, unfortunately, that you are either clueless, stubborn or excessively paranoid. It also suggests to potential investors that you have not taken the time to actually know them and understand their interests. 

Another reason that VCs and Accelerators decline to sign NDAs is that the process to sign and fully execute an NDA is very involved and complicated. You have to go back and forth on changes to the NDA, involving lawyers, who charge by the hour. The VC puts something in the NDA that you don’t like; then the VC puts something in the NDA that you don’t like. The VC will end up spending more time working on the NDA than spending time talking to you as an entrepreneur. How productive is that?

The other thing about NDAs that many entrepreneurs don’t even consider is the managing of the NDAs. VCs and Accelerators would need to track all NDAs and be constantly up to date. It would create so much extra work for them. It would be difficult and time-consuming. Furthermore, even if an NDA were signed, there would be little chance that the NDA would be enforced if a VC ended up investing in a similar company. In large part, VCs and Accelerators view NDAs as a waste of time and paper. An NDA typically only makes sense when it involves a merger or acquisition. When the stakes are actually very high for all parties involved. 

The general rule of thumb is: If you think you have something that you think needs to be kept under lock and key so that no competitor finds out, then you do not tell the VC or Accelerator that part of your idea or your business. You can speak in more generic terms. However, in doing so you may lose the opportunity to articulate your differentiation. Even if sharing your idea will spark ideas in others, the way you implement your idea will be the thing to make you and your company standout. If you hide in imaginary “NDA land,” then no one will know you or your company.

So when a VC or an Accelerator turns down your request to sign an NDA, it’s not personal against you. It’s an opportunity for you to build trust with the VCs and the Accelerator. You will have an opportunity to get feedback and test your ideas. Don’t waste the paper that an NDA is printed on. The surviving trees will thank and so will your potential investors.

How to Find Investors the Right Way & Wrong Way

How to Find Investors the Right Way & Wrong Way

You signed up for this accelerator first and foremost because you want to learn how to fundraise the right way. Good for you. In fact, congratulations for making this wise choice. We admire you because it’s one that very few entrepreneurs make, considering how important fundraising is to the launch, growth, and success of a company.

Make Or Break?

Fundraising can make or break you. And most startups will need to fundraise at some point of their journey since cash will often be unavailable to get things off the ground. How startups go about this process can make a world’s difference on the trajectory and outcome of their fundraising efforts.

Some entrepreneurs are effective administrators who know how to make the most of their limited resources. This mindset is highly beneficial for fundraising. Then there are those entrepreneurs who lack discipline with money and end up throwing it at any problem that arises. More often that not, this is a problem we will discuss through the course of this week’s lessons.

But fundraising itself is a high-level concept that must be narrowed down to its most fundamental unit: investors. You can go out and try to fundraise here, there, or anywhere you wish, but if you aren’t reaching the right investors, your whole effort will be in vain.

There is such a thing as a bad investor. In fact, the history of startup world is filled with tragic tales of would-be successes that failed because of the involvement of terrible investors. But instead of focusing this entire lesson on bad investors, we will show you how you should go about finding investors the right way.

Not All Investors are Created Equal

Investors all have different specializations, needs, and preferences for the investments and founders they work with. The first step in identifying potential investors is to identify who you are, what you are selling or building, and your market. Familiarize yourself with how investors think and categorize their deal flow. This course includes a basic primer section, but Crunchbase, Pitchbook, and CBInsights are also great places to explore the nomenclature of founders and investors.

Be able to talk the talk before you can walk the walk. Once you really understand the words and industry jargon, you can figure out what you are in relation to what they are looking for. Are you a seed stage, Fintech, B2B startup based out of the Southwest United States? Are you early stage? Late stage? Are you a marketplace? Service provider? Hardware vendor? What is a unicorn really?

Who Is Most Likely to Invest in You?

Figure out who you are, so you can find out who’d invest in you. Finding out who’ll invest in you is as easy as going back to Crunchbase, Pitchbook, or CBInsights. You’ll find names and networks there. You’ll find other startups, and you’ll build out your knowledge base. Learn anything and everything about your niche, and you’ll have a greater understanding of the whole ecosystem. You’ll see natural fits, and maybe even find the investor you want to be your lead.

That’s the other piece of finding investors. What kind of investor are you looking for? A lead? A Co-Lead? Or just a co-investor? Do you want active or passive investors? Do you know what those terms mean? Have you asked your investor what they want and are looking for?

These questions also give you a way to vet investors and figure out if they’re right for you. Remember, position yourself as the aggressor, the one in control and dominating the conversation. Ask questions in a way that makes it so you are vetting them on the opportunity to be a part of something big, not just that they are vetting you to be a part of their portfolio. Some other questions you can ask are: How many investments have you made recently? How many companies are in your portfolio? What’s your average check sizes?

