Kings County

These type of discussions are not helpful...  there in fact way too many
criteria...  pre revenue?  whether or not there has been an investment...
 salary (yes/no/equity offset).. Is the CTO a real CTO or just the first
technical person.  Will he be a member of the management team.  Will he be
a team member for the financing team (translation .. has he done a startup
before, secured funding and executed or are the plans just for him to be a
good coder/ product guy )..

and believe it or not there are acceptable norms for all the variations
above..

pk



The question do you have experience as a CMO of a really successful firm?
 (My vantage point is from two IPOs..  One that got to F500, currently
involved personally with 12 startups, two adjunct appointments in this
space,  and serving as an outside advisor to a VC fund).  I just think that
your views at times are academic and one size fits all.

I may be wrong (if so apologies) but it appears you are providing guidance
to many young people who are easily influenced when you appear to be at
most a half step ahead of them.  Thats the danger of social media.

Happy to help.

pk



Jose..  the standard,  in both silicon valley and silicon ally in New York
thinking revolves around value points in a company's development for
equity.   Is it pre/post revenue,  is it pre/post its first institutional
funding event,  is it pre/post product or where is it in the code process (
scribbling on a whiteboard or a code base.   Then there are the other
factors...  Is this a cofounder (as you accurately described) and even if a
cofounder is it an equal co founder ( meaning is this the sixth startup,
with two successful for one person and the first trip to the rodeo to the
other )...  there are bounds but to apply a chart for anything other than
guidance does not make sense...



couple observations

1.  You are making an assumption thats its your channel or sales strategy
not your product, pricing or generic interest.   What were the
results/feedback of your MVP or initial customer research.  Just a hunch I
would guess that many individuals would shy away from mileage tracking
because it eliminates abuse..  A salesman that charges or logs 50 miles for
a trip to his boss, the IRS does not want a device that verifies it was
actually 43 miles.

2.  Who is the customer.  I sense your target is the user..  ( the same guy
who does not want it tracked)..  What if it was the person wants it
tracked...  meaning the trucking company, messenger service..

Who were your investors and advisors?  if they were chosen well it was
because they believed in the product or were in the industry...  Have you
approached them?

pk



mixed message as to who the client or target audience is...  i glanced at website,  which is all a prerspective person might do, and immediately got the impression the target was end users not business.

Obviously value is in the eye of the beholder and pre revenue is pardon the
phrase a crap shoot...  Its about the founders (have they been successful
or experienced or is this their first effort )...  are they enterprise
worthy... meaning are they visionaires, founders, smart technical types or
legit candidates to be longer term leaders and CXOs ( and usually the
latter is not true ).  Do I believe the market,  what is the business
model,  potential market, size, margin.   And while I have no indication of
any of this for the company at hand I can tell you that pre revenue
valuation at 4 or 5M better have a bunch of things going for it...  I am
currently invested in a pre revenue SAAS company,  who has a trial with a
Fortune 500,  has appeared with the F500 at CES and has a commitment for a
1000 person beta for the Fortune 500 and is struggling with a 2-3M number.
  I have another with a fabulous product/service, just got a press mention,
 also has a partnership with a major distribution partner signed,  has a
few dozen customers through them already has trials (under 100 dollars a
month business license)  and is in the 3M range.

So...  I am skeptical as to 4-8M valuation pre rev  ( but then again its
not impossible )

and I think that putting out the question without data is not a methodology
I would encourage of CEOs we coach at 1099Partners

pk



Well start by definition of partnership. What do you want and what can the
firm share or be willing to share  If it's equity you can tie hours billed
or worked to capitalization very easily.  If it's share in the proceeds you
can tie to success factors.  We receive x% of each dollar up to .....   or
if it's not funded yet you can offer to defer some or all payment s.  You
can also tie things to project completion or first client or until there is
an institutional round. This is an area that   1099Partners consults on and
supplies expertise on for emerging companies


These are all valid... but as I stated previously get an advisor or coach...   I teach entrepreneruship.  One of the major points we try to instill in young entrepreneurs is stop going it alone.. get yourself two or three advisors who complement the skills you do not have... ( If you are a coder or product guy get a bus dev/marketing coach--  if you are a concept guy get a technical coach if you are going the on line route )..  Many of the discussions I see on this forum just should not be happening if the founder was surrounded with the right person....    Advisors are 1/2-3/4 percent people vested over 4 years,  terminable if things do not work out and in most cases will accept a cliff (no vesting for 3 or 6 months ) so they cost you nothing if you do not get value.<div><br></div><div>Just a recommendation...</div>

 evan way to general a question....  knowing nothing of your product, the market, your firm, your objectives, your status ( is your product at mvp or beyond.. do you have clients?   ) your finances its all over the place..sit down with an advisor or mentor for a few hours... good ones will be glad to help and not charge you..

Coaches/Advisors/Mentors are really different albeit many times one person
could be a mentor at one company and an advisor at another..  Founders
routinely confuse them and use the descriptions inproperly.

Advisor - tied to company and role (advisor to board, advisor to senior
leadership)- generalist but frequently leveraged for contacts and industry
knowledge.. could help with recruiting, go to market plans, financing, etc
depending on their knowledge.  In startups usually comes from a more
established firm in same space..  typcially more senior meaning 40 or 50
years old.   Usually paid in equity..   typical is 1/4 to one percent over
4 years with exception of the lead person for an advisory board.   Not
uncommon to have 3 or 4 advisors at a good startup and for advisors to come
and go as company grows and needs change.

