Why Your Startup Should Eat A Debt Sandwich

I’ve given this talk at various Techstars programs quite a few times now, and most recently gave it in L.A. at our awesome Healthcare Accelerator in partnership with Cedars-Sinai. I always do this talk off-the-cuff (no slides) to keep it interactive. You won’t find my talk online anywhere, so I’m excited to share some of the key points for the first time here.

Founders are often given valid but over-simplified advice when it comes to debt financing. Some of the “mostly true” points include; debt rounds cost less from a legal standpoint, that you can negotiate a high conversion cap (implicit next round valuation target) than are priced equity rounds, and you can raise money progressively (one investor at a time).

All of this is often true. Debt rounds can be easier and can also keep costs down for all parties involved. That’s why I’ve often heard it said: “If you don’t know what to do just raise debt”, or “if you don’t want to price your company, just raise debt.” Venture Deals does a great job of discussing these dynamics in more detail.

Don’t get me wrong, I’m not here to say debt rounds are bad news. At all. All I’m saying is avoid raising two (or more!) debt rounds in a row.

Instead, sandwich debt between equity so the debt won’t come back to haunt your company later.

Why Sandwich Your Debt?

Your cap table can end up like a sandwich with too many condiments stacked on top of each other. We all know what happens, and only about ½ the sandwich ends up in your mouth!

Debt rounds become problematic because each round of debt comes with its own discount, it’s own conversion cap, and other rights/terms. It becomes particularly complex if one of the rounds has a low conversion cap and the next has a higher one. The cap table math gets complicated, the founder/common dilution gets significant, and the new money investors end up with less ownership than they are looking for.

All of this has to be sorted out by legal or the VCs, messaged to the existing investors, and managed by the lawyers in papering the round. This causes problems for everyone, and some investors will just walk because the deal becomes complicated.

The early investor sometimes get asked move the cap up, and no one feels good about that move. I often remind founders that $1.00 isn’t actually $1.00 with debt, it’s either a $1.25 (remember the 20% discount & interest) or more like $1.50+ if your next round is well above the cap.

It’s good to go in eyes open and to realize that stacking debt means the discounts, the interest, and the cap all end up driving up the actual dollar leverage to the investor and the company sells more equity in the round but gets no additional net-new capital to spend from it.

When you sandwich your debt between equity rounds you are mitigating the risk of the next equity round toppling over due to complexity or having to do a massive amount of negotiating with both old and new investors and having the dilution get out of control.

Real World Example

One company I worked with had 3 different note rounds with escalating caps and discounts (1M/50%, 2M/20%, 3M/20%). The 1M cap round was the 1st money in and what a deal that was (for the investor)!

The timeframe across all of the 3 notes was ‘too short’; The 1M note was only 6 months from 3M — new investors felt the cap/discounts on the early notes were a ‘deal that never should have been done’ and there was friction from the get-go. Naturally the founders didn’t want to sell any more debt at that 1M/50% level.

Without a restructure of the early debt, it would have amounted to an approximate 5% additional dilution to founders when the priced round closed.

The early note holders were friends and family, but despite that, getting them to agree to changing the debt terms was very challenging. Who wants to give up the better deal they got for taking the early risk?

New investors have a range (ownership model) that keeps founder/early investor/new investor ratios balanced — the successive debt rounds painted the company into a corner where it was almost an impossible equation to solve for. It became messy — and almost killed the deal.

The Solution

The company ended up renegotiating the 1M cap notes to 2M. This cost the CEO 80 hours of time, the co-founder another 60 hours, and a substantial legal bill. Let that sink in for a moment. The founders lost a good month of productivity on this.

Had they raised the 2nd/3rd round of notes as a priced round, the first round of notes would have been converted in early. The 1M note investors would have gotten a quick 2x on their investment and then owned equity. None of this process and extra dilution would have taken place. The company would have raised that seed round with a pre-money around the same valuation as the later note caps, so they would have also saved the 20% discount.

Avoid this kind of headache, and just eat a debt sandwich instead.