Be Cautious

Be especially careful with angel investors. Some of them call themselves angel and have only invested a few thousand dollars into a handful of companies or none. You may even be their first investment. Many don’t invest often, but they will take meetings and waste your time. Some, even if they invest, may be a “regret” investor once the “shiny new object” feels washes away, causing you headaches. Others may not be sophisticated enough to understand what they invested in. And some don’t have the risk tolerance to handle the ebbs and flows of startup life, causing headaches.

Remember, as a founder, you don’t have time or energy to waste; trust me we’ve wasted enough for all of us and you want to learn from our mistakes. Every hour spent vetting investors to find the right one might save ten hours of worthless meetings. You want to spend your time with the right investors or building your company. Invest in vetting and researching investors.

Where to Find Investors

Investors usually live and hang out in big startup hubs like San Francisco or New York City, areas where startups have had exits, and people have made money from startups. If you’re not from these hubs, it gets tougher to raise money and recruit talent, but it’s still possible to build and launch a successful company. Investors can also be found at accelerators, other startups, and quality startup conferences. These are the places to look if you’re not in the “right cities.”

We stay focused on quality startup conferences because there are a lot of pointless ones out there now that just charge huge sums of money and provide little value beyond lining their wallets.

Research into conferences and find the ones with a good legacy, background of startup successes, or ones that have excellent attendees. You can find these because they list multiple major investors, venture firms, or family offices attending. Don’t focus on the speakers; they’re irrelevant. You want to see who is attending to determine with whom you can mingle and network.

One place that investors don’t spend time is co-working spaces. They might be fine for office space, but don’t see a co-working space as a gateway to investors. It won’t be. Co-working has become more of a place for companies to sell to each other so you’re more likely to meet investors at an accelerator.

Here is the ideal first-time fundraiser from a VC perspective: went to an Ivy League school, comes from a rich family, lives in a VC hub, is part of the right organizations connected to the right networks, has worked in a startup or failed in a business. That last one might surprise, but someone who has never had failure can be a concern to investors.

People who have experienced failure and come out the other side are resilient and understand how to deal with hardship. They’ve also learned things “not to do.” The VCs don’t want you to have blown hundreds of millions in investments, but if you’ve failed at a small business, it gives you seasoning. Not all entrepreneurs fit the ideal. This means you have to be more creative and work harder. It doesn’t mean it’s impossible to raise money.

How to Talk to VCs

Now, how do you talk to VCs? Like they are in the sixth grade. Never assume they have the knowledge or the experience to understand you or your business. You’re the expert and only you will give them the basics. We’ve mentioned industry metrics and key performance indicators, KPIs, in some form before. This is where they’re useful. You could spend 30 minutes explaining why your idea is innovative, or you could say that your company beats the industry average by a wide margin.

Imagine you’re a solar panel company and you have an innovative new technology. You could spend hours going into the technical details of your technology with all the science and engineering. You might walk out of there with an investment if you are talking to an expert. More likely you’ll put them to sleep with your jargon; they’ll thank you for the meeting, and you’ll miss an investment opportunity.

Now if you tell them that your solar panels work at 97% efficiency eating light and creating power, and the industry average is in the low 30%, you’ve raised eyebrows. That’s an extreme example, but if the average was 32% and you were doing 40%, investors would take notice. That’s the information people respond to.

Basically, “we beat those guys by this much” is what you need to say. If you are doing something nobody is doing and you don’t have a lot of comparative KPIs, then frame it as a benefit for them or society. For example, no one is doing self-healing roads. To pitch that your investors would mean talking about self-fixing potholes, government infrastructure expense, and the associated taxes. The only thing that matters about how the technology works is that it DOES work, and it’s workable in the real world, and not just in an ideal setting. Don’t try to pedal vaporware!

You will still hear “no” a lot. But not all “No’s” are created equal. Some varieties of no from investors are: No, I’m not in this space. No, I don’t have the money; sometimes this is followed by “yet.” No, not now. No, waiting for the market. No, since I don’t know you. No, I want control. Some of these can be overcome. Some of them SHOULDN’T be overcome.

Some of these No’s are a timing issue or relational. You can wait, keep in contact, and bring up the investment again later. Other No’s won’t lead to future investment. But you can ask for feedback or a referral. NEVER be afraid to ask for a referral!

Referred by an Investor

You don’t want a referral from an investor that would invest in you. Meaning, if the investor is in your space for companies your size, and so forth, you don’t want them giving you a referral. Because the other end of the referral would wonder why the investor passed. You want the investor referring you to have passed for structural reasons, like different industry, or they focus on later stage startups.

Some investors may be hesitant to refer you. In that case, the double opt-in will usually work. The double opt-in means that the investor asks their contact if they are open to a referral. If their contact says yes, then they’ll make the introduction. This is instead of just shooting a group email and introducing you in the first communication. Warm referrals are important. Every big check we’ve ever closed has been via referral.

