One of the most important skills you can have as an entrepreneur is to be an effective communicator. How often and how much should you communicate to investors? The answer can depend on what stage your business is in and what you are looking to gain from your investors. Being able to manage expectations of your investors could be the make or break of your next fundraising round.
I often get the question, “ how much equity should I offer my new employee?”, from our founders. Unfortunately, there is no one right answer. You have to take a step back and think about the context and bigger picture. In a perfect word, employees and companies would match so well that the employees would be so content with their job that they wouldn’t even need compensation. In reality, you do need to offer compensation, and in start-ups that comes in the form of cash and equity. If you find and employee that is a good match and can put together a compensation package that satisfies both parties, you will have an amazing employee for years to come.
Recently, I was working with a Founder/CEO through some fairly complex and challenging issues. In this case, I was not a member of the Board, but instead acting as an advisor/coach to the Founder. And, the issues being worked through were significant – it is not an exaggeration to say that the combination of issues could be fatal for this company.
We have been talking a lot about financial modeling, and there seems to be some confusion around how to model the financial growth of your company. Instead of assuming, your company will just grow 10% each month, think about the drives that will cause it to grow and what it will take to get 10% each month. Will you hire more salespeople? Spend more on marketing? Attend more conferences? Run more seminars?
Last time we left you with a question, would you rather keep the Dollar Cave Club business as is? Or raise 50% more capital to spend more on customer acquisition? We know that we will become profitable sooner, but is it worth 50% more dilution? Today, we are looking at how to model both your fundraise and your founder equity.
It’s always interesting to see how entrepreneurs react to our content and our different styles and perspectives. This particular team is the classic case of consultants that have solved a problem for years with bespoke, customized services but believe they have found a way to build a scalable technology product. They have immense industry knowledge and experience but they recognize selling a SaaS product is different than selling a custom service offering, and they are eager to learn.