Extreme Startups – the Incubator Up North
Do you want to take your company to an extreme? Well, we’ve found the incubator for you. Extreme Startups is extremely cold. At least for those of us living in sunny California. It’s way up in Ontario, Canada. But that shouldn’t stop you. First of all, they’re offering $200,000 in funding to each startup that enters their program. Nice! That can buy you plenty of long underwear.
They also have a nice roster of mentors and solid industry connections. Most importantly, they have a program that they put you through to make sure you’re prepared to spend their money wisely. Are you up for a trip to the great white north? If so, Extreme Startups is worth considering. And they have a sense of humor…
500 Startups: Blowing up Startups with Design, Data & Distribution
Today, as part of incubator roundup, we’re featuring Dave McClure’s 500 Startups.
If you haven’t heard of it already, 500 Startups provides early-stage companies with funding ranging from $10K to $250K via seed investments. They offer a startup accelerator program and new micro-fund models, like the Twilio Fund. With over 160 experienced startup mentors around the world, a cool creative workspace in the heart of Silicon Valley, and a vibrant community of startup founders, we think 500 Startups is a winner!
Here’s a bit about their philosophy:
Need a loan for your startup? Try ZestBank
ZestCash
Okay, so angel investors are ignoring you, VCs won’t give you a second meeting, your credit card is maxed out, and you can’t get a loan from any bank. What do you do? First off, pay-off your credit card. The interest will kill you. Next, look for an alternative.
One option is ZestCash, a financial services technology startup that serves the needs of the underbanked. It has just secured $73 million in its second round of funding. ZestCash doesn’t pull any information from credit burrows. Instead, it uses non obvious variables, like cell phone payment records and how much time applicants spend on our site, to offer loans to its customers.
Want to be a Reality TV Star while Founding a Startup?
Startup Engine
Start Engine, the small L.A.-based accelerator, is now the focus of a new reality TV show. That’s right, you’ll get all those horrifying startup moments memorialized on video for the world to watch. If this sounds like a cheesy idea, welcome to reality TV. The show, which comes from Cameron Casey, producer of the TechStars reality program on Bloomberg TV, will capture entrepreneurs on video as they participate in the accelerator program.
Besides selling your soul to Hollywood, here’s what you get when you join Start Engine:
- Up to $20K of seed funding.
What are the advantages of convertible debt?
- Ethan Stone
Question: I’m looking to raise angel funding. What are the advantages of convertible debt? And should I do convertible debt over a typical seed round where I set a valuation and sell shares in my company?
Answer by Ethan Stone, Stone Business Law
First, a quick caveat: I’m not your lawyer and this answer doesn’t establish an lawyer-client relationship. I’m giving a generic answer to a generic question to educate the users of this site.
Now to the question: There are two main advantages of raising seed funding through convertible debt. Neither one is an unequivocal benefit, so I’ll give you the pluses and minuses.
Deferred Compensation = Accelerated Dilution
Richard Komaiko
by Richard Komaiko, Cofounder of AttorneyFee
A few weeks ago I met a really promising seed stage team at a Hackers and Founders event. Out of sheer curiosity I asked them whether they had gone through all the legal formalities associated with starting a company. They said that they had just met with an attorney, and were planning on hiring him the next day. “How much did he quote you for the incorporation?” I asked. “He said it would be $2,500.”
What’s the best way to prepare in advance for a possible acquisition?
Charles Swan
Question: What should I do ahead of time so that my company is ready should an acquisition offer come through?
Answer by Charles Swan at The Virtual CFO
Preparation! G&A is often overlooked in favor of R&D and Sales and Marketing in developing companies. In order to be acquired, you will need to comply with basic corporate governance requirements (not all inclusive):
How Much “Skin in the Game” is Enough to Satisfy Investors?
Naomi Kokubo
Question: Entrepreneurs having their own “skin in the game” is a recurring requirement when discussing the necessary steps to acquire investor funding. Just how much of your own money, and therefore risk, is enough to satisfy an investor?
Answer by Naomi Kokubo, Editor of Founders Space
Zero. You don’t need skin in the game. If the opportunity is good enough, investors will invest even if you haven’t put a dime into your company.
What incentives does the government provide to small businesses & startups?
RJ Johnston
Question: What incentives does the government provide to small businesses & startups? And where can I find more info on this?
Answer by RJ Johnston
SBA.gov is the generic answer for our federal government. To drill down further you may want to visit your local economic development agency/department, they should be able to assist with town/county and possibly state program information.
Many States have technology investment tax credit programs to encourage private investment into local technology startups.
What are the top 5 things we should pay attention to when negotiating a term sheet with VCs?
Ethan Stone
Question: My startup is now going out for its first round of venture financing. What are the top 5 things we should pay attention to when negotiating a term sheet with VCs?
Answer by Ethan Stone, Stone Business Law
First, a quick caveat: I’m not your lawyer and this answer doesn’t establish an lawyer-client relationship. I’m giving a generic answer to a generic question to educate the users of this site.