Ask for Feedback

The last way to turn a “no” around, either into an investment or into at least a relationship, is through the feedback we discussed before. Ask for advice and feedback. You can be direct with these questions once you get past their initial hesitancy. Ask things like, what would it take to convert you into an investor? What KPIs do you need? Do you need more traction, or would you recommend a fundamental change?

Commitment Level

Last, choose investors that will have the involvement level you want. We’ve preferred investors that will help entrepreneurs build teams and manage growth, but we don’t want them to give out advice on day-to-day decisions. Keeping your investors at the strategic level for advice makes things easier. And it also makes them feel more comfortable with their investment in you, which may lead to them investing again. You need to figure out what works for you and for your company at the stage you’re at to find the right investors.

The Types of Investors by Stage 

While investors come in all flavors, there are some useful generalizations. For example, the bigger the VC (venture capital fund), the more open they are to an IPO as an exit, typically. The fact is that IPOs are becoming a thing of the past in the current venture industry. Don’t believe me? Let’s look at the data. Only 190 companies IPO’d in 2018. That’s less than a thousandth of a percent of portfolio companies! Perhaps it’s because only the largest VCs can support companies through unicorn status into eventual IPOs. For context, the term unicorn refers to private companies, namely startups, valued at over $1 billion.

The reality of the venture world today is that most deals are made with an acquisition in mind. That being said, VCs do tend to prefer larger acquisitions than angels, but it largely depends on the size of the fund and their goals. If you are talking to a medium-sized venture fund or smaller, then don’t lean solely on the IPO route. It may send them running for the hills. Instead, incorporate potential buyers, aka people that may want to acquire you into your pitch. You don’t even have to be obvious about it. When you’re explaining your industry and your idea, you can use potential buyers to help investors understand your business. 

For example, if Walmart is a potential acquirer of your company, that one meeting you had with a VP of Walmart, even if the deal isn’t in stone, can still be floated with potential investors. Also, things such as, “this product can help Amazon do X and it totally fits within their business model,” or “Netflix would love to be able to track X because it would let them know what scenes people like best,” help arouse investor interest. 

Make it sound like a partnership, but strong partners are also potential buyers, especially large enterprise partners. Another example: “Oracle is terrible at the cloud, but if they had us, they’d finally crack it because we have X that they’re missing.” That shows how you could get acquired, what your place in the ecosystem is, and who might acquire you. 

Focusing on acquisition may come more naturally to those who are in it for the money, but most founders love their vision and want to hold on to their “baby” forever. IPO is attractive because they can keep running their company in the big leagues. Unfortunately, that’s just not the investment landscape right now; and only a fraction of a percentage of companies make it there. If you’re dead set on IPO only, then you must target the biggest and hardest to close investors. And they will only invest in you if you can make them 100X return. 

Investors want you to have the confidence to believe in an IPO, that it’s possible, but without becoming overly attached to the idea. You have to strike the right balance to always do what is right for the company and its shareholders. How do you know if it’s a small or medium fund? It is not always easy, but a quick look at their portfolio should tell you. The more unicorns, the more likely they are to be a big VC; the stage is also important. The bigger the fund, the larger the typical investment check and size of the round they run. 

Other key signs to look for include not being in Silicon Valley. If they are based anywhere other than Silicon Valley, then an IPO is probably not on the top of their list. We’ll go more in depth on the dilemma between an IPO versus an acquisition in upcoming modules. 

Angel investors are almost always looking for an acquisition, and usually much sooner, and smaller than the venture funds of the world. This is why you should always vet your investors, be it an angel or VC because VCs will take meetings just to take meetings, even if they have no money to invest, but angels are the highest risk of wasting your time. Not all angels do this, but a bad angel will suck away your time. They may have just invested in a Friends and Family round or one of those party rounds. A party round is a round that has a ton of small investors. Imagine 30 small checks that fill out a round. 

Throughout this accelerator program, you are also learning about Reg CFs and Reg A+, and some of those investors may call themselves Angel investors. Some Angels may just be modestly wealthy small business owners who are looking to diversify into startups. 

Nothing defines an Angel, and one investment can win you that moniker for life. Therefore, make sure they are not wasting your time because they will. They like the networking; they like the prestige, the lifestyle, and everything that makes startups and venture investing cool. Remember that you have a company to run, so you don’t have time to indulge them. You want to know how much they’ve invested in the past. The number of investments; how long ago that was; how much they are looking to invest now. These are good VC questions, but you’re more likely to be sorry for not asking them with Angels. 

Now let’s discuss time horizons and exit multiples. VCs are typically looking for 100x return in 3-7 years. This is what they want, and the reason is that it makes up for the 100% losses. The classical benchmark for VCs is a 3x return to their limited partners after 10 years and after taking 20% of the profit and a yearly management fee. One 100x win will provide a great return for their LPs and the rest of the investments may not matter as much to secure the firm’s reputation. 

