Invested Interests

Gust Startup Trend Map

Gust Startup Map & Trends Analysis – August 2012

Attention startup enthusiasts! Gust is thrilled to have nearly 7,000 new entrepreneurs creating startup profiles each month. To help us visualize the scale and global reach of these entrepreneurs we have put together a monthly startup map, which captures all new startup profiles on Gust. The map showcases new entrepreneur sign ups that chose to publish their startup profiles between August 1st and August 31st. Entrepreneurs that kept their startup profiles private are labeled unpublished in the map, and are not included in the trends analysis.

Take a look below!

 

At first glance we can see the US contains the majority of new startups, with a significant 60%, but Canada, India, France, and Brazil are closely following and worth to keep an eye on for future startup growth.

Unsurprisingly the dominant industry for new startups in August is Internet/Web Services, but other top industries include Consumer Products and Services, Media and Entertainment, as well as Financial Services. However, when we compare industries across the top startup countries, we notice there are better performing industries specific to each country. For example, India has the highest percentage of startups in the Education industry, with almost 10%, while other startup leaders such as Brazil have a greater focus on the Industrial/Energy sector.

Almost a quarter of all startups have a product in development stage, regardless of industry and country location, and less than 10% have a product that is fully ready. If we zoom into the US, we find California is the leading state across all stages, which includes products in concept, development, fully ready, and revenue. 28% of California startups have a product fully ready and 25% are in revenue stage. New York, Florida, and Texas closely follow as top states across all product development stages.

We look forward to presenting September’s startups and sharing the next trend map!

Invested Interests

Entrepreneurship Is All About Taking Smart Risks

Most entrepreneurs think that risk is just an “occupational hazard” that can be minimized or eliminated by a smart businessman. That way of thinking is simplistic and wrong. In reality, some risks are good and should be embraced for growth and a competitive edge, while others are bad and should be avoided completely.

Traditional risk management focuses only on bad risks, and seeks to contain losses. But if you want growth and sustainability, you need to create smart risks, which means intentionally taking a risk to grow your business or gain competitive advantage. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
September 23rd, 2012 3

Invested Interests

Is it legal to solicit investors for a startup since the JOBS Act has passed?

Yes and No.

The JOBS Act has several pieces, two of which are relevant here. The fascinating thing is that they allow for diametrically opposite activities! The key questions are:

  1. Who can you MARKET to?
  2. Who can you SELL to?

Under the Crowdfunding provisions of the JOBS Act, a startup company will, for the first time, be able to sell shares of stock to anyone (that is, “the crowd”) once the SEC publishes the final rules for the program in January of 2013.  However, the fascinating wrinkle is that it looks like startups will NOT be able market this sale to anyone, but that instead the sale will have to be done through a new form of web site called a funding portal (think “Kickstarter for equity”.)

However, under another part of the JOBS Act dealing with General Solicitation, startups, which have always been allowed to sell shares of stock privately only to Accredited Investors (rich people with investable assets over $1m or income over $200K) will, for the first time, be allowed to market that sale to anyone, once those provisions go into effect this summer.

So, at the moment it looks like your choice will therefore be: MARKET to anyone but SELL to Accredited Investors, or SELL to anyone but MARKET only through funding portals. If this all sounds a bit confusing…it is! And since the actual rules are still being written, quite a bit may end up changing by January, when crowdfunding will finally become legal.

For the moment, however, we’re still in the traditional world of “MARKET to nobody, SELL only to Accredited Investors.”

*original post can be found on Quora @ : http://www.quora.com/David-S-Rose/answers *

Invested Interests

Special Attendee Rate for DEMO Fall 2012

We are delighted to present a special rate to attend DEMO in Santa Clara, California on October 1-3, 2012. Please apply the registration code ‘DF12ANL’ to receive 50% off the published rate.

During the two-day conference, DEMO provides an environment for companies to secure venture funding, establish critical relationships, influence early adopters, and meet with top tier press. DEMO has built an unmatched track record of selecting, coaching, promoting and making successful some of the most game-changing products the world has ever seen.

Register for the special attendee rate.

Invested Interests

How to Relate Your Technology to Business Values

Steve Forbes image via Wikipedia

Presenting your startup vision as a founder to a potential investor, or presenting an idea as an employee to an executive, requires that you effectively communicate, or “translate”, the value proposition into terms that the receiver can fully understand and appreciate. If you fail, it’s your loss, not theirs, no matter what the reason.

For example, if your investor has been a senior business leader, you need to transform your message so that it addresses the issues that senior business leaders have experienced as priorities. For the business leaders I know, these priorities almost always include the following: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
September 16th, 2012 1

Invested Interests

What is the “maximum” amount (%) of a startup an investor should have?

It’s generally not a good idea for an initial investor to own more than 50% of a company (although there are always special exceptions), because the odds are that by the time the company is fully funded (and hopefully successful), the entrepreneur/founder’s equity will be reduced to such an extent that it will have effectively eliminated an incentive for him/her to continue building the company’s value.

In general, and in a more-or-less-ideal world, companies should be prepared to give up roughly 20%-40% of equity for each round of early financing, where the size of each round is enough for the company to increase its valuation significantly.

So, for example, taking a not-uncommon streamlined case of a company that had a seed round, a Series A and a Series B before being acquired (and for the purposes of this exercise disregarding any option pool), the math for a single-founder’s ownership of a startup would work like this based on giving up 20% each round:

After Founding: 100%
After Seed: 80%
After Series A: 64%
After Series B: 51%

…and like this based on giving up 40% for each financing round:

After Founding: 100%
After Seed: 60%
After Series A: 36%
After Series B: 22%

A really nice visual calculator for working all of this out can be found at:
http://www.ownyourventure.com/equitySim.html

*original post can be found on Quora @ : http://www.quora.com/David-S-Rose/answers *

Pivotal Moments

On the Paradox Consistency vs. Pivot

One of the more stubborn problems in building a business is the paradox of consistency vs. the pivot. 

Consider this: It’s better to have a mediocre strategy consistently applied over three or more years than a series of brilliant strategies, each applied for six months or so. But too often people get bored with consistency and drop a working strategy long before the market understands it.

And on the other hand, there’s the brick wall. Maybe it’s the futility of trying to implement a flawed strategy. Maybe it was a good strategy but depended on assumptions that changed.

And there’s the problem: is it time to pivot? Or has a good plan been poorly executed? Or has a good plan been well executed and simply needs more time? 

One good way to deal with it is focusing on the assumptions. Identify the key assumptions and whether or not they’ve changed. When assumptions have changed there is no virtue whatsoever in sticking to the plan you built on top of them. Use your common sense. Were you wrong about the whole thing, or just about timing? Has something else happened, like market problems or disruptive technology, or competition, to change your basic assumptions?

As a business planner, I’ve always disliked “because that’s the plan” thinking. Plan should be fluid and flexible. Plans should be reviewed and revised. Sticking with the plan thinking explains in part why some business experts question the value of the business plan. That’s sloppy thinking, in my opinion, confusing the value of the planning with the mistake of implementing a plan without change or review, just because it’s the plan.

Do not revise your plan glibly. Remember that some of the best strategies take longer to implement. Remember also that you’re living with it every day; it is naturally going to seem old to you, and boring, and sometimes it just takes longer to develop. 

But don’t stick to your plan either. That in itself isn’t a virtue. 

That’s why they put people in charge, instead of formulas, algorithms, or cliches. 

Tim Berry , Founder, Palo Alto Software
September 11th, 2012 1