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The 8 Personas of Successful Entrepreneurs – Which Are You?

entrepreneur personas and personalitiesSuccessful emergency room doctors must be highly intelligent and calm under pressure.  Successful  triathletes must to be goal-oriented and driven.  Successful songwriters must be creative.  What about entrepreneurs?  Entrepreneurship is an interesting field and one that often stokes the debate over whether successful entrepreneurs are born with the prerequisite traits or if they can also be learned/developed over time.  Rather than get into that debate, I thought I would share what I see as the eight most common personas of successful entrepreneurs.

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Your Most Valuable Resource

When I ask entrepreneurs what their most valuable resource is, I ALWAYS get one of two responses: money (aka – funding, cash) or people.  And it’s hard to argue about the relative importance of these two things.  But those resources are replaceable.  There’s another resource that isn’t, and it’s Time.  Time is an entrepreneur’s most valuable resource and is the subject of this article.  Given the various other tools and resources you have, how can you maximize time?  Let’s explore further.

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Using Verbal Commits to Secure Your First Investors

startup fundraisingAlmost no investor wants to be the “first check written” for your round of funding.  This makes total sense if you think about it from their perspective.  If you don’t secure any other investors, they are in big trouble because you needed a certain amount of money to remain viable and now their investment is already extremely risky.  For this reason, until you actually have money in the bank from a few investors you will find most interested investors dragging their heels (artificially delaying things).  This article describes how you can use verbal commitments as a crucial tool to shake things loose, get some money in the bank and trigger needed fundraising momentum.

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Importance of the Time-to-Value Metric

time to valueWhat do buying a new smartphone and being given a gift card have in common?  In both cases you want to extract value as soon as possible.  With the gift card you immediately want to go shopping and with the new smartphone you immediately want to port over your contacts and download your favorite apps so you can start using it.

The same thing happens when subscription-based companies sell their offering to a new customer.  This article describes the all-important time-to-value (TTV) metric and the various ways it can be measured.

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A Series A Isn’t Just a Large Seed Round

Here’s a scenario I commonly see.  A startup raises $1M in total seed funding to turn their MVP into a real product and figure out a profitable and scalable customer acquisition model.  All goes well over the coming 12 months as they reach $80K in MRR while also growing the team to 10 employees.  They find themselves setting plans for a Series A round of funding and predict the process will be similar to their seed round but just with venture funds as the primary target and larger check sizes.  After eight weeks and zero success, they approach someone like me for advice and the reaction they get is some flavor of this: “a Series A is not just a larger version of a seed round”.  This article dives deeper into what exactly that statement means.

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Tell Me Your Price and I’ll Tell You My Terms

negotiationI didn’t invent this quote (can’t remember where I heard it) but what a great one to help remember that with most business-related transactions, price is definitely not the only factor.  Three such transaction types relate to the things I commonly write about on this site:

  • Fundraising (valuation)
  • Technology licensing (royalty or license fee)
  • Acquisition (price tag)

In this article I provide insights into possible terms for each type of transaction that could dramatically change the value equation.

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What You Should Know About the New Equity Crowdfunding Rules

equity crowdfundingFINALLY!!!  After years of waiting for equity-based crowdfunding rules (aka Reg CF) to be adopted and put into effect following legislative approval of the JOBS Act of 2012, it’s finally here (effective May 16, 2016).  So should you stand on top of your roof and heed the battle cry to all of your fellow entrepreneurs?  Well, not so fast.

I think you should “double click” on the final regulation to know what you would be advocating.  I’m not sure it’s for everyone and certainly it is not for every situation.  In this article I’ll attempt to demystify at least the basics.

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Preparing for a Pitching Event

pitching eventI’m not talking about a stand-up presentation in front of an individual investor or VC firm but rather some form of on-stage pitching event.  It might be called a “demo day” or “shark tank” and might also come with awards (including cash).  Too often, I see entrepreneurs make basic mistakes that could have easily been avoided if they had prepared, even just a little.  I actually think it’s a common personality trait of many entrepreneurs.  They take pride in being able to “wing it”.  But if the stakes are high, why impose the extra risk?  In this article I cover a checklist of simple preparation tasks for pitching events.

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Licensing Your Technology

contract 2Some startups build core technology with the sole purpose of making money by licensing it to others while other startups later discover they have something that could be licensed as a revenue enhancement opportunity.  In either case, licensing your intellectual property (IP) is a fairly involved venture with significant downside risks, if done wrong.  But if done correctly and with the right partners, magic can happen.  This article explains the risks and opportunities with technology licensing deals from a business development and deal structuring perspective (rather than a purely legal perspective).