Mentor-  tied to one person not company and  spans companies.  Example a
CEO of a startup leaves but his mentor stays with him to next company..
Longer term.. Usually more of a generalist.  Equity or Cash but not
uncommon for a CEO to compensate a Mentor at one company with an eye on how
much he helped him at his first two failures by rewarding him with a little
extra equity or bonus check

Coach-  tied to a specific skill-  ( presentation coach,  funding coach )-
 usually paid in cash and paid by project or contracted for short time
period ( usually not more than 6 months ) -


Most entrepreneural programs spend time explaining to founders they need a
team of senior "advisors"  but here the term advisors could be a combo of
the three people above.

Opinion-   If founders followed the above and had a team in place a large
percentage of the questions that show up on this blog would not be posted.
Many of the questions posted especially on things like sales commission,
 how do you.....,  has anyone ever......,   are questions for the companies
advisor team.  Not only is the team qualified to answer but they are much
better than a blog because they understand the specifics of the company and
the depth of other company team players

Opinion-    Due to demographics (babyboomers) and due to market cycles
(last hot startup period was late 90s so the populations is 10-15 years
more experienced now) there are plenty of folks to help...    and plenty of
folks who are financially comfortable want to stay engaged and not ready to
golf 5 days a week and want to help....They are not looking for cash or at
worst are willing to say... hey I am going to bill you $N dollars per
month... but only payable when your company reaches $X dollars in revenue (
or some other metric)  Use em@!

Peter Kestenbaum
1099Partners




Michael's comment... and an entrepreneur will have a mix or portfolio of
them is exactly correct....  And to echo a previous comment if more
entrepreneurs had them many of the questions on this forum would never see
the light of day...

A strength of a true entrepreneur is that they believe they can do
everything... Its also their weakness... they need to focus on what they
are passionate about and understand and stop trying to learn about every
aspect of their business..  If they are not from the sales side get an
advisor or coach to help you recruit and get that compensation plan done...
a much better solution than sending out an email can anyone give me
guidance on a compensation plan for my company



Hard to be specific given the details but here are some guidlines we use when looking at websites<div><br></div><div>Revenue and client numbers if a ecommerce type of site-- if your interest is VC backing understand there is little interest in sites that could be nice 10 or 20M business'.  The financial model usually does not work.  and I would say that today (as opposed to 5 years ago ) if you need more than a few hundred K to get a good site off the ground something is askew...  and for 250-500K your answer should be angels not VCs. The site has to be the front end for a business.  (think UBER).   The site is probably not the business.</div><div><br></div><div>If its an aggregator site... meaning we build a user base and try to leverage that base as marketing or advertising or similar models...   don't show up unless you have 500K or 1M user base.</div><div><br></div><div>along with the basics..</div><div><br></div><div>- management team and their mindset to pivot and move on if required..  breadth... its alot more than just a good web developer and good idea guy...   in particular for something (like web) that has to scale..</div><div><br></div><div>- web vs mobile...   most creative things seem to be mobile based not web based... especially given the phablet phenomena</div><div><br></div><div>- uniqueness and ability to sustain differentiation...  alot more than no one else is doing this...</div><div><br></div><div><br></div>

Observation from my past....  it was easy to get a few mil to develop a new ring tone app or photo app and in the last few years social apps of course....  impossible to get money for a new medical or manufacturing app...   thats why our country is in catch up in so many areas now .. maybe we shouldn't be so proud that you do not need to have a college degree or technology degree to be an entrepreneur.  Hats off to the people lwho are working issues  as opposed to the snapchat crowd or those people who believe that music and watches will make our world a better place to live. 

there are a 100 questions to answer first...  do you need money?  how much
for what?  what is your revenue situation? burn rate and related
financials?  what exactly is your product? personal track record.   etc etc
etc...    what type of money do you want and why.. corp structure...
 founders history  without saying knowing more,  I will say that the world
is very different than it was years ago...  beta in many spaces is not a
qualifier for serious money beside angel money..    sorry cannot help you
more



Depends on the program...   There are some great programs that span two or three courses and folks come out of them building companies...   Montclair State in NJ just had their demo day ( with a 10,000 prize to the winning company )... Some (not all) pitches and concepts were better than many I see as an angel investor.  There were 10 teams presenting...    Many had customers and in MVP mode...   (google Montclair Feliciano center ) 

Grinding has its value but to be a bit controversial many of the questions you see on this forum would never come from some of the kids we work with.. for example funding questions today... how do I find angels, what do I tell them, what will my terms look like, what do they look for before they will fund me (or 8 or 10 different profile companies ), what is the minimum I need to have for them given the profile I have... you get exposed to that...  not only from folks who "teach" but from a parade of angels that get brought in to guest lecture...  same for many other disciplines...start up lawyers, local successful founders who exited and so on...    but it takes 3 or 4 semesters... .   agree on the cost of an MBA....  the entrepreneurship programs are sometimes separate certificate programs so you paying for 9 or 12 credits..   but again the school has to have a very specific program....  its alot less academic but very hands on and experiential 

Well I read 6 plans this am...   a typical collection...   4 were from tech types that hit me with reams of technical stuff and just missed basic criteria..<div>- can I in either the first paragraph (if written )  or slide(s) understand what problem you are solving,  who the buyer (as opposed to user of client) is,  and what business model you have...</div><div>- What criteria ( other than I got an engineering degree from harvard ) does the founder have and what pieces of the management team does he have in place or need</div><div>- Is there a prototype, mvp, or heaven help us an attempt at revenue...</div><div><br></div><div>of the 4 two went even further into abiss...   they were for tools for developers who service small business...  and they proceeded to inundate me with how big the small business market it without a mention of the system integrators or suppliers who would do the buying or using of the client</div><div><br></div><div><br></div>

good comments Julien... with one caveat...  Most investors are not pitch
deaf...  they are deaf to investments that are not of interest to them or
are understandable..