Funding and M&A Activity Across the Techstars Ecosystem

The past three months have seen some exciting funding news for Techstars companies! Congratulations to:

Also, a big shout out to the Techstars companies below that have recently received investments!  

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datarobot DataRobot (Cloud ‘13), the Boston-based company that brings machine learning and data-science tools to businesses, raised $33M in a Series B round in February.
Latch_Logo_300x300-02 Latch (R/GA ’15), is the first smart access system that works for your apartment, your office and your home. Latch recently raised $10.5M in a Series A round led by Lux Capital. 
Screenshot_2015-02-02_06.54.56 StatMuse (Disney ’15), is an artificial intelligence platform to help sports fans explore data using simple, natural language. StatMuse received $10M in a Series A round in late January.
logo Wunder (Boulder ’14), the company that provides the solar expertise and partnerships necessary to make investing in, diversifying, and optimizing a solar portfolio delightfully simple, recently raised $3.6M in a new round of financing.
twittericon Naritiv (Disney ’14), announced a $3M Series A round led by Third Wave Digital in February. Naritiv is the platform that connects brands and advertisers with influencers on Snapchat  
DOPAY_LOCKUP_WHITEONPURPLE dopay (Barclays London ’14), the SaaS solution that provides payroll services to both banked and unbanked workers, recently announced a $2.4M pre-Series A round.
GreatHorn-Owl_(logo_for_print) GreatHorn (NYC ‘15), is a cloud security platform that helps detect and prevent spear phishing and credential theft attacks in realtime. GreatHorn announced a $2.25M seed funding round this past March. 
connect_infiniscene Infiniscene (Chicago ’15) recently raised $1.8M to scale-up and improve their existing platform. Infiniscene is a broadcast studio in the cloud that empowers gamers to easily create live broadcasts from their browser. 
Screen Shot 2016-04-07 at 12.54.05 PM eRated (London ‘14), creates a single identity for e-commerce sites, allowing online buyers and sellers to utilize their already existing reputation everywhere they go. eRated raised $1.7M in late January.
ChainalysisLogo2 Chainalysis (Barclays NYC ’15) has raised $1.6M in funding. Chainalysis specializes in countering money laundering and fraud in the digital currency industry. 
logo-square Gorgias (NYC ‘15), the automated helpdesk enabling companies to respond faster to customers, recently raised $1.5M.
Tenacity (Sprint ’14), is a scientific cloud application to engage, retain and optimize your contact center workforce. The company raised $1.5M in funding this past February.
Screen Shot 2016-04-07 at 12.57.05 PM Socedo (Microsoft ‘12), raised $1.5M earlier this year. Socedo is an automated social media lead generation tool.
logo Datapath.io (Berlin ‘15) raised $1.1M this past February. Datapath.io is a network performance management solution.
Screen Shot 2016-04-07 at 1.00.10 PM DataCamp (NYC ‘15) is an online Data Science school that uses video lessons and coding challenges. DataCamp recently announced that they secured another $1M in funding.

 








Living on the Edge: Your Startup Runway (Comic)

#entrepreneurfail Runway

“We are ready to take off. Fasten your safety belt.”

That is of course, until the plane comes to a screeching halt.  New startups have to build their business before they are airborne. However, the startups need to do this before their funding runs out. This funding is the runway and it is always shorter than the founder thinks. It is calculated by dividing the current cash position by the current monthly burn rate.

Extend the runway as much as possible by leveraging the following:

  1. Create a budget and double it.
  2. Launch profitable products and sell them to profitable customers.
  3. Build a service to hone your product.
  4. Hire judiciously.
  5. Initially, use subscription services instead of making capital expenditures (e.g. subscribe to software instead of buying it outright).
  6. Keep on the watch out for the end of the runway.
  7. Think lean.
How long was your runway when you first started? Let us know in the comments below.
This was created by Kriti Vichare for #entrepreneurfail: Startup Success.







What I Wish I Knew Before Techstars

Techstars was incredible. In fact, I’ve already written two other blogs “Words, Words, Words” and  “The Magical and Diverse World of Techstars” where I share some lessons from my time there.