Most funds don’t even do the 3x over 10 years. They want 100x returns, but they get way lower than that, and some investments just lose money. Angels want a 5x-10x return in 2-3 years via smaller acquisitions. This can differ with Super Angels and Family Offices, who can be so big that they will take longer time horizons and larger returns. Remember, Family Offices fall closer to Angels than VCs, so the term Angel covers many types of investors. In the near-term, all VCs want unicorns, which is the one billion dollar valuation for a startup. 

Some of you might have heard the term “lead investor.” You don’t always need a lead investor, contrary to what some might say. However, lead investors can be useful as long as you understand what comes with that. A lead investor is a large investor in a round, usually the largest, that drives the terms and brings on other investors. If you can lockdown an active lead investor, then they’ll take some burden of filling out the rest of the round. You’ll remain a critical part, but they’ll help make introductions and be an advocate for you. A lead that takes over fundraising can be VERY valuable, especially if you are doing a large round, and you can lock-in the lead early. 

Large VCs that like to be leads typically have a network of other VCs they work with. The lead also standardizes the term sheet, so it is the same across the whole round. That means you only need to negotiate the terms once. Most leads will also control the term sheet, but this might not always be the case. Note that a lead investor will typically take over 5% of the company. It will be higher if your startup is tiny or very early, but it depends on how much you’re raising and your traction. Taking up 5% can be quite a bit if you’re in Series D or E. 

Here is a quick breakdown of the type of investors and when they usually invest:

 STAGE

 WHO INVESTS

 Seed

 Bootstrapping, friends and family investments, crowdfunding campaigns, angel

 Early Stage

 Angel, Crowdinvesting, VC

 Expansion

 VC, Angel, Crowdinvesting

 Late Stage / Growth Capital

 VC, Super-Angel, Crowdinvesting

Investor Personalities & Personas: Beginning to Understand your Audience and What They Need

Investor Personalities & Personas: Beginning to Understand your Audience and What They Need

Like most things, investors can be categorized. They have personality types that will help you understand how to interact with them a lot easier. The five major personality types include: The Gambler, The Analyst, The Cheerleader, The Bull, and The Operator. 

There are others, but they’re mostly subsets, and we’ve found that it’s better to stay with the main ones. Here is a quick breakdown of what each personality entails. 

 The Gambler – Takes many bets, a small one early and then again when success is inevitable. This one won’t be of use beyond some capital. 

The Analyst – Will spot all the flaws in your pitch and business model, ignoring the fact you’re a startup, and flaws are par for the course. They care about the financial models and see rounding as sloppy. This person is better suited to late stage companies, and that makes them useful in preparing for a future round. 

 The Cheerleader – Supportive, but not much use in running your company or helping with the strategy. 

 The Bull – Will push you past your limits, though you might break. They think they’re better than you, so they’ll be a pain to work with. For M&A negotiations, you may want one of these on your side. 

The Operator – This is the “been there, done that” investor. Tons of experience that can help you unless they aren’t in your sector. They can still be useful for general company building advice, since that is more universal. 

Investors are human, and like each human, they are unique and common at the same time. All people can be categorized, but most cut across categories. Get to understand who you’re talking to and you’ll be able to move forward easier, and with your eyes wide open. Depending on the investor type, change how you’ll communicate, but not necessarily what you’ll communicate. 

Hustle vs Grit

With raising money, many people talk about hustle. That makes sense if you’re talking about working hard and being always on the go. But grit goes further than hustle ever will. Having grit means that you can take on all the challenges that come with raising capital, but there’s much more to it than that. You need to communicate to investors you have grit. 

A startup journey is full of hardship and challenges. Investors need to know that you can get through it. You already know failure in your past is a positive trait. Bouncing back from a failure and even grabbing success from the clutches of failure shows a lot of inner strength. All the operational ability in the world won’t save a company whose leader folds when things get hard

Showing grit is something you will have to learn to show on your own, but when you introduce yourself to investors, don’t build yourself up as an infallible demi-god. Show them you know how to learn from your mistakes, get up when you fall, and persevere in the face of adversity. That also helps keep your ego in check. Confidence is good, but arrogance will rub people the wrong way. 

Grit is something every entrepreneur should have. However, there are quirks specific to different entrepreneurs. Just like investors have personalities, so do entrepreneurs. This is part of understanding yourself. The main entrepreneurs include: 

The Innovator – Builds something brand new and sometimes disruptive, but this takes a lot of capital and time. 

The Hustler – Has a vision and works crazy hard to make it happen, but owning their vision so much means they’re less likely to see the value of raising capital. 

The Imitator – Improves on something that exists, which has the potential to be easier. But you start from behind and are always compared to the original. 

Researcher – Learns and analyzes so much that they become a high-level expert in all aspects. This takes time, and researchers tend to be more risk-averse, which can be tough in a venture. 

 The Buyer – Buys an existing business, usually at a premium. The buyer has the money to do this, but is that really the entrepreneur we have been talking about? 