Its a question of who needs whom...   As an entrepreneur to preach that the
investment community does not understand what I am selling them...  they
are the buyers.. they are your clients..   if they are not buying what you
are selling you have no business..

Kind of like Ford telling the world,  the consumer does not appreciate all
the advanced design that went into the Edsel...



Perhaps the question is wrong... it should be in what area SHOULD you look for advisors..  We all understand money...  hate to sound like a broken record but good companies with potential (vs good ideas with limited potential because of narrow founder thinking) get funded...   Unique Go to Market strategies, securing early clients and partnerships,  different business models are of significant value..  Real time example... A firm with a decent mobile app for IOT..  Struggling for early traction and orders..  Now has their first client..  a Fortune 1000 by customizing their app and volunteering to make this "old line" company look cool in a trade show booth.  They would never perceive that client as a legit first revenue client but the fallout (PR) from the trade event built a pipeline of both prospects and investors. Thats the power of a good advisor in the go to market space.    He turned the conversation from help me sell to help me with a go to market strategy..

A bit more info please...  a healthcare startup which does what....       A CMO who is going to do what ( meaning evangelize,  PR,  build industry partnerships,   generate leads )......  to assist our product, for which we have N clients ,   whose main clients will be  (healthcare providers, healthcare funders, doctors, hospitals, oncology patients........   and will sold to via direct, channel, or even tbd...   and lastly is this your long term CMO or just your lead marketing person now....   can you leverage fractional leadership<div><br></div><div><br></div>

You gotta be kidding me...  In the east you might have someone argue is
there a bias against someone with a college degree..  Perhaps  in the west
you are in a bit of bubble...

I do not think we have one ivy leauger in the accelerator I am involved
with...  the fact that I do not even know (or care) or ask during pitch
days tells it all..   Lawyers yes,  Wall Street yes...( unless very
specific..   Rutgers...  pharma manufacturing and supply chain for example
are clearly the yardstick in the pharma world..)   but other than that we
look for smart folks with clever ideas that can scale who can show they can
execute



Some comments off the top of my head

- Start with someone who is a business person.. your messaging ( what is
ethical fashion compared to non ethical fashion?) is too centered on "your"
world..  I have no clue... and I would characterise my family fashion spend
as significant..

- and helpsy relates to your business how



Anand..

Lots of different components here..  All will temper the plan

Is it a company objective or an account objective... meaning secure early
revenue,  or secure first account in this vertical or penetrate the
account...

Is the product, even though you said enterprise,   sold to
departments/business units or is it one that perhaps a single copy or
license or instance is sold

What is the revenue goal for the account...  and how is that revenue
structured...  do you think of it as a yearly annuity like a SAAS or
recurring service or is it closer to a one time sale... training, HW, etc

What is the "role" or structure of the sales rep...  for example is it to
break down a door and sell or is it to convert or grow after a freemium or
home office/tele sales/web break thru?

What is the nature of the sale...   Is it to make a company more
competitive or make it more efficient and secure in what it does...  IE  is
the company going to make more money or take share from its competitors
because of the product or is it going to be more efficient...  they are
different sales and require different plans and milestones...  in the first
case more evangelism is required.. in the second internal analysis is
really needed..   An evangelism sales plan is a very different plan than an
internal analysis one-- Not only are the actions different but the people
you need to get buy and decisions are..    could translate to emphasis on a
business unit leader, CMO chain..  vs someone in the CFO  chain...   and
consequently very different sales plans...

What is the role of partners at the account... for example if you were
selling a database acceleration product what is your relationship with the
data base supplier.....  IE  partners might or might not be part of the
plan..

Where are you in the typical cross the chasm analysis... are you going to
need an early adoptor of a new different technology... or an early adoptor
of an improved technology...  again different plans...

What is your company goal... do you need revenue? industry reference?
 beach head,, (first account in New York or first account in fianance on
wall street)  or even first enterprise account...

hope I gave you some things to think about....   Not pitching you here but
we do workshops on this and they are multi day...  you did not ask a
trivial question...



Give Back... No one did it for me until I met my "wonderful" boss at SUN Microsystems..    No one teaches you what you need to know..  <div><br></div><div>I have 20 (and sigh... 30 year olds)...   They are in different industries than me ....  They have mentors and I see how much value they receive</div><div><br></div><div>How do you learn.. Do you think an engineer graduating from a tier 1 school who knows how to code or design knows how to be an engineer in a company that has to build a product for profit... or a coder that understands the difference between code that works and code that scales ( or is saleable@!).   Or a business school grad who can whip through a spread sheet and knows the ins and out of corporate or venture finance but has never seen a term sheet or led an offering...   As a 20 something what happens the first time you need to speak intelligently to a corporate exec or funding source...</div><div><br></div><div>There is a difference between smart young people and experienced people ...  and a difference between smart young people who know there are things they do not know and cannot learn from a book or a meetup ( those are the ones I like to work with ) vs those who think they know it all ( witness the on going thread about the founder who wants to keep all the equity for himself and not build a team..  clearly someone I would not like to mentor )</div><div><br></div><div>Mentoring is an art not a science...  its best explained by a recent example...  a firm I work with had a very creditable idea and prototype for a product usable by a fortune 1000 firm but as a startup of course had little traction...   they asked several of us what to do...  We told them to stop trying to sell the Fortune firms...  go to the business development group and ask for opinions of their product...   they followed that bit of  "mentor advice".   the firm of course recognized the value,  put the product in one of their display areas at CES and now the entrepreneur is in consumer trials with them...  Cost him nothing ... cost me nothing,..   but glad we were able to help...  thats the value of mentoring...  </div>