Now that it’s been several months since the program, I want to share (from the CEO perspective) the one thing I would have done differently prior to entering Techstars.

Now, there’s no doubt in my mind that Techstars was incredibly beneficial to our growth. It allowed me to meet with incredible mentors and during your time at the accelerator, important contacts are even willing to come to you to meet.

The program is three months long and is broken down roughly like this:

– 1st month: Mentor Madness AKA Mentor Whiplash. This is a solid month with the most brilliant people in their fields giving you advice in 30-minute increments and it’s ABSOLUTELY INSANE.

You will walk away from this first month, or at least I did, more confused than when I started, but with some really awesome mentors who are in it for the long haul.

– 2nd month: Execution. You get one month to go full force and literally accelerate your business as rapidly as you can. How are you able to get so much done so quickly? You’re able to accelerate because Techstars is there to help you access every and any resource you need.

– 3rd month: Preparations. This really kicks into full gear for Demo Day. Demo Day is a very big deal. Don’t lose your mind. Until you nail it, they will keep pushing you to get better and better.

Here’s what I didn’t anticipate: building relationships with investors doesn’t happen overnight, and it rarely happens in a month.

I walked into Techstars thinking that they would give me access to the investors I wanted to meet. What I had not considered was the time it would take to build those strong relationships.

Everything worked out wonderfully for us. I am very lucky to have formed such a strong relationship with Seth from the Foundry Group because three months post Techstars, we closed a $3 million round with them. But here’s the thing, I knew Seth from before. In fact, even before we were accepted into Techstars, we had done our seed round with Seth as our lead with the FG Angels.

So as a CEO, if I were ever to do an accelerator again, I would do my research ahead of time.

I would have walked into Techstars on day one with a list of researched VCs and have a clear reason for why I believe they would have been a good fit for us and why we would be a good fit for them.

Then on day one, I would have given that list to my MD, along with the person I believed would be ideal to contact in their group and then asked for introductions. This would have given me three months to work on building a relationship with them versus trying to find the time to do all this in the madness that ensues during those three months of acceleration.

As a first time CEO, I had never thought of these things, but hopefully this helps you prepare to use your time as effectively as possible while in your accelerator program. If nothing else, it forces you outside of your comfort zone and that’s where the true growth comes from.

Best of luck!

[Application deadline for the next session of Techstars programs is March 20th. Apply now for Atlanta, Retail, Chicago, NYC, Mobility and London.]








Gymy does the double at #SWDub

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54 hours later and we’ve come to the end of the road for #SWDub – April Edition. Just like any other Startup Weekends, we’ve had a fair share of pitching, coaching, mentoring, hacking, pivoting, re-branding, munching, drinking, among other things.

We even had a session with mentors sharing their failure stories.

Of all 11 ideas, here are those that made it to the big stage for prizes:

The team behind Sober Sean was awarded special recognition for showing team spirit. According to Eamon Leonard, a #SWDub judge, this was very important and essential to the success of any venture.

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In 3rd Place – 11th Hour, the startup idea to help pubs and bars get last minute employees. The mobile solution was very impressive and definitely meets a need for businesses.

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And in 2nd Place – Xiron, an online platform that helps gamers book coaches in order to improve gaming skills through one-on-one play, feedback system, and community rankings and ratings. The judges were mostly impressed with the idea as it explored a sector that has is very underestimated especially when it comes to revenue and profitability.

IMG_20150412_200307

And the winner for the April 2015 edition of Startup Weekend Dublin is Gymy, a startup that describes itself as the Airbnb for Gyms, allowing users make on-demand bookings for gym sessions. The team also won the prize for best pitch from the judges for a very well rounded presentation.

The winning team will be headed to Startup Festival in Berlin, courtesy of the DCU Ryan Academy. They also get to go on to Startup Next, one of Europe’s best incubator. Many thanks to our other sponsors – Bank of Ireland, Google, The T-Shirt Company, European Pioneers, WeDevelop, and Currency Fair.

Till next time, which should be at the June edition of Startup Weekend, keep doing epic sh*t!

