A Leading Investor’s Perspective on Raising Follow-On Funding and Making a Difference

July 9, 2020 4 min read Opinions expressed by Entrepreneur contributors are their own. In a market dominated by uncertainty, many entrepreneurs are now asking themselves a simple question: Will I be able to raise follow-on capital? And if so, what’s the best way to do so? And according to Bloomberg, that path may not be easy, as investors are telling founders to expect down or flat rounds and a protracted fundraising process. Sarah Cone, the founder and Managing Partner of Social Impact Capital, has a different perspective. Investing at the seed stage, Cone’s firm has completed investments in 19 businesses with portfolio companies including Milk Run, an on-demand marketplace for locally sourced produce, and Judy, a unique business that creates plug-and-play prepper kits. Every one of Social Impact Capital’s investments have raised follow-on capital or have exited.  I recently spoke with Cone for a bit more insight into her run of […]

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When Negotiating Term Sheets, How Much Is Too Much?

May 27, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. It was pounding rain outside my bedroom when my co-founder bursted through the door in a panic. He didn’t wait for my reaction to explain his ever pressing fear.  “One of our investor leads is on the phone and he’s about to walk away. He said we were too aggressive! How do we save this? I responded immediately: “What did we do? We asked way too much on the valuation, right?” “I bid him up on price too much and he is just threatening to walk away. He is not even picking up the phone. He just periodically texts me now. It’s very scary.” “Give it some time,” I responded. “Then, let him get in touch with you on his schedule. Make him want to come to you.”  Although my co-founder and I quickly closed this […]

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How to Recruit Employees With Equity

April 28, 2020 6 min read Opinions expressed by Entrepreneur contributors are their own. It was well past midnight, and I was on the phone with my co-founder and a potential “company-making” hire who we wanted to join our team. Very badly. An acclaimed systems engineer, this individual would enable us to take our business to the next level.  “If you look at the pay today, yes, it’s low, but we know that you will make up more than your fair share of return with the sizable ownership and equity package we are giving you,” said my co-founder to the potential hire.  The potential hire immediately responded back, “Yes, I get that. But I also like cash in my pocket now, and I am getting offers from other firms that, while not as generous on ownership, give me more of a sense of security today.”  I immediately chimed in: “Totally get you […]

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Are Accelerator Programs Right for Your Business?

Entrepreneurs think they’ll provide that extra “oomph” to their business. The opposite may often be true. March 31, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. Shortly after I first moved to San Francisco, I was sitting outside Peet’s Coffee in Palo Alto and speaking with my then-co-founder about accelerator programs. We were eager to get into one of the most prolific accelerators in Silicon Valley because of the instant brand recognition and investor connections it would provide.  “If we can get into 500 Startups, it can really take us to the next level,” he said. “We can raise at least $1 million at a valuation over $6 million. We just have to give away 7 percent of the company.”  I responded bluntly: “Is it worth it?”  “If we get the results, then yes,” he said, before lobbing one more comment, somewhat anticipating my reaction: “It’s going to be […]

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How to Raise Capital in Uncertain Times

Here’s how to raise capital when things get challenging. Opinions expressed by Entrepreneur contributors are their own. For the past decade, we have been in the midst of the biggest economic expansion in American history with unemployment at a historic low of 3.6%.  Naturally, during periods of economic expansion, raising capital for a startup or new business is easier. Investors are incentivized to plow capital into nascent businesses because both the prospect of return is higher in comparison to other investment opportunities and the downside risk is lessened because of target customer spending and capital replenishment. If the “times are good,” investors generally know that even if founders make mistakes, they will have ample chances and opportunities to correct them.  But what happens when the market turns and we enter a recession? Or something unexpected, a so-called, “Black Swan” event like the Coronavirus upends global markets? How do entrepreneurs raise […]

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How to Profit Without Venture Capital