From an investor standpoint...   and what happens when you decide you found the next best thing... get involved in a relationship,  have a death of parent or other life event that distracts you....   and from a company standpoint if you think you can do it alone without a team I am skeptical from the start...    <div><br></div><div>As far as keeping equity... yes keep as much as you can but investors look for teams...</div><div><br></div><div>pk</div>

Thomas.  I find it hard to equate the culture of the founders impact on the
current DOW world plausible...   its founders were there over 100 years
ago... at a time when women did not even vote, the current rulings in the
supreme court would have caused a revolution...  Dow probably succeeded
because of a few good products...   some lucky,,  some because of good
engineering...   and  a mature management team knew how to market, sell,
raise money in the capital markets and manage large scale manufacturing.



Many Investors like to stay in their comfort zone...  So look at similar companies and call and ask their founders who funded them...   Also you might try companies that are in the food business and have enjoyed some success ( like Melissa's cupcakes ) and might want to dive into the investment world ( and you might even find a first client or two ).   Sounds like you are still in angel mode and looking for tens of thousands...  a new successful entrepreneur are good profiles for that investment level.   Lastly get into the community.    Not sure where your product fits but shows, celebrity chefs et al are always worth calls...     I had one startup who actually got approached by a VC at a food show...  ( he had a unique item... a special brazilian dessert )...   hope that helps

1. The VC model,  without going into too much detail,  is one based on management fees, carry etc which in the end means that the minimum viable VC fund is really around 100M...  albeit you do see some circa 2000-2010 funds a bit smaller.   Kind of like anything else there is a baseine cost in feeding some minimal salary to GPs,  your receptionist, meeting legal fees (both for firms and the partnership filings ) and expenses to research and solicit new firms...   you need a few mil per year to do that and at 2% mgt fee thats 100M-- higher mgt fees are not competitive with other investments...  <div><br></div><div>2.  In the olden days (circa 1990-95) it took a few million dollar investment to start and cultivate an emerging company..  You had to pay for your SUN servers,  an office,  an office receptionist,  your monthly oracle license, a crack in house sys admin to keep your mail system humming,  desktops for everyone..  Today its 50 bucks a month for cloud services,  no charge open source tools/databases, no office costs, minimal equipment cost, and your office space ranges from open public spaces in hotel lobbies to a few hundred bucks a month in WeWorks...   or to be blunt 100-200K to get a start up off the ground is very real.  I need 50 or 100K and commit for another 100-300K to be off and running not a commit of 2M with a promise of another few mil if I meet objectives unless I need hardware prototypes...</div><div>I can build the next SAP for 100K ( I might need more to take it to market.... see discussion below)   </div><div><br></div><div>3.  The VCs challenge...    We have to invest 100M...  That use to be 20-30 firms at 2 to 5M each...    Firms do not need 2M to start so we are stuck....  we can</div><div><br></div><div>a.  invest in more firms at less dollars..  but that means more good investments have to exist and we can find them plus we need to find a way to keep board presence and management presence/oversight  in 50 or 100 firms with just a few general.. partners...   a tall order</div><div><br></div><div>b,  figure out how  to compete with angels and super angels who easily play in the 100K-500K funding startup space</div><div><br></div><div>c,  wait for follow in rounds when that firm does need $1-5M to roll out...   I know how to do that  am good at it but later round investments are lower risk meaning less reward for my LPs.</div><div><br></div><div>Plus as you mentioned Melissa the VCs have to deal with LPs who quite frankly no longer see the generic upside...  sure there are many unicorn stories but LPs are smart and know that barring a lucky hit they are now looking at 5 to 10% returns not 20% or more with a time frame that is not less than 5 years but probably closer to 10...    </div><div><br></div><div>At least where I stand in my little world the private equity model,  angel networks  etc are going to win the battle...  </div><div><br></div><div>pk</div>

Lets close this discussion down...   everyone is just repeating the key points .. at times using personal vignettes..<div><br></div><div>- not common for the founder and long term ceo to be the same person for various reasons</div><div><br></div><div>-skill set required change,  interest of company or founder changes,  vision changes,  making money, effiiceinetly running a companyand keeping a vision do not necessarily align.</div><div><br></div><div><br></div>

Not answerable....  few do but some do ( McNealy, Ellison,  Gates )...  Most do not...consider google more typical.   The things that make a good CEO are typically just not the same as those that make a good founder and visionary  The skill set that gets a company from 0 to 5M  are different than those that get it from 5 to 25 and different for 25 to 75 and so on.    Situations change,,, family,  personal wealth and ones view of it and importance of it...   <div><br></div><div>In fact when I instruct my mentees in preparing their investment pitches I tell them never say to the investor hi..  I am the founder and CEO of xyz company...  it almost sounds arrogaunt...  better off with hi..  I am the founder and temporary CEO of xyz company...  doesn't mean you might not be the long term CEO but shows maturity as to the realization that founders typically do not make good long term ceos.   I also coach mentees how to be on the look out for good CEOs...  they can pick em or the investors can pick em for them..</div><div><br></div><div>pk</div>

Industries or areas they know...  ( If I have financial resources because I ran a chain of 9 retail outlets during my working career,  I look to fund retail )<div><br></div><div>Areas where they have contacts who can add value or make a difference in their investment..  (frequently the same but many times not ....   )</div><div><br></div><div>Areas where they have invested prior..  You might find someone who funds music service startups... </div>

