Marco JaneczekPartner at SproutCamp
Bio

Founder of a number of Startups. Currently Investor (hatchbrands, first stone ventures), M&A, Board Advisor. Mentor and Advisor to a number of startups in Canada, USA, Poland and Italy. Raising Money, Business Development and Networking is my specialty.



Recent Answers


Stock Exchanges should be one of your last resorts to go and raise money. They are a good way if through a different series of voting shares you are in control of the stock.

Let me explain:

1. There are a number of stock exchanges that can help or hurt startup companies. These are TSXV, OTCB, PINKSHEETS, AIM, FRANKFURT, CNSX....

2. There are a few ways to go public

in USA: you can buy a Public Shell. You need to make sure that Public Shell is 'clean' in terms of filing (there are strict laws these days), lawsuits, and most importantly the relationship with brokers (who they are) and promoters (investor relations). It is important to have all these in place.

You can also get acquired by a current company. What you need to watch out is the terms and if the new company will be able to raise money to acquire you. Raising money is not difficult if the story, management etc.. is good (like if you were raising money from an investor)

in Canada: you can qualify for a transaction with a CPC (Canadian Pool Company). A CPC is setup by directors who put into a shell in the rounds of $125k, which serves to identify a qualifying transaction and at the same time raise a private placement through brokers to RTO (Reverse Take Over). The CPC changes its name into your company. I think this is the 'cleanest' way to do things.

3. Volume is key to a success of raising money. Most day traders wait and are notified when significant volume is created on the market by a shell. A significant volume is typically created when a broker buys equity from the owner of a shell. The owner is typically given cash in order to do some specific transaction (acquisition, financing in your case). The broker at some point in time dumps slowly the shares into the market, creating volume for day traders etc...

4. Make sure you don't settle for shares ONLY. you should come up with an agreement. there are many that work in your favour.

marco.


When facebook started, they were a 'closed' social network. An Invite only. You had to have a .EDU email address, and could only invite 10 of your friends. The Invite Only became an exclusive club and it grew quite quickly (virally). Then Facebook opened up.

Either way, you still need a seed round.

Traction is defined by Users or Revenue growth. In case of Facebook, users grew quickly and it is there where investors saw value. Facebook, Twitter, Foursquare and many others needed to raise money as their traction was defined by users and not $. Later on some of them where able to monetize users, finding that silver bullet.


You should have Market Size and Addressable Market.
Market Size you can display with a large number, and then include some logos of companies and their market cap.

Addressable Market you should include a number.

If you are raising money, it is suggested your Market Size should be in $Billions.


The best way to learn about startup fundraising is to get a mentor/advisor. They will be able to take you through a number of realistic scenarios, including if your startup is fundable, and at what stage your startup is. They should also be able to tell you where you should seek your investment, what type of investment and network your to the right investor.


If you know that the tech cofounder is about to leave, then probably they should have options.

A cap table (with founder shares) has usually Equity and Options. The main difference is that Equity is hard to give and hard to take away (think: Shareholder agreement etc...), Options (easy to give, easy to take away).

The above question would probably be never be asked due to a number of reasons.

Without funding, it will be very hard to attract a CTO after a tech co-founder leaves.

Fundable startups at very early stage are usually composed of 2-3 founders. This is to due with many factors.
If 2 people, then one should have a majority, one minority. Someone has to lead (decision). With 3 founders it is different. If you have more then 3 founders, the startup might go into too many directions. it does not mean it does not happen, but you might be creating a barrier (IF YOUR GOAL IS TO RAISE MONEY).

It is very important that your MVP is validated with customers and gets traction. Traction is Users or Revenue.

I suggest you learn how a cap table works and if you do some simulations you will see how to answer this question.


There are many formulas, my advice is at a very early stage try to avoid the valuation.

If you are seeking a seed round, you can avoid the valuation question by structuring your investment via a convertible note (with or without a cap).

If you really want to assign a valuation (it will work against you). It will create a barrier for an investment.

If you really want to be 'fair', you can simply calculate how many people in the team x number of months/years x monthly salary.
ex. 3 founders x 6 months x $10k, your valuation is $180k.
You see this works against you and gives you very little.

If you see that money is strategic money (means that there is more then just money offered, ex. advice, business development etc...), then you should give more to the investor.

If you choose the path of raising money, remember that founders shares are the last one to be paid, and initially they do not have a real value until they are triggered by investment, customers, etc...traction.

At the VC stage, when you raise round A, assume that a VC typically wants 20-35%. The number varies on a number of factors. But for simple calculations think of the above number (30%). Note, a VC takes their money out first (liquidation preference) and has a participation preference.

If you are attracting co-founders, then its a different story.
Lets say an engineers makes $120k/year, you can offer them a salary (or not) of $30k and $150k of shares at a certain valuation.

There are many many ways to answer this question. It all depends if you are chasing money (investment) or if you are not.

Happy to answer any questions.


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