Now to the question: I’m going to cheat a bit and combine some things that tend to appear as separate line items on a term sheet into general categories. But here’s my top five.
Does anyone know of any federal loans that help small businesses?
QUESTION:
Does anyone know of any federal loans that help small businesses? And how do I apply for these? Thank you!
ANSWER:
Aaron Kelly
by Aaron Kelly at Aaron Kelly Law
The Small Business Jobs Act of 2010, and the programs that were created by it, should be a good start. The purpose of the act is to extend loans that were first put into place by the American Recovery and Reinvestment Act of 2009. Among other things, the Recovery Act allowed the SBA to raise the government-backed guarantee on its 7(a) loans to 90% and it also allowed the SBA to waive its $1,000 packaging fee on both its 7(a) loans and its 504 loans. There was also an increase in the cap on microloans from 35k to 50k. The intent of the act was to help small businesses and entrepreneur’s but its effect remains to be seen.
Crafting Your Wow! Statement
Bill Reichert
by Bill Reichert at Garage Technology Ventures
How to distill the essence of your value proposition into something short, meaningful, and effective?
If you have only a few seconds to communicate the essence of your company, what is the most important message to deliver?
When confronted with this question, most entrepreneurs think about their elevator pitch – sixty seconds of highly condensed hyperbole intended to entice an investor to ask for more. But all the workshops and how-to blogs offered on elevator pitches have probably done as much damage as good. Almost every guide to developing an elevator pitch suggests that you pack the six to eight key points of your 85 page business plan into 120 words. The result is usually an unintelligible gibberish of techspeak embedded in a cloud of superlative adjectives:
When negotiating VC funding, what should I look out for regarding founders termination clauses?
Question: I understand that venture capitalists like to include a founders termination clauses in most of their deals. What should I look out for with these termination clauses? And what should I include to protect myself?
Ethan Stone
Answer by Ethan Stone, Stone Business Law
First, a quick but important clarification: I’m not your lawyer and this answer doesn’t establish a lawyer-client relationship. I’m giving a generic answer to a generic question to educate the users of this site. The information below is general in nature and should not be understood as a substitute for personal legal advice.
Don Valentine, Sequoia Capital: “Target Big Markets”
Since founding Sequoia Capital in 1972, Don Valentine has financed many of the companies (Apple, Oracle, Electronic Arts, NVIDIA, Cisco, Google, YouTube, etc.) that have been Silicon Valley’s biggest technology and business success stories. In this View From The Top, he describes some of the insights that allowed him to lead Sequoia through almost four decades of disruptive changes, creating several new industries along the way.
Is Quickbooks sufficient to manage a startup’s money?
Naomi Kokubo
by Naomi Kokubo, Editor of Founders Space
Quickbooks Pro is an excellent way to get started. For an early-stage startup, the simplest solutions are often the best. You can use Quickbooks Pro yourself or hire a professional to keep your books. Either way, you can get the job done.
That said, you may find it valuable to seek out the advice of a professional accountant at the beginning. This can help you better organize your books and get insight into key issues you may not have thought of.
Writing a Compelling Executive Summary
Bill Reichert
by Bill Reichert at Garage Technology Ventures
By now, you’ve probably already read several articles, web pages—even books—about writing the perfect executive summary. Most of them offer a wealth of well-intended suggestions about all the stuff you need to include in the executive summary. They provide a helpful list of the forty-two critical items you should cover, and then they tell you to be concise. Most guides to writing an executive summary miss the key point: The job of the executive summary is to sell, not to describe.
Top Ten Reasons to Raise Money Now
Richard Hsu
by Richard Hsu at One Page Blog
When David Hornik (author of VentureBlog and VentureCast) hosted “Late Night with David Hornik” at VatorSplash, venture capitalist Alex Rosen from IDG Ventures did a fantastic David Letterman-style “Top Ten Reasons to Raise Money Now,” which he kindly let me respost below:
How does a foreign company get help launching a product in the United States?
Soody Tronson
by Soody Tronson, Founder of Soody Tronson Law Group
QUESTION: I am based in Australia & have a business that I am passionate about. I want to find a VC that has experience in taking a product & selling it succesfully via infomercials throughout the U.S. It is difficult to find anyone in Australia that has this experience & not sure as to where to start looking in the U.S.? Your help is greatly appreciated! Glen Pattison
What is Class F Stock (or Founders Stock)?
Naomi Kokubo
by Naomi Kokubo, Editor of Founders Space
Class F stock was invented by The Founder Institute and Yokum Taku (a Silicon Valley lawyer) to help protect founders. Typically, when a startup receives venture funding, the founders wind up with Common Class shares, while the investors get Preferred Class shares. So what is Class F stock? Class F stock gives founders some added benefits, including 10 votes per share, some protective rights similar to those of preferred stockholders, and the right to elect a director that has two votes on the Board.
