CEO’s hear this a lot: “Your Prime Directive is to BUILD VALUE FOR THE COMPANY.” We tell CEOs that everything must be run through the filter, “Is what I’m doing, being asked to do, spend time or money on, going to build value for my company?”
We even tell that to CEOs who have not yet taken outside investment, unlike who have taken investment. They have a new boss – the investor or investors collectively. They made a written agreement with those investors to work to build value for the company in a good faith effort to return a multiple of the invested capital back to the investors.
Let’s talk about broader definitions for the term ‘value’ with respect to ‘building value for the company’ that CEOs must have front and center in their thoughts every day.
Let’s talk about raising a seed round. Might as well jump into the new year with how to get your startup funded. Elizabeth Yin of 500 Startups did just that in a really clear primer on three seed funding vehicles -- equity, convertible notes and convertible securities -- three ways that entrepreneurs raise seed rounds.
In her January 4 blog post, Yin goes into the basic mechanics of how investors can seed your company. Of the three ways, she says, traditional equity is most widely used, while newer convertible notes gained popularity since 2000, and, and the newest on offer, convertible securities, a hybrid developed and used by 500 Startups and Y Combinator for about a year now. Y Combinator has a very developed and detailed program called ‘SAFE’ which means ‘simple agreement for future equity’ -- pretty much what a convertible security is.
Entrepreneur and investor Nitin Rai is on a bold mission to change the balance of women and minorities in business for better, and he backs his intentions with solid investments. Inclusion, he says, includes everybody. Diversity frequently describes women and minorities, while inclusion welcomes, as well, veterans, rural communities, and anyone or any group underrepresented, underserved or marginalized by changing economies.
He is bullish on an inclusive future, pointing to demographic trends in the country. We are growing more multicolored, “a United Colors of Bennetton”, he says. “Teenagers today have a very different view of the world, even from millennials. Inclusion and diversity are a part of their lives, especially in cities. They not only expect this to happen, they want it to happen. We must be conscious of this upcoming generation.”
Yeah, we all groan about writing them, and put doing so off as long as possible. What’s worse, how many business plans wind up in a file drawer, or in the cloud, never to be read again? So, I just have to ask “What is your business plan for?”
It appears there is no slow down in this activity for Q4, if events are any indication. We just spent a day with investors from China at Seattle Biz TechSummit, and two major investor summits are took place in Europe: The NOAH conference in London and Web Summit in Lisbon. While it’s questionable whether a start-up will actually get funded at these, they are nevertheless excellent opportunities to make contact with potential investors. We certainly saw a lot of that at The Chinese Investor event.
We’re concerned about how many times startups actually qualify their potential investors so they don’t waste precious time and effort going after those who will never funds them … i.e. barking up the wrong tree?