As I say to others, “I got this.”

Soccer’s been on my mind recently with several blog posts already this year, but last Tuesday’s soccer games illustrated yet another important revelation in my entrepreneurial, professional, and personal life… and it’s this notion that Quality Breeds Trust.

Last week, I was asked to fill in for two other games after my own. You could really see the disparities in quality from team to team, even before each game started. During warm-ups, you could see who was serious, who wasn’t. You could see who had a good technical touch, who didn’t. And in the opening five minutes of each game, all those earlier impressions were dead-on. That, in effect, had a drastic effect on how I played from simple things like positioning to passes. With lower quality players, everything had to be much more direct and calculated. With greater players, I could be more creative and play more piercing passes.
I remember when I started playing Silverbacks 7v7 so many years ago (damn, I’ve gotten old), I started out with one of my best buds, Don Pottinger – co-founder of Body Boss, programmer extraordinaire now plying his trade at ATV. He was so freaky fast, strong, and skilled that when I had the ball in our defensive half and I had to “clear it”, I would send the ball down the line or into a far corner. I knew that I could put it in no man’s land and before that ball went out of bounds, Don would latch onto it. We’d be off and attacking in seconds.
When you have quality players on your team, you let players make the play. You can see this happening any given Sunday – with Matthew Stafford and Calvin Johnson. When Stafford’s in trouble, he scrambles, and he’ll oftentimes lob it to the freak that is CJ trusting in CJ’s ability to make the play.
Sometimes, taking risks like throwing into triple coverage is okay… let great players make great plays! This is the Stafford to Johnson connection in the Lions-Bengals game from October 20, 2013. (Image source:
In a different way, you also have generalists like a player of James Milner’s capability of the current Barclays Premier Leaguechampions Manchester City. Milner’s not the most skilled defender or the lethal attacker of many others, but he’s a solid utility player that can be placed in any position, and his work ethic makes him invaluable.
(Image source:
Manchester City boss Manuel Pellegrini on Milner: “I understand. I’m Milner’s No1 fan. Find me a more complete English player. There are players who’re better technically, yes. Quicker players, yes. Players who head better, yes. But show me one who does all the things Milner does well. There isn’t one.”
You can also trust quality players when they take on risks. It’s just part of their game. So called “risky plays” or their audacity to take on three, four defenders may have low probabilities of success, but it’s okay. It’s okay if it doesn’t come off because risk is inherent in their game… inherent to being great and to pull everyone else forward. For quality players, plays are calculated risks.
There’s an obvious quality and trust relationship in entrepreneurship, of course. They go hand-in-hand. In a startup team, the world is changing so fast that having high quality team members you can trust enables the team to act at speed. At Body Boss, I knew that Andrew had some slick designs and UX in queue for new features while Don and Darren were working hard building new features for our coaches and players. Meanwhile, I was out closing deals and handling logistics for our upcoming coaching clinics. There was no need for any one of us to micro-manage each other. That’d be a waste of time anyways.
From quarterbacks to wide receivers, center-mids to forwards, and sales people to engineers, quality breeds trust. Quality can take on many forms in skills and capabilities to an individual’s work ethic and personality… specialists to generalists. In any case, you know quality when you see it. Give them difficult tasks or ambiguous projects, and they’ll somehow find a way to nail it. With high quality players, you just have to trust them and let them make the plays.
What else influences trust? How else do sports not only build character but foster leadership and teamwork?
In November of last year, I’ve taken upon myself to get more comfortable and knowledgeable (dare I say, “dangerous”) in the world of finance, especially in the realm of startups and entrepreneurship. Take those two things I’m passionate about (startups and entrepreneurship) and layer in a subject I know little about and am… uncomfortable with.
Every month since November, I’ve published a post touching on 3-5 financial concepts ranging from vesting options applicable if you get that offer letter to join a startup to issuing different types of stock like common, preferred, etc. if you’re looking to raise money from a VC as an entrepreneur. I don’t necessarily have a set “path” or “course” through concepts. Instead, I just rely on the things I don’t know or what I read about, and I tackle the concepts from there.
It’s been a fun, humbling, highly informative experience so far. I’ve been reading more news about startups, funding events, offer letters, etc., and I actually know what the authors are talking about! Haha, yes, it’s been fun. Soooo, today, I’ve got my 5th installment of Finance of Startups!
Today’s topics include:
  • Board of… People (Advisors/ Directors)
  • Leverage(d)
  • Par Value

Board of… Advisors vs. Directors

Visit webpages of many startups’ “About Us” pages, and you’ll likely see a group of highly distinguished people grouped either as Board of Advisors or Board of Directors. Do you know the difference? No worries – I got you.
  • Commonalities – Both Boards are made up of a collection of highly knowledgeable, connected, and diverse individuals whose goals are to really help the company succeed. Ensuring all parties’ interests are aligned, Boards are typically compensated with equity on a vesting schedule; though, commonly in startups during funding rounds, Board of Directors may invest in the company (more on this later). Both Boards work at a higher/ strategic level rather than the day-to-day which is left to the management team (CEO, COO, etc.)
  • Board of Directors (BoD) – Provides a collective, broad, strategic vision. Directors have legal requirements and fiduciary duties to the company’s shareholders – meaning they are acting in the best interest of the shareholders – relevant as one of the primary abilities of shareholders is the vote and appointment of members of the BoD. The BoD typically grows with funding rounds as invested interests may want additional direction of the company via the appointment of representative. Also, corporations (C-Corp, S-Corp) are legally required – not so in limited liability companies, partnerships, etc. The BoD is also typically guided by a Chairman.
  • Board of Advisors (BoA) – Made up of specific experts who help mitigate risk that may arise. As such, Advisors are called upon rather infrequently or when a particular needs arise. Well, unless the Advisor is a wicked brilliant entrepreneur which the startup itself may lean on to provide guidance for growth. Both, the startup and the Advisor, may go this route (vs. the BoD) because of the legal ramifications, investment obligations, if any, etc.


