Are you struggling to find a lead investor for your business?
Finding the right investor is more than just identifying those that invest in your industry and life cycle stage. Investors, and in particular lead investors, are commonly going to take an active advisory role in your company.
Alignment with your lead investor on values, belief systems, and overall goals is essential. When you are faced with this decision, realizing this is a long-term relationship that will impact your company’s future is an important aspect to your success.
What Defines a Lead Investor?
The definition of a lead investor varies on who you ask:
1. Someone that helps work with the entrepreneur to organize the other investors and any soft commitments.
2. The first person who invests in a particular round. However, this does not necessarily mean that your first investor will provide the greatest amount of capital.
3. Someone who provides the highest amount of capital in a syndicated round.
Regardless of which definition resonates with you the most, it is important to know that our lead investor will be an important one to the success of your business. Keeping that relationship positive and professional will expand your capital even further down the road in various aspects.
Why is Choosing the Right Lead Investor so Important?
Beyond providing essential operational capital, lead investors have other effects on a company. To start, securing a lead investor will provide a level of comfort to other potential investors. Nobody wants to be the first to show up to the newest and hottest night club, right?
Similarly, every investor or investment fund combs through their deal flow, looking for the right opportunity. Having a noteworthy first or lead investor can shorten a financing round, for it conveys a sign of trust.
Without a lead investor, other potential investors will have reservations, even in the best of market circumstances. As we’re all experiencing this challenging financial climate, entrepreneurs need to take every possible step to reduce the perception of risk.
Securing a lead investor is critical in that trust-building process. They signal that there is a future promise of an ROI and solidify the team and business model are strong. Partnering with a lead investor who places a sizable initial investment signals confidence, and like a gravitational magnet, pulls in other investors more easily. This helps propel your valuation and closes your round at the desired amount
Finally, investors travel in circles. Landing your lead investor gets you access to their network of influence, again improving the likelihood of closing your round more quickly.
Where are the Lead Investors?
While success depends on networking and follow up (Remember: The noisy wheel gets the deal!), there are a large number of tools to help streamline this critical part of the job.
For starters, entrepreneurs can purchase subscriptions to sites like CrunchBase and Pitchbook. These sites provide endless amounts of data, from who has raised capital, when, and how much. They also show the investors that are backing each company.
Finding investors can be done without purchasing expensive tools. Sitting down and doing research on Google or inside LinkedIn can reveal investor networks in your area. Most large cities or entrepreneurial communities have investment funds, accelerators, and groups that are always searching to build upon their deal flow.
After putting in the work to network, build relationships, and develop your pitch, entrepreneurs can also apply to pitch competitions, further exposing them to high net worth individuals. If you still need help, you can always hire an investor relations ninja to help open doors and make introductions
Finally, if all of this isn’t working, you can work on the other side of the equation and network with recently funded companies. Communicating with other founders in your space and life cycle stage can help open opportunities for networking and capturing investors, all while possibly teaching you valuable information about their experience with their personal process.
The Importance of a Good CRM
The best way to find a lead investor is through prioritization of your leads and management of those relationships through a CRM, or Customer Relationship Management platform.
The main benefit of utilizing this tool is to organize and assist with communication and to respond to any requests promptly, such as providing information or updating pitch materials to potential investors.
Key metrics to prioritize investors by include:
· Their track record as a lead investor
· Their ability to syndicate
· Knowledge and experience in your space/business stage
· Ability to interact with and manage other investors if necessary
· The amount of capital they have to deploy
This certainly isn’t an exhaustive list, and there will be other factors to consider. As you go through the process of raising capital, remember that patience and positivity are essential. Raising money is a brutal
process, and the road is riddled with many who will say no. Just keep building and remember that timing is everything, and eventually, your day will come.
Running a corporation can be a massive undertaking. Whether handling assets, executing transactions, or managing document trails, the underlying operational dynamics can be quite complex.
The growth trajectory of new and emerging businesses worldwide shows no signs of abating. With this comes a steady stream of asset transactions, friction, and regulatory due diligence. Absent efficient corporate systems friction can occur in the corporate landscape resulting in greater expense and bottlenecks for those engaged in corporate governance and business operations.
equaSTART, an innovative startup providing a document creation and management portal for the smooth functioning of a business is poised to address these prevailing issues. In blazing a new path toward the frictionless flow of documents and equity ownership transactions, equaSTART will be employing a cutting edge solution tied to the Ravencoin blockchain.
Taking Flight With Ravencoin
Today’s equity transfer process has become quite intricate, often requiring a series of signatures and paperwork to execute. Shares of ownership in a company need good recordkeeping. It’s here where blockchain can automatically provide cryptographically sealed security mechanisms that validate every issuance, transfer, and sale of shares in an organization.
