Venture Shark

by Demetri Demascus

Posts tagged venture capital

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E-Tip: Structuring Equity when bringing on Investors

When starting a company, many entrepreneurs wonder how they should dole out shares in their company.  Even structuring an agreement with your partners can turn into a messy situation.  This can be especially difficult when bringing in external financing.  I recommend that you use the 3 T’s to structure how you would divide your company:

  1. Time
  2. Talent
  3. Treasure

Time would include how much time have you invested in your business since inception.  This is extremely important to consider as some entrepreneurs have invested years of time into their business.  Talent would encompass all of your skills and knowledge.  Was it your business idea?  How did you develop it?  What value did you add?  How can you help it move forward?  These are all important questions to consider when evaluating talent.  Treasure is exactly that, what investment did you put into the business?  How much will other investors put in?  How do you value that?  Remember that once people get their skin in the game (ie. put their money into the business), they will usually become extremely invested in the business in both the time and talent categories.  I will touch on this later.

Many investors feel that because they are taking monetary risk, they should be receiving a significant chuck of the company.  While it will come down to your negotiating, you must consider your time and talent.  While as an entrepreneur you may have only had limited funds to invest yourself into the business, it is important to remember what you bring to the table.

Despite this, I want to urge you to completely consider what value venture capitalist’s can add to your business.  Too many times on Shark Tank have I seen entrepreneurs leave empty handed because they would not give away merely 30% of your business.  With venture capitalist’s with such expansive networks and experience, it confuses me why an entrepreneur would not give 30%+ of their business to a magnate such as Mark Cuban.  Remember that while an investor may be at first contributing equity, they are businessmen as well and will want their investment to grow.  Evaluate and talk with them about what time and talent they plan on contributing.  Get to know both sides and see the total value that an investor is adding.  Owning 100% of a company making $30,000 per year is much different then owning 30% of a company making $1,000,000.  

Filed under financing venture capital e-tip entrepreneurship

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E-Tip: StorySelling

Today, I heard a substantial serial entrepreneur, Larry Blumsach, discuss how to sell your products to potential customers in a group setting OR how to pitch your business to a group of investors.  StorySelling is ultimately using a real-life story from your life in a sales pitch.  It lets those listening become engaged and learn about you as the speaker. I found his theory very intriguing and loved how he discussed using a story to attract people without boring them with the same speech they always hear.  IN ADDITION, remember ultimately people invest in YOU and not your company necessarilly.  By applying these story telling tips to optimize StorySelling, you will have instantly set yourself apart from the masses.  I recommend that you start your speech with a story, as it will instantly engage the audience and nicely transition to your sales pitch after.

Steps in telling a story:

  1. Describe a location and a setting.
  2. Describe the characters (Physical and Psychological)
  3. Describe the goal and/or challenge
  4. Encounter an obstacle
  5. Crisis and Climax
  6. Resolution
  7. Lesson Learned

Here are the steps to transitioning story telling into StorySelling:

  1. Engage Mindfullness
  2. Look and see
  3. Listen and hear
  4. Yes and … (how to approach a disagreement.  Make sure you show the other person that you see their side…As in “yes, I see what your saying…, what do you think about this…”)
  5. StorySelling  (Tell the story)

Filed under StorySelling financing Venture Capital Selling Public Speaking