The term “leveraged” is used to describe a company’s risk in debt vs. equity (debt-to-equity ratio works, too). Recall from the PART 2 Lessons touching on equity financing and debt financing.
A highly leverage company has a high percentage of debt financing in relation to equity. As debts must be repaid at some point as well as interest being a fixed cost, the costs of the company are much higher (simplistically). If the company was to go under, its assets would likely be sold to satisfy as much of the debts as possible first before any disbursements to shareholders.
So if debt drives up costs and if the company goes under, its assets are liquidated to satisfy the lenders first… you see why there’s more risk for a highly leveraged company? Okay, good. 

Par Value (for stocks)

So “par value” actually arose from recently looking at Etsy’s Form S-1 as they’re seeking an IPO.
Par value is more commonly referred to in relation to bonds, but I’m going to stick simple here since I’m talking about Etsy’s S-1. That is, the issuance of stock.
Snapshot from Etsy’s Form S-1 filing
In gist, par value (also known as par, nominal value, and face value) refers to the original price a security is issued. In the case of stocks, companies typically issues stock at a very, very small par value (like Etsy’s S-1 shows above) or no par value at all. This enables Etsy to limit or avoid altogether liability should its stock drop. For example, if Company Not Great issued stock with a par value of $10, and its stock started trading at $5, then it would technically be liable to the shareholder at $5 per stock!
Simple, right? Par value for stocks à very little, or none to limit liability. For bonds, par value works with a coupon rate to determine fixed annual payments. Well, I’ll talk about bonds in Part 6 next month that will be more technical, but hopefully, easy to understand.


Keep on keepin’ on, as ­theysay. I’m six months into learning finance, and luckily, it’s such a big, complicated subject that there’s still so much to learn.
Next month’s installment, I hope to touch on bonds, for sure, especially given how lightly I touched on “par value”. Perhaps I’ll also share some insights from the Etsy S-1 as I’m still poring over it. If there are other concepts or questions you have, feel free to send them my way!
First time hitting three plates on dips
Way back in the day when this blog was actually branded Supply Chain Ninja [vs. Entrepreneurial Ninja now], I wrote about consulting and supply chain and, of course, subjects that interested me that I then related to one of the two. One such post was “What consulting has taught me about weight lifting, and vice versa” – you can probably guesstimatewhat that post was about.
Well, now that this blog’s about the Art of Startups and Entrepreneurship, I want to translate some take-aways and experiences from weight lifting to the entrepreneurial realm. Or even better, tell you why every entrepreneur should be working out. REGULARLY.
The benefits of weight lifting for entrepreneurs are many-fold ranging from adding structure to the entrepreneur’s chaotic day, the quantifiable challenge, and its benefits to your overall wellness.

At the end of the day, you’re probably your harshest critic

Hey, I get you. Being an entrepreneur, you probably feel the difference between success and failure is driven by you. The brand, the company’s missions and values, it’s about how you develop it. Of course, though, there’s a ton of external forces that make or break your company including your team, the market, your client’s internal office politics, forces majeure… so maybe it’s not all about you, too.
When you’re lifting weights, though, it’s first and foremost a test of you against yourself. When you’re lifting however many pounds (or kilos), those big chunks of iron don’t care about you. They don’t care if you had a bad day or good day. They just abide by the laws of gravity. If you disrespect the weight and aren’t careful, they’ll punish you.
In one of the rare instances of your life, as an entrepreneur, it’s really about you. You can make excuses of why you aren’t going to make it to the gym this early morning, but at the end of the day, you’re making excuses to yourself. So in this way, working out gives you the ability to truly be your harshest critic while being very honest in that it’s largely… yes, about you.

Adding a little structure to the chaos is a beautiful thing

When you’re an entrepreneur crushing it every day (working, that is), you can lose track of time. You’re in this mode of figuring out why this piece of code isn’t working, and it’s driving you insane. Or customers are hitting you up left and right asking if you can help them import data else all heck breaks loose. Maybe you even forget to use the bathroom… that happens. Often.
Your weekends are much like your weekdays, so much so that you wake up not actually sure what day it is. Happens. Often.
When you insert a little time for working out, you start to add a nice little placeholder and structure to your schedule. Suddenly, you’ve added time for yourself (maybe a workout partner, too?). The only way to achieve any results from working out is doing it consistently. So when you put on your calendar placeholders for 30 minutes or an hour a few days a week, you’ve added consistency in your otherwise chaotic, fluid life.
I’ve long understood the notion that you only make time for those things that matter to you. When people say they don’t “have time”, it’s an excuse. You don’t make time. With a workout schedule that you follow, you’ve made it a priority for you. And beyond that, you’re making YOURSELF a priority. If you’re going to succeed, you need to take care of yourself first to be in a place to care for your company and others.

You like challenges. Well, there’s nothing more challenging than adding 2.5 pounds to the bar

It’s amazing when you’re squatting and you’re contracting those quads, driving your heels into the ground keeping your chest high… you’re breathing out slowly, and when you’ve reached the top, you rack that weight, and *BAM!* you just set a new personal record.
Lifting is an amazing exercise in quantification and having a true visual gauge for improvement. Sure, you can use Hubspot’s Sidekick to track email open and click-rates or crunch spreadsheets for inventory fulfillment metrics, but there’s a lot going on there. When you’re lifting, you can see yourself getting stronger and fitter in the mirror and on the bar. Want to do more than you’ve ever done? Just add something incremental like the 2.5-lb plate. It’s not much, but it can mean A LOT.
I believe entrepreneurs are driven by a host of things, but one of the most common is the challengeof building something meaningful from nothing. It’s a test against the 800-lb gorillas more established in the market. It’s a test of your leadership abilities. It’s a test of your persuasive skills.
You love challenges. Embrace weight lifting as the challenge you get benefits from every workout.

