You’ve Heard all the B.S. Reasons — Here’s the One that Matters

Photo by Roland Samuel on Unsplash

When our investment group negotiates the term sheet with startups, the most contentious item other than valuation is frequently board representation. Early stage startups are resistant to having an investor on their board.

You’ve heard all the usual reasons why your board ought to include an investor representative, which basically comes down to helping you run a professional organization. But here’s the real reason you absolutely need an investor on your board…

But first, a little background. A corporation is a legal entity owned by its shareholders. A private company can have a single shareholder, though a public company may…


Everything a Founder Needs to Know About Corporate Structure

Stock Certificate For Your Startup

Disclaimer: I dropped out of law school. I am not a lawyer. This is not legal advice. I’m not an accountant, and this is not tax advice, either. I’m a startup founder. This is startup common sense.

A surprisingly large number of early-stage startups I see pitching for investment are LLCs instead of C-Corps. Since common sense is the collection of all the things that everyone knows except you, I’ve put together this mini-overview of what a startup founder needs to know about choosing a corporate structure.

The only thing you have to know is that if you want investors…


Understanding the difference between the end user, customer, and decision maker is key to sales

Nara Deer. Photo by Karen Farrah Oswald

When I first visited Japan, I was young and if not quite penniless, I didn’t have many extra nickels to spare. At the time, Japan was the most expensive country in the world, and everything from food to trains to lodging strained my limited budget. But I couldn’t miss the seeing the largest bronze statue of the Buddha in the world (1), so I made my way to Nara.

After admiring the Really Big Effing Buddha, it was near lunchtime and I was growing hungry. But $25 for a convenience store bento or $40 for a real meal had me…


After taking our investment, keep us in the loop

Send Out Quarterly Updates to Keep Investors In the Loop. Photo by Markus Winkler on Unsplash

Congratulations. You’ve had a successful seed raise and collected checks from angel investors and a couple of early stage funds. Now you’re busy building the team, extending the product, and signing up customers. Those investors are busy people and the only thing they want is that big check when you exit, right?

Not really. The biggest frustration I hear over and over from other angels is that after taking our money, we never hear from the company again. What we want more than anything is to be informed of your progress and stay involved in the business.

Most angels invest…


Lifestyle Businesses Leave Venture Investors in a Pickle. Photo by David Todd McCarty on Unsplash

The first time an investor asked if I was building a lifestyle business, I felt insulted. With images of working from the beach or spending my days golfing with clients, their question seemed to belittle the insane hours I was working.

I eventually learned “lifestyle business” is a specific term that isn’t what the name implies. And now as an angel investor myself now, I’ve learned the hard way why lifestyle businesses are deadly for investors, and now ask entrepreneurs the same question when deciding whether to invest.

What’s a Lifestyle Business?

The term itself seems to imply a company…


And why all startups should do the same

Photo by LinkedIn Sales Solutions on Unsplash

In building three startups, I really wanted to hire a head of sales as soon as I could. Not doing so was the best decision I ever made and probably the most important reason those companies were successful.

As a startup investor and mentor now, I meet too many founders who believe that hiring a head of sales is what they need to get the company to the next level. It isn’t. And it rarely works out well.

Personally, I hate doing sales and I know I’m not alone. …


Photo by Bill Stephan on Unsplash

After writing more than twenty articles on pitching, I was asked if I could sum up my advice in a single sentence. My first reaction was a snarky, “Yes, my advice is read all the damn articles.”

But while working with various startups over the past few weeks to help them prepare for their pitches, I realized I frequently said, “The one thing you need to keep in mind is…”

When getting started raising money from friends and family, and even into pre-seed, people are investing in you because they know you, they want to support you, they love you…


What Happens to Angel Investors When the Big Money Comes In

Conventional wisdom says startups should begin their funding process with friends and family, then raise an “angel round” before grabbing serious venture capital. However, crunched between the interests of the founders and the venture capitalists with only a thin slice of equity, investing in the angel round rarely leads to good outcomes and is best avoided.

If everything goes perfectly, the angel round has huge upside for investors. The company’s valuation should continue to grow round after round so that even while angel investors are diluted by later capital, the value of their shares continues to increase. …


Unleash the power of storytelling to draw investors into your world

Storytime for Investors

Imagine you’re the CEO of a startup with an important new product. You’ve developed a device to create an instant communications network after a disaster. The prototype works great and users are excited; now you need investment to produce the devices. You’re in a room filled with investors, but they don’t even understand the difference between 5G and wi-fi.

So you start to explain — cells towers can take weeks to fix so you’ve developed a temporary replacement. As you move to the next slide you look up at your audience. Half the room is chatting with each other; the…


Here’s why you shouldn’t change your business plan to meet venture funding models

Image by author

When I went through YC Startup School, their advice often made me angry. Their attitude is that the only way to build a business is to go big or go home, and that infused everything they taught. If you’re building a unicorn, their advice was usually right. For everyone else, it’s wrong. Which wouldn’t bother me so much if their attitude wasn’t that unless your startup is shooting for the moon, go back to working at Starbucks. As my previous article outlined, there’s many ways to fund a great business besides venture capital. …

DC Palter

Entrepreneur, angel investor, writer, and sake snob. Author of the series on pitching your startup to angel investors at https://pitchingangels.com.

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