The Raven blockchain or Ravencoin, as it is more affectionately known, is a digital ecosystem that fosters the efficient creation and transfer of assets between parties. By employing a protocol tied to a fork in the Bitcoin code, it provides a mechanism for tokens to be issued on the Raven blockchain. This feature can help mitigate many of the complexities associated with managing corporate assets.
Embodying best practices and fully compliant methodology, these tokens can be individually tailored to reflect quantity limits, asset names, utility, and other qualities just like stocks on public exchanges like Nasdaq. The beauty here is that tokens can be produced within minutes and used to transact worldwide.
Raven’s supporters tout its advantages over Ethereum in terms of the ability of the protocol to differentiate assets and regular transactions. In general, it offers a more frictionless experience in the transacting of contracts and agreements between various parties.
All in all, it offers a more efficient, speedier process for digital asset transactions to take place.
By way of example, in December of 2018 Medici Ventures, a leading blockchain accelerator and a subsidiary of Overstock.com, Inc., successfully executed a digital securities token transfer tied to its equity ownership in Portsmouth, New Hampshire-based Chainstone Labs. This $3.6 million securities token transfer, one of the first equity tokens issued using a public blockchain, took place through the use of Ravencoin.
Here is a video highlighting this transaction:
Asked about Raven’s growing repute as a leading worldwide digital asset network, lead developer Tron Block had this to offer:
“Honestly, that’s not a claim that we’re making. In fact, I would argue that if there were only one leading digital asset peer-to-peer network, it very quickly fail under a tremendous load. We’ve seen this happen in the past with ETH and Crypto Kitties. So I believe there will be many of these networks, each suited to different purposes and large enough to be secure, and well distributed.”
He says that the Ravencoin Network as it exists today provides functionality like ERC-20, but with much better ease of use.
“Currently there are wallets for Linux, Mac, Windows, iOS, Android, and Web. You can create your own asset in ten seconds, and send it to anyone with those platforms.”
In terms of the sorts of solutions Raven hopes to deliver to EQUA Start, Black had this to offer:
“Ravencoin has new capabilities on testnet that are perfectly aligned with what equaSTART is seeking to do. Once messaging and memos hit main-net, the ability to transfer tokens and add additional data that is immutable using the combination of Ravencoin and IPFS will become a reality.”
Black says that the owner of a token with a private key associated with a name will anchor the trust. That token owner can then transfer tokens to himself or others, attaching hashes that are immutable.
He cites a number of equaSTART documents including incorporation, board meeting minutes, and changes to corporate purpose, where Raven’s value proposition could apply.
By aligning the blockchain advancements spirited by Raven, equaSTART is taking aim at creating a new normal for frictionless business by bringing living, breathing documents and digital assets all under one umbrella.
Trust. Consent. Radical Transparency. Community. Openness. Innovation — these are the “North Star” principles that serve as a guide for equaSTART’s ambitious foray into the management of frictionless business documents.
And Ravencoin is perched to help equaSTART take flight.
To learn more about Equa and sign up for a free trial, please visit us at www.equa.global
Originally posted June 10, 2019
To learn more about Equa and sign up for a free trial, please visit us at www.equa.global
An option pool consists of shares of stock reserved for employees of a private company. The option pool is a way of attracting talented employees to a startup company - if the employees help the company do well enough to go public, they will be compensated with stock. Employees who get into the startup early will usually receive a greater percentage of the option pool than employees who arrive later.
The initial size of the option pool may decrease with subsequent rounds of funding because of investors' ownership demands. The creation of an option pool will commonly dilute the founders' share in the company because investors (angels and venture capitalists) often insist on it.
The shares that comprise an option pool typically are drawn from investor stock in the company rather than the shares earmarked for investors. This may be 15%–25% of the overall outstanding shares and may be determined when the startup receives its earliest funding round as part of the overall terms put in place.
It is also possible that a company, over the course of its development and subsequent funding rounds, may establish additional option pools after the initial one is put in place. The size of the pool may be dictated or advised by the venture backers to be a portion of the pre-money or post-money valuation of the company. Negotiations over the scope of the option pool can affect the startup’s overall price. For example, investors may want an option pool offered post-money option to be priced at the pre-money valuation, which could lower the price for the company.
The shares disbursed from the option pool may be determined by the roles of the employees as well as when they are hired. For example, senior management that is brought on board near the founding of the startup may receive a percentage of the entire pool, whereas later employees in more junior roles might be granted just fractions of a percent.
The option pool grants shares that, like other types of stock options, often require a period of time before they are vested. This means the employee will not be able to benefit from these shares possibly for several years. By delaying their ability to reap monetary value from their portion of the option pool, the belief is that the employee will contribute more to the overall health and growth of the company in order to see the greatest possible gains when the shares vest.
Startups, emerging enterprises, and aspiring entrepreneurs are increasing at the crosshairs of a messy challenge, namely, how to create an orderly, secure, single source of truth for their documents and agreements.
