Adeo Ressi from the Founders Institute says, “When looking at Advisory board compensation, it ranges from nothing to small grants (usually less than 0.1% of the company.) Cash comp is not appropriate”.

Fred Wilson mentions, “In all cases you should be willing to cover reasonable expenses for board member and advisors to come to your meetings if they have to travel. They key word is reasonable – you get to define this. For example, I once sat on a board where the CEO insisted that she choose the hotel we stay at and book the reservation (fortunately she had frugal but good taste).

Brad Feld states “In general, I don’t value “advisory boards” very highly and as a result anyone who needs cash comp to be on an “advisory board” is probably not that qualified for it. People do this for either a little bit of stock or good karma to help an entrepreneur they like.”

Nivi from Venture Hacks and AngelList says, “Another data point: In my experience, Advisors who join early (pre-financing) and kick ass can get .5% or more of the post-money”.

Looking for a quick and easy Advisory Board agreement document? The Founders Institute has provided this resource.

Interested in learning more about Advisory Boards? Check out our newest Udemy course today.

And that was good.

Headlines…

Defy Ventures was one of the most interesting stories I have heard in a longtime. The dedication and transparency of the founder, Catherine Rohr, is amazing. The stories of the positive impact on lives brought tears to many in the audience. Words here can not do it justice here. Read up on it on twitter (@DefyVenturesInc) and put Defy & Catherine on your radar.

http://www.bigomaha.com/

The presentation I most looked forward to was a pleasant surprise. I thought I would be able to gather insights on the coming disruption of the payment transaction industry by Dwolla founder Ben Milne (@bpmilne). What he delivered was straight talk to his peers. $20 million in venture capital has clearly not changed him. If anything, it has given him a bigger megaphone to tell it like it is. Here are some of my favorite lines from Ben.

“Connect to your assets here (ie Midwest) and create something special with a unique heartbeat.”

“Get your team excited to make things and let it rip. People build great things when they have autonomy.”

“Your team at work and at home pay for your bad decisions.”

“Appreciate your bandwidth limitations. Multitasking is a fallacy”

“Be religious about being an agent of change. It doesn’t matter how many people agree with you. Your tribe will gather”

And finale: “life is totally abnormal – so f#ck normal”.

The final panel discussion had a couple of questions around fundraising, how to approach investors, etc. giving me a pleasant reminder that INVESTyR is on the right path as we serve a real need in the world. There were several comments that will make our next book.

Someone asked the panel for entrepreneurial advice and here are the four answers:
- Everything is bullshit that is not in writing… Get everything in writing.
- Know when you are right and stick to it.
- Design your own life.
- Only work with people you are super jazzed about.

So as I sit at Aromas coffee house in Omaha, Nebraska typing this up, I am thinking that tomorrow will be another day enjoying the unexpected. As it should be.

Cheers!
Patrick

Angel Investors are not angelic. Nor are they fools. There are no harps, angelic glows or halos bequeathed on anyone. Nor does anyone deserve a dunce cap if they invest in a person / business that they really believe in no matter what the terms are. (Maybe some pity, but no dunce cap!)

Angels are private investors and they have been around since money was invented. Investing in private companies – or as most put it, Angel Investing, is the simple the act of parties putting money into a pot to achieve a business objective. And all of the business people involved with the company own a piece of the pot (aka stock, shares, membership units of an LLC, limimited partnership units etc.) Now some business people own more of the pot than the cash they actually put in because they have skin in the game – sweat equity – these are the founders, inventors and early employees that are working for below-market compensation.

