Company valuation is one of the great myths of early stage company finance. Both investors and entrepreneurs get themselves endlessly tied in knots trying to calculate a startup’s value despite the fact that the whole concept of valuation is entirely artificial. How to value a startup is one of the most common questions I get when I present to entrepreneurs on the topic of venture capital and online angel investing. But talking about valuation distracts people from the real issues of economics (amount of cash invested) and control (percentage equity offered).
The value of a startup is determined by the willingness of the entrepreneur and the investor to agree on a price that works for both parties.
One of the most common questions that you hear entrepreneurs ask each other is “What’s your valuation”? It seems like a sensible question and it’s a tempting way to compare different companies who are raising capital, but the idea of a single number as an agreed valuation for a startup is a dangerous distraction from the real issues. The term “valuation” is simply a useful shorthand to talk about several independent variables. These variables can be quickly forgotten when you start a conversation with the issue of valuation. Continue reading →
Brant Cooper and Patrick Vlaskovits interviewed VC investor Dave McClure as part of their book the Lean Entrepreneur. The Lean Entrepreneur was published in 2013 and I picked up a copy after seeing Patrick Vlaskovits speak at the Innovation Warehouse in London.
Patrick has a really practical and grounded approach to innovation, growth hacking and the world of startups. He’s been an inspiration to me and has contributed a lot back to the community through mentoring and coaching various startups.
After reading the book last year, I got a copy of the audiobook on Audible. Some of the checklists and bullet-points don’t survive the transition to audio that well, but overall the audiobook was excellent and I recommend it alongside the Lean Startup as one of the key audiobooks for entrepreneurs and investors.
In 2013 Mark Suster a leading VC investor and Clayton Christensen a leading business author sat down at Startup Grind to talk about disruptive innovation and startup investment. Their conversation touched briefly on the subject of equity crowdfunding. Both Mark and Clayton are extremely cynical about equity crowdfunding. Some of their concerns are sensible questions about an emerging industry. But what they were secretly doing was arguing for the old model. I’m a big fan of Mark’s blog and Clayton’s books but they’re wrong about the disruptive potential of equity crowdfunding.
VC investor Mark Suster and business author Clayton Chistensen at Startup Grind.
By betting against against equity crowdfunding, Mark Suster is betting against the internet. I believe the internet will do the same thing to early stage finance that it does to all industries. Namely, make them more competitive, connected and democratic.
I’ve worked in venture capital, management consulting and design thinking. But nothing prepared me for the intensity of working inside a startup. Since joining Seedrs in January I’ve been consumed with the task of making Seedrs the best place in the world for startups and investors to find each other. I’ve been lucky to have gradually absorbed the startup mindset over several years of working in startup incubators and accelerators. This mindset has allowed me to cope with the intensity of startup life. But the mindset needs to be learned.
Start with why is a great introduction to how the startup mindset works in marketing.
Some of the things that you need to succeed in a startup are techniques and information, but the bedrock is the “startup mindset”. This mindset takes time to acquire. I enjoy a good TED talk or conference video. But spending a several hours listening to an audiobook written and read by someone who lives the mindset is one of the best ways you can start to think like a startup person.
These days I get a lot more requests for coffee. My policy in the past was always to say yes to meeting new people. In fact, I wrote a whole blog post about why having coffee with 50 people could change your life. I pride myself on connecting with a random assortment of interesting people across all sorts of industries. I guess you could say that I’m a pretty friendly guy.
It’s worth getting your online presence in order before you reach out to someone asking for a coffee.
Recently I’ve started to notice correlations between whether a coffee meeting is useful and some common factors (that are obvious before we sit down). So I’m starting to filter my inbound coffee requests a little bit more than I used to. I still love meeting new people, but these days a coffee catch-up has to be short, sharp and effective.
Seedrs provides a tool that startups can use to raise capital from their friends, family, customers and the crowd. This process is often called “equity crowdfunding” because it’s like Kiva or Kickstarter, except that the investors get equity in the company instead of a product or a loan. In January 2014, I joined Seedrs as part of the marketing team.
The Seedrs team have been featured in Wired, TechCrunch, the Financial Times and the Wall Street Journal.
At the end of last year, Seedrs raised 2.58 million pounds from over 900 investors using their own platform. That means that in my new marketing role, I now have over 900 bosses. I feel very accountable for the success and growth of the business. In this blog post, I want to share two main things about my new role, the expanded view of marketing that we’re taking at Seedrs, and the way that we’re incorporating lean manufacturing habits and processes into our team culture.