That’s all folks!
– @NubiKay. Signing out.








Ask An Entrepreneur: What it is really like to raise capital as an early stage startup?

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Answer provided by: Brad Sams, CEO of Tracour.

Past Employment: Consultant at Clark Schaefer Consulting, Staff Auditor at Kendle International

Featured Recently in: TechCrunch — “Tracour Locks Up $335K To Help Uncover The Best Financial Analysts”

 

_____

Do you like bashing your head on the table, being told ‘this wont work’ and having to consistently sell yourself, your idea, and how you will execute this plan 100 times a week? If you answered yes to all of those questions, then you are ready to try and raise money for your idea.

My startup, Tracour, is a project that has been in the works for roughly two years and has taken a considerable amount of time to perfect the model and to get our pitch ready for prime time.

There are few people in this world who can walk into a VC office with an idea and get a check for $10,000,000 to kick start their endeavor…the qualifying statement on that is if you can answer yes to “I sold my previous startup and returned a 10x multiple to our investors”, then you are a special breed.

How we pitched Tracour

Here is the funny thing about Tracour, when we went out pitching, we did not show off Tracour, we showed off Sorsed, a project that we had previously built. Sorsed tracks tech rumors and vets journalists to see who is reliable and is crowd-sourced. We built Sorsed out of fun and it’s a lightweight product from developers’ point of view since it is all crowd sourced.

Tracour ranks financial analysts in real time to see who is generating quality investment advice using automated procedures. Hopefully you can see the comparable here and this began our journey to start pitching.

We got our foot in the door with our one-line pitch, “We rate financial equity advice in real time”, at least, that was our goal at the time of the initial pitch.

When we got face time, we showed off Sorsed and this accomplished two things. 1) It showed that we could build a product 2) It offered talking points about how we can turn Sorsed into our new platform and had easy comparable that investors could see at the time.

Here is what you have to understand; when I finally met with our angel investor and got him to invest he told me something to the degree of:

“I am investing more in you and your ability to execute ideas than I am in concept of Tracour. I like what Tracour will do and I believe you can build a product to deliver on these promises. “

When we pitched to VCs, we had a functioning prototype of Tracour thanks to our angel investment, this made it much easier to show that we were capable of building the platform but required additional funds to reach our goals. At this point, it was “we love the idea and know that you can execute on your promises”.

What it is like to pitch

If you are not willing to be a persistent jerk, you will not survive. You don’t have to be a jerk to the investors (I don’t recommend that) but you have to follow-up, get used to having your calls not answered and most of all, you better be persistent.

Here’s a fun fact for you, Tracour does not have a pitch slide deck; nothing, not a single completed PowerPoint. We always pitched demos, a demo goes so much further than static slides. Our entire pitch was a demo of either Sorsed (angel level) or of the prototype (VC level).

Granted, our financials at that time were pretty simple so we didn’t have customer growth charts so slides would have been boring.

What I learned from this process

1) Be ready to be turned down, a ‘no’ is only part of the process and it only takes one ‘yes’ to complete a deal.

2) If this is your first startup, be prepared to talk about how you are able to be ‘that guy’ who can build this product; They are investing in your ability to execute.

3) You cannot do it all, surround yourself with go-getters and divest the work as needed. Focus on what you are good at (hopefully pitching) and drive that home.

4) Prove that you can build something…Sorsed for us proved that we could build a product and got us our first bit of cash.

Not sure if this will help, but it was our journey to raising money. Build something (anything) to show off that is related to your end goal…let them see what you can do, it helped us out quite a bit.

Follow along with Tracour: Twitter and Facebook








Crowdfunder Blunder: Leverage Crowdfunding or Waste of Time?

#entrepreneurfail Crowdfunding Parking Tickets

Have you ever heard aspiring entrepreneurs casually say: “Oh I’ll just put it on Kickstarter”.   I’ve heard that quite a bit recently and I thought I’d investigate.