Pros and Cons

There are benefits and downsides associated with each. It isn’t about picking the best; it is about figuring out which one you are. You might overlap across a few of the types. Know who you are, so you can maximize your strengths and minimize your weaknesses. 

You’re an entrepreneur and you probably have entrepreneur friends. One of the biggest pieces of advice we can give you might sound terrible to some of you, but you should take it. 

There is no better way to improve and grow than to surround yourself with a great pack. Make sure that the members of your pack are better than you because that will help pull you upwards. Founders that raise successfully hang out in groups of founders that raise. This occurs naturally because people like to hang out with peers. 

Think of it like chess. If you played chess with a bunch of people just like you, you’d probably win some games and lose others, but you wouldn’t learn much, so you wouldn’t get any better at the game. However, if you played with a bunch of grandmasters, you may lose a lot, but you’d learn, and eventually get better. Maybe becoming a grandmaster yourself. 

We’ve given talks in front of groups of entrepreneurs, and when asked of who has successfully raised large amounts, the hands that went up were usually all at the same table. Lots of things play into this. One thing is that the network is effective because they help each other, but sometimes the old adage that “birds of a feather flock together” is just true. Maybe they knew each other before they raised, and they all just happened to successfully raise money. They didn’t create a winners group. They had the qualities of winners and then was in a group when they all won. While this is possible, it’s highly unlikely. 

That advice might sound problematic to some of you, but surrounding yourself with high-performers is one of the easiest ways to get a level in “badass” for whatever you’re doing. It happens in schools all over the country. In fact, the best athletes hang out together, practice together, and get better together. The best students hang out together, study together, and get smarter together, ruining the curve for everyone. There are lots of real-world examples of this being true, so make getting a pack a priority. 

Another benefit is that it puts you in a mode of constant development and improvement. Conversation and dialogue among a group of highly competent individuals raises the competency of all of them, or put another way, a group of smart people get smarter faster by hanging together. This is especially true in the context of investors. Surrounding yourself with investors whose backgrounds and personas not just align with yours but also have much to teach you is a wise move because they will add more value to your company. 

There’s a benefit to mentoring and teaching those in your pack. It helps them learn, and it helps you develop. But I am talking about your leisure time. When I hang out with my friends, we talk about business topics for fun. It’s that leisurely conversation that adds value to and from your pack; you’re developing even while you’re having fun and relaxing. There’s always more benefit to be had from partnering with investors who can offer you mentorship and coaching. As you embark on the journey of looking for investors, always keep in mind the personalities you will face and what that audience needs from you.

Things You Can’t Say

Things You Can’t Say

There are things you cannot and should not say, especially when speaking to potential investors. This depends on the context you are in and to what end. For example, ballparking a number at 100,000 when the real number is closer to 75,000 for a group of people curious to learn about your company is fine. However, if talking to investors and that number is a subscriber number, then it makes a big difference to the recurring revenue number. 

Even in that case, saying about 80,000, which overestimates the number, is fine if it is close and you provide access to documents and information that gives more precision. If retail investors are involved, even more precision may be necessary in addition to omitting projections. For example, when utilizing Reg CF, you can’t submit inaccurate projections where you make $1,000 this year and $1M next year.

When you are fundraising to retail investors or talking in public, it is very important that you do not promise “investment returns.” You can tell them to look forward to growth and convince them that it is a good investment. However, if you give a specific return amount such as “double your money in 3 years,” then you are breaking the rules regarding what can and can’t be said. 

You might be hit with steep fines, or your campaign could be canceled. If you are doing a debt or revenue share deal, then there is an expected return and you can talk about that as long as you signal to investors that there is a risk of default if the business fails. 

It’s different with accredited investors behind closed doors because there is an expectation that they are sophisticated and understand that an investment return is just a projection. When the audience can be mixed, you must follow applicable rules for retail investors. 

Aside from this rule, make sure you don’t make a material misstatement of facts, especially if that fact cannot be corrected by quickly looking at materials. Even then, the mistake should be small, and not intentional. This can seem like a high burden, but things that should be considered marketing speak are not included. Saying the industry is “hot” or growth has been “impressive” is fine. If you wish to learn more, you can look into “puffery.” 

When you have real doubt, consult an attorney, but one that specializes in your industry and gives realistic advice. Any attorney can give you advice that will help you avoid getting in trouble, but they will do it by maiming your marketing. For example, you’ll never get in trouble saying nothing or telling people they should not invest because of the risk. 

If you need an introduction to an expert attorney, we can help connect you if you let your advisor know!

Venture Capital Awareness: The Shark Tank Effect

 

Venture Capital Awareness: The Shark Tank Effect

Before Shark Tank, the American public didn’t know much about venture capital. The show debuted in 2009, when the country was in the midst of a financial crisis. Part of the appeal was seeing mom-and-pop entrepreneurs pull themselves up by the bootstraps, taking charge of their financial success.

