Offer stock options based on engagement, responsibilities & company stage

Photo: Nadir sYzYgY/Unsplash

As a mentor or advisor to many early-stage startups, I’m often asked, “How much am I supposed to pay you?”

I’m glad you asked since most startups assume I’m happy to spend all my time helping them for free. And the truth is, for occasional advice and guidance, I don’t expect compensation beyond the satisfaction of seeing a startup moving in the right direction. So please stroke my ego every once in a while and make me feel like a hero. Let me know you’re using my advice, so I feel like my time is well-spent. …


Hard-tech startups need to choose a business model early

Do You Want to Invent Technologies or Sell Products? Photo by ThisisEngineering RAEng on Unsplash

When I built my first startup long ago, we invented a technology to make applications run faster over the internet. But we were a small team of engineers and coders and the idea of manufacturing and selling network infrastructure to compete with giants like Cisco looked daunting.

So we thought that if we could license the technology to Cisco and all its competitors, that would be so much easier. We could focus on building the technology and everyone could include it in their routers.

When we approached potential partners, most of them were excited. But when we discussed license fees…


Founders are Working for Equity But Equity Can’t Pay the Mortgage

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A common question founders are faced with is how much to pay themselves. On one hand, they need to pay rent and other bills. But the more they pay themselves, the sooner they’ll need to raise more funding. And if they pay themselves too much, it’s a red flag for investors. So what is a suitable salary?

There’s no one right answer to what founders’ salaries should be, but there are many wrong ones that limit the company’s financial runway or turn off potential investors.

It depends on the stage of the company and on the financial situation of the…


Faster Exits Lead to More Funding at Higher Valuations in Early Rounds

SPACs Offer a One Way Street to Riches for Early Stage Investors. Photo by Uwe Conrad on Unsplash

Since last year, SPACs (special purpose acquisition companies) have accounted for the majority of IPOs on the stock market. This SPAC craze is now transforming angel and venture capital investing, making it easier for early stage startups to raise money at higher valuations.

To start, it’s important to keep in mind a unique condition of startup investing — whether by SAFE, convertible note, or equity, an investment in a startup can’t be sold, redeemed, or traded until the company is either acquired or makes its stock publicly traded…


The Presentation Deck vs. the Sending Deck

Photo by Campaign Creators on Unsplash

“It was the best of time, it was the worst of times…” shouldn’t be the first slide of your pitch deck (unless you’re pitching a new publishing venture.) It’s great literature, but too many words for your deck. It’s thought provoking rather than intuitive.

Dickens was famously wordy in his writing and his stories were read over months. You only have 1 minute to convey your story so every slide in your pitch deck needs to be concise and on-point.

Most early-stage pitch decks are far, far, far too wordy and missing needed information. …


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…

What is a Board & Do I Even Need One?

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…

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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