As VC investors tighten their purse strings, your business can still be successful. March 2, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. Just a few days ago, I was on the phone with a friend and fellow founder who runs a direct-to-consumer marketing platform and had spent quite aggressively on user acquisition over the past year. Casually, I suggested that he should work with a former colleague of mine who was a whiz at growth marketing and could probably lower his Customer Acquisition Cost (CAC) by more than 25 percent. He didn’t hesitate for a moment before replying: “I don’t want to spend it. We need to focus on profitability — our core product — not growth.” “What do you mean? You have over two years of runway,” I said. “Surely, you can afford some marketing and experimentation.” “No,” he replied. “We’re really drilling down on our core product, […]

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How to Make Your Business Resilient to Disasters Like Coronavirus

From devastating earthquakes and floods to pandemics, a new set of challenges is testing entrepreneurs. Here’s how to be more resilient. February 18, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. About 10 years ago, I arrived at the Hong Kong International Airport for the first time. After the 16-hour flight from San Francisco, I had a day of meetings ahead of me. Upon exiting the plane, I was shocked to be screened for fever and any signs of flu from the Hong Kong Airport Authority. I later learned these measures were put in place after the SARS outbreak a full decade earlier. Even though the risk of SARS had receded, the preventative measures were still in place. Fast forward to today and things have drastically changed. Over the past month, the coronavirus outbreak starting in Wuhan has spread across China and put the world on […]

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Telltale Signs That You Shouldn’t Be Raising Venture Capital

Most entrepreneurs think they need VC funds to start a business, but the reverse is often true. January 24, 2020 6 min read Opinions expressed by Entrepreneur contributors are their own. Standing outside of the Mercy Virtual facility in St. Louis on an unusually cold fall day, I was on the phone with two founders who were pitching me on a new blockchain startup. They had a few customers and some early traction, but nothing to indicate product-market fit. And yet, they had raised $3.5 million from crypto investors in an Initial Exchange Offering (IEO) to grow the team and build product. Remarkably, the $3.5 million they raised was non-dilutive, meaning they didn’t have to give up equity in their business the same way you would have to through traditional venture capital.  “We’re planning on raising traditional venture because it’s a great time to do so,” said one of the founders. “Our […]

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What You Can Learn From the Rise of Sustainability-Focused Entrepreneurship

Just a decade after the ‘Cleantech Crash,’ a daring group is challenging the status quo. January 5, 2020 6 min read Opinions expressed by Entrepreneur contributors are their own. A few months ago, I was standing outside a Demo Day event in the heart of Silicon Valley. With the temperature approaching 90 degrees, I was beginning to feel the heat, and I wasn’t the only one sweating; with various entrepreneurs running from investor to investor, you could feel a palpable nervous energy in the air. And yet, something struck me as different. Nearly every entrepreneur was discretely focused on building an outwardly sustainable enterprise. From alternatives to plastic packaging to next-generation milk replacements, this crop of entrepreneurs placed sustainability benefits front and center as a product attribute. Additionally, they were looking for investors that shared their vision of a more equitable and sustainable world. This is somewhat surprising, especially when you […]

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How to Say No to a Deal the Right Way

There is a method to turning down potential partnerships without jeopardizing your relationships. December 2, 2019 5 min read Opinions expressed by Entrepreneur contributors are their own. Just a few weeks ago, I was standing outside of San Francisco’s Ferry Building in the pouring rain on the phone. Torrential rain in San Francisco is unusual for October, which is normally considered the city’s ostnesible summer. But in this case, it contributed to a sense of evil foreboding, as what I expected to be a friendly and collegial call quickly took a nasty turn.   “We thought about this overnight, and we are not a good partner for you,” said the individual on the phone, a potential business partner.  This shocked me. You see, over the past few months, I had developed what I thought was a genuinely friendly relationship with this individual; always responding to texts, calling early mornings and on weekends. He […]

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How to Use Bridge Capital to Accelerate Your Business