Round out your health in more ways than the physical

I’m a big proponent of University of California, Riverside’s (UCR) Seven Dimensions of Wellness. I believe at any one time, you should strive to have at least five of these dimensions in a stable condition. Of course, depending on your own preferences in risk and the like, maybe just three or four should stable for you. 
University of Californa, Riverside’s Seven Dimensions of Wellness
There are countless studies on the positive effects of exercise, and I won’t cite the many articles here – just a Google if you’re interested after you’re done reading this. Instead, I want you to look at UCR’s dimensions, and you may be able to see all the different ways exercise can impact you.
For me, I’ve met some great friends (social), found time alone to think on my own — like my own introverted nirvana (spiritual, emotional, occupational), am in great physical shape with loads of energy (physical which then affects occupational, social, etc.), eating better because I want to maximize my exercise gains and optimize nutritional value (physical), etc. The list goes on and on.
When you’re heads down plugging away at your startup, it’s easy to lose track of time. It’s easy to grab something quick and easy like fast food. It’s easy to work in silo on your own or holed up with just your team with little interaction with the outside world. As an entrepreneur, it’s easy to stress until you’re exhausted mentally, emotionally, physically, etc. Weight lifting gives you the platform to find stability and strength in more wellness dimensions, so in the end, you’re working and living at peak capacity.

Weight lifting can teach you patience and perseverance

I loved this story I read about legendary Romanian Olympic lifter Nicu Vlad about the time Nicu was working on the Snatch. He had a progression to follow with the end goal of lifting 185 kilograms on the Snatch. However, he missed his progression of 170 and 180 (multiple sets with varying degrees of success, but largely misses). He didn’t once act out from missing the lifts. He kept progressing up to 185. On that 185 rep, Nicu gripped the bar, eyes determined… and in one swift, smooth motion, he nailed 185 kgs over his head for the best lift of the day.
The great Romanian lifter Nicu Vlad
Nicu had amazing determination, impeccable skill, and unrelenting mental fortitude. Despite all of the missed attempts, Nicu knew the plan for the day focusing on the end game, not missed sets in between. Each lift, no matter the weight, was performed to perfect technique. He was consistent, even if he failed to hit the Snatch.
In entrepreneurship, wins like Facebook, Uber, Pardot, AirWatch, etc., are not made over night. They take time with eyes on the grander vision. Weight lifting can teach you all about patience and trusting the process of hard work and consistency and, yes, perseverance. Because if you’re looking to lose weight, hit three plates on the bench, it’s not going to be accomplished in one workout. It’s going to be a consistent process with small accomplishments along the way.

I could go on and on…

I really could. I’ve already written a lot, but there are so many parallels of weight lifting and entrepreneurship and startups… and so many reasons why entrepreneurs should all lift weights. (Perhaps I’ll write a follow-up next month.) That’s just how powerful weight lifting can be for entrepreneurs, or heck, everyone.
Next time you get frustrated about how a typo caused you to spend hours trouble-shooting your code, maybe you should take that frustration to the gym. Entrepreneurships’ ebbs and flows, highs and lows are a great match with weight lifting’s ability to expend energy and build mental fortitude.
Okay, lift on 3. 1… 2… 3… LIFT!
What are your thoughts on the benefits of weight lifting for entrepreneurs? How do you think working out or exercises has been beneficial (or not) to your startup aspirations? 

William the Magician!
About a month ago, I was talking to a buddy at a coffee shop about start-ups and entrepreneurship. A man sitting next to us overheard heard our conversation, and asked us questions about building businesses. He happened to be a professional magician, and ran a small business called Davenport Magic. William Davenport was, in gist, an entertainer for kids, company events, business customers (like Wow Café’s customers who would enjoy a dinner anda show), etc.
We spoke to William for a few minutes before having to part ways about all things including marketing, selling, and generally, growing the business.
Fast forward a couple weeks, and William called me to schedule a sit-down to talk in greater length about what he’s looking to accomplish and glean more tips. He also mentioned how that day we met, however brief, was taken to heart and he had implemented a lot of what we talked about including blogging to drive inbound marketing… EVERYDAY. I was astounded and impressed, so I agreed to an officialsit-down.
So we met yesterday, and had some good conversation, and man, I’m excited for him. He’s got a good thing going for himself, and has the desire to be something greater. But really, I’m more excited because he’s a good guy who is PASSIONATE about what he does.
I want to share a few tidbits from our conversation…
  • It’s all about relationships. I think everything is ultimately driven by relationships whether that’s to a brand, to a friend, to family, etc. For William, it’s apparent how important relationships are. Much of his business is from word-of-mouth. He’s a magician, and though it’s not a common skill/ profession, there are plenty of other options for selecting entertainment for a gathering. As such, what makes someone call you for a gig is that relationship. For me as I do independent consulting, I’m not really that different from others. Consulting’s commoditized. Instead, though, I get calls because of my relationships.
  • Your brand needs to be consistent and genuine. Part and parcel to relationships is your brand – who you are, what you represent. For William, he showed up in a suit, and carried himself with confidence. His tone of enthusiasm was authentic. He wanted to portray himself as a professional and inviting. Your relationships grow and become stronger through a consistent, genuine brand.
  • Call to action. Call to action. Call to action! From his website, to his emails, William didn’t have an apparent call to action to either visit his website, send him an email for more information, or sign up for a gig. When someone visits William’s site or sends an email, he (you can insert your name here) should motivate the visitor to interact with you. Leads are special and coveted, and once you have them in your queue, you can start to cultivate that relationship, which hopefully turns into an event (for William’s case).
  • Know your audience. William mentioned how he works hard to understand the psychology of the crowd. It allows him to throttle or mix up his tricks to cater to the crowd. For example, at tradeshows, he knows he needs to approach more than one person at a time because with one person, they can be scared and distrustful. With approaching two or more people at once, people tend to open up more… and with two people engaged, more of the crowd around stops to look at what’s happening.
  • “Make people feel great”. This was priority number one for William, and it’s a great message for everyone for their customers. This reminds me of the Head of Care for a major phone manufacturer I worked – she and her team strived for a common vision: “Delight the customer”. For William, making people feel great included the following facets: 1) great personality; 2) dress the part; 3) hold yourself to a higher standard; 4) ASTONISHMENT – this was more of an aim, but it’s paramount.
  • Be and stay humble. There’s always someone out there smarter than you, with more experience, or with a grander network. For William, there’s plenty he can learn from others, and there’s much I can learn from him including captivating audiences (or sales prospect for that matter). 
  • Work your @$$ off for your dreams and passions. When I asked William what kept him up at night, he recited everything about his business. His business is what drives him, and what motivates him. At the end of the day, he’s thrilled to have left his corporate life and computer science background behind in pursuit of his passion in magic and entertainment. You could tell that though he worked so hard, he still had so much energy and enthusiasm for what he does.