The viewing audience, however, didn’t understand how deals work. So the show dumbed down the nuts-and-bolts of negotiations. Over the next 10 years, producers have increasingly slipped in terms like “equity,” “royalty,” and “preferred shares,” as the deals became more complex and the viewer knowledge increased.

For Shark Tank fans, it has meant getting a basic education about investing in companies. This was new for many people who used to think owning part of a company was out of reach or reserved for the very wealthy.

As the show became more popular, the media spent more time covering business. The drama of reality television had made entrepreneurship exciting and compelling. No longer confined to dry commentary by established business leaders, the world of venture capital was now a source of inspiration and opportunity.

Key Impact of Shark Tank

The key impact of Shark Tank has been twofold: increased awareness about different investment opportunities on a positive note and lowering expectations of startups for raising capital on a less than optimal note. 

On the positive side, perhaps for the first time, everyday people thought about putting money in a startup, whether it was their own venture or someone else’s. They no longer had to rely on a banker to tell them the best place to put their funds.

This change did not happen overnight. Money was still tight for many folks. There were still legal barriers to widespread investment until new laws opened the market. Nevertheless, the Shark Tank effect opened possibilities for investors and entrepreneurs, who saw new ways to harness financial opportunities and achieve financial security.

On the more negative side, Shark Tank inadvertently (or perhaps subconsciously) has conveyed the sense that entrepreneurs will inevitably fall short of raising capital for their businesses or they have to give away too much of their companies to “shark” investors.

On the television show, the entrepreneurs were talked into higher levels of dilution than they wanted because of the “now or never” heat of the moment on television.

Shark Tank should not be a guide on what the normal venture capital fundraising process looks like or what a normal valuation ends up being. You do not need to make decisions in a 10-minute span as done on television.  

Observers of the show have reported that entrepreneurs have given away almost twice as much equity stake than they originally wanted to sell to the “sharks.” About 85% of the money was raised at valuations that have been over 50% lower than the entrepreneurs originally hoped for.  

Done right, raising money for your startup can deliver better results than what the trend has been on Shark Tank for years. You don’t have to fall short on your capital raise. While being on Shark Tank may have good promotional value for your product, continuing to educate yourself on raising capital is a better strategy for bolstering your chances at success. It may be a good thing for you that you don’t have to be in the heat of the “now or never” television spotlight.  

Shark Tank has had an overall good impact on broadening people’s awareness of investing in startups.

Coming of Age

Shark Tank entered the American mindset as a core demographic, millennials, were coming of age. This age group had a distinct set of experiences that affected how they think of entrepreneurship and how they manage money.

In 2015, The Washington Post reported that millennials had the best chance of renewing American entrepreneurship which, according to the article, had been on the decline since 2010 (popularity of Shark Tank notwithstanding). Millennials know more about entrepreneurship than any other generation. By 2020, they will also make up the largest age group in the U.S.

Millennials may start fewer businesses than generations past, but they still have money to invest. The strategy of most millennials, however, differs from those of their parents. Aligning of goals is very important to millennial investors. They want to give money to companies they believe in and who follow the same ethical code.

Many members of this generation are cautious about where they want to invest their money. They may want to risk very little at one time. There is a growing trend toward investment opportunities that cater to low-dollar contributions. These investors are looking for an alternative to the traditional mutual fund with a hefty minimum investment.

As such, there’s a growing market of people looking to invest. They are willing to take a gamble on new companies if they like what that company has to say. That means you can reach these potential investors. You need only spread the word about crowdinvesting and having a strong elevator pitch about why you’re the right company to receive their dollars.

 

1) “We fact checked 7 seasons of Shark Tank.” https://www.forbes.com/sites/emilycanal/2016/10/21/about-72-of-deals-that-happen-on-shark-tank-dont-turn-out-as-seen-on-tv/#32029a844ed1

2)  J.D. Harrison, “The decline of American entrepreneurship — in five charts,” Washington Post, February 12, 2015. https://www.washingtonpost.com/news/on-small-business/wp/2015/02/12/the-decline-of-american-entrepreneurship-in-five-charts/

Preparing for an Online Raise

Preparing for an Online Raise

It has become much simpler for entrepreneurs to raise capital online since the passage of the JOBS Act. As a result, a variety of capital raising, startup investing, and equity crowdfunding platforms have become available for founders and investors. Each platform has its own approach. Choosing a platform that knows the ingredients and a recipe for creating a successful fundraising campaign is critical. Partnering with a bad apple could lead to severe penalties, even including a temporary ban on capital raising. Aside from choosing a platform on which to sell your shares as a founder, it’s important to show market demand for your product. 

Creating a Campaign 

Campaign Materials: 

Your profile on an online investment platform should include basic company information, a description of the industry you operate in and a summary of the investment opportunity. There is also an opportunity to upload supporting documents, videos, and images. 

