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How to Tell If an Investor Is Right for Your Business

Posted by Celene Robert to Investment, Business Advice, Business, Guides, Funding

It’s time to bring your business to the next level. Maybe you’ve recently launched and sparked significant interest in the market, or maybe you’ve been building the company for several years and have recently achieved a sustainable pattern of growth and momentum. Whatever stage you’re at—whether you’re looking for seed capital, early stage funding, or later stage financing—you’re entering into serious discussions with potential investors.

  • Do you know which investors are worth your time and energy?
  • Are you able to pick out the worthwhile sources of capital and smart strategic partners from the crowd?

If you can’t, you risk not only wasting your own time, but potentially setting your business up for significant legal and financial instability.

GAAP: What It Is and Why Your Investors Expect It

Posted by Celene Robert to Investment, Business Advice, Funding


 

GAAP. It may seem like accounting jargon, but if your business is entering a Series A round and you’ve begun to have serious discussions with potential sources of capital, those four letters can be the difference between securing and losing out on funding. That’s because investors, banks, and other outside parties expect your business to comply with GAAP.


Let’s back up. What is GAAP accounting, and why is it important? What are the benefits of GAAP? When is GAAP necessary? Which businesses must use GAAP?


So many questions, so few clear answers out there for business owners who aren’t already CPAs. Here’s everything you need to know about GAAP—what it means, why it matters to your startup, its pros and cons, and when you should start thinking about making the switch to GAAP accounting.

Due Diligence: What It Is, What to Expect, and How to Make It Out Alive

Posted by Celene Robert to Investment, Funding, Startup Tips

They’re the two words that can make or break a deal with an investor—the two words that cause even the most seasoned entrepreneurs to grimace:


Due diligence.


Make no mistake: due diligence can be stressful. But amidst all the fun and exciting parts of attracting investors to your business—innovating, creating a brand, traveling, pitching ideas, forging new connections—due diligence is always a necessary step. It’s how you build trust with investors. It’s where you show your work.

5 Ways Bad Financial Data Can Cost You During Funding

Posted by Celene Robert to Investment, Business Advice, Funding, Mergers & Acquisitions


 

If there’s one four-letter word on the mind of every investor, it’s “risk.”


While virtually all investment opportunities involve some level of uncertainty, the people and organizations who eventually invest in your company—be they bank lenders, venture capitalists, or your friends and family—are the ones who are confident they have minimized their risk. Sure, they want to feel excited about an opportunity, but what they’re ultimately looking for is a safe bet.


How can you ensure that the company you’ve built poses the least amount of risk to investors possible? The answer is in your books.

Seed Investment: Comparing SAFE and Convertible Notes

Posted by Melissa Hollis to Investment, Business Advice

When it comes to seed investment, founders have options. Typically they prefer low interest which is where SAFE comes in as a favorable alternative to convertible notes, but there's much more to the picture. Every entrepreneur should understand his or her options and make sure that they align with their long-term strategic fundraising plans.

 

Definition of Convertible Note

A convertible note is a type of debt that has the right to convert into equity when you hit an agreed upon milestone. FundersClub explains convertible notes as an investment vehicle that is structured similarly to a loan. However, as TechCrunch points out, this type of debt automatically converts into shares of preferred stock upon the closing of a Series A round of financing. The overall consensus about convertible notes is that they are known to be complex and therefore, finicky or glitchy.

 

Definition of SAFE as Seed Investment

SAFE is an acronym that stands for “simple agreement for future equity” and was created by the Silicon Valley accelerator Y Combinator as a new financial instrument to simplify seed investment. At its core, a SAFE is a warrant to purchase stock in a future priced round.

 

There are some similarities between SAFE and convertible notes investments. Both act as a viable way to help startups overcome their current big hurdle in growing or scaling to reach the milestones that warrant a Series A round. Also, both options carry a discount on the next round (or current round for convertible notes), so neither presents a clear advantage. With those in mind, looking at the differences will help an entrepreneur consider their pros and cons when determining their preferred seed investment terms.

4 Tips to Build a Strong Foundation for Funding

Posted by Melissa Hollis to Investment, Accounting, Business, Funding, Startup Tips

There are many articles out there that provide a wide array of lofty advice about fundraising. Some of the groundbreaking tips in those articles may cause you to rethink minor details such as the order of the slides in your deck or even something as major as your go-to-market strategy. This is not one of those articles, but we do have an ebook full of stories that are sure to inspire here.

Navigating a "Friends and Family" Funding Round

Posted by Melissa Hollis to Investment, Business Advice, Business, Funding

Early in his company’s history, entrepreneur Greg Vetter achieved a seemingly impossible feat: he convinced Whole Foods to distribute his family’s line of salad dressings on a national level.

Although the green light from Whole Foods provided an incredible opportunity, Greg knew it meant he needed capital—fast. So, he liquidated his and his wife’s 401(k)s, maxed out his credit cards, and even used his parents’ home as collateral to secure a bank loan. Then, he raised an additional $1 million from about 30 friends and family members.

Your Small Business Can Afford to Offer Retirement Plans—Here’s How

Posted by Damian Davila to Investment, Business Advice, Budgeting, Startup Tips

In the past, many small business owners have thought that providing a 401(k) plan wasn’t realistic for their employees. Perhaps they felt they were too small, that the plans were too expensive, or that the administrative burden was just too high.


Luckily, this is no longer the case, and not only is it possible—and affordable—for companies of any size to start providing a savings plan, but getting an early start is also advantageous from a tax-saving perspective


Consider this:

  • A recent Glassdoor employment confidence survey found that 31% of workers value a 401(k), retirement plan, and/or pension over more than a pay raise.
  • Approximately two-thirds of workers not saving for retirement say they would be likely to save for retirement if their employer used automatic paycheck deductions at either 3% or 6% of salary.
  • In 2018, workers can make tax-deductible contributions of up to $18,500 to a 401(k).

The other good news is that in this tight job market, offering a workplace retirement plan is a great way to make your business stand out from the competition. However, it’s not just employees who can draw huge benefits: as it turns out, employers can also reap some incredible tax credits and deductions for providing a 401(k).

5 Accounting Problems That Can Sink Your Funding Round

Posted by Molly Otter to Investment, Taxes, Accounting, Business Advice, Funding, Startup Tips

You’re a startup CEO. You’re running your business fast and lean. Getting your company’s financials cleaned up and organized is on your to-do list, but so are a thousand other things. You’ll get around to it—just as soon as you secure the loan that will help you scale up.


I hate to break it to you, but as long as your financials are a mess, that funding is going to stay forever out of your reach. At Lighter Capital, we field a lot of loan applications, and the number one reason we reject potential borrowers is that the entrepreneur is unable to produce financials. And we’re not the only ones who feel this way.

Does Your Business Have Financial Confidence?

Posted by Tony Esposito to Investment, Accounting, Business Advice, Funding, Budgeting

Ask yourself: How confident are you in your company’s financial position? How much knowledge do you have about the transactions and activity that flow in and out of your books? Not to mention, how much faith do you have in the accuracy of your financial picture?