People throw around the word “crowdfunding” like a party favor. Crowdfunding is the networking and pooling of individual funds for a project, often in return for a gift.  Last year “crowdfunding” and “crowdsourcing” were buzz words, and the popularity of Crowdfunding sites still reign supreme. In a recent count, every niche seems to have its own crowdfunding site.

Crowdfunding seems like a great way to fund your startup without the hassle of investors that want their money back, and with instant validation from potential customers. Kickstarter, which has to date provided $1.4 billion (as of Dec 2014) in funding is always a great case study for the benefits of crowdfunding. But what many entrepreneurs don’t hear about is the flip side. I recently fumbled across YourKickstarterSucks which shows the sad fate of pitches that should never have been posted to begin with. If you think crowdfunding is the best method for gaining some traction on your business idea, consider the following: a subset of projects on Kickstarter completed their round without receiving a single pledge, and some do not get funding because they don’t reach their goal – an unfortunate #entrepreneurfail.

The only way a project will be a good candidate for crowdfunding, is if the target investors and donors are both willing and able to align with the project conceptually and financially.

Now, say you do identify a project that makes sense to crowdfund. Here are some guidelines about posting a project on a crowdfunding site to maximize the returns for both your venture and the investors:

  1. Be realistic about the total goals
  2. Make project crystal clear, concise and super easy to communicate
  3. Show evidence of potential future success – through past sales or market research
  4. Provide compelling gifts for investors/donators

Good luck with whatever funding route you take! Let us know how it went in the comments below.

This was originally published by #entrepreneurfail: Startup Success.

 








Take the First Hasty Exit, then Make a U-Turn (Comic)

#entrepreneurfail Exit

Last year, I was working on a business that I was convinced could be bought by a huge media conglomerate. In fact, before I had a business model, funding, prototype or even a single customer, I was ready to sell the business! Needless to say, the business didn’t work out. My passion was focused on the wrong place. And I’m not the only one. Many entrepreneurs I speak to are looking for an exit strategy much earlier than even their entrance strategy.

I read an article by Mark Cuban many months later and the second line struck me:

  1. Don’t start a company unless it’s an obsession and something you love. 
  2. If you have an exit strategy, it’s not an obsession. 

Who is Mark Cuban? If you haven’t seen him on Shark Tank, or aren’t a fan of the Dallas Mavericks, just know he a billionaire who built his way up. And, yes, in retrospect, that business I was working on was not an obsession – making it an #entrepreneurfail.

From my experience, here is a checklist of red flags to warn you that you may be too interested in an exit strategy too soon:

  1. You are more interested in selling the business than in creating what your business needs to sell.
  2. You haven’t talked to a single customer, but are sure that future owners of the business will.
  3. You are browsing potential investors of the company, before creating a proof-of-concept yourself.
  4. You don’t want to learn too much industry knowledge since it won’t be needed after you sell the company.
Do you agree with Mark Cuban’s quote about the exit strategy? Let us know in the comments below.

This post and comic were originally created for www.entrepreneurfail.com








How to Get Investors and Funding for Your Business

Originally featured on grasshopper

Ok, so you’ve got a business idea, and you’re working to make the dream a reality, but you’ve got to consider funding.

After all, you need money to turn your idea into something tangible. You need cash to pay your employees.

If the money isn’t rolling in yet, it’s tough to build a top notch product or service.That’s why many small businesses and startups look for funding and seek out investors.

Before you even begin to consider outside investment, consider how you can launch the company and get to revenue before you have to raise money. Although it seems hard in the short-term, it’ll be better for you in the long-run in terms of your knowledge of the process, and building your own equity.

So, how do you do it?

Screen Shot 2014-11-18 at 11.49.26 AM

Why You Should Bootstrap

Bootstrapping means that you raise money without any help from investors. It’s how we got Grasshopper off the ground. If you can build your business without investors, do it this way.

You might bootstrap and keep your full-time job or quit and use your savings to get business off the ground. Begging your parents for money counts as bootstrapping.

Why bootstrap? You’ll retain complete control. That might not sound like a big deal, but when you’ve got investors’ hands in your company, you won’t be able to build the product you dreamed. Things get mucky when you’re playing with someone else’s money.