So if your product is not up to snuff or loses out competitively or for some reason your early clients do not believe in your vision your sales rep gets what for his efforts?<div><br></div><div>the only commission only reps that work (at least to my experience )</div><div><br></div><div>- more senior individuals who no longer need cash flow and want to help (usually for equity) or join the management team</div><div><br></div><div>- short term deal or account focused individuals...  I worked at IBM for 35 years and can bring you in.. (great...  will give you 15 percent for all deals closed in 30 days or revenue collected from your intro's within 6 months )</div>

Who is the right sales hire?<div><br></div><div>About as tough to ask as who would be a good wife (or husband)..</div><div><br></div><div>You probably need to answer 20 or 30 questions before you even contemplate--</div><div><br></div><div>Where is your product ( pre rev, rev, ) and what product/market expertise does your rep need?</div><div><br></div><div>What are your organizational thoughts... are you hiring a sales person,  someone who has Bus Dev skills,  someone who follows up leads or has their own network,  someone who is your sales guy or member of the management team...  are you hiring your "VP" of sales for now or someone who can be the VP when your firms is 5-10M in sales...    is he a channel person? partner person? direct face to face guy?   Is he expected to close or just get the lead qualified and through the first level calls...</div><div><br></div><div>What is your financial model and compensation ability  ,  What can you afford now?  </div><div><br></div><div>What skill sets do you want added to the team to complement you...  For example many times good sales guys are way more experienced than the founders in a startup... Hence they can add value in funding efforts,  product development,   production/product roll out guidance and so on.  What additional skills is your firm short on..     One of the classic mistakes that founders make is trying to hire sales guys in their own image...  "get me a young smart guy 3 years out of college like me" when they would be better off with a 40 year old who has sold in the market and has contacts or connections who can at least commit to take prototypes of be early adoptors...      and again this is dependent on the rest of the team...  ( Perhaps because I am senior,  I preach that every entrepreneurial team should have at least one grey hair around )</div><div><br></div><div>hope that helps</div><div><br></div>

Who is the right first sales hire?   Everyone is supplying well intentioned advice for our young entrepreneurs but to be brutal telling someone to read a book or look at a website or believe them personally  because this or that worked in their specific interest is not going to cut it.   Every startup is different.  Every entrepreneur team has different skill sets, needs, objectives...   Most entrepreneurs view sales and business development as necessary evils to their creative brillant idea(s). (Unfortunately based on their sales experience in a car showroom, bank or mall ).  We who came from the bus dev/sales world understand..  we are not offended..    Ergo my advice to entrepreneurs...    Find a good advisor and spend a few hours. Hint..   if he/she asks you for compensation (other than maybe buying lunch or a starbucks) to spend some time to understand you and your company they are the wrong ones...   Questions should be how to find the right advisors not find the right sales person<div><br></div><div>pk</div>

Leads at trade Shows<div><br></div><div>- give aways or raffles (ipad or similar)</div><div>- White papers (hence you need them to supply an email address)</div><div>- Most shows have magnetic swipe systems</div><div><br></div><div>There are lots of people who do these routinely who can give you a few hours...  if you spent 20,000 all ready get one of them for a few hours ( a few hundred dollar consult )..   if you need references email me directly</div><div><br></div><div>pk</div>

uber/lyft while very visible are not a good yardstick to use..  the answer is simply it depends..<div><br></div><div>- 10,000 folks become babyboomers each day... Many do not want a full time job and have ( or have access to ) benefits..  but they have no need financially, nor interest in a full time gig..</div><div><br></div><div>- it might not be a function of working when you want but when you need to..  Might be family situation, or other commitments such as school, childcare</div><div><br></div><div>- there use to be a 1099 "stigma".   meaning you were a 1099er because you were "between" jobs..  thats not true anymore..</div><div><br></div><div>- its a different economy...  20 or 30 years ago your objective was to go work for citibank or ibm for 20 years and have the company take care of you.. Also economic models for many roles dictate 1099 employment... that is I only want to compensate the employee when the employee is generating revenue for me.  Think the Geek squad..  I only want to pay the employee when he is working..  If I have no computers to work on in a specific day why should he/she be on my payroll</div><div><br></div>

Doctors who worked in a hospital in startups...<div><br></div><div>Not really a complete question..  There are no rules in hiring in startups...   Hey is this an attending physician or an academic doing research?  in what field and does that match what you need...  What is their personal profile?  The same questions you need to ask of anyone in a startup...  interest, energy,  ability to see beyond the obvious, ability to pivot,  a fit  for what you need ( be that adult supervision, content expertise, a sales/marketing "face" to the public... assume your client(s) might be in the medical space and feel better speaking with a MD on the other side of the table )..  so my comment to you is this... don't get hung up on someones degrees or education or lack of but focus on the fit and what you need...  My only warning would be is this... young doctors sometimes have big debt so make sure his/her financial condition and stage in life is a fit for your firm</div>

Yes.. valid point left out of my comments... advisor agreements should have a cliff of 3 or 6 months..   sometimes when you are deeply involved in something you take the obvious for granted...   apologies

Stock vested over a period of time is the legacy approach..  A half to one percent has been traditional.<div>If the advisor has a very specific role.. Say you have a software package applicable to wall street and he is a retired svp for Citibank you should tie a success fee to performance.     Upon the advisor helping you secure an order exceeding x from one of the following named firms he is entitled to.....</div><div>Other approaches used has been allowing advisors to invoice you but payable only upon certain milestone schedules such as an institutional investment or revenue.  Just a token such as a maxof 2% of any investment over 250k.  A method to save cash that I once used was allowing my invoice for services to be credited into the founders original convertible note.  No cash out of his pocket, upside for me, and accelerated vesting of sorts.</div><div><br></div><div>In all these the key is to have the advisor invested in the success of the firm on one side and the ability of the founder to separate if it makes sense</div><div><br></div><div>Hope that helps</div>