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Defending Your MVP or Prototype Stage with Investors

defendingWhile you are still in the idea phase, investors tend to focus on vision, promise, potential and personality traits of the founder(s) because that’s all you have for them to evaluate.  Once you’ve got an established business model, starting management system and initial track record of paying customers, investors will naturally give those things focus when considering an investment.  But when you’re in between these two phases with a yet-to-be-launched MVP (software) or ugly-but-working prototype (hardware), the conversations and debates are often more challenging.  You have something tangible (MVP, prototype) but can’t yet connect any dots of real customer traction.  This article describes a method for helping the investor understand where you are currently and how their money will effectively be used to continue your pursuit of building a great product and eventually a great company.

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Colten – Imitation

Colton“Imitation is the sincerest form of flattery”

– Charles Caleb Colton, 1820

 

 

Note:  Similar versions of this quote can be found as far back as 1708:

  • “You should consider that Imitation is the most acceptable part of Worship, and that the Gods had much rather Mankind should Resemble, than Flatter them.” (in a 1708 biography of Marcus Aurelius by Jeremy Collier and André Dacier)
  • “Imitation is a kind of artless Flattery” (English writer Eustace Budgell, 1714)

Bridging a Gap Using a Convertible Note

mind the gapMost startups think of a convertible note as the most common fundraising vehicle used during the pre-seed and seed stages (see related article titled “Convertible Note Basics“).  What they might not know is that convertible notes are also used for what’s called a “bridge round”.  It is just like it sounds, bridging the gap between today and some point in the future.  This article describes the use of convertible notes for such a scenario and, more specifically, the differences and nuances versus using them for seed rounds.

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Is a Startup Accelerator Right for You?

Uncle Sam - I want youIt seems like everywhere you look now there is some form of startup program advertising their method of helping entrepreneurs increase their odds of success.  From incubators and accelerators to boot camps and co-working spaces, each has a different collection of benefits and associated costs.  But how should you go about deciding if they are right for you and your particular venture?  And if the answer is “yes”, how do you go about comparing them?  Let’s explore further.

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Expanding Beyond Your Home Market (Marketplaces)

Flight MapSome online marketplaces that have a local services component on one side of the marketplace carry an extra burden that “pure” online marketplaces don’t have.  Such marketplaces can’t immediately gain broad geographic coverage for their offering.  Examples, include transportation network companies (ie – Uber, Lyft), food delivery services (ie – GrubHub, Postmates), in-home cooking services, on demand photography services and many other types of services that aren’t easily on-boarded into the marketplace and activated without some local presence by the marketplace company itself.

This phenomenon creates an extra burden when trying to scale after initial business model validation and that, in turn, creates an extra burden when trying to convince investors to put their money into the company.  If you have such a company, read on because in this article I describe some key things to consider and possible approaches to take when devising your market expansion plan.

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Intro to Enterprise Sales

handshakeNot all sales processes are created equal.  In fact, the whole purpose of developing a sales process for your company is to uniquely match the dynamics of your target audience’s purchasing methods with the approach you use to convince them to buy your “stuff”.  One major mistake I see a lot of startups make is thinking that a transactional, SMB-focused sales process can work with large enterprises but just with longer sales cycles and bigger deal sizes.  It’s not nearly that simple.

There are many books about enterprise sales.  In this article I’ll highlight what I think are the key attributes of a successful enterprise sales process while sharing some tips and tricks I picked up during my tenure as an IBM enterprise sales rep and later as Sales VP for an early stage tech company with an enterprise focus.

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Approached for Acquisition – Now What?

start hereI have written articles about various aspects of M&A and have even written two, based-on-true-story case studies (titled “A Tale of Two Acquisitions”) to teach the numerous lessons I’ve learned throughout 14 acquisitions I was involved in, mostly as the buyer. But these days when I’m approach by an entrepreneur for advice related to M&A, it is almost always because they were just approached by an interested acquirer and are trying to figure out how to react, what to do next and what to prepare for should things proceed down the acquisition path. This article intends to serve as a “Start Here” guide for such a situation.

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Golden Rules for Really Tough Times

tough timesMany (probably most) startups go through periods of extremely little cash in the bank and with visions of crashing and burning before being able to recover.  Unfortunately, crashing and burning is what actually happens a high percentage of the time after getting extremely low on cash.  But it’s not what always happens and even if closing the company is the only option, there is a certain way to go about it.  This article highlights some golden rules to keep in mind upon hitting really tough times, having doubts about survival and deciding how to proceed.

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The Hidden Value of Embedding With Your Strategic Partner

strategic partnershipIt usually takes a huge effort to get the attention of a big strategic partner and impress them enough to get a formal partnership. In fact, might have you read my articles titled “A Secret to Securing a Strategic Partnership with a Major Player” and “Get the Strategic Alliance Partner to Come After You” and they worked. Either way, congrats. Unfortunately, at that point you’re still only half way to fully exploiting the relationship. You might get some interesting press attention right after the announcement and your employees will certainly be proud of the accomplishment. But that doesn’t mean your revenue production will suddenly shift into a new gear. In this article I’ll explain how to significantly increase your leverage by embedding with your new strategic partner.

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Startup Lessons from Mother Goose

As I was reading a collection of Mother Goose rhymes that I bought to eventually read to my new granddaughter, I was reminded of a great book titled “All I Really Need to Know I Learned in Kindergarten”. While my exercise is definitely more light-hearted, it is in that same spirit that I’ve discovered several startup lessons from the narrative and underlying messages in these rhymes. I did the same thing with various Dr. Seuss books and you can find that article here. I mean, how much more fundamental and principled can you get than Mother Goose and Dr. Seuss? I hope you enjoy this article and decide to pass it along to others.

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Startup Lessons from Dr. Seuss

As I was reading some Dr. Seuss books that I bought to eventually read to my new granddaughter, I was reminded of a great book titled “All I Really Need to Know I Learned in Kindergarten”. While my exercise is definitely more light-hearted, it is in that same spirit that I’ve discovered several startup lessons from Dr. Seuss’ narrative and underlying messages. I did the same thing with various Mother Goose rhymes and you can find that article here. I mean, how much more fundamental and principled can you get than Dr. Seuss and Mother Goose?  I hope you enjoy this article and decide to pass it along to others.

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10 Basic Fundraising Terms You Must Understand

ABC blocksEvery field of study has its basic vocabulary of words and phrases that come up over and over again. This vocabulary is so fundamental that it is used to explain other concepts that are more advanced. Well, fundraising is no different. This article is intended to serve as a primer of sorts with a description of ten basic terms that must be understood by any startup pursuing fundraising.

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Optimizing Demand Generation Using Portfolio Theory

demand generation campaign portfolio optimizationThere is one question that haunts every experienced marketing executive as it relates to spending money on demand generation: what is the optimal mix of demand gen marketing campaigns and if we have extra money to spend, where should we spend it and why? Lots of advanced marketing tools are available and new ones are released all the time. But none that I’ve seen exactly answer these questions and the reason is because optimizing your mix demand generation activities is just as difficult as optimizing your mix of personal investments (ie – stocks, bonds, real estate, CD’s, etc). So why not steal a concept from the investing world and apply it to marketing? I’m talking about Portfolio Theory.

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Hiring Your First Sales Professional

hiring your first sales employeesYou built your MVP, got it launched to the delight of some paying customers and just raised some seed funding to move to the next phase of your company’s evolution.  You and your co-founder have been doing all of the selling (closing deals) but neither of you has real experience as a sales professional, so you decide it’s time to hire one.  Easy, right?  Well, maybe not as easy as you think.  Forget the recruiting process for a moment and take a step back.  Should you first hire a sales rep or a sales executive?  How will you compensate them?  How will you know if they are performing well?  Let’s explore further.

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Misuse of Open Source Software Can Kill Your Acquisition Exit

open source software acquisitionHow can something that’s free and openly available cause so much unintended harm to your business?  The availability of open source software has contributed as much to lowering the cost of starting a software company as cloud hosting services.  So much so that it’s not unusual to find software companies with 40% or more of their code attributable to open source software.  But too many startups learn later as they’re in the middle of due diligence from a big acquirer that their practices for using open source software created significant problems – including reducing the acquisition price or, worse, killing the deal.

I previously described a specific example of this, which I was personally involved in.  You can read it here:  A Tale of Two Acquisitions – Part 1.  Let’s dissect the issues a little further so that you can decide what the right uses and processes should be related to open source software at your company.

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10 Ways to Improve Website Conversion Rates

website conversion ratesRegardless of your ideal mix of demand generation programs, I’m willing to bet that most of them are designed to bring prospects to your website in the hopes of later converting them to a paying customer.  It doesn’t matter if your solution is hardware or software and it doesn’t matter if your sales model is zero touch or requires full-blown field sales reps.  The path to prospect conversion surely passes through your website at least 90% of the time.

If you agree, then also realize that even a perfect mix of demand generation programs can be totally destroyed if your website doesn’t do an effective job of facilitating conversion.  In this context I’m using the word “conversion” in a generic sense because for some companies that might mean the prospect downloads a free trial while for other companies it might mean filling out a contact request form.  But in all cases, I’m referring to the final desired action a prospect could take from the website along their path to becoming a paid customer.

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A Secret to Securing a Strategic Partnership with a Major Player

securing a strategic partnershipMost startups desperately crave a partnership with a big, strategic player that could offer them significant leverage and credibility.  Just think about the giants in your particular industry.  That’s who I’m talking about.  But they are huge and you are tiny, so how do you secure a real partnership in which they actually utilize their size and influence to help you?  Too many startups only think about the benefits they will get from such a partnership when the only way to get the partner to even lift a finger is to provide real value to THEM.

In a previous article I described a way to get a prospective strategic partner’s attention (see “Get the Strategic Alliance Partner to Come After You”).  In this article I’ll describe how to leverage that initial momentum into a real partnership that produces real results.  I’ve secured several such partnerships throughout my professional career and have identified three primary categories of the needed value creation I described.  Let’s dive into each of them further to see what your secret ingredient(s) could be.

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Investors Write Checks for Outcomes, Not Activities

startup fundraisingIn a previous article, I described various ways to determine how much money to raise (you can read it here).  If you’ve decided and communicated how much you are raising, you might be getting the obvious follow-up question: “Why is that the right amount?”  It’s a very simple and justifiable question for the investor to ask but it is commonly met with a host of unacceptable responses, such as these:

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Your First Board Meeting

first board meetingWhen you first incorporated as a C-corporation, probably only you and your co-founder were named as board members. You never really had official meetings or voted on anything, that you were aware of. Your attorney would have you sign some documents from time to time but you didn’t pay much attention to them. After some time and some success, you raised an equity round of funding from a VC and one thing they required was a board seat and quarterly board meetings. Now it’s time for the first board meeting and you’re having a mild panic attack because you don’t know what to expect or how to prepare. And you certainly don’t want to embarrass yourself in front of your new VC investor.

This blog article is just for you. I’ll describe typical participants, presentation topics, formalities, common courtesies and other administrative activities associated with board meetings. Let’s get started.

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Establishing a Management System

Startup Management SystemI know what you’re thinking.  “We don’t even have 20 employees, so why do we need a management system?”  You might be thinking this because you previously worked for a larger company and one of the things you hated was death-by-meetings, decision-making red tape and excessive processes/procedures.  Or you might not yet know what a management system is but it sounds burdensome.  But every company needs a method to their madness – a way of getting things done, deciding what to focus on and communicating to the team so everyone is pointed in the right direction.  That’s a Management System.  Now you just need some tips for how to right-size a management system for your stage of company evolution so that it is most effective.  This article focuses on the very early stages.

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Estimating Your Market Size

estimating market sizeIt’s a necessary element of your business plan and pitch deck.  It’s a question you’ll get asked all the time by investor prospects.  And it’s something you’ll find yourself defending, even if much of the underlying data and assumptions didn’t come from you.  As the title of this blog article suggests, I’m talking about your market size.  But how do you go about estimating the size of your market and what should you do if the resulting estimate is way too big or way too small?  Read further for a few hints and tricks for conducting this important exercise.

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A Tale of Two Acquisitions – Part 2

M-and-A graphic 2Common perception is that in an acquisition the acquirer has all of the power.  After all, they are the one that’s writing the check and they can walk away at any time.  But companies considering an eventual acquisition exit need not give up hope because there are several things that can be done to maintain a balance of power, if not an upper hand, during critical parts of the acquisition process.  I’m going to attempt to describe some basic M&A do’s and dont’s through the lens of two stories and the associated lessons learned.  Part one in this series (see related article here) had a sad ending for the selling company.  But Part 2 has a very favorable outcome.  Both stories draw from actual acquisitions I have been involved in, either on the buyer or seller side of the table.  But since I have been involved in 10 such deals to date and many dozens of exploratory acquisition approaches, I have incorporated elements from multiple engagements to better help demonstrate the lessons learned.

Now for the story.

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A Tale of Two Acquisitions – Part 1

merger acquisition

For every headline you see about a tech company being acquired for some huge multiple of revenue or profit there are literally hundreds of other acquisition approaches that either ended in nothing or a much less desirable outcome for the company being acquired.  I’m going to attempt to describe some basic M&A do’s and dont’s through the lens of two stories and the associated lessons learned.  This first story has a sad ending for the selling company but don’t worry, Part 2 of this series has a happy ending (you can read it here).  Both stories draw from actual acquisitions I have been involved in, either on the buyer or seller side of the table.  But since I have been involved in 10 such deals to date and many dozens of exploratory acquisition approaches, I have incorporated elements from multiple engagements to better help demonstrate the lessons learned.

Now for the story.

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The Dilemma of the Startup CTO Title

startup CTO titleYou see it all the time.  A young, invincible hustler-hacker team join together as startup co-founders to pursue a dream of becoming the next Google or Facebook.  The hustler takes the CEO title while the hacker becomes the CTO.  All is good, right?  Well, maybe not.  Many first-time startup CEO’s know there will probably be a time in the future when they will need to decide if they want to be rich or be the king, which translates to a possible need to step down as CEO and bring in someone with more experience.  The CEO learns this by getting asked by investors if they insist on remaining the CEO forever.  What about the CTO?  The dilemma is different but has similar implications.  Let’s explore further.

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Compensating Your First Employees When You are Cash Poor

startup employee compensationMany startups begin with a founder that spends part-time on the idea while still having a paying job.  Another common approach is to secure a small amount of funding via “friends and family” or even to self-fund with personal savings. These super-lean methods of starting can be great for focus during the early validation stage but once the idea is proven and more resources are needed, how does the startup go about hiring the first employees with zero/little cash in the bank and not enough revenue to self-fund?  The answer probably lies in equity but it’s not as easy as some think.  In this blog article I will explore the various nuances and give some specific examples and recommendations.

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Setting the Max Authorized Amount on Your Convertible Note

setting the max authorized amount on your convertible noteLet’s assume you have already determined $500K is the ideal amount of money to raise in your current fundraising round (see related blog article titled “How Much Should You Raise”) and you’ve also decided a convertible note is the right instrument to use (see related blog article titled “Convertible Note Basics”). Most convertible note templates have a statement/clause that mentions how much you are authorized to raise in that round (as a series of individual notes with multiple investors). $500K is the amount you should show as the maximum authorized amount, right? Not so quick. There are reasons you might want to set the amount lower or higher. Let’s explore the dynamics and trade-offs using $500K as the amount you truly think you need.

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Documenting Your Sales Compensation Plan

sales compensation planI can’t tell you how many startups go through the effort to think through the best method to compensate their sales team but don’t take the next step to document it so that it can be clearly communicated.  Deciding about the metric(s) on which to pay the sales team and the right split of base compensation versus sales commission is absolutely fundamental to any sales compensation plan.  But that’s not enough.  If you read my other sales-related blog articles titled 5 Golden Rules for Setting Sales Compensation and Is Your Sales Incentive Plan Driving Bad Behavior, you know there are several other factors that must be included in the full plan.  Two of my mantras are that it must be simple and it must be clear.  This blog article will describe what should be in the documented plan that you deliver to each commissioned sales rep and have them sign in acknowledgement.  I have even included a template for you to use.  So no excuses.

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Pricing Your Stock in the Early Days

pricing your startup stockI get this question all the time from US-based startups: how should we price our Common stock?  It’s a very simple question with a not-so-simple answer.  The reason is that in the very early days of a startup’s evolution, the methods used to price the company’s stock involve more art than science.  Let’s explore further.
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10 Tips for Controlling Legal Costs

controlling legal costsIt’s amazing how quickly legal costs can add up. If you’re running a startup, it’s possible that your legal costs are second or third highest amongst all of your expenses. And just like medical bills, they always seem to be higher than you imagined possible. Even if you don’t like the lawyer you are using, you know you can’t do without one. So what can you do to control your legal costs? Here are 10 ideas to try.

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Extending Your Convertible Note

convertible note extensionYou didn’t plan for it to happen this way but you’re reaching the maturity date (end of term) on your convertible note and didn’t raise money in an equity round to cause a natural conversion (called a “qualifying transaction”).  Your options are somewhat limited.  You could try to complete the qualifying transaction, even if the terms are terrible.  Yikes.  You could talk to your attorney about offering to convert the note holders to equity using the Valuation Cap as the pre-money valuation.  Not bad.  Or you could request that your note holders give you more time by approving an extension to the maturity date.  Yuck.  It’s the last option that I want to explore further in this article so that you can see the investor’s point of view and decide how to best handle.

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Code Names

top-secretHow cool is it to use a code name for an important project rather than “version 2.5” or “next gen”?  Below is a list of more than 150 code names to consider for your project.  The left column includes code words grouped by theme and the right column just lists a bunch of cool words and phrases to consider.  I’ve used many of these code words over the years and hope you enjoy using them too.

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