A collection of notes on startup and small business operations.

I've built a few companies. During the 1999-2001 I had my first startup experiences. I joined an early stage company (Everdev) that sold app-site development services and a content management platform.

The Happy Path

Idea
Canvas - https://businessmodelanalyst.com/downloads/lean-canvas-template/
Customer Development / Build Community
Team
Traction

The Un-Happy Path

Idea
Skip Canvas
Start building PRODUCT
Forget Marketing
LAUNCH
Realise room is empty, clients are scarce, revenue is zero
Start blaming each other or some bullshit "market forces" or "we were to early"

Prime Objective: Get to Cash Flow Positive

Get some revenue, some how some why. Revenue proves traction, any other metric you can imagine is a BULLSHIT metric for proof of traction. Think "beyond a reasonable doubt".

Default Alive or Default Dead?

Start a Business

Start a Sole-Prop if you're just getting started. It's very easy and inexpensive to ramp-up from Sole-Prop, to LLC to S-CORP to C-CORP. It's difficult and expensive to unwind or to roll-back.

A tool called [Stripe Atlas]() can help.

First tax year with Stripe Atlas

The Happy Path

Due Dilligence

https://www.meetup.com/Seattle-Angel/events/271263808/

-- @todo Can we get a Checklist? -- @todo What About a ENT "Canvas" for Fund Raising -- @todo Canvas All the Things! -- @todo ENT should have a Prepared One-Sheet + Link to Doc-Set Magic

Books / Links

SAC YouTube Channel, Some Recordings have Books "Angels" by Jason...something "Calacanis?"

Pre-Seed?

Angels & Syndicates

FFF, Heros, Angels
DD Focus: TAM, Simple Company (simple cap-table), Good Team
- TAM: >$5B
- Proven Team: 18+ mo together? All Key Players on Cap-Table
- No Surprises!!
- Buying the Team more; INT is buying BEFORE the "Pivot"

Seed (eg: Priced)

Angels and Syndicates & Seed

Serious Money
DD Focus: Product/Market Fit ("PMF"), Unit Economics,
- CAC: Customer Acuisition Cost
- ASP: Average Sales Price
- ICP: Ideal Client Profile
- CLTV: Customer Life Time Value
- Stickyness: IP,

Series A

Seed and Early Stage Venture Funds

DD Focus: Scale
- Documented & PRoven Scale Metrics
- Control of Churn, not a "leaky bucket", doing client exit interviews? Active Surveys?
- =50 Clients at ASP
- Margins Good/Real
- Eye on Next Target, Customer Segment, Growth Area
- Capital Stack?

Always Do

Thesis: Bio-Pharma, FinSaaS, etc.
Ability to write this check
Ability to say "no" or "not yet" ** Not Yet is a big deal
Passion for Service

Table Stakes for ENT

Must haves for getting started

Identify Lead -- "big dogs", "whos in charge", audience research
Organized Documents
- Legal: Articls, Cap-Table, etc, etc, keep it clean and tidy
- Pitch Deck
- Financials: P&L, Balanace Sheet, Projection
- Team Details: Current Resumes, Future Hires, Options Details
- Team is on LinkedIn, AngelList, ProSeeder, Gust, CrunchBase, PitchBook, etc, etc

Books / Links

Risky Business

Most fail, lose all your money, lose some friends, etc.

https://www.codingvc.com/how-to-de-risk-a-startup/

Risky Business

Core Questions

Who Is the Client
What does the Prospect/Customer Smell Like?
Where are they located? Where are they spending time?
When do they care first? When do they care in a cycle?
Why are there problems? Why do they want/need you?
Who Is is the Payer
Who is the User
Who are the Competitors
What are the Alternatives, Accessories, Supplements

16 Things:

16 things that you need to understand for your startup business

Customer
early adopters
Problem
existing alternatives
key metrics
Unique Value Proposition
Unfair Advantage
high level Concept
Income
expenses
Market size
traction
team
go to market
Channels
Solutions

Core Questions

Finding other Founders

T+MMM -- Techonology, Money, Marketing and Management

Could be skills found in 2, 3 people too; early you wear multiple hats.