Crowdfunding Video: 

For some investors, the video can be the most important part of a campaign because it gives the viewer a chance to meet your team and see your commitment to the business. There are a few key things to keep in mind when creating your video: 

  • Talk directly to the camera. Investors want to see your commitment and excitement about the business. The most powerful way to convey this is to present directly to the camera.
  • The audio is the most important part of the video because investors need to hear clearly what you are saying. Use good quality sound equipment and film in a quiet location.
  • Write a script in advance and consult with the investment platform to make sure that there are no compliance issues with what you’re planning on saying.
  • Film the video on location in your offices so that investors can see where you work and get a feel for the business. Also try to show the product in use with your customers. 

Launching on an Investment Platform 

When you raise capital online, the platform may conduct due diligence before launching your round on the platform. During the due diligence process, you will be asked to provide supporting documents and additional information before you can raise capital on the platform. 

The common steps in launching a capital raising process include: 

  • Selection committee and initial review
  • Legal and confirmatory due diligence
  • Review of transaction documents
  • Detailed business due diligence
  • Investment committee 

Many choices exist when you’re considering raising capital online. Smart entrepreneurs know how to spot any “bad apples” and to tell their story in a way that inspires investors. 

Promote Your Campaign 

When it comes to promoting your capital raising campaign, it’s all about telling a compelling story to captivate your audience. Giving investors a front-row seat to your company’s growth is a complex form of marketing. Communicating the case for investment requires a delicate balance of messages relating to your product, company, and team. You need to compose an inspiring story that connects the past, present, and future of your business. 

Public vs. private rounds 

General Solicitation: 

Funding rounds conducted under the 506(c) exemption are permitted to generally solicit, so you can advertise your fundraise on your website, across social media, or shout it from the rooftops (you should still be careful not to say anything inaccurate or materially misleading). However, in these types of offerings, the SEC requires companies to verify the accreditation status of all investors in their 506(c) offering. If you have publicly mentioned your fundraise on any online platform, forum, or article (e.g., AngelList, Facebook, TechCrunch) at any time in the past, then you may have accidentally engaged solicitation and, can therefore, be required to verify the accreditation of all investors (self-certification by investors is not sufficient). Failure to meet these requirements can result in punitive action by the SEC. 

SeedInvest 

SeedInvest helps entrepreneurs throughout this process. Their platform guides startups through creating a profile for presentation to investors and helps control which potential investors have access to the information. They also work proactively with companies to help them craft their marketing activities to promote their funding rounds. 

506(c) New Rules with General Solicitation 

DO: 

  • Promote your financing on social media such as Twitter, Facebook, and LinkedIn
  • Send email blasts to relevant email lists about your offering
  • Speak about your offering at demo days, pitch events, and public events
  • Talk to the press and bloggers about your offering
  • Accept smaller investment amounts from many shareholders up to a maximum of 2,000 accredited investors (i.e. raise $10,000 each from 1,000 people)
  • Verify the accredited investor status of each participating investor before closing, including by: written confirmation from a lawyer, CPA, broker-dealer or investment advisor or verifying income or net worth through financial documents
  • Use technology platforms for compliance and to extract shareholder value
  • Limit advertising materials to broad, non-sensitive, non-controversial statements
  • Have each key employee, 20% shareholder, director, and officer, a new investor, broker, solicitor or other “promoter” complete a Bad Actor Questionnaire 

DO NOT: 

  • Advertise without speaking to a qualified securities lawyer
  • Advertise before you are sure about 506(c) because there is no going back to 506(b)
  • Allow any unaccredited investors to invest in your round
  • Make any untrue statements, misrepresentations or omissions (anti-fraud applies) regarding the offering
  • Include sensitive, confidential or controversial information in public advertisements
  • Include “puffery” or other boisterous or “off the cuff” statements in advertisements 

506(b) Old Rules with no General Solicitation 

DO: 

  • Conduct private offerings with friends, family, and your professional network
  • Reach out to individual investors through personal introductions
  • Confirm a substantive pre-existing relationship with every prospective investor to whom you speak
  • Confirm accredited investor status via self-certification (i.e. investors to check the box)
  • Have each key employee, 20% shareholder, director, and officer, a new investor, broker, solicitor or other “promoter” complete a Bad Actor Questionnaire 

DO NOT: 

  • Talk about your financing at any public demo days or pitch events (i.e. do not mention that you are fundraising, do not talk about financial projections or business models)
  • Allow the press or bloggers to speak about your offering
  • Send email blasts about your offering
  • Talk about your offering on social media
  • Participate in business plan competitions open to the public
  • Make any material misrepresentations or omissions (anti-fraud applies) regarding the offering 

1. Direct Promotion 

Direct Outreach: 

For public rounds, the first stage of promoting a capital raising campaign is to inform your direct connections you are raising capital. These direct connections already know you and your product. 

Customer Email: 

For public rounds, your customers can be a key source of potential investors, and a group email is the most effective way of letting them know that you are raising capital online. You can craft this email to your customers to look like a “letter from the CEO” and invite your customers to share in your success by becoming investors. 