How to Raise Cash Without Giving up Equity
Feisal Mosleh
by Feisal Mosleh of New Ventures Partner at Juldee Innovation Group
Here’s a novel way to raise cash without even giving up equity. The catch?
You must already have granted patents for your wunderkind statup or venture. if you do, read on….If you don’t, you might want to file some patents ASAP – in a a year or so they may be able to fund your company !
Get your startup or new venture inside a larger corporation going by getting a dose of juicy funding through your patents.
How does it work?
Sample Deck for Pitching VCs and Angels
Naomi Kokubo
by Naomi Kokubo, Editor of Founders Space
I’m always looking around for good sample pitch decks. Entrepreneurs keep asking me how to create the best pitches for VCs and angels. Well, here’s a good one that I came across today: View Pitch Deck.
High-level Suggestions from ReOverThinking:
- Create your own deck: This is as true today as it was last year; create a deck that allows you to tell your story according to your style and your business; use your own look and feel; name the slides what you want; tell your story with text, pictures, spreadsheets, etc.
Critical Factors for Obtaining Venture Funding
Bill Reichert
by Bill Reichert at Garage Technology Ventures
Sometimes there is nothing more powerful than the passion and vision of an entrepreneur. But sometimes passion and vision are just not enough. It helps to understand the criteria that venture capital firms use to decide which companies to fund.
Some venture capital firms and corporate investors have very narrow criteria—specific technologies at specific stages in specific regions of the country. Others have broader criteria and invest across many technology sectors and geographic locations.
What’s the Straight Scoop on Business Plans?
Adam Toren
by Adam Toren, cofounder of YoungEntrepreneur.com
Everyone knows that the first thing you have to do before you start a business is to create a business plan, right? At least that’s what one school of thought tells us. I’ve seen everything from comments on blogs to entire books dedicated to the belief that no business can succeed without a business plan. Some people even get a little heated over the mere suggestion that creating a business plan might not always be absolutely necessary. And these business plan purists do raise a valid point. Without any planning, your chances of success in anything are slim to none.
Why are You Looking for Investors?
Matthew Toren
by Matthew Toren, cofounder of YoungEntrepreneur.com
Everywhere you look in the entrepreneurial press – blogs, magazines, news stories – you see a lot of coverage of companies who acquired millions of dollars in startup funding, second-round VC financing, and angel investments. So it’s no wonder a lot of new entrepreneurs believe that bringing in outside funding is a necessary step in the startup process. Visions of nice offices, a hefty payroll account, new equipment – and let’s not forget a salary for the founder – can further cement an entrepreneur’s desire for someone with deep pockets to back their new venture.
Are there any good tax deductions I should be looking out for?
QUESTION:
Are there any good tax deductions I should be looking out for?
ANSWER:
Naomi Kokubo
by Naomi Kokubo cofounder of Founders Space
Yes. Here are 14 of the top tax deductions you should be aware of:
1. Auto Expenses
2. Expenses of Going Into Business
3. Books, Legal & Professional Fees
4. Bad Debts
5. Entertaining Clients/Customers
6. Travel
7. Interest
8. New Equipment
9. Moving Expenses
10. Software
11. Charitable Contributions
12. Taxes
13. Education Expenses
Is niche positioning considered a sustainable competitive advantage?
QUESTION:
I’m wondering if niche positioning is considered a sustainable competitive advantage by the investment community?
ANSWER:
Larry Chaityn
by Larry Chaityn, President, Keiretsu Forum NY
Great question and way to be thinking! The short answer is yes.
When determining the type of product/service there are 4 basic strategic options to consider:
1. Enter an existing market
2. Create a totally new market
3. Resegment an existing market as a low cost entrant
4. Resegment an existing market as a niche player
There are specific strategies with each.
What are VC looking for in an early-stage startup?
QUESTION:
I’m trying to raise money for my startup, and I was wondering what VC are looking for in an early-stage startup.
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
It’s hard enough to catch a venture capital company’s eye, but convincing them to give you money is even harder. Here are a few tips my partner and I learned after raising funds for three different startups:
1) VC want to see a viable team with strong leadership. The team is the most important part. They know you’ll hit numerous roadblocks, but if the team is excellent, you should be able to navigate around them and come out successful.
How do private equity and venture capital funds grow the value of portfolio companies?
David Teten
by David Teten, Partner at ff Venture Capital
One of the major themes of the evolution of the private equity industry for the past decade has been the growth of internal groups focused on enhancing the value of portfolio companies. Twenty years ago, the great majority of the people working in private equity came out of investment banking, i.e., a deal background. Today, it is far more common for a private equity fund to employ people with an operational/consulting skill set, e.g., Bob Nardelli at Cerberus. I predict we’ll see the same phenomenon among venture capital funds. The latest example: Union Square Ventures announced that they are hiring for a newly created position as General Manager of the Union Square Ventures Network.