William’s going to do well on his current strategy, but there are few things he can do to be even greater – yes, including his website. We’re working on that. However, I know that he’s going to hustle and make good choices to expand. He’s eager to learn, and he wants to improve.
The other thing I realized, more for myself, is how much I like working with small businesses. This is probably what motivated my good friend Don Pottinger to write “The Best Entrepreneur I Know”. I see the same small business challenges and opportunities being in startups myself… also because I see the crazy hard work my dad puts into his small business in electrical and mechanical engineering. I just started a dialogue in potentially helping a small biz in Midtown selling lighting fixtures. With all the conversations, these are entrepreneurs who are working their tails off, and are so busy. I know that if I can make small changes in their businesses, I can make a world of difference for them, too.
William’s a magician and small business owner doing what he loves… that’s special, and what drives me. Dare I say, “It’s magical.” Haha, okay, when I reach this level of cheesy, I know it’s time to end.
Till next time!
What are your thoughts on what makes a great small business? How about a small business owner? What are some words of wisdom for William on up his company?
Just because a few doors are closed, doesn’t mean one won’t open later. (image source:×197.jpg)
Ever stop to think about who you are? What makes you tick and tock? How about what you truly enjoy and what you’re good at vs. not good at? Or what/ who has shaped you into the person you are today?
I’m at this stage of figuring out whether to continue independent consulting while iterating on ideas for the next startup or take on some full-time employment (consulting, product management, or otherwise). My recent post about my daily/ weekly schedule was an interesting exercise in stepping back and recognizing what I’m actually doing in a day, and made me really think at the macro level.
In one of my recent reflections, I thought about defining moments in my life. One of those watershed events that truly transformed me was my failure to make the Varsity soccer team in high school. I won’t rehash the whole story here – shared the story almost a year ago in my post titled “Getting Through Dark Moments and the Most Vulnerable Story I’ve Ever Told Publicly”. It’s this moment that I would say was a major Defining Moment in my life.’s definition of “Defining Moment
I remember that day in high school so vividly… it sucked, for a lack of a better word. I was crushed. Soccer was my life. Sure, I apparently wasn’t so great at it, but I loved it. I played every day. I had aspirations to be a pro one day. It’s true what they say, “you learn more from failure than success”.
As I think back to that moment and my life since, I can distinctly see how it’s shaped me.

Consistency – it’s what separates the good from the great.

Actually, the Varsity coach told me this was a major reason for my exclusion. I played well, but I wasn’t consistently playing well with errant passes or poor positioning. When you watch the great players, they were consistent in their play. They were dependable center backs who you could rely on to make that last-ditch stop, if needed. I just wasn’t dependable.
In entrepreneurship for me, this plays out in my interactions with others, being on my toes ready to pitch at any moment, maintaining a cadence with customers, etc. I strive to maintain consistency in putting together high quality products and presenting myself to the highest level.

Details – it’s also what separates the good from the great.

One of the other aspects of the great players who made the Varsity team from the others was the subtle details in their play. I remember one of the center-mids on the team had such amazing field perception that he knew where everyone was on the field. He had some Spidey Senseof when an opposing player was coming up on his back. The best players weren’t just passing, but were passing with enough oomph and in a direction that would allow the receiver to move WITH the ball and away from an oncoming defender. This is kind of like the best quarterbacks in the NFL who lead their receivers with a throw, away from the onrushing corner.
From a professional standpoint, paying attention to details means checking for spelling mistakes. It’s ensuring logistics are nailed down for any meeting or get-together. At Body Boss, for example, details included doing reconnaissance work of a school and the strength program I was visiting. It meant ensuring all the marketing collateral was ready before a coach’s clinic.

Be Aggressive. B-E Aggressive.

(Thinking back to my high school days reminded me of this constant chant at football games. That’s funny, right? No? Okay…)
I remember my earlier years on the JV team when I played incredibly conservatively. I was naïve and hadn’t played at a high level like some of the others. I distinctly remember one player who had played in the highest echelons of youth soccer (beyond Classic 1 – some summit I didn’t know anything about). I had the ball running in one direction, and the player was defending me. Except, he just brushed me aside, and ran off with the ball. I just witnessed the football “swim move” but on a soccer pitch. I thought it was a foul, but it was perfectly legal. I was just weak.
Today, that mindset of being aggressive and strong pervades me. If I’m not, others who “want it more” will grab opportunities leaving me in dust. If you want the ball, if you want the sale, you need to “swim move” your @$$ in there. Don’t play conservative…

If you’re not confident, you’re not going anywhere.

Kinda like the above point, but aside from being aggressive, having a mindset of confidence goes a long, LOONNNGGG way. Be confident in your abilities. Be confident in who you are. Be confident in others.
I remember I always looked up to those guys who played in much, much higher levels than me. They carried themselves like they owned the pitch, and compared to me… they did. I looked up to them like I was a small fish, and when I thought like that, everyone else did, too.
It’s hard to get others to believe in you if you don’t.

Bad outcomes don’t mean bad outcomes forever… and short-term memory is great.

I wanted to parse these two into different bullets, but they go together so darn well. Plus, it’s the most important point here.
At the end of the day (or in my case, my high school years), I didn’t make Varsity my Junior or Senior years. Boom. Didn’t make it. Enter college, though, I eventually made it to the Georgia Tech Club Team’s A team. I even captained a team one year. Since then, I’ve played on teams that have won leagues and divisions from Atlanta Division Amateur Soccer League (ADASL) to Silverbacks and various tournaments. I’ve played with some amazing players from all over the country, and my best friends are from these years.
I loved soccer so much that even as I failed to make Varsity, I kept at it, and eventually, I was in with the soccer crowds I wanted to be a part of when I was younger. I failed to make the teams prior, but then some really great things came about later because I learned from those earlier playing days, and I kept at it.

The take-aways…

It’s funny taking a step or two back to look at the grander picture. For me, I looked back at a terrible moment of my life, and found a lot of positives that came from it. I lost a couple battles in high school, but so far, I feel I’ve been winning the war.
Thinking about it perhaps more philosophically, the ­failure of not making Varsity doesn’t define me. It was the lessons from failure that defines me, or maybe just helps define me.  