Here are some of our favorite resources for bootstrapping:

  • Starting Up on a Shoestring | Inc. If you want to bootstrap your business, check out Inc.’s comprehensive list of bootstrapping articles. The list includes tons of stories of entrepreneurs who successfully bootstrapped their businesses.
  • Bootstrapped, Profitable, & Proud | 37signals 37signals is famous for being both bootstrapped and profitable. They have a whole page dedicated to companies who didn’t take money from venture capitalists. Read Rework by founders Jason Fried and David Heinemeier Hansson for more info on bootstrapping.
  • How to Bootstrap your Business | Entrepreneur Erica Ziela, founder and CEO of Sitting Around, explains how moonlighting helped her succeed. She also discusses how keeping her day job allowed her to pour significant cash into her business
  • Bootstrapping Your Startup: 7 Hard-Earned Tips from Real Entrepreneurs | readwrite Real entrepreneurs offer tips and tricks on how to bootstrap a business. These leaders discuss what they’ve learned from bootstrapping, its benefits, and what bootstrapping can do for you.

If you can’t bootstrap, it’s worth learning a little about equity.

THE DIFFERENT TYPES OF EQUITY

  • Equity financing is when you sell “shares” of your company to outside investors in order to finance your business. When you make money, your investors are entitled to a portion of the profits. This type of equity is best for sole proprietors who need some start up cash.
  • Equity compensation is when you offer your employees a percentage of company profits as part of their compensation package, typically in exchange for a lower than average salary, or occasionally in lieu of salary completely. This type of equity is best for businesses that are in need of human capital more than physical capital. If you already have an office, a coffee maker, a copier, but need a new software developer, this might be the model for you.

CALCULATING EQUITY

As you get started, it’s worth understanding how to calculate shareholders’ equity, and it’s important to investors. To figure out your business equity, you’ll need to calculate the assets and liabilities of their business.

Start by determining the company’s total assets- these are things that are in progress, inventory, cash, or other receivables. You’ll also need to figure out your debts and liabilities, including salaries and accounts payable. To calculate equity, you can subtract the liabilities from the assets. Accounting software such as FreshBooks or QuickBooks can help you do this.

ANGEL INVESTORS

Too many young entrepreneurs become obsessed with raising angel and venture capital. When this happens, these folks lose sight of the real reason they became entrepreneurs – to launch and grow their company.

Remember that raising money is not a competitive game where you’re out to win. If you focus on the sport rather than building your business, you’ll undoubtedly end up on the losing side.

If you really have no option but to raise money, angels can be a good alternative to smaller VC rounds, but you want to make sure you’re working with the right investor.

Start by learning the three types of angel investors. Then pick the right one.

ANGEL INVESTOR #1: “I LIKE MONEY AND NEED MORE.”

There are too many of these “professional angel investors” out there, and they’re the worst. Their only goal is increasing their wealth. This type of investor is actually a person that wanted to be a VC, but couldn’t raise enough capital.

The reason they are so dangerous is that they have too much vested in the small amount of money they give to your business, which then leads to over-involvement and pressure on you for all the wrong reasons.

Should you take her money? No.

ANGEL INVESTOR #2: “I HAVE SO MUCH MONEY, I DON’T KNOW WHAT TO DO WITH IT.”

Every entrepreneur has met one of these investors: it’s the person who has already generated significant wealth and has no real need for more money, and can afford to be a lot less selective in funding ventures. They’re probably in the stage in life when they’re giving back, and part of that can be through angel investments.

This type of investor is ok if you’re looking for just money and maybe some general advice about the start-up process. But don’t expect incredible moral support or stellar advice from this kind of investor on a regular basis – he or she is likely over-extended in that realm due to their involvement in multiple ventures.

Should you take his money? Maybe.

ANGEL INVESTOR #3: “I’M PASSIONATE ABOUT A SPECIFIC INDUSTRY, AND HAVE TONS OF CONNECTIONS IN IT.”