One-to-one Email: 

For public rounds, your own personal network may not be a significant source of capital, but their vocal and public support can be a vital part of creating momentum and awareness of your campaign among potential investors. And the mass email to your customers should also share a link to your campaign with your personal and professional networks. 

Events: 

For public rounds, running events for potential investors is a key way to allow potential investors to learn more about your business and your management team. As always, talk to the investment platform and your lawyer prior to launching any promotions for your offering. 

2. Online Promotion 

Community: 

For public rounds, social media and online communities can be an excellent source of investors. You can use social media to notify your existing followers you are raising capital and to find other communities of interest that may also wish to become investors in your business. 

Content: 

For public rounds, creating useful and informative content is a powerful way to communicate your credibility to potential investors and to make it easy for online communities to share their enthusiasm for your business with their peers. Content useful for a capital raising campaign can include: 

  • Blog posts from the CEO about the vision for the company
  • Video interviews with key team members about their functions
  • Interviews with existing investors
  • Testimonials from customers 

Influencers: 

Bloggers, YouTube celebrities, and industry influencers can have substantial personal followings. These can make for powerful endorsements. During a public round you can use your relationship with influencers to encourage them to share your round with their followers. 

3. Public Promotion 

Press: 

For public rounds, public relations and press outreach can amplify your message by finding relevant publications that can write about your company and your capital raising round. 

Advertising: 

For public rounds, online advertising can be an effective source of investors if the message and channel placements are highly targeted to find investors that will be strategically useful to your business.

What you’ll do for your campaign: 

  • Provide information about your business — things such as GAAP financials and potential risks
  • Create your public profile — funding portals provide you with an editor to help you craft a good landing page
  • Bring the crowd — invite your customers, friends, family, and colleagues to invest in your business 

Part 1 – Campaign Prep 

Step 1: Get started [30 minutes] 

As you start your application, you will be asked for some basic information about your business and your fundraising plan. 

Think about the type of terms you would like to offer investors. 

Step 2: Finish filling out information for the SEC [3 hours] 

Once you’ve figured out how much you’ll be raising, you’ll be asked to provide some more information for your SEC Form C. 

Your goal in this section is to fill in the information as accurately as possible — next they’ll be reviewing it with their lawyers and filing it with the Securities and Exchange Commission. 

What you should provide: two years of CPA reviews and GAAP financials (if you have them). If you’re planning to raise more than $107,000, your GAAP financials also need to be reviewed by a CPA. 

Step 3: Build a polished profile [3 hours] 

In this section you’re building the profile that investors will see and use to determine whether or not to invest in your business. 

Your goal here is to build the most compelling pitch about your business possible, without including any projections of future growth (the SEC doesn’t like that) or making any false claims. 

What you should bring: any photo, video, or written content you have about your business, as well as compelling numbers and charts. 

Step 4: Get ready to launch! [5 – 10 days] 

Once you’ve completed your profile and disclosures, you’ll most likely be assigned an Account Manager from the funding portal team, who will be your point of contact moving forward. 

During this time, your primary role is to be available for questions. As they generate and review your Form C, and file it with the SEC, they’ll probably have additional questions for you. 

This process can take a few days — they have to make sure everything is compliant and complete. Once you’ve done a final review and signed off, they’ll take care of the filing for you — and then you’re off! 

Part 2 – Fundraising 

[1 – 6 months] 

When your campaign first goes live, it’s in stealth mode, meaning only investors with the direct link to your campaign can see it. Your job during this time is to bring the crowd — usually about 60% of it — with support from our team. You want to reach your minimum fundraising goal within six months from your initial launch date to have an effective campaign. Again, this is crucial! Have everyone in the company tap into their network via ALL social media platforms. 

Once you’ve reached a certain investment amount (differs from portal to portal), you can potentially be featured in their weekly newsletter and a targeted marketing newsletter, which goes out to their community of investors. You’ll also most likely be featured on their Instagram and Facebook. 

Depending on the platform, once you’ve reached a certain amount of your minimum goal, you can withdraw one lump sum once before the closing of your campaign. 

Best Practices 

Step 1 – Hone Your Pitch 

Over the course of your fundraise you’ll be speaking to hundreds of investors; your pitch is your most crucial tool. In 2-3 sentences you should be able to answer: 

  • What does your company do?
  • Why should someone invest in your company?
  • Why should someone invest in you—the founder? 

Step 2 – Assemble Your Team

  • Have a designated point-person for: 
    • Social Media 
    • Emails & Newsletters 
    • Investor Questions 

Step 3 – Get On the Offensive 

All fundraises inevitably hit a plateau. Create a timeline of “attacks” to reignite investor enthusiasm. When investments slow down, try the following: 

  • Press Releases & Features
  • Promotional Events
  • Major Investor Announcements
  • Exciting Product/Progress Updates
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