Take 10 minutes out of your day for yourself and think about this – what was a defining moment in your life? Why? How has it impacted you today? 
I’ve somehow managed to keep this going for four months (including today) researching finance concepts, and blogging about them. Wow, it’s been a great exercise learning and sharing.
I admit my recent blog posts haven’t gotten me THAT excited where I’m openly sharing, but when I started researching and writing this post, I felt that excitement again.
So, anyways… moving on for today’s post – PART 4! The following topics will be covered:
  • Convertible Note
  • Discount (as part of Convertible Note)
  • Cap (as part of Convertible Note)
  • Dividend
  • Pro-Rata Rights

Convertible Note.

A convertible note is kinda, sorta, like-a hybrid of debt and equity financing. Here, the company and the investor delays setting a valuation for the company till a time when the company may raise another round with a valuation. Convertibles are a popular vehicle for early stage startups as it’s hard to discern the value of an extremely young company with little to no earnings.
So instead, the capital at the beginning is treated like a loan upfront. When the company raises another (or official) round, then the outstanding convertible note is converted to equity as a ratio of the valuation. However, to sweeten the deal for the inherent risk of investing early on, there are a couple levers that impact the conversion of the convertible:
  •  Discount – a percentage reduction the convertible note holders can convert to the principal loan amount relative to the purchase price of the next round. The discounts typically range from 0-35% with 20% being the most common. So if Series B round investors are paying $10 per share, the original investors who had a 20% discount on a principal amount of $100,000 can convert this loan amount at a per-share-price of $8 ($10 less 20%)… they’d get 12,500 shares at $8 each but valued at $10 per share.
Seed Round: You invest in a convertible note of…
Principal of $100,000 with a discount of 20% (convertible to Preferred Stock)
Series A: Awesome Venture Capital Firm invests…
$10 per share at a valuation of $10M (pre-money)
Your conversion price-per-share
$10 * (1 – (20%)) = $8 per share
Shares of stock
$100,000 / $8 = 12,500 shares of Preferred Stock
Book Value of stock (unrealized)
12,500 * $10 per share from round = $125,000 (25% unrealized return)
Series A investors would’ve gotten…
10,000 shares for $100,000 investment due to $10-per-share price
  • Cap – a maximum limit of the valuation that can be converted into equity at a later priced round. The investors will typically be priced at the lower of the cap or the valuation of the round. How this works…

Seed Round: You invest in a convertible note of…
Principal of $100,000 with a cap of $5M (convertible to Preferred Stock)
Series A: Awesome Venture Capital Firm invests…
$10 per share at a valuation of $10M (pre-money)
Your conversion price-per-share
$10 * ($5M / $10M) = $5 per share
Shares of stock
$100,000 / $5 = 20,000 shares of Preferred Stock
Book Value of stock (unrealized)
20,000 * $10 per share from round = $200,000 (100% unrealized return)
Series A investors would’ve gotten…
10,000 shares for $100,000 investment due to $10-per-share price


Dividends are disbursements of profits from a company to its shareholders. Dividends are post-tax, and typically abide by a dividends schedule. Though, companies can issues dividends at any time as “special dividends”.
On the opposite end of dividends, companies can also choose to reinvest its net profit into the business as retained earnings rather than issue dividends.
Dividends are more commonly issued as cash to its shareholders. Each dividend is fixed per share, but the total amount will vary depending on the percentage of the shareholder’s shareholding (ownership).

Pro-Rata Rights.

In PART 1, I talked about dilution – the outcome where ownership percentage may decrease when a company raises a round of capital at a higher valuation. Pro-rata rights enables investors from earlier investing rounds to maintain their shareholding percentage and avoid dilution by investing additional capital.
So if an investor invests $500,000 in Amazing Hair Gel Company with a post-money valuation of $2M, the investor has a 25% equity stake in the company ($500,000 / $2,000,000). If the company raises additional capital in a Series B with a post-money valuation of $40M, the investor has pro-rata rights to invest an additional $9.5M to maintain a 25% stake in the company (25% of $40M = $10M with an initial investment of $500,000 already).

Need Your Help Moving Forward!

All of this research has been making me so much more adept and savvy when reading posts about investments and valuations, and also much more knowledgeable talking to others about them. This has been a great exercise, but I think I can do better, but I need your help.
I’ve heard positive feedback so far, and I’m always looking for ways to explain things better. This stuff makes sense in my head as I’m writing it, but it’s largely been one-way communication. That is, I write and “teach” without the student-interaction that makes good teachers GREAT teacher. That is, in 1-to-1 teaching, the teacher (or presenter) and student (or audience) interact with thought-provoking questions. Heck, I oftentimes learn more through these interactions.
Short story – interactions help me learn and explain things even better. So if you have feedback, feel free to shoot me a message on Twitter (@TheDLu) or email so I can explain things better.
Till next month… Cheers!
Dilbert comic by Scott Adams
I talked earlier about how and why I started to program in “These 3 Questions Led Me to Stop Waiting and Start Programming” back in December. I used the idea of Dee Duper – an online marketplace connecting parents in communities to buy and sell gently used kids goods.
The most popular “I wish” statement I hear from others today when I talk about what I do is: “I wish I had a good idea to start a company”. However, these days, a close second is “I wish I knew how to program”. It’s not just about entrepreneurship but companies big and small are looking for resources who not only understand business, but who have a technical capacity to do some coding, too.
There’s an inherent and subtle level of creativity with coding as well as layers of analytics involved. With the Internet of Thingsand the explosion of Big Data and mobile, I wouldn’t be surprised if some level of programming is introduced as part of core classes in high school and colleges soon.
So I don’t get carried away with paragraph after paragraph of… stuff, I’m going to share a quick list of what I’ve learned from getting started on iOS and building out Dee Duper. As always, I’m being specific about my experience, but any of these take-aways can be ported to any other programming – macros in Excel, SQL for databases, Ruby on Rails for web apps, etc.
Hopefully, these will help you stop waiting and empowering yourself to learn and put yourself ahead of the curve.

Keep programming day in, day out to keep your skills sharp.