Look for complementary skills; don't need three managers at the start; don't need three engineers.

Test your prospects, like dating for marrage. Can do "the thing" that's in their skill-set in "T" time? eg: I'll get the landing page built in 2 hours I'll get our legal paper work in order this week I'll get some ads running on $SITE and get 1000 clicks I'll get three meetings with investor prospects.

Startup events can be a great way to find new people outside your existing network. Eg: Startup Weekend - Real or Virtual

Alignment

The Founders are all in for a long journey together, must have good alignment. Do you want to build the same size / type of busienss (eg: SMB vs VC Backed)? Do you have the same exit stratgey? Do you envision the same type of growth (steady vs hyper) Can you make the same time commitments

Tools

Use an Equity Calculator

Internet Commentary

Alignment

The Pitch

Practice these, really, practice -- and time your practice. Don't want to just read off a transcript, needs to feel dynamic.

Be Ready for REMOTE PITCH -- RECORD IT; Practice TESTING the Meeting Software & your Remote Access Setup.

Make sure you're skipping the UMs and stuff. If you have a CTA make sure you land it (at the end).

NOTE: Be aware of Private vs Public Solicitation Reg D 506(x) So don't ask about specific money, or round or amount to raise if it's possible it could be considered Public.

Pitch Deck Checklist
How to build a great Series A deck and pitch
Team, why-us.
Traction, why-now
Problem Space
Market Size, Growth of any Metric (Audience, Followers, Prospects, Clients, Wait-Lists, etc)
Expertise / Solution
Ask

15 Seconds

$COMPANY_NAME does $X for $Y We have a TAM of $X and current $REVENUE We are looking for $ASK

5 Minutes

More of the same but, longer still

The CTA for this one should be UNIQUE from the CTA in 1m, 3m

10 Minutes

More of the same but, longer still

The CTA for this one should be UNIQUE from the CTA in 1m, 3m, 5m

15 Seconds

Pitch - 1 Minutes

No Slides, cover Team and Traction The Good Talking Points -- what's going right, where it's going.

Traction: Any Revenue? Path to Revenue?

Using this to get to the NEXT step. Don't try to get the FULL detail.

$COMPANY is a $THING_TYPE that helps $CLIENT_TYPE. Our $CLIENT_TYPE is a huge $MARKET_SIZE. Our $MAGIC helps with $PAIN.

Pitch - 1 Minutes

3 Minutes

Maybe like 30 seconds per bullet point.

Company Introduction
Team Slide (core, maybe advisors, etc)
TAM, SAM, SOM - Who is the Client, Competitors
Details about the Problem
Prospects, Customers, Revenue, Funding
Contact Information, ASK, Social Networks, Email, Phone, etc

Be prepared for details about your Team

Need to Be Clear about points -- don't go to far into the weeds on the technicial details.

Good to cover the Channels that are how folks landing at your business Be sure to cover GTM (Go To Market) process/strategey

Should at least touch on some information about Competition

There is room to talk about some KPIs but keep them simple. If you mention money, or money raised or contributed be prepared to talk about those details. When talking about finances be brief, if you're pre-revenue there isn't much to say.

Should still stay focused on points, and give enough pause for inventors brains to absorb, riff and comeback.

Charts are not such a good idea, expecially detailed one -- three huge bars is MAYBE acceptable.

Contact information is critical, The CTA for this one should be UNIQUE from the CTA in 1m

3 Minutes

Client Segments

How to build a SEgement.

Self Filter out the Folks who are clearly NOT interested. Don't waste time with them, save them in a "CRM" and maybe come back to them.

Client Segments

Beware

Client says it looks great and wants the Product; but is waffling. Doesn't Commit Hard ($CASH) Maybe Routes you to Tier-2 Clients (really $TIER - 1) - This person is FAN not a CLIENT

ASK ABOUT BUDGET EARLY AND OFTEN -- What does a Purchase Look Like? What are the Metrics for Success

AARRR Metrics for Pirates

Acquisition, Activation, Retention, Referral, Revenue!