The reason I don’t like the term “angel” is because it is very misleading to the nature of the transaction that needs to play out. Investors and entrepreneurs need to come together and agree on the pricing and corporate structure. These are simply business people doing business deals. In my experience, most angels do have some higher calling to their work because frankly their work investing in private companies often underperforms owning other assets – most of which have much less emotional baggage (like owning some shares of Pepsi or Google). These crazy business people invest in private companies because they enjoy some aspect of it – whether it is the bragging rights at the country club, the inside knowledge of the next big thing, adding “board member” to their CV, or just having an excuse to be around the people involved in the company. Frankly, in my experience, these psychological motivators can be as great, if not greater, than the actual potential financial reward at the end of the rainbow.

Angel Investors is a fun buzz term to use, but both parties – the investors and the entrepreneurs – need to keep it real. We are all just business people working on business tractations that will hopefully lead to personal and professional rewards.

Keepin’ it Real
~Patrick
Patrick Donohue

Green Bay Packers Stock Certificate

The Packers are the only team in sports that is publicly owned. They’ve only offered stock five times in their history. For $250 a share, you could have purchased shares in the Green Bay Packers in 2012. But there are no investment return opportunities in Green Bay Packers shares, as one would expect from owning stock in a company. There are no benefits conferred onto the owner, nor is the stock itself tradeable in any way, shape, or form. In fact, there are only two benefits which come from owning this stock: receiving a stock certificate which demonstrates your support and the privilege of purchasing special Green Bay Packers memorabilia. The Packers used the money from this sale of stock to fund an expansion to their stadium. Selling stock was essentially a fundraiser.

From an investment point of view, it makes no sense to purchase Green Bay Packers’ stock, but people bought it like crazy! Why is this? Emotional attachment to what the stock represents. People want to be a part of the team, and a stock certificate is a show of proof that they support their team. And this draws on one the strongest human emotions – love. Love is typically associated with feelings of personal attachment to people, but love can fall anywhere on the spectrum from passionate affection to mere enthusiasm. And that includes feelings that go beyond people to teams, companies, brands and material goods.

From a die-hard fan’s point of view, it makes perfect sense because they are showing support and emotional investment into the team. We love to feel like we’re a part of something bigger than ourselves.  We want to know that we’ve done our part.  Many people thrive on that warm feeling that they get when they help out a friend or give a dollar to someone on the street.  That makes us feel connected to the world around us. That feeling of connection is what motivates many people to invest and hold on to investments that are ‘worthless’ in investment terms, but full of worth in emotional ones.  The Packers know this. They netted $68 million from selling ‘worthless’ stock.

Go Pack!

Patrick Donohue

PS. I am a fan of their fundraising strategy, but not the team

At INVESTyR, we’re thrilled to announce the launch of “Learn How to Raise Money Using Digital Media”, a 19-lecture online Udemy course.

“Learn How to Raise Money Using Digital Media” is a fast-paced look into the new world of finance 3.0. This course shows you how the previous model of raising money is broken. Using our techniques and tools will dramatically improve your access to capital and cut the time of raising money from an average of 10-12 months down to 4. This course follows 3 basic principles:

1. Investors want to be found

2. People Invest in People They Like

3. The modern investor has changed

This course won’t show you how to do financial modeling or scary pro formas. It will help you change your frame of mind about fundraising, provide actionable tools and exercises, and give confidence to take a giant leap forward to bringing money into your business.

So, take the course! Share with your friends and let us know what you think. We’ll be continuously updating the course and want it to exceed your expectations.

The INVESTyR DealTeam

Agile Pitching is a term we use frequently at INVESTyR. Agile Pitching is the process of constantly revising and refining your pitch.

Agile Pitching provides two valuable components:

1) Promotes a continuous feedback loop

2) Strengthens and polishes key messaging

Entrepreneurs tend to fall in love with an idea and it becomes their baby. They huddle up at a coffee shop and crank out code on “game changing” products that will “change the world”. By the time they are ready to “go public”, the opportunity has passed and they come to find out that nobody understands their business opportunity. Entrepreneurs can suffer from perpetual paralysis by analysis.