We recently asked Equa Start Vice-President Sten Wie, to share a few brief thoughts on the herculean efforts taking place at Equa START to deliver a fresh set of solutions around this prevailing issue.
What’s the fundamental problem Equa Start is trying to solve?
The problem we are solving ties back to a knowledge gap among entrepreneurs and business owners around running a company efficiently and compliantly from a document system, corporate governance standpoint.
When you say corporate governance, what are you referring to?
It’s true, most people don’t know what that is. They may have a vague understanding or an operating agreement that references it and states that they have to do certain things. But they don’t understand the recipe in terms of their document system.
Can you elaborate a bit more here?
Business owners are often solely focused on building a product, idea or brand, that they are seeking to communicate to customers. While that’s great, they later find that not managing these document systems in an efficient way becomes problematic.
Problematic in what way?
Let’s say you want to add capital to your company because you’ve taken on a new partner. Or you want to issue shares or do a capital raise. It’s no mystery here that your documentation trail needs to be solid. There’s a proscribed process for doing this and doing it right. And if you don’t, you’ll be subjected to a lot of risks.
What are some other instances where due diligence around documentation is important?
If you are a company that’s vastly successful, and you want to get acquired or have now issued shares, documentation is of vital importance. In other words, you have issued stock or vested shares and handshakes have taken place. But if that paper trail is not outlined, defined and stored somewhere, then you expose yourself to a tremendous amount of liability. Even worse, you could even get sued if people become angry.
So a failure to address these shortcomings creates exposure?
Correct. It’s a simple truth that when you are leading a company that has reached a certain level of success, you will have a target on your back in one way, shape, or form. And without a process of establishing and maintaining your corporate governance, all this can now become a threat to the wealth you’ve built, to your livelihood, to your family, to everything.
So how does Equa START fit in here?
Doing this well and doing it right is our motto with clients. We are essentially providing an old school software installation wizard for document management, agreements, and corporate governance.
What’s the primary value proposition?
Whether it’s an employee agreement, vendor agreement, new bylaws, whatever a group of people can create consensus around the terms of a document, that’s where we are here to help.
But why replace the architecture or systems a company currently has in place?
Great question.So here’s the deal,many of these systems made sense and worked when a company was in its early stages and had, say, two partners. Problem is they never went back to their corporate bylaws once their number of partners grew and said, OK, we need to make sure that we have one version of a document instead of each partner making revisions and not knowing what the reality is, what the true document is.
So, in other words, it’s very difficult to reconcile what the truth is when everybody can individually without oversight, without notification, edit that reality?
Correct. If you have nineteen partners and they are all editing things, how do you reconcile all of that? Often things are in paper format, in Dropbox, maybe even in Excel. But there is no path, there is no process to force everyone to do it in only one master document, in one place. This is what we mean by the term “single source of truth.”
What is the ramification of not addressing this?
Without this reconciliation and due diligence, people simply do whatever they feel they need to do with regard to a single source of truth. It’s not malfeasance or people trying to screw one another. It simply becomes a scenario where a bunch of people all acting independently in terms of what they think needs to be done.
What sorts of issues ensue from this?
As more and more people become layered into this process, it becomes extremely problematic. Because if everyone is not looking at the same single source of truth then it becomes almost as if impossible to figure things out and to bring everything together.
So ultimately, what’s the solution?
Reconciling their documents into a digital environment where everyone is looking at one truth.
Can you describe the Equa START onboarding process?
It starts with setting the expectation in terms of the documents that we are going to need from your company, things like an operating agreement, bylaws, board meeting minutes, and corporate shares documents. Our philosophy is to get all of this gathered first and so we can migrate it into our system and structure it properly.
At that point, what’s the next step?
Once captured on our ecosystem all future document changes can occur in a single document instead of ten people having ten different versions of the same document. Everyone who has access to that single document can’t change it unless there’s a consensus.
And then are there principal overseers of this process?
Yes, your company leadership will determine who is going to be the administrator. You’ll also be prompted to invite your chief financial officer and legal counsel so that everyone can begin working within your one document environment.
So how will the system work once these documents have been migrated into the Equa START environment?
Once everyone is working off of the Equa framework, changes can be redlined and passed back and forth through a notification system that essentially says, alright, somebody made an edit or change here. But you can’t delete text because it’s always just redlining. In other words, you make a suggestion and then that suggestion is then sent out into the notification. The beauty here is that all of the documentation is captured in one environment instead of being pulled out to email or retrieved from Dropbox.
So ultimately this represents a much more efficient process?
Yes. When you can make something that may normally take five people, two hours and boil it down to something that takes five people 30-minutes, this can represent enormous time savings. And if you multiply this every time you need to go through this process, you are also fundamentally saving so much money for your company. In the end, you are preserving wealth instead of just letting it go out the back door with all these expenses.
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