Whether to accept cash or equity is of course not a cut and dry decision for a variety of reasons...  first of course is whether you need the cash now even putting aside whether you think this is the next facebook or not...  another is opportunity lost... meaning   " is working on this project preventing you from working or doing something else more valuable with your time ".   There are middle grounds...  <div><br></div><div>Examples ...  Accept cash but deferred payment ..  ie pay me when you get some revenue...  usually people do a cap meaning the firm does not pay until they clear x dollars and then a cap of 10% of revenue...</div><div><br></div><div>Another which I have used is allow your "phantom" cash invoice to be converted into their convertible note...  ergo thats a way to sort of have a note but also an equity play...   in other words if you invoiced say 25000 let that 25000 credit go into their note when they structure it...  (assuming they have not done that yet ).</div><div><br></div><div>again though it really is a function of need and greed...  and again there is no one size fits all</div><div><br></div><div>pk</div>

Advisory Boards are either biggest bargain for startups or useless waste of
your equity.  I have had clients that have gone from startup to 100M+
valuation (that was right in my wheelhouse and I added significant value
to) and clients that I called periodically to remind them I was there to
help them (and subsequently resigned my role).  It all has to do with the
expectation and agreement up front..  If you clearly state what you need
and the advsor clearly states what value he can add and there is a match
that goes a long way toward the qualification process.  Good advisors
understand they have to add value.. More specifically any good advisor will
agree with you to a 30-60-90 day trial ( the agreement gets written with a
cliff ) so he is not going to sign up to work with you unless he knows he
can really help you.

So to answer your question about how to qualify an advisor,  do an
agreement as to what your mutual expectations are...  if they work you are
good to go... if not no harm no foul...

Peter Kestenbaum



could not agree with you more bob..  I also encourage folks to see what they really need and then see the mentors or coaches that are specific to that need...  

Jen..<div><br></div><div>Commenting on the best accelerator program is a shot in the dark..  Its about the firm and what it needs..  Some folks need pitch help.. others tech assistance.. others business modelling or developing a go to market plan..  some are a B to B ..  some B to C...  some folks are going to manufacture product.. some deliver volume software..   and in many cases you will be looking for early sales help and having an accelerator with contacts or a track record within a segment or type of clients is a big plus ... Many times accelerators are also good at finding co founders or rounding out a team...  So...  what is someones best accelerator may not be even close to a tier 1 fit for someone else...  </div><div><br></div><div>When our firm (1099Partners) works with a firm who is seeking an accelerator (and we believe they should be seeking one too)  we ask them to prepare a self evaluation of what they need ( which we of course help them prepare ).  Armed with that they (and the accelerator) can make a better decision...   </div>

I was an exec at sun micro, was active in the NY VC community , am embedded
in the east coast start up community, part of faculty at 4 universities in
NY area.



David...

I certainly have several good advisory board agreement templates but prefer
not to share.  Can discuss over telecon if you wish.   You can get basic
templates in many locations but to be blunt advisory board agreements have
two components... one is easy and is built around the compensation and
general business terms..
 -some amount of stock vested over some years,
 -standard clauses such as cliffs,  buyback clauses ( if there is no
liquidity event in x years and  revenue exceeds n then the company will buy
back vested shares at y% on the dollar...  Protects the advisor if the
company stays private ),
- operating terms such the advisor can't spend company money
- termination,
- Legal separation between advisor and company

and many more.    As mentioned these are templated.

The second piece is actually the more important piece... what exactly do
you want the advisor to do and how much time or effort is expected..   Some
samples

- The advisor shall commit N hours nominally per quarter in support of the
company

- The advisor is expected to have a minimum of one face to face meeting per
quarter with the founders to review specific company issues or plans.

 - The advisor shall  be available for approximately four 30 Minute calls
per quarter to discuss issues relative to the company

 - The advisor and founder shall agree on a quarterly basis on a limited
number of tasks to advance the stature of the company ... examples of such
tasks could be

-introduction to n companies in the advisors network to evaluate early
prototypes or perhaps participate in a beta program...
- the review and assistance in preparation of the companies pitch deck...
-  assistance in recruitment or participation in the interview process of
.....          introduction to finance partners (angel investors  VCs)....
-  reviewing the operational/go to market plans...

You might also have some bonus clauses in your agreement... Again this
unique to each situation...    it could be stock or cash...  If the advisor
introduces us to a client and is instrumental in securing an order of X the
advisor shall be entitled to .... (stock, cash,  other ).

Sorry... I know this is not specific to your firm but hopefully you get the
big picture..


pk




No real solid generic answer for dealing with clients who want one offs
especially given the sparse info provided..

HOWEVER ... one word of caution...  when you do a one off for a client
watch your IP rights...  usually if you do not identify the client winds up
with some IP rights to your product and even if its a 5% addition to your
code  makes future investment or M&A much harder...   Net is that you have
to maintain all IP even if client volunteers to pay for modifications or
development



Lexi

The term best anything without alot of data is hard to answer.  Kind of
like asking what the best car is..   for gas mileage..acceleration. ..city
usage.. min of 4 people. .  Has nearby local service because I live in
Vermont and so on..

In  your case there are at least 50 questions to ask.. location..your
profile (first entrepreneur, tech background etc etc)..your product.
Market, where your team needs help.. go to market/tech/securing investment
and on and on...   so take the answers from our peers with an open mind


9.5 times out of 10,  your term sheet says that the board seat
representative is just that a representative of the investment firm and
hence can be nominated or replaced by the firm.  The one case that
sometimes can be up for grabs is if the deal was syndicated and the
syndicator has rights...  usually though the syndicator already holds the
seat and the other investors have observer status

pk



Many of these comments are excellent but we many seem to be missing
two-three points that I want to re emphasize.