INVESTyR hosts monthly pitch sessions “for entrepreneurs by entrepreneurs”, because we believe that talking about your idea, even before it is built, is crucial to understanding and validating the potential of the opportunity. The insights that come out of conversations with peers can shape a business for the better and save precious time.

When we hear a startup is in ‘stealth mode’ it makes us cringe. Why can’t the entrepreneur talk about what they’re building? Is their mad scientist, basement dwelling approach really going achieve their vision? Probably not. Entrepreneurship is hard, and business owners need continuous feedback loops to save them from the landmines along their journey.

Agile Pitching is the key to success.

Jason Martin

Every DealTeam we work with at some point says “we’re overwhelmed. There is so much to do!”

Yes entrepreneurship is hard and the heat is on when you are in need of capital. Many accomplished business people say fundraising is the most difficult task of starting a company because you need to balance it with building the business.

DealTeams often want to have a “better pitch, better financial model, etc.” The best way to deal with it? Go! Go pitch. Every pitch is a practice. Constantly make it better. The goal is to constantly make it better, not to put it on a pedestal someday.

Fail forward. Get out there and show people what you have, be proud of it, get their feedback and make improvements. If you wait for that magical day when all of your materials are “investor worthy”, you will have already failed before starting.

So we have created a free pitch clinic for entrepreneurs, by entrepreneurs from 3:00 to 5:00 every third Tuesday of the Month at CoCo Minneapolis. Register Here

Cheers!

Patrick Donohue

Reach out today to three potential investors and or fellow entrepreneurs in your startups domain. No matter how far along your startup is, if you’re the only member on the team,  or if you haven’t had any sales yet. You need to reach outside of your network to meet new people who have social credibility and tell them about your business. Every day could be better than the worlds best networking event and all you have to do is organize your communication strategy yourself. Here’s an example, lets say your startup is a B2B mobile payment solution provider. Search AngelList for other B2B companies (not within payments) and document who their founders, amount raised, and investors into your CRM. Use the tag ‘Influencers’ and ‘B2B Entrepreneurs” to their entries. Search for these individuals emails by using LinkedIn first, checking the contact info button and if it is not there scroll to the bottom and search if they added something under additional information like preferred contact method. If this doesn’t work, search on Google for their email with this format “@dropbox.com” and see the format of the companies emails.

Now the fun begins. Time to reach out to these individuals you have sourced and see if you can find a time to chat with them. If you’re building an AngelList profile, you’re going to have build out your profile to showcase to potential investors. Many of these conversations will allow you to move things forward with the individual and potentially add them as an Advisor, Referrer, Reference or Investor. These types of influencers will not reach out to you randomly. You will need to hustle as a startup founder and make these connections. In order to have any pull on your angel profile, you will need to build these relationships with influencers to display the social proof of what you’re working on. Using tools like AngelList is an easy and free way to market your company. You have no excuse to not do this if your startup is ready for it.

Until you reach out and have a few conversations with these influencers, you will never be able to get an intro to a group of investors. Assuming your network is small within the startup community, this is so crucial to reach out to people and tell them about your story. People will make time for you to chat 15-20 minutes if you don’t know them and you can make it an engaging conversation.

So much of being a successful entrepreneur boils down to being a great salesman. You need to create funnels for different aspects of your business and be able to execute on each opportunity. Being a great salesman comes down to having a high level of accountability, enthusiasm, persistence, and product/market understanding. Funny how these traits are what an investor looks for in an entrepreneur, isn’t it? Just remember, “Always Be Closing”.

Jason

Entrepreneurs need to show accountability during the process of fundraising.

With every meeting and conversation between yourself and investors make sure you are showing accountability and forward progress!

It is not only a matter of showing and telling your audience what you’ve completed but also take that next step and say “here’s what we also did”.

One thing always leads to another. Making sure you have positive momentum is a such a huge thing to for me to stress. You need to keep your potential investors excited.

Follow these words from this classic 80’s joint and you should be on your way to bringing in money.

 
Jason