10 Red Flags

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10 Red Flags

  1. 1. Red Flags: 10 things you should never say, do, or write about your startup
  2. 2. Wiley Larsen About me: , Venture Manager, ASU SkySong President, Owner, and CEO of Dilla Marketing Group, COO, CFO Director of Sales and Marketing, Principal Designer, Creative Director, Webmaster, Head Software Architect, Chairman of the Board, Receptionist Red Flag #1: Wearing too many hats
  3. 3. DO: Assemble a diverse and complimentary team
  4. 4. Red Flag #22 “Hi my name is ___________. If you can just sign this NDA, we can get started.”
  5. 5. Don’t: Ask for an NDA too early Do: • Be careful not to divulge too much information • Ask for an NDA when the investor begins to show genuine interest • Remember it’s as much about your ability to execute as it is about the solution, so don’t oversell the technology and undersell yourself.
  6. 6. Red Flag #33 “I have over $100,000 in Sweat Equity.”
  7. 7. Sweat ≠ Cash The only equity anyone cares about is REAL cash.
  8. 8. Red Flag #44 “I’m still looking for a CTO, so if you know a good coder who will work for equity…”
  9. 9. Reality: Good ideas are a dime a dozen, and good coders don’t work for equity. Make some new friends
  10. 10. Red Flag #55 “We need $250K for business development “
  11. 11. Reality: • Hiring a sales guy is not a marketing plan • Business development = Networking • You (CEO) are going to be the “Sales Guy” for a while
  12. 12. Red Flag #66 “Our burn rate is kind of high, but we would be making this king of money if we worked at a regular company.“
  13. 13. Red Flag #77 “IPO”
  14. 14. http://blogs-images.forbes.com/truebridge/files/2012/04/IPO-Chart-21.png
  15. 15. Red Flag #88 “We have no competition“
  16. 16. You have competition! • If you thought of it, chances are someone else has too • If you haven’t found them, you haven’t looked hard enough • The status quo is competition – It’s not really that big of a problem – It’s too costly to solve • Competition is validation of the market and customer base • Second Mouse…
  17. 17. Red Flag #99 “If we capture just 2% of this $57 Billion dollar market, we’ll be a $100 Million dollar company“
  18. 18. http://geekyfry.com/management/marketing/pam-tam-sam-som/ Be Realistic! Know your Target Market Have a Plan
  19. 19. Red Flag #1010 “Our revenue projections are very conservative“
  20. 20. Guess well. 2013 2014 2015 2016 2017 Number of Units Sold 5 50 500 2500 5000 Avg. selling price 800.00 850.00 900.00 950.00 1000.00 Gross margin % 68.75 70.59 77.78 78.95 80.00 Below in ($000s) Revenues 4.00 42.50 450.00 2,375.00 5,000.00 EBITDA -128.77 -290.47 -196.89 -294.79 837.40 Cash burned / created -128.77 -290.47 -196.89 -294.79 837.40 Funding required 128.77 290.47 196.89 294.79 0
  21. 21. Honorable Mentions: • “I want control of the company, so I retain 51% ownership share.” • “I have been working on this my whole life” • “My team is made up of my brother Chuck, my cousin Bobby, my wife Janet is CFO and my dad is chairman of the board.” • “We had an early investment of $1.2 Million about three months ago and need just a little more to complete the beta site.” • “I’m a serial entrepreneur” • “This is our last shot, we really need your support” • “I’m looking for $500,000 in exchange for 10% of my company”
  22. 22. Thank you Wiley Larsen Venture Manager ASU Entrepreneurship and Innovation Focus: Faculty Startups / Furnace wiley.larsen@asu.edu 480-884-1803
  23. 23. Resources/References: • YouTube: Bill Reichert – Top 10 Lies Entrepreneurs tell VCs • Rob Adams: A Good Hard Kick in the Ass • http://geekyfry.com/management/marketing/pam-tam-sam-som • http://blogs-images.forbes.com/truebridge/files/2012/04/IPO-Chart-21.png • http://www.garage.com/resources/perfectingpitch.shtml • Dragