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Finance of Startups for Dummies: Cap Table

The capitalization table (cap table) is referred to the agreement of shares and ownership of a company. It sits at the intersection of shareholder, number of shares, and company valuation. I realized that I’ve never touched on this in previous Finance of Startups posts, so I’ll cover that ground here.
A few examples of cap tables…
Lois and Clark want to cofound a venture to provide virtual tours into the unknown – called The Great Digital Explore. Lois will be the CEO while Clark will be the CTO. Given their differing skill sets and being friends, they’ve decided to split ownership in half – 50-50. They’ve also decided to set aside 20% of the company for future employees. They value the company initially at $20,000. Par value is $0.002 as they “create” an initial pool of 10,00,000 shares (pretty standard).
The cap table for The Great Digital Explore would look like this:
Shareholder Equity Position Number of Shares Price per Share Value Lois 40% 4,000,000 $0.002 $8,000 Clark 40% 4,000,00…
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Practice Empathy: Hitting Home and Leaving Isolation

Empathy. It’s been on my mind a lot recently, and I’m trying to understand why. Then, it hit me – too often we lack it, and this leaves others (most everyone) feeling isolated.
Merriam-Webster’s dictionary defines empathy as: The ability to understand and share the feelings of another. I’ve decided to dedicate today’s post to this singular word because it’s highly important for not just everyday citizens of our communities, but also as entrepreneurs. If you can’t be empathetic to your customers’ problems, you’ll likely fail to build a product/ service that resonates and is sustainable.
First, sympathy and empathy are not the same. It’s important to know the difference because they’re oftentimes interchanged improperly. Sympathy is defined as feelings of pity and sorrow for someone else's misfortune, or understanding between people; common feeling. Empathy goes deeper than sympathy in being able to share/ experience emotions of another.
In a recent enlightenment of empathy and …

Negative Churn: Opportunities to Continue Selling

Last week, I shared a post about negative churn – when revenue from existing customers is greater than revenue lost from customers churning (see article). The relevant question, then, is how do companies achieve negative churn? Here are a few options: Additional licenses – This one is common in today’s SaaS companies – selling based on licenses or “seats”. As a team grows, more seats may be required to gain access to a product/ service.Cross-sell – This type of sale captures cross-functionally opportunities within an organization. For example, a CRM may first be sold to a sales team to manage pipeline. Then, marketing may buy access to the CRM to understand lead and prospect-flow. And so on…Up-sell – Many products and services have tiered business models (packages). Tiered packages allow for companies to address a market’s consumer surplus – sell packages that capitalize on differing price considerations, typically. Think: silver, gold, platinum packages with options that are locked f…

What Would You Do Differently?

I met an entrepreneur recently who is approaching a similar market and product that I once did. Before meeting, he realized I had written a book, so read it beforehand. It resonated greatly for him. As we met, he had a few specific questions including: “if you could do it all over again, what would you change?”
There was a lot I would change as I’ve outlined on this blog and in Postmortem of a Failed Startup: Lessons for Success. There are always ways to improve. But one major lesson stuck out at me – start out smaller, more deliberate. Start out with a very specific product addressing a very specific pain.
This would invariably lead to quicker rollout of the product. This would lead to quicker feedback. This would lead to quicker iterations. This would lead to… success? I’m not sure, but I feel this approach would have been much smarter.
Success does not follow a formula. The most brilliant minds have failed. It’s critical to fail at times, too. But the approach to success can be …

Negative Churn: Continued Growth Beyond New Customers

Negative churn – a major milestone for any company. Negative churn occurs when the growth of revenue offsets the loss of revenue from customers who leave (churn). This is a great metric for SaaS companies, especially.
Churn, if you recall, is the rate of loss of customers (leave). Just about every company will experience loss of customers in recurring revenue companies.
In effect, companies who have negative churn can continue to grow without having to sign any new customers (at least, short-term). That is a remarkable milestone, and one that is highly valued by investors. It points to growth opportunities with up-sell and cross-sell opportunities as well as high retention. It points to a loved company and its products.
Achieve low churn. Then, aim for negative churn.

The Parallels of Sales and Constructive Criticism

Tuesday’s post about constructive criticism (Constructive Criticism Gone Awry (As a Receiver)), especially my “unappreciative” reception, made me think about business and sales. In many ways, giving and receiving constructive criticism is similar to selling. The lack of understanding (and lack of trying to understand) lost me as a receiver. The man offering the criticism came in with a solution based off a few brief observations. He did not realize that the gym is a very important place for me – my “safe haven”. As such, speaking at the gym, to me, is unwanted.The validity of the man’s constructive criticism was derailed early from a misunderstood position. Again, without understanding what was happening, the man stated I was being rude by not facing another man – the chiropractor. He did not observe how I was pointing and craning my neck in various positions while talking to a known chiropractor. How quickly, then, I dismissed his observation.The lack of empathy creates friction and …

Constructive Criticism Gone Awry (As a Receiver)

Prefacing today’s post saying I appreciate and even look forward to constructive criticism. Deep-rooted in me is a competitive strive to be the best version of myself, so constructive criticism is welcome.
Recently, an acquaintance offered me constructive criticism that I did not, however, appreciate. Summarizing the incident: Man walks up to me in the gym while I’m working out with my buddy, and asks, “Daryl, can I offer you some constructive criticism?”  Me: “Sure.”  Man: “Well, I’ve been noticing lately when you’re talking to people, you’re not turned facing them. You’re facing another way, which can be rude. It doesn’t show that you’re paying attention to them.”  Me: “Oh, okay.”  Man: “Daryl, I like talking to you. I know we’re in here working out, but lately, I’ve just noticed you doing this, and I know you don’t mean it. However, it comes across as you not caring.”  Me: “Hmm, sorry to hear that. Were you just noticing me talking to [Man Y] of there?” Man: “Yes.”  Me: “Oh, well,…