The hardest part of programming isn’t getting started. In fact, getting started is the second hardest. The award for Hardest goes to… programming consistently. Like I said before, I had programmed in the past, but programming, like most skills, is perishable knowledge. It’s important to keep the skills fresh with continued practice.

Be prepared to delete and adapt when adopting new technology.

I decided to plunge into Apple’s new language Swift vs. Objective-C because Swift will be the programming language Apple preaches going forward, and I liked its clean syntax. However, when I started, Swift wasn’t officially released… having spent many months/ years in development, I had to do a lot of code refactoring when Swift was actuallyreleased at Apple’s event in September (2014). I had a bunch of code that needed to be updated because functions and classes were already obsolete/ deprecated.
Note: Refactoring is the process of “cleaning up” code via restructuring code, implementing more efficient syntax, etc. while keeping the behavior the same. The benefits happen behind the scenes beyond efficiency.

Big features may represent 90% of the tech, but the remaining 10% will take up 90% of your effort.

I actually got a TON done of the Dee Duper app in the first week surprisingly. However, it was all the fine-tuning and dealing with Constraints that had me incredibly frustrated and head buried in my hands at the desk.
This wasn’t so much of a big deal before when Apple had really just one size (iPhone 5s and earlier all had the same width), but once screen sizes change, you need to set limits and constraints right so your app doesn’t look ridiculous on the various screen width sizes. Then, you’ve gotta handle the exceptions of “well, what happens if a user selects this first before that?”
Rules are easy to plan for… exceptions are what crashes your app and aren’t explicitly planned for.
Note: Constraints are what dictate the size of images, labels, etc. to fit different sizes of screens.

Dealing with Apple’s Developer processes will infuriate everyone – account for this time if you want to launch by XYZ date.

Apple’s products are [usually] pretty great quality because the ecosystem is so tightly regulated. I never appreciated this so much till I started developing. I had to buy a MacBook to even program iOS in the first place. Then, there’s a ton of headache involved with just being ALLOWED to program. There are things like certification, provisioning profiles, etc. that you have to constantly share keys and authorize devices to even test, authorize people to be able to test your app, etc. It’s mind-numbing.
If someone makes this process easier (a few clicks maybe?!), he/ she can make a ton of money. The frustrations through these processes are MANY for newbies like me and even experienced pros, I’ve found.
If you want to launch on a particular day, you need to be wary of how long it may take for Apple to approve the app (or if it gets restricted).
Don’t forget that if you leverage other tech, you may also need to get approval from them, too, like Facebook.

When you’re down in the dumps of coding disarray, Google is your best friend.

I probably run a hundred searches a day for problems I have or for ways to build Dee Duper out better – probably because I’m that green. Some of the features I was trying to build have been attempted/ successfully implemented by other developers. So, there’s a high likelihood there are other developers who have had similar problems and solutions. Being able to Google these situations is great, but you have to get the search terms right or you get flooded with irrelevant content. Google will likely steer you to personal blogs and Stack Overflow posts to help. The development community is alive and strong. Though with new tech like Swift, the community is much, much smaller, and can be a bit more difficult to find help with.

Integrations to platforms can be stupidly easy.

Credit goes to the great startups today who have developed such great platforms that can be easily tapped into.
For Dee Duper, I leverage Facebook’s API (application programming interface) so users can sign up and log in easily. With it, too, I can show mutual connections/ friends. Facebook’s documentation is decent, and can really help get you started.
I also use Parse(acquired by Facebook in 2013) as my back-end – stores the data model, content, etc. so I don’t have to build one from scratch. It’s so simple to get started and running. Creating tables and running queries is a cinch. I also use Parse to send Push notifications. This is useful when Dee Duper users send messages to one another critical for buyer-seller interactions. Push notifications are great, too, for Saved Searches (like if you’re looking for a particular items with key search terms, you can save the search, and be alerted whenever someone posts a listing that matches your search).
These large platform integrations just makes building apps that much easier and faster.

It’s so easy to keep building, and going overboard, but you need to stay simple.

Plugging in my earbuds and sliding my hoodie over my head, it’s easy to just get cranking and keep going.
“Oh, that can be a cool feature to implement… hmm, I’ll do that!” And the next thing you know it, you’ve blown past your MVP (minimum viable product).
It’s easy to just keep going, and thus, spinning your wheels and delaying your launch. As much customer discovery as I’ve done, I need to get the product in people’s hands to test hypotheses like features, layouts, etc. If I keep building, I’ll never get this good insight.
I have a couple lists in my notebook and on my whiteboard at home with clear objectives of what the MVP is… everything else can come later after some testing and learning.

Building is easier than selling (in my view).

I like to sell. I like to work with people face-to-face to find how I can help them through my product/ service. However, building things like an app is way easier, I think. You can do it from anywhere pretty much and at any time. Except for some quirks, the computer and code is pretty unbiased towards you with not so many personality “differences”. Thus, it’s easy to get validation when things work or why things don’t work.
In sales or working with people, there’s so much more you’re not necessarily privy to because there’s a person on the other side with a mindset, an attitude, a life, etc. However, I still like the people interaction, so would rather hand over the technical reins when the timing is right.

It’s really easy to take your time or delay.

Dee Duper was approved for the Apple App Store on Monday, December 1, 2014. (First try – sweet!) However, it took me a while to publish it officially because I was scared about how it’d be perceived by others.
Fast forward to February 2015, and since its launch, I really haven’t marketed it at all. I think I was excited about Dee Duper as an idea and as a project to learn coding with. However, since then, I’ve developed a couple other apps. As a solo-preneur, I dictate what gets my attention and what doesn’t. My schedule is completely of my own choosing, and sadly, that could mean I focus on building so many different things without the focus of only one thing even after launching it recently.
I need to do some marketing, though, so that I can get feedback on the apps that I’ve built. At least this way, I can really work in the Lean Startup mindset of iterating and collecting feedback. 
Another Dilbert comic by Scott Adams… because they’re great.
Late or no time at all? Make time by scheduling that which matters most (image source:

I’m a huge creature of habit. I like schedules, and I also hate them. Like my DISC assessment (high in both influence and conscientious), I’m a bit paradoxical in that I value both structure and spontaneity. As an entrepreneur, I’ve learned to really embrace this bend-but-don’t break schedule.

