My last role was as Head of Finance and Head of Deals for a Swiss based angel investor platform
- I have 12 years experience in early stage finance and corporate finance
- I managed a portfolio of more than 100 startups across Switzerland, Europe and the US where I helped portfolio startups raise more then 25Mln € in early stage finance, added value to their growth as well as assisted with a couple of exits for our investors
- Developed a knowledge programme for novice and experienced business angels and maintained and upgraded tools and processes on an ongoing basis for more than 800+ investor network
- assisted to devise and execute our startup's financing rounds, raising more than 4.5 Mln € from business angels, VCs & family offices
- set up business units and completed investment financing rounds in several countries throughout Europe and in the US
Crowdfunding is essentially of 4 kinds: Donation - Revenue - Loan - Equity
The manner it is reflected in your books is according to the nature of the funding received in return.
Will provide only quickfire explanations:
Donation will be classified as "Other Income" as it is earned, but in case you do not deliver on the promise of the campaign, it is not due back to the doner. Watch out for the terms of the campaign however.
If the nature of the campaign is that donors are acquiring a product or service in advance, this is classified as "deferred revenue". The portion of the product or service that is given to the client can then be classified as revenue (i.e. the transaction is concluded), whereas the uncompleted portion is still a liability on the books until completed.
Classical loan accountancy treatment here. Maybe the campaign is such that loan repayments are made in kind, such that the loan is deemed as repaid upon service delivery.
This is transaction based, where the cash received during the campaign in exchange for equity in the business. The terms of that equity need to be defined as either ordinary shareholders. or with certain preference rights.
One of the value adds a consultant/advisor brings is familiarity and convencience.
Let's say I want to improve the SEO ranking for my website. I can solve for this myself, probably it will take me a few weeks, but I can eventually get there.
So in many cases, the answer is not impossible to be responded to, but your value as an advisor is that your know how is at hand.
So as much as possible yes! that will buy you credit for the times you will not be in a position to respond to the question immediately - either cause you are otherwise occupied, or because the response needs research time.
So use those quick wins to your advantage. By the way, you can answer so quickly because you are knowledgeable, not necessarily because the question was an easy way.
Your clients, will learn to appreciate that it is not a given to get such immediate service
I think if you are hoping to make a living off Clarity, you should place your energy elsewhere.
Use the Answers section to train on how to answer real questions you will receive from clients in the marketplace, whether on Clarity, other platforms for through face to face activities.
Improve your ability to communicate clearly and in a manner that showcase your expertise, is impactful and is persuasive enough that it enages your audience to ask for more.
Once that interest is at its peak, then you need to move in to close the deal, and make your business request.
There are 3 aspects to the negotiation
1. the intrinsic value of your proposition
Here due diligence is undertaken namely upon the idea, market, team and product as well as if any IP can be protected and what traction has been obtained to date.
This is what most people speak about when they talk about valuation, but it does not stop here.
2. Market heat.
Try raising money for a crypto startup now, not many are interested other than enthusiasts. But in late 2018, you were the hottest prospect. So timing is key.
However, my personal stance, is that you should not prepare for market heat. Build in what you are uniquely and comparable advantaged to build.
3. Cash runway.
A startup without cash prepare has time to feel the market, enter into parallel discussions with various investors and may even as a result get multiple offers.
A startup with a limited cash runway? with a few months left, that becomes a buyer's market, where investors have the upper hand.
Basically any startup as of the Covid19 pandemic, has little negotiation power (other than a few exceptions who are winning from the moment).
My experience on this topic is to ensure as a founder you know what you need in terms of ask, and what you want to build and by when. As long as you do not give up to much, you should be willing to compromise on valuation, as long as the other party will be a good partner in terms of providing cash today, creating network and business opportunities and be willing to support future equity rounds, either through investment or at least as an ambassador.
Start with why? see Simon Sinek Golden Circle about this.
Why do people need a directory app in this day and age? what inflection has happened in the market place for the time to be NOW? new technology, new culture, new laws?
What unique insight do you believe to be true about the market that others do not believe? What have you observed in the behaviours of your target audience that others have not capitalised upon?
Answer these questions convincingly, and show that a relevant sample of people care enough to spend $x - and that is your pitch