What was formerly a last resort is now a means of achieving independence and profitability. November 1, 2019 6 min read Opinions expressed by Entrepreneur contributors are their own. It was cold and slightly misty outside my hotel in Dublin, Ireland when I got the call. As an entrepreneur and investor, I have seen my fair share of ideas run down to zero. The founder on the other end of the line had informed me a week earlier that he was raising a bridge round. Usually, this means doom and gloom, so naturally, I expected the worst.  “Are you in? You investing can send a really positive signal to everyone,” said the founder. “Well, how bad is the business?” I asked. “Is there a chance of saving the intellectual property, the product, repositioning; something, anything, that will make this work?” “Actually no, that’s the thing,” replied the Founder. “We are raising a […]

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The Importance of Getting Advisors to Invest in Your Business

Outside consultants can show true conviction with their capital. October 11, 2019 6 min read Opinions expressed by Entrepreneur contributors are their own. I was sitting outside at Samovar Tea Lounge in the heart of San Francisco’s Yerba Buena Center. It was the middle of July, but the 55-degree temperatures and brisk coastal winds made it feel more like late November. “I thought this one advisor would be great with connections to multiple customers, but after signing the advisory agreement, I have not heard back from her in six months,” said an entrepreneur I knew who was starting a company for remote product shipping in Europe. “I’ve seen this before,” I replied. “Did she invest capital in the company as well?” “No,” said my entrepreneur friend. “She said that she did not have available dry powder, but wanted to help out.” After much prodding by my friend over the ensuing weeks, nothing […]

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What Entrepreneurs Can Learn from the Backlash to Hotel and Resort Fees

Being upfront with customers about pricing will create a customer for life. September 8, 2019 6 min read Opinions expressed by Entrepreneur contributors are their own. Every January, I go to the Consumer Electronics Show (CES) in Las Vegas. CES is a cavalcade of “what’s next” in consumer electronics, from televisions to smart refrigerators. And robots. Lots of robots. Some of which are really creepy. With how expensive hotels tend to be during this event, I book months in advance to secure a still unreasonable but not eyeball-gouging rate. But this year was different. To my surprise, a $54 resort fee was added to my bill upon checkout, thus adding a total of about 20 percent to the cost of my stay. Inquiring to the hotel, I was told that the fee was “mandatory” and that it covered such generous amenities as water bottles, a chocolate bar and an airport shuttle that is “currently […]

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Why ‘Now’ May Well Be the Right Time to Start a Blockchain Company

With the crypto market growing again, here are the three main factors to watch out for if you’re starting, or investing, in a company in the space. July 16, 2019 7 min read Opinions expressed by Entrepreneur contributors are their own. A little over two years ago, I was at my company’s holiday dinner, and the only topic of conversation was the stratospheric rise of cryptocurrencies like Bitcoin, Ethereum and those others that were lesser known but certainly more amusingly named (like Putincoin). Related: Should You Still Invest in Bitcoin in 2018? With Bitcoin at that time topping $20,000 and Crypto Kitties also hitting the world by storm, something momentous was afoot; and we all wanted in. Yet, my company’s CTO called a halt to our excitement, cautioning that a deep decline was coming. The reason he gave: The potential of the blockchain — the platform through which cryptocurrencies are built — to create real-world applications […]

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3 Counter-intuitive Customer Service Lessons Entrepreneurs Should Learn

How a bad experience at a self-styled “luxury” Sydney hotel reminded me of the most important customer service lessons for small business owners and entrepreneurs. June 19, 2019 7 min read Opinions expressed by Entrepreneur contributors are their own. At about 1 a.m. during a memorable trip I took to Australia, I awoke suddenly in a hot sweat in my hotel room at the Intercontinental Sydney Double Bay. Supposedly among that country’s leading hotels, the Intercontinental bills itself as “Sydney’s Exclusive Bayside retreat,” where guests stay in luxury. According to the hotel’s website, air-conditioning is one of these luxuries. Related: 10 Reasons Why Good Customer Service Is Your Most Important Metric But not on that particular night. In fact, the thermostat in my room was stuck at a stuffy 24 C. (75 F.) degrees. So, I turned the temperature down, but to no avail. When I called the front desk, I was informed that the […]

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How to Raise Money Even When You Don’t Have ‘Traction’

