Of the private companies trading on secondary markets, how much (percentage) of those companies’ stock is available through the secondary market?

On average…none.

The secondary market for private company stock is brand new, and so nascent that it is virtually nonexistent.

For a very brief time, when Facebook, LinkedIn, Groupon and Zynga were still private, there was a quick flurry of private secondary sales through platforms like SecondMarket and SharesPost. But there was much, much, much more smoke than fire, and I would be extremely surprised if even 1% of those four companies changed hands in the secondary market.

Down the road I believe that we will begin to see a viable private secondary market emerge, but that is unquestionably years away.

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


What tools can I use to manage relationships with investors?

Gust.com is the most widely used tool platform for both sides, with hundreds of thousands of companies and tens of thousands of investors using it to track and manage their relations with the other. It’s the official collaboration tool of the Angel Capital Association (and the equivalent national angel investor federations in 20 other countries.) It’s also used by over 300 venture capital funds. For a longer discussion of its utility for entrepreneurs from pitch to exit, see my answer to: While raising money, what tool are you currently using to manage your relationship with investors?

…and for a discussion of the investor-side tools, see my answer to: What are some ways you keep track of startups you are evaluating/diligencing/investing in?

(Needless to say, the author of this post is completely biased, as I am the Founder & CEO of Gust :-) )

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

Every Entrepreneur Needs Help In Getting Things Done

To Do List Chalkboard by Mufidah Kassalias, on Flickr

To Do List Chalkboard by Mufidah Kassalias, on Flickr

The universal challenge of every startup founder is to get everything done that needs to get done, and still have a life. Even outside of business, everyone wants to accomplish more, while working less. I’ve been a student of these techniques for some time, but some time ago I saw a great summary that seems to pull all the key principles together.

Stever Robbins, known on the Internet as the Get-It-Done Guy, outlines his strategies in his classic book “9 Steps to Work Less and Do More.” These steps are not aimed specifically at entrepreneurs, but I see how they can be applied there as follows: Read more

Martin Zwilling , Founder and CEO, Startup Professionals
September 1st, 2014

Can a private company take investment money from anyone?

Unfortunately, a private company in the US may not take investment money from “anyone”. The only people who are legally eligible to purchase an equity interest in a private company without a great deal of special paperwork are, as you noted,Accredited Investors. These are defined as a person with net assets of over $1 million (not including the value of his or her primary residence), or an income of $200,000 (not $250,000) annually for the past two years and a reasonable expectation of that for the next year. (In the case of a married couple, the amount is $300,000 together.) This is an absolute rule. There is no except for “friends”, “family”, “another guy” or anything else. It’s binary: you either are, or are not, an Accredited Investor.

Note, however, the weasel words above: “without a great deal of special paperwork”. That means a company can take an investment from people who are not Accredited Investors, however it adds so many requirements and potential issues to the arrangement, that most corporate lawyers will strongly urge you to not do it if at all possible. Among the considerations you need to take into account if you go this route are: (1) the rules for this differ from state to state, and every state needs to be handled separately; (2) there is a very limited number of such investors in total from whom you can accept an investment (the number varies by state); (3) you are required to prepare and file a Private Placement Memorandum, which is almost the same thing you would file for a public offering, extensively listing absolutely everything about the business, including pages and pages of warnings about all the things that could go wrong, and why it is a risky investment; (4) professional investors such as angels and venture capitalists are often allergic to having any non-Accredited Investors with an ownership interest; and (5) several other things.

The section of the JOBS Act of 2012 that modifies this part of the law is known asTitle III. The problems are that (a) it is not close to becoming available yet for companies because the SEC has not yet written rules for it (and shows no inclination to do so any time soon), and (b) when the rules are eventually written, they will be very, very specific about exactly what both the company and the investor need to do.

So if your goal is to take in money from “just guys”, you will likely need to wait until the Title III regulations are adopted, likely in 2013.

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

As a new independent angel investor, how will I find new companies to invest in?

The two sites you mentioned are both secondary listing services, for later stage companies. For a new angel investor, by far the best thing to do is to join a local angel investor group that belongs to the Angel Capital Association. There are hundreds of them, with at least one in every state. Major metropolitan areas typically have more than one.

Some groups specialize, investing primarily in life sciences or tech companies or women-led ventures or other areas. Some are wide open, investing in everything from real estate to films. Most are somewhere in between, focusing primarily on early-stage, high-growth companies with scalable business models. These are typically Internet-enabled, or consumer products, or medical devices.

But regardless of the specifics, what they all have in common is bringing together a group of active Accredited Investors interested in supporting young startups. Benefits of joining a group include pooling deal flow, capital, domain expertise, and investing experience. Most groups run regular education sessions for new members, and provide mentoring for less experienced investors by those with many deals under their belt.

The typical US angel group will receive a dozen or more funding applications from startups each month; the most active ones, such as New York Angels will receive over 100. Groups also often “syndicate” investments, working cooperatively to fund larger rounds that are bigger than one group can easily handle alone.

As a very rough idea of what these groups are like, the typical member invests in one or two companies each year, putting in $25,000 to $100,000 in each one.

To find one or more local angel groups near you, use the industry’s official investment group search engine at http://gust.com/find-investors.

And for a more in-depth view of angel investing, check out Angel Investors: If I want to invest $5,000 as a new angel investor, what chances do I have of making a profit in 5 years?.


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

How Do You Select A Revenue Model For Your Startup?

Image via Wikipedia

Image via Wikipedia

One of the toughest decisions for a startup is how to price their product or service. The alternatives range from giving it away for free, to pricing based on costs, to charging what the market will bear (premium pricing). The implications of the decision you make are huge, defining your brand image, your funding requirements, and your long-term business viability.

The revenue model you select is basically the implementation of your business strategy, and the key to attaining your financial objectives. Obviously, it must be grounded by the characteristics of the market and customers you choose to serve, the pricing model of existing competitors, and a strategy you believe is consistent with your future products and direction. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
August 24th, 2014

How does a VC keep a track of his/her investment?

Professional investors typically have a range of information rights that they negotiate for when making an investment. While not every investor will have every right (or every right with the same frequency), the types of things we’re talking about include:

  • Seat on the Board of Directors
  • Non-voting Board Observer Seat
  • Monthly, quarterly or annual financial statements (audited or unaudited)
  • Monthly, quarterly or annual narrative management reports
  • Annual budgets
  • “Information rights” (the ability to come into the office and ask questions and view documents)


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