This is the best angel investor, and a selective one, but the kind you should absolutely target. Why? Because this person already has money and isn’t looking to get involved in angel investing to generate more wealth as the ultimate goal. Instead, they’re hoping to serve as a true angel and really come through for your business by offering both funding and insight.

Best of all, she has clear passion for the industry you’re in, and probably the connections that will indirectly help you succeed. They’ll also have something money can’t buy: credibility in your industry and the connections to make good things happen.

Should you take her money? Yes.

Our advice is to look for angels that fall into either #2 or #3. Stay away from #1 no matter how desperate you get.

STARTUP INCUBATORS AND ACCELERATORS

Both startup incubators and accelerators offer seed money, expert mentorship, supplies, and office space to winners in exchange for a share of company ownership.

Giving up company ownership is a huge deal, and it’s not something you want to take lightly. However, if you’re looking for mentorship and a community, joining an incubator or accelerator might be a good idea.

The two are slightly different from each other. Accelerators usually focus on mentoring and refining as a company tries to go to market, while incubators are more involved in getting the ball rolling on making money.

Some of the most popular include Y CombinatorTechstars500 Startups, andCapital Factory, among many, many others. These are sometimes specific to certain fields (technology or entertainment, for example), and others will accept applications for all types of ventures.

Given how beneficial they can be, acceptance into incubators and accelerators is typically VERY competitive across all industries.

There are incubators and accelerators everywhere. Just check out this comprehensive list.

VESTING SCHEDULES

If you’ve got a co-founder or other employees that are riding the wave with you, set up a vesting schedule so that they get benefits once they’ve stayed for a while, not right away.

This protects you from any employees who want to jump on to get rich quick, then take off. With vesting schedules, these employees will only own a part of your company after they’ve stuck around for a while.

Cliff vesting – If an employee is part of a cliff vesting plan, they’ll become vested at a specified time (like after staying for 3 years) rather than gradually or incrementally.

Graded vesting – In graded vesting, employees get a certain amount of company ownership over a period of time. Graded vesting is different from cliff vesting because cliff vesting allows employees to become 100% vested after a shorter period of service

MORE FINANCIAL INFO

We know a lot about funding and investing, but we strongly recommend hiring a business lawyer to protect you as you go through these processes. Lawyers can help you sort out what’s fair and right as you hunt down money.

Sure, lawyers are expensive, but they’re worth it!

If you’re looking for more info regarding investors, financing, and equity, check out our Equity for Entrepreneurs: A How-to Guide. We dive in deeper there.








Education Entrepreneurs Partners With Imagine K12

Entrepreneurship is a Journey

It’s a marathon, not a sprint. We’ve all heard this phrase used to set the context for those about to take their first leap into entrepreneurship, and I think most seasoned entrepreneurs would agree with the point it’s trying to make. The development and sustainment of a successful startup doesn’t just happen overnight; it takes months upon years of hard work, sacrifice, discipline, and execution to produce a venture that’s secured product market fit and established a solid foundation to ensure its livelihood for years to come. Due to the various obstacles entrepreneurs will have to overcome and the wide range of emotions they will experience trying to turn their vision into reality, some might argue that entrepreneurship is neither a marathon or a sprint – it’s moreso a marathon, a sprint, an Ironman Triathlon, Tough Mudder, and Tour de France all rolled into one, while carrying 50lbs on your shoulders.

No matter what you compare it to, the fact is, becoming a successful entrepreneur and building a successful startup is quite the arduous process. Success doesn’t just happen; large amounts of time and energy must be invested over extended period of times, and throughout various stages of the company’s development. Recognizing this, UP Global, created The Entrepreneurs Journey. Broken up into six stages, The Entrepreneurs Journey outlines the specific phases every entrepreneur goes through in pursuit of creating a prosperous venture. In order to ensure entrepreneurs’ needs are met at every stage, UP Global has created complementary programs for each one, including Startup Digest, Startup Weekend, Startup Next, Startup Week, and Entrepreneurs Across Borders.