Early-stage entrepreneurs need marketplace traction to raise capital. And capital to generate traction. Here’s how to get out of this frustrating cycle. June 7, 2019 7 min read Opinions expressed by Entrepreneur contributors are their own. It was an unusually sunny early spring afternoon in San Francisco’s SOMA neighborhood. I was meeting with the founders of a new company, fresh out of Y Combinator’s latest cohort, and they were pitching me on investing in and advising their business. They were excited and pumped for the future. Related: Raising Capital? The Latest (and Greatest) Ways to Fund Your Startup “We are creating a marketplace for mineral rights and options,” they told me. This marketplace they envisioned? It would enable landowners to sell the rights to mine for minerals or even oil on their property to prospectors and others. “Stuck in a pen and paper dynamic, this market is worth at least $50 billion,” one of the […]

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How to Introduce Investors to Your Team the Right Way

Eager to introduce investors to the rest of your “rockstar team”? That meeting could be to your detriment. Here’s how to turn your dilemma into a win and close the deal. April 9, 2019 5 min read Opinions expressed by Entrepreneur contributors are their own. “We love you and your co-founder,but we want to meet the rest of the team.” The speaker was a partner at an investment firm thinking about sinking money into the startup my co-founder and I ran. Related: First Meeting With an Investor? These 5 Guidelines Will Help “Specifically, we want to meet the engineers on board and understand how they think about the product,” the partner told us. And, without even thinking twice, my co-founder and I promptly set up the meeting for the next afternoon. The meeting happened. The partner and his associate met with our entire engineering and product teams.  We came out of the meeting […]

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How Rapid ‘Testing and Learning’ During Product Development Saves Time and Money

Investing money and design work is all very well. But what do your (potential) customers think? That’s what really counts. February 26, 2019 6 min read Opinions expressed by Entrepreneur contributors are their own. A few weeks ago, I met with an extremely frustrated founder. “I just spent all of my capital building and designing a great product,” he fretted to me. “We hired the best branding and design team, and we paid top dollar for ‘first in class’ market research. Now, I can’t get anyone to use my product.” “But did you know if anyone wanted it?” I immediately asked. Related: Starting Up Wrong: 6 Product Testing Mistakes You Need to Avoid “Of course they do!” he said. “I know they want it because we’ve invested so much. How could anyone not like this?” “But you haven’t really tested it!” I responded. “You haven’t gotten customers to sign up and […]

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Why It Was Southwest Airlines’ Herb Kelleher’s Most Important Lesson for Entrepreneurs

Sadly, Kelleher died last month. But his legacy lives on: Ever hear of how he and his airline became Texas’s largest bourbon distributor? February 4, 2019 6 min read Opinions expressed by Entrepreneur contributors are their own. I was actually on a Southwest Airlines flight when I found out that the company’s legendary co-founder and chairman, Herb Kelleher, had passed away. Kelleher died on Jan. 3, but over the five decades before that, his vision revolutionized air travel. His creation, Southwest — arguably the world’s first low-cost airline — democratized flying for millions. Related: How Southwest Airlines Created a Mass Market for Air Travel The company’s differential was that by competing more with bus services than legacy airlines, it could disrupt the market. This strategy was so successful that in 1993, the U.S. Department of Transportation coined the term “The Southwest Effect” to denote an increase in origination air travel and a corresponding drop in prices, […]

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2 Harsh Experiences Convinced Me Never to Invest in Friends’ Companies

How do you avoid the drama-filled minefield that can result when a friend pressures you for financial support? Try these 4 responses. November 30, 2018 6 min read Opinions expressed by Entrepreneur contributors are their own. I’ve lost not one but two friendships this year because my response to an investment opportunity didn’t meet those friends’ expectations. The lesson I learned? Friends and funding definitely don’t mix. Here’s what happened: Related: The Ins and Outs of Raising Money From Friends and Family Experience No. 1 occurred at 2 a.m., Sydney, Australia, time. I had just met my girlfriend’s mom, so it had been a full day. And, given the late hour, I just wanted to go to bed. That was when I received a text message from a close friend who had been pushing hard for me to invest in his business.   I had already told him in multiple conversations that thought he had […]

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