- First making money...  Just because you can make money is not a reason
for a VC to invest.  It has to scale and scale quickly and have appeal so
it can turn into a liquidity event...    VC are not interested in very
profitable companies unless they can scale and can turn into a liquidity
event for them

- Its about the people and team..  I keep stressing this and it seems to
fall on deaf ears.  If we invest in 20 firms we know more than half will
fail..  thats the nature of the business.   If and when that occurs we want
to be a position that says... that idea did not make it but Joe, who we
worked with, has another  idea lets back him again because he was a
resonable smart guy and really understands this space..  The question a VC
will ask is   not if the company is investable but is the team investable...

- If you have not presented in settings like meetups,  other investor
meetings such as angel groups, conferences etc at least 30 or 40 times you
will probably fail.  Its where you get questions you never considered,
 suggestions...  if you do not have that backup you are toast..

- cold VC pitches are  1.  Hard to secure    2. rarely successful.     The
best options are introductions and if those are not possible the " you guys
are expert in this space can I buy you a cup of coffee and get your
thoughts informally on what we are doing approach  with a junior team
member who could become a champion"



Discussion in the community is Microsofts intention to leverage Linkedin
​as an entry to the HR space and potentially the service support space..
For example a curated Microsoft support offering could use linkedin.  (call
microsoft for help and have a microsoft experienced person respond who is a
third party on demand to microsoft person).  Linkedin was at the point
where they could no longer figure out how to add services besides profile
listing for dollars.. Their HR efforts were not creative and their
management team sort of had reached its potential..  Personal opinion is
that it is a win win and allows linkedin staff to monetize their efforts..

pk3



Approaching VCs..

Nick if you email me privately (peter.kestenbaum@gmail.com) I will send you
a copy of a 3 hour workshop I do (funding for Aspiring Entrepreneurs).  Its
been delivered at 5 different university entrepreneurship programs in the
New York area, college VC clubs and similar, both by myself and by myself
with a VC partner(s). At least 15-20 times in the last 3 years...

There are several parts of this question that you need to have in place
first..  the tone of your note indicates you might not have a total grasp
yet if you are asking the questions you are.


   - First do you have a company that is a good VC fit...  Experience is
   that many entrepreneurs even with a very viable company are not VC
   fundable..  There are questions of returns, timelines, scalability (VCs
   typically are not interested in can't miss 20M companies ,, the economic
   models do not work for their model).  Are you yourself investable.  VCs
   invest in people as much if not more in the team..  Not all members of the
   team need to be in place yet but the founder has to be either a clear
   leader (Is this your first rodeo?-- Are you coming out of the industry with
   10years as the SVP of product development or marketing)  or demonstrate the
   ability to build the team around him.
   - It is extremely difficult to approach VCs successfully without an
   intro..  A typical NY based VC might see 100s of plans or pitches tossed in
   over the transom each month...  Who is your sponsor or link.  What VCs have
   you been exposed to even if it is to be able to say... I see you attended
   the xyz conference where I presented. Can I buy you a cup of coffee and get
   your opinion on what we are doing...   Your first encounter with a VC if
   you go this cup of coffee route can (and should) be with a junior member of
   the firm... maybe even an intern...  that can be your intro for your more
   formal pitch and give you a champion...  Get on Linkedin.. Which of friends
   can intro you.
   - Is your pitch VC worthy.   When I work with entrepreneurs I tell them
   if they have not given their pitch in formal settings ( a meetup, a pitch
   to angel investors/partners,  industry conferences ) they will fail...
   There are alot of reasons.  Its not the color pallette used in their
   powerpoint... Its the message they construct, the questions they get, the
   feedback (did you think about this or adding that to the offering ).
   - The status of your company.   Are you pre or post revenue,  what is
   the status of your angel round?  What type of PR do you have?  What do your
   first clients look like ( or if you do not have clients who are speaking
   with ).   How much money do you need?  How are you going to spend it?  What
   are the milestones upcoming and so on.
   - YOU...  as I indicated above thats going to be the big driver...

So I understand your question... how do I get intro'd but just sense you
need some more up front thought process...  If that was nailed down not
sure you would be asking the question..

Some random tips..

1.  Targt a VC who is in your space...  VCs like to invest in what they
know..  Generally for example a VC who invests in enterprise software might
not invest in a music startup...   A VC might have a health care fund... If
you are a health care company it makes sense..   If you have a social media
play it does not
2.  A VC is looking to invest a few hundred K.  If you are looking for a
50K or 100K start you are probably more likely to be an angel investment.
Even at 200 or 300K an angel network is usually more appropriate...   There
are some examples of VCs who might invest 50K ( you need to research ) but
more frequently than not its individual VCs at those firms who might give
you 50K out of their pocket as an angel.  Look at other firms in your
space.  Which VCs funded them.  If you find one, then find out which
particular partner sits on their board.  He should be your target..   (
Dear xxx.  I see your firm funded spotify so I know you appreciate our
market... I am working on a product named pandora which is in the same
space but does xyz...  would it be possible to share a cup of coffee with
you or one of your staff and get some feedback on what we are doing .... )

best



Graeme

I just coached someone through one of these mobile focused solutions..
voice for IOT devices..  strongly recommend you seriously consider getting
an established player with infrastructure and substance to front for you.
Besides the go to market speed and client support and regulatory advantages
you can structure an agreement that can focus on some particular personal
needs you might desire.  It's going to be less lucrative but the
probability of success might be worth it


A convertible note is a common approach to this.  Angels typically will
skip a convertible round but it really is the best vehicle for friends and
family.  I have a series of power points on the big points if you want to
email me privately.