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Education Entrepreneurship is Unique

Recognizing that entrepreneurs aiming to build education businesses face unique problems (e.g. developing products that align to both the needs of students and teachers, securing pilot opportunities in schools, navigating government policy around student data), UP Global developed Education Entrepreneurs. The goal of Education Entrepreneurs is to create a suite of programs and resources specifically to meet the needs of education entrepreneurs. Beginning with the popular “turn your idea into a startup in 54 hours” program called Startup Weekend Education, Education Entrepreneurs offerings have expanded to include Startup Digest Education, Bootcamps, and Summits. Whether interested in exploring different options to innovate in education, excited by the opportunity to build a prototype in a weekend, or ready to jump full steam ahead into the world of being an official edtech founder, Education Entrepreneurs is giving more people than ever the opportunity to utilize entrepreneurship and technology to solve problems in education.

 

Partnering With Imagine K12

In the past year alone, Education Entrepreneurs has expanded from 12 to 74 events, 9 to 59 cities, 3 to 24 countries, and 2 to 6 continents. This means nearly 7,000 people around the world have joined our community and are engaging in the innovation process. As we help increasingly more people enter education entrepreneurship, we want to make sure they have access to the best resources, mentorship, and funding opportunities throughout their journey. Earlier this year, we partnered with edSurge, the leading source of news and resources on education technology. This partnership has provided our community with access to important and timely content, valuable resources, and unique opportunities.

Today, we’re excited to announce that we are partnering with Imagine K12, the leading edtech accelerator. This partnership will give our education entrepreneurs better access to crucial mentorship and funding opportunities to scale their ventures and ensure the solutions they develop actually reach the learners they were designed to help.

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Since 2011, Imagine K12 has cultivated hundreds of edtech entrepreneurs and companies by providing them with funding, mentorship, connections, and incredible guest speakers, like Mitch Kapor, founder of Kapor Capital, Eric Ries, founder of The Lean Startup, and Paul Graham, founder of YCombinator. Here’s some data highlighting Imagine K12 results to-date:

  • Launched more than 70 companies

  • Imagine K12 companies have raised more than $120 million

  • More than 10 million students and more than 1 million teachers are using Imagine K12 products

  • Award-winning companies:

    • Remind, 2014 Educators Top Messaging App

    • Code HS, 2013 NBC Innovation Challenge

    • Hapara, 2013 NYC Schools Gap App Challenge

    • Raise Labs, 2013 GSV/ASU Education Innovation Summit

    • LearnSprout, 2013 MBA Impact Investing Network

    • Bloomboard, 2012 SXSW LAUNCHedu K-12

    • NoRedInk, 2012 NBC Innovation Challenge

    • ClassDojo, 2011 NBC Innovation Challenge

Over the past three years, several Startup Weekend Education and Startup Weekend alumni have been admitted into the Imagine K12 cohorts, including the founders of Class Dojo, NoRedInk, Blendspace, Plickers, Learning Jar, and Tioki. With a goal of connecting even more Startup Weekend Education alumni to valuable funding and mentorship opportunities, our new partnership with Imagine K12 will give all first place winners of Startup Weekend Education events a guaranteed interview with Imagine K12’s investment team, if they choose to apply. All teams participating in Startup Weekend Education events as part of the Education, Empowered Track during Global Startup Battle this weekend and next (November 14th-23rd) are eligible for this opportunity, and local Facilitators and Organizers will be equipped to answer participant questions.

As Education Entrepreneurs grows over the years, it is our goal to support education entrepreneurs at every single stage of their journey, and we’re excited that our partnership with Imagine K12 will help us achieve that.

More About Imagine K12

Imagine K12 is a startup accelerator for companies that are creating innovative technology solutions to enrich and transform K-12 education. Starting a company is hard, and the education market presents unique challenges. Imagine K12 has a singular goal: improving your company’s chances of success. They do this through a combination of strategic advice and mentorship; supportive networks of investors, educators, and entrepreneurs; and a small amount of initial funding (about $100,000). Over the past three years, Imagine K12 has helped to launch 70 companies, which have collectively raised over $120 million in funding and reached millions of classrooms around the country. Read why Imagine K12 is excited to partner with Education Entrepreneurs.