Original Here: https://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version

Phone Calls

Some folks think that 10 calls a week is good Some folks think that 100 calls a day is good (with like 5 connects)

Ask HN: What's a side project you built to make money that hasn't?

Beware

The Event Plan:

I know X about Y (eg: X=everyone asks this, Y=Puppy Care) (eg: X=biggest complains are...; Y=cannabis compliance)

Great, now prove it.
Collect 100 new target type $P Observe $P for presentation about $TOPIC Record the response, comparitive to $X to record how accurate your prection of $X is It's turning your feeling (soft-$QUAL) into $QUANT

Event Plan opens $TOPIC to get observations of $P against $X theory in the context of $Y Count things, some things, as measure.

The Event Plan:

TAM, SAM, SOM

Total Addressable Market
Serviceable Addressable Market
Serviceable Obtainable Market

Identifiy these things, look at who they are and slice, slice slice into narrow segment.

Get into small SOM to for customer developement.

TAM, SAM, SOM

Early Survey

TIP: Don't!

Don't to early Survey while you are doing Client/Customer Discovery! You need to connect with these early adopters at a differnt level. A Survey is for quantifying theoritical values to measure: (left v right v top v bottom)

Early we are trying to measure which feeling, which direction is the strongest and also evaluate WHY. Why is not a question that gets answered with survey.

See AppFog/PHPFog Early Survey Example

Early Survey

Rasing Money

504 Investment Exception

Rasing Money

Private Equity Rollup

Prices is $4k - $12k; rolls all smaller investors into an LLC as one line-item on the cap-table.

Bauban.io - Smart Private Equity

Revenue Redemption

WeFunder - Lighter Capital -

Borrow Money; Then Get Revenue and Grow Revenue and pay back to buy back out the debt or equity vehicle they've used.

SAFE vs Convertable Note

Rule 1202 Qualified Small Business Stock 0% Captial Gains if held 5YR

Investment Options

Bunch of different options for how to get money from Investors. Reg506B, Reg504, RegCF, etc

Private Equity Rollup

Y Combinator has lost its soul: A YC founder's perspective

title: Valuation

Valuation

There are numerious ways to value a business. During pre-revenue it's about feelings and things. Once revenue and actual trajectory.

https://online.hbs.edu/blog/post/how-to-value-a-company

Book Value

DCF -- Discounted Cash Flow

Profit Based

Using Profits

EBIDTA

Earnings Before Interest, Depreciation, Taxes and Amortization

Earnings

Revenue

409A

Paying a company to look at your revenues and growth and operations. Then you can figure it out.

Valuation

Experiments

Must have a falsifiable hypothesis

That is, make a it a test like:

By doing A we will get Q things in T time.

A is a specifici activity, narrowly scoped Q is a quantifieable metric, not just "more" clients but something like "50" or "100" T is a specific time frame

Experiments

Staff / Employees

Keep everone on 1099 for AS LONG AS POSSIBLE.

This allows you to easily hire/fire folks in nearly any location.

If you hire folks on W2 type wages, you'll have to deal with loads of bullshit introduced by the various state governments. In each state you hire you'll have to make sure your payroll provider can handle it. You may need to add a registered agent (eg: Oregon) You'll hve to register with the SOS and/or the DOR and/or the DOL. Many cases require waiting days for paper-mail with registration numbers, these delays cost you a) time and b) cash. Some cases (CT) you have to wait for the first letter, to then use that ID for the next department, which also waits 10 days. So, now you've added 20+ days of waiting and at least two hours of paperwork for a W2 Employee. It's just not worth it.

Each one requires more and more paperwork you just don't have time for. Each one requires learing some one-off byzantine system. Each one requires recording and tracking some bullshit registration numbers. Each one obligates you to additional monthly, quarterly and/or yearly paperwork. Each one exposes you to risk that if any of those things are not done you'll have penalties. Each one could expose you to nexus in said State which may then also require you to pay some business taxes in said State.

It's such a waste of time and cash.

Staff / Employees