Having coffee with fifty people is a great way to get input for a new project, startup or career move. I first wrote about the fifty coffees idea in Inc Magazine and it was based on an insight from Silicon Valley investor Mark Suster. Personally, I’m a bit shy so meeting fifty new strangers was a great project for me.
I had coffee with 50 strategists and leaders working in design, innovation and entrepreneurship.
Last year, I wanted to immerse myself in London’s design and innovation scene so I had coffee with fifty people working in the industry. I learned a lot from their advice and even more from the questions that they asked me. I asked them about the future of innovation, design thinking and how different companies are adapting to social media. It was also a good excuse to check out some new cafes for my coffee blog the Coffee Hunter.
This year, instead of setting goals, I’m going to try creating systems. I’ve been reading a great new book by Scott Adams that dives into the psychology of why New Year’s resolutions and personal development goals don’t work. The book is called ‘How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life‘ and it’s so good that instead of reviewing it, I’ve reprinted an excerpt so that you can hear directly from Scott. I’ve pieced together this except myself using a few of my favourite chapters. The excerpt is just a sample of the key ideas and you really should buy the book.
Scott Adams is the creator of Dilbert and an insightful observer of human psychology.
Scott Adams is the creator of Dilbert, one of the most popular and widely distributed comic strips of the past quarter century. He has been a full-time cartoonist since 1995, after sixteen years as a technology worker for companies like Crocker National Bank and Pacific Bell. His many bestsellers include The Dilbert Principle and Dogbert’s Top Secret Management Handbook. Enter Scott Adams…
This year I had coffee with fifty strategists working in innovation, design, public relations and advertising. My work this year focused on technology startups and research for my book on B2B social media, so the coffees were a great way for me to keep my eye on agency land. All that caffeine also helped me to spot four new services that I think clients will be asking their agencies for in 2014.
To spot these agency trends I had coffee with fifty strategists from London, New York and New Zealand.
Clients will still want campaigns made, websites built and apps created but these services are becoming increasingly commoditised. Some agencies will focus on making things faster and cheaper but the best agencies will make money helping clients build their own capability.
I hate seeing good products that aren’t succeeding because they aren’t being noticed. I love working with people who have a great product but aren’t so great at communicating. I have done some of my best work with software developers, engineers, and scientists. These people are great at thinking (and building) but not so great at articulating their product to customers and investors. I’ve gradually become one of the go-to people in the London tech scene for how to market very complex technology products like big data, commercialisation of military technology, financial services and enterprise technology systems.
Equity crowdfunding is a new way of raising capital for startups. Kickstarter has proven a successful model for crowdfunding an idea (by pre-selling the product). Equity crowdfunding takes this further by allowing the crowd to buy shares in the company itself. The volume of alternative finance for startups, entrepreneurship and innovation is growing rapidly.
During the HackHumanity hackathon I realised that startups need help with equity crowdfunding.
Crowdfunding is a delicate balance of describing the product, the team, the business and the investment opportunity. Each of these need to be communicated in a clear, compelling and persuasive way. Often the teams with the best technical skill are not the best communicators.
Dr Brennan is a co-author of the leading textbook on business to business marketing.
I wrote ‘Tickle: Digital marketing for tech companies’ primarily about B2B companies because they have unique challenges in managing their reputations online and reaching business customers. Dr Ross Brennan was kind enough to write a foreword to the book which has now been included in the latest edition. I’ve also reproduced it here as a guest blog post. Enter Dr Ross Brennan…
If you were the CEO of a large company, who would you turn to for help to recapture your lost mojo? How would you create, test and build new products? Big companies have been steadily getting worse at innovation, whereas startups have begun to eat the world. Small companies can move fast, take risks and attract talent.
Startups an bring together designers (like Jon Gold, pictured) and developers in much more creative and agile ways. (Photo: Paul Clarke and Makeshift)
The brightest minds of the next generation are spending their weekends building software in hackathons, quitting their jobs to build interesting startups and being investing in by incubators and accelerators. It’s a brave new world, but large companies are still looking for ways to become more agile.
A new trend is emerging where hot studios (that combine design, business and technology skills) are building startups from scratch for large companies. This new approach is reviving the patronage model from Renaissance Florence.