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Welcome to Phase Two of our four-part Funding Series — all about Investor Selection!

Phase One - Structuring a Fundraise

Phase Two - Investor Selection

• Part 1 - Introduction to Startup Investors (←YOU ARE HERE 😀)

• Part 2 - How to find Startup Investors

Phase Three - The Pitch

Phase Four - Investor Outreach

This article is an Introduction to Startup Investors. Let's dive in!

Whatever stage your business is in when you launch your fundraising efforts, you can find the investor support that you’re looking for. Now that you’ve determined the fundraise structure that matches your needs and goals, it’s all about finding the investors that make sense.

All investors are not created equal.

They may all have capital, but the vast majority of investment profe...

It’s rare for any team to have an open Q&A with their board — even more so when they’re such well-known investors as Ben Horowitz of Andreessen Horowitz and Matt Murphy of Menlo Ventures. The Usermind team was fortunate to be able to sit down with Ben and Matt for an informal discussion on the current fundraising climate, conquering the competition, and creating a new software category.

Why did you invest in Usermind? What has you most excited about our market space in particular?

Ben: One of the things that became pretty clear to me back in 2009 when we started the firm was that if there was going to be SaaS — if software was going to become a service — then there was a whole set of infrastructure work that needed to be done, and it was g...

LinkedIn was founded in 2002 — and, even with its recent facelift, their basic product reflects that. While the world is moving on to more and more people working freelance (and frequently working multiple jobs), LinkedIn is stuck in the past — a time when people would stay with one company and one role over an extended period of time. The interface is tired; their “inmail” system is annoying; and it’s really more of a utility than any kind of delight.

Luckily, while LinkedIn is a dinosaur in startup years — there are newer, younger companies yipping at its heels — companies like VentureApp.

“LinkedIn is a really really really good resume database,” VentureApp CEO Chase Garbarino tells Startups.co. “But I think there’s a lot to be desired ...

Welcome to Phase Two of a four-part Splitting Equity Series. If you missed it, start your journey here: Introduction - Early Startup Equity — Getting it Right before continuing on if you haven’t already, and go in order from there.

Phase One - Startup Equity - Avoiding Early Mistakes

Phase Two - Part 1 - How Startup Equity Works

• Part 2 - Startup Stock Options

• Part 3 - Startup Stock Vesting

• Part 4 - Startup Stock Valuation ( ←YOU ARE HERE 😀)

Phase Three - How to Split Equity

Phase Four - Equity Management

Let's continue!

Early-stage startups use a Stock Valuation to determine their fair market value. This will determine everything from how much a venture capital firm might receive for their investment to how we distribute employee stock options.

T...

What is a term sheet?

In the context of startups, term sheet is the first formal — but non-binding — document between a startup founder and an investor. A term sheet lays out the terms and conditions for investment. It’s used to negotiate the final terms, which are then written up in a contract.

A good term sheet aligns the interests of the investors and the founders, because that’s better for everyone involved (and the company) in the long run. A bad term sheet pits investors and founders against each other.

Let’s take a look at the elements of a good term sheet — and some elements every founder should be sure to avoid.

What is included in a term sheet?

While each term sheet is going to be different, depending on the specifics of the star...

Living in an overpriced is now a choice, not a requirement.

That wasn't always the case, as startup Founders like us would flock to cities like San Francisco, Los Angeles, and New York to find the capital and people we needed to build something incredible (I lived in all of them). We'd convince ourselves that our 800 square foot apartment (with roommates!) made sense because if we weren't here, we would never have a shot a startup glory!

And we were mostly right — for a time.

But the requirements of being in a big, overpriced city have changed dramatically. For the first time in startup history, we can do nearly all of the things we once did in a big city from the comfort of our own (much cheaper) home. In a new era of Slack, Social, and Z...

I grew up with zero choices. As a broke kid with a single mom, I never really understood what people were talking about when they said they could "choose" how life worked for them. I just got used to being stuck with zero choices and dealing with the outcomes.

"Oh, you want to pay me 'ones of dollars' to mow your lawn? OK! I guess that’s what I have to do, because I need money."

Later on in life, I got to live this all over again as a broke startup Founder. No one presented me with an abundance of choices, I just took what I could get because I was constantly leveraged. Unfortunately, that runs a bit counter to the popular narrative we're hearing in startup culture, where we somehow have all the choices in the world and we're simply not ma...

What would happen if we went straight up nuclear on the staff today?

That's right — a total hard reset. We burn the whole thing down and start all over again. We stomp out the politics, throw the dead weight overboard, and wipe the slate clean altogether.

Depending on how our day as a Founder is going, that might sound like our worst nightmare or pure heaven. But it's actually a very real question that Founders can and should contemplate, in good times and in bad.

For argument's sake, let's say that we were forced to shut down and let everyone go, but then managed to raise some capital to resuscitate the business and had a chance to do it all over again (we actually did this with Zirtual.com when we bought it, so it's not just mental exerci...

Our "How it Works" slide is where we begin explaining the mechanics of our solution in a pitch deck presentation. It's notably different than the Solution Slide of a pitch deck which sometimes confuses startup founders. We'll explain how the best pitch decks walk venture capitalists and angel investors step-by-step through their products.

How Potential Investors view the How it Works Slide

When raising money from potential investors, a successful pitch deck focuses on the needs of the audience first (read: investors). Every word in our pitch deck should be tailored to the 2 unique selling point goals they have.

Investor: "Do I understand how it works?"

In our solution slide, we explained what the product does. Now we have to begin convincing in...

What if no matter what we do, our anxiety never goes away?

We all want to believe that the relief from whatever is stressing us out is just one milestone away. If we could just raise this next round, or get the product shipped, or get to profitability — we'd be able to breathe easy.

It doesn't stop there. We believe if we just make enough money, meet the right person, or finally buy that one thing then we'll be "satisfied" and all that anxiety will melt.

But what if it never does? What if all of our achievements keep bringing us right back to the same point — and we can never figure out why? Can we really "out achieve" our anxiety?

I Tried It — It Didn't Work!

Let me tell you Founder friends — I tried it. I started this game with a boatload...