Not that there might not be extenuating circumstances but to be blunt NO....



Ryan..

To make a recommendation on business structure without knowing anything
about the type of company, marketplace, future funding plans/needs is not
possible.  I do not want to sound condescending but if you are asking these
type of questions you are not where you need to be as an entrepreneur
(which is ok) but you  have to then recognize that you have to surround
yourself with advisors/coaches who can fill in the gaps where you do not
have expertise..   If you email privately I will email you a presentation


People.. Is founder investable or has he recognized he is not and
surrounded himself with others who are. Who on team has done a startup
prior ( failure or success is immaterial)

Ability to execute in trial or limited fashion however preference is a
working proof of concept, prototype, first revenue and client feedback

Ability and plan to scale, potential for partnerships, and profile of first
clients.

Market attractiveness

IP ( or what protects against someone else doing it )

Investment/risk/return/financials (assuming everything else passes)



It is probably a mute discussion..  I would be shocked if this election
comes out any different than the current pole suggestions...

Impact for startup, not necessarily emerging firms,  is much more likely to
be influenced by local (state) initiatives..  for example enterprise zones
( for example in NY if you reside in certain designated startup areas or
accelerator locations you pay no state tax  )-  the largest potential
impacts I see on the table is how "carry" is treated on taxation but
whether or not that will trickle down to impact a founder looking for 500
or 1M dollars is not clear..  Another potential impact are some of the
regulations around crowd funding and/or securities treatment for  small
firms...  again not all sure how much of an impact that will have.   I am a
great believer in unintended consequences.  For example when SOX
regulations were passed for making sure larger firms had the right type of
audits to protect the public after the Enron frauds no one expected that
making public company subject to a SOX audit would mean that smaller
software firms ( 10-20-50M ) would make IPOs far less attractive and hence
the alternative (M&A) much more popular... Less expensive college and the
potential for education for kids to become programmers is another one that
might have unintended consequences.  If some of our youth can get to less
expensive training environments and come out semi proficient programmers
that would be great.  Some of the programs, like the ones in NY (Flatiron
comes to mind) to generate software programmers are great but their breadth
is narrow.  Changing college funding models might make an impact on
programs in schools.  Kids do not want to sit at a desk for 4 years but an
intensive one year we can make you a programmer college program might work
and have a broader appeal and breadth.    We can all sit around and due
mental contortions about the policies of our candidates but dollars to
donuts it some unintended consequence that will impact the most..



All mothers think their babies are cute.    Maybe your advisor is wrong..
but maybe he is right.   Go get other opinions.    Sure it is costly to
change your website and branding.  It's also costly to not to make it
because you have a decent product or service and are executing well but get
limited by poor image or brand.  You are the mother here.



Esther ... seem to asking monolithic questions for a multi dimensional
topic.. hiring...  What are you hiring for?  a senior exec?  a staff
person...  someone who is going to be with you an extended period of
time....  are you hiring to fill a skill set or for another reason ( a
manager,  mentor, team leader,  sales...  and just in sales am I hiring
because I am looking for someone with contacts or a high energy door
knocker or a solution sales guy vs a coverage type sales guy...

ergo I think the first question you need to ask is how you approach hiring
and recruiting not the characteristic you use in doing it

pk



There is no hard rule but there are guidlines and there are considerations..  First is it pre or post revenue or first client (sounds like pre here).  Second is it pre or post funding or funding discussion.  third what is the "role" meaning is this a developer who you envision to be part of the management team, maybe the CTO, or just the first coder so to speak.. fourth... is this a full time or part time gig and oh by the way is he getting paid... getting paid per his market value or being paid just enough so he can pay his rent or not at all.  .fifth has to do with the type of company and time to market...  and lastly has to do with performance..  What metrics are you putting on what he does..  even with vesting there is performance that is good enough to not get yourself fired and performance that gets you to market with an outstanding product 6 months early...  you giving the same equity to both...<div><br></div><div>You tell me all that and I can give you a much better answer..  Likely though the answer is going to be in the low single digits if it is pre rev, pre funding, he is taking a salary haircut, and you do not envision, today, he is your CTO.  Someone mentioned 5%..  that seems rich</div>

I was an exec with Sun Microsystems in those days and Kodak was one of our
largest clients..  You pretty much got it right... We had many discussions
with them about moving them into the digital age but the resistance from
the film side was ingrained in their culture... they dabbled using our
technology for prototypes like in store processing for camera shops and
lots of other related efforts they thought would be cutting edge...  the
underlying thought process though was that digital would never have enough
resolution to compete with film ( those initial cameras were 1Mega pixel
and the future ... meaning 5 or 10 years out might get it to 2 or 4 ) and
did you know how much storage you would need on a camera to hold 10 or 20
shots.. the camera would need an palm size board full of memory chips that
would cost as much as a small car@!  (well a bit of a stretch but you get
the point).  The world was just getting from floppy disc to CD.  The CD was
a major break thru..

from a financial standpoint the entire company margin was based on film and
film processing so you know what the internal politics were too...

Its not like we did not try...   I remember one meeting with Scott McNealy
then SUN CEO and one of their SVPs whose name escapes me...  after the
meeting Scott turns to me and says  " they have no clue they will be out of
business or irrelevent in 5 years"..  Hey Scott was wrong...  it was closer
to 10


pk



Managing Partner, 1099 Partners. Previously Business Unit Exec, IBM.

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