However, I’ve always been a bit programmed in appreciating structure and bottlenecks. It’s probably what ultimately drove me to Industrial Engineering at Tech and a consultant after graduation. I always understood priorities and making time for those things that matter most.
In entrepreneurship, this can be a tough task — making time for things that matter while balancing the needs to create and execute. We hear all the time how it’s important to live and breathe the business. Work 20 hours a day; sleep for 4. Even though I don’t have a startup success under my belt, I have to believe that’s a load of crap. At least for me, I know to operate at my best, I need to do what works FOR ME. For me, that means making time for the things that matter.
Below is a quick snapshot of what a typical day looks like for me. This is largely “today” vs. when Body Boss was going when I would have dedicate more time for cold calls and school visits.
5:00 AM
Most days during the week, I’ll wake up about 5AM-5:15AM. I’ll get ready to work out with my pre-workout regimen. This includes reading any emails, reviewing the day’s agenda, reading blogs or, and playing music on Spotify… and dancing. It’s my warm-up.
6:00 AM
6AM I head to LA Fitness. I pretty much get my workout going at 6:15AM. This will go for about 1-1.5 hours depending on how much warm-up I do.
7:00 AM
8:00 AM
Typically by 8AM, I’m back home, showered, and making a quick breakfast of a couple over-medium eggs, grits or cream of wheat, and protein shake.

While eating, I address quick emails (takes < 2 min to reply). Most of the time, I won’t answer any till later when I’m set up.

9:00 AM
I don’t have an official office, so I can be nomadic, but most days, by 9AM, I’m at the local Starbucks.

I’ll be set up, tall green tea in hand, and I’ll read a few industry or blog posts to start my day.

9:15-30AM, I’ll start addressing emails. I’m a big fan of Inbox Zero. Heck, I’ve been doing that for a while before I knew there was a name for it. That is, I treat my inbox as a makeshift task manager, and work to clear it out depending on how I need to handle each email.

10:00 AM
By this time, if I have any consulting work, I’ll start that. Otherwise, I’m likely starting to code or wrapping up a blog post, if it’s Wednesday for my weekly publish.

I also like to have any pre-brief meetings during 10AM-11AM… if I have a bigger meeting later that day, and I have to collaborate with others.

11:00 AM
12:00 PM
1:00 PM
I might have already snacked on almonds or pistachios by this time. However, for lunch, I’ll have a peanut butter sandwich – the lean life. They’re not delicious by any stretch of the imagination, but they’re incredibly fast to make, clean to eat, and I can continue to work while taking bites. Pretty boring, but very effective.

1PM is also a great lunch time for it seems. By this time, I’ve had put in a good rhythm and accomplished several things.

2:00 PM
I’m continuing to work here with any continuation of earlier work. However, usually, I’m done with any consulting work, and now, I’m focused on programming, marketing, customer discovery, or whatever else. Since I don’t have an official “role” or “job”, I just do what’s needed.

During 2-4PM, I’ll also try to handle most of my meetings including meet-n-greets.

3:00 PM
4:00 PM
5:00 PM
6:00 PM
I typically leave Starbucks about 6-7PM depending on what I’m doing later that night. I’ll keep working from home, but if I’m meeting with friends, I try to make those at 8PM. Yoga at LA Fitness on Monday and Wednesday evenings at 8PM. Friday Night Futbol (pick-up soccer) at 6PM at Tech. We’ve kept FNF going for the better part of a decade with much of the original cast still playing.

Either way, I try to incorporate a more “social” fitness activity during the week so I can break up the monotony of working “alone” at Starbucks.

7:00 PM
8:00 PM
9:00 PM
By this time, I’m eating dinner. I usually have left-overs from having cooked a big batch of whatever on Sunday. I try to cook something new or incorporate a new ingredient every week. However, sometimes, I amaze myself with some delicious meal, so I end up cooking the same thing two weeks in a row.

After dinner, I try to close out any other emails before bed.

10:00 PM
Before actually falling asleep, I like to throw up something on Netflix. It has to be something funny or “mind-numbing”. I’ve always had trouble falling asleep and staying asleep as my mind races with ideas or questions and reflections.
When I watch mind-numbing TV, it allows my brain to shut off. I tried reading, but most of the time, it doesn’t turn my brain off. So I’ll watch a couple episodes of some show, and likely try to fall asleep to it in the background.

These days, I’m on “Friends”. I’ve churned through “How I Met Your Mother” and “Scrubs” over the last seven months.

11:00 PM
12:00 AM
1:00 AM
… even with the mind-numbing TV, I find myself getting up about 1-2AM, and staying up for another couple hours. I’ll be thinking about all these opportunities or reflecting on recent events. It’s crazy. I guess, sometimes, it’s just hard to shut off.

This is particularly annoying when I finally fall asleep about 4AM, and have to wake up in an hour to start my cycle again.

Other general thoughts on schedule…
  • I cook in bulk largely on Sunday evenings and keep everything in Tupperware to last throughout the week. I’m a fan of spontaneity and variety in food, but for the sake of efficiency, variety rolls week-to-week.
  • I like to stay very active as it’s my “safe haven” to get away, but I include some team-oriented sports to get in some social time, too. So I play soccer largely on Friday evenings, but may play on Sunday, Tuesday, and Wednesdays as well. Weight training happens on Sunday, Tuesday, Thursday, and Friday, and yoga classes on Monday and Wednesday evenings. And if I have energy, I’ll include either mountain biking or golf on Saturday.
  • I work just about everyday… the extent of how long is another question. I don’t work too much on either Saturday or Sunday to have an “off-day”. However, I like what I do, and I like that I’m continually learning. As such, the concept of “work-life balance” is foreign to me. Instead, I feel that work is part and parcel to my life, and I happily include the two together.
  • I try to see my family at least once every two weeks. I absolutely love my family. Especially with a young niece, I make it a point to see my family somewhat often even if it’s just for a quick meal.
  • I typically work 9AM-7PM – not a crazy number of hours, but I’m focused and keep my head mostly down. More times than I care to admit, I’ve forgotten to use the bathroom. I get in trouble when I get stuck in traffic.
  • I address emails three times daily… once in the morning, once around lunch, and once at the end of the day. At least, that’s what I do most of the time.
  • Most of my meetings are on Tuesdays or Thursdays. Friday mornings I may meet with people at Atlanta Tech Village. Keeps my schedule sane.

Surprisingly, some of the greatest benefits of a schedule is having flexibility and allowing focus. With a schedule, I’ve essentially set aside time to accomplish what needs to be done while all other time is largely fluid. Add to that, I don’t have to wonder when I’m going to do something or when I will finish what I need to do as my schedule takes the thought-process out of it.

What I’ve also noticed in my schedule as it’s evolved is this notion of the introvert me vs. the extrovert me. The solo-preneur vs. the collaborative entrepreneur. I’ve found myself putting a lot of emphasis on finding activities and times where I am not dependent on others. For example, when I work out, I may go with a friend. However, if he/ she doesn’t join me, I’m okay with that. Weights don’t care about my mood. They don’t care about if I’m there with a friend. Instead, it’s a purely ME-challenge. In the evenings, I’ll then try to double-up with the group activities like yoga. I’ll invite others to join; or in the case of FNF, it’s highly dependent on others. If others can’t make it, then I’ve still, at least, gotten SOME form of physical exercise in earlier.
Even with Starbucks, I’ve given myself the ability to be quiet and to myself when I wear a hoodie and plug in my earbuds, or I can opt to be more social and talk to the person next to me. Either way, I’ve given myself flexibility. When I’m at home, I don’t have that flexibility which inevitably drives me wild with “cabin fever”.

In gist, everyone’s schedule is different, but we all have the same number of hours in the day. We prioritize and make time for those things that matter most to us. For me, I’ve stuck to sometimes a very rigid schedule that actually allows me latitude to include other activities that I hadn’t included before… all because I’ve already set aside the time to do what I need to do.
Reflecting posthumously… Source:
If the inner voice in you keeps telling you to go back or to keep forging ahead, should you? Should I?
I keep bringing up Body Boss recently because I feel it’s unfinished business. I feel like we quit too early. Or maybe I’m just really passionate about it still. Or maybe I still get messages from happy customer-partners who want to continue to do more. Or maybe I’m crazy and I’m blinded by the potential opportunities to see the actual lack of opportunity.
There’s a popular picture I’ve seen illustrating the cost of giving up too early:
For the myriad of lessons learned in 21 Rough Lessons Learned from Failure post, I still can’t shake that maybe we stopped building Body Boss too early for ONE major reason. In fact, Marc Andreessen shared the idea recently in “On product/market fit for startups“:

“My contention, in fact, is that they [startups] fail because they never get to product/market fit.” – Marc Andreessen

In the article, Marc was referring a lot to the market being the determining factor of startup success as the market can actually pull a product and team in the right direction. At least, that’s my simplified synopsis. However, this notion of failure before product-market fit is an incredibly resonating one.
In the 16 months following launch, we had over 70 unique schools/ programs trial Body Boss, and we had 12 paying customers with about 4 of those signing back up. Yes, these are paltry numbers. However, if you look at the data from interviews as to why they weren’t subscribing or why they didn’t re-subscribe there were very, very common reasons. The market was trying to pull us in the right direction. We just resisted.
In fact, 3 of the 4 re-subscribers were actually in months 10-14 when we started to build some of those features customers were asking for. (They re-subscribed after we announced the zombification of Body Boss, actually.) However, in the end, we made a collective decision to not pursue Body Boss as it stood.
“So what are you trying to say, Daryl?!” I’m saying this…
  • Capture data, and you can start to see a story. For us, it was poor product-market fit at the beginning which could be explained, largely, by a lot of hubris on our part (we thought we could be like Steve Jobs and tell coaches what they really wanted) and by poor customer discovery up front.
  • Speed kills… or rather, lack of speed. If I could, I would’ve funded the team so everyone could be full-time on Body Boss, and thus, no other distractions of full-time employment elsewhere. Without distractions, perhaps we could have churned out the right features and user experience [quicker] to reach closer and closer to product-market fit.
  • Have Empathy and Let the Currents Take You. As I mentioned above, there were many moments we, as a team, failed to listen to our customers. We naively believed we knew the better way to do things. We lacked empathy, and even though the market was trying to pull us in the right direction, we didn’t let it. When enough of the market tells you to move one way, you have to put aside your ideals for the greater good.
  • Failure/ quitting is always an option. I don’t want to say “quitting” is always a bad thing, because sometimes, it’s the right thing. Like I said before, I could be blinded by what I believe is there. That’s why having a great team is important, too… to not just say, “YES” to everything I say, but to challenge me.  
  • Regret is a damned thing that can haunt you, but you have to move on. The experience with Body Boss has taught me a great deal on startups, about building a team, and much more documented in the 21 Lessons Learned. However, in corporate settings, a failure is a failure. In startups, failure is called experience. Embracing the lessons learned will give me great hope for the future.

Of the 70 schools who signed up for trials, but didn’t convert, I’d say at least half of those would’ve subscribed had we nailed a few items down ranging from a rework on user interface to features. That’d give us about 40-45 customers in the first 18 months – not too bad. That’s my expected benefit. Conservatively, 20 schools would have converted – still not bad, and I’d venture to guess many more would re-subscribe, too.
However, features aren’t always going to win over customers, I know. That’s why I’m suggesting this based on my actual conversations. Perhaps designing for the users would also have helped move a low-tech industry to embrace more technology… or maybe we would’ve died anyways. There are a number of things we could’ve implemented, too, to help really mitigate against building the wrong product such as Letters of Intent, development alongside customers, a system by which customers/ prospects can request or reserve features almost like a Kickstarter (it’s in my head how this would work), etc.
I suppose that given we never reached product-market fit and looking at the data posthumously… I can’t help but wonder the WHAT IF. I ask myself whenever I finish a project or day if I killed it (in a good way). I don’t feel like we killed it for Body Boss. I think we could’ve done better… that’s a pretty bad feeling, but one that I have to learn from and move on. Right now, our competitors are making large headway in the market, and the opportunity has largely passed by to revive Body Boss and be the dominant player. Lack of speed kills.
For now, Body Boss will be one of those opportunities with great regrets and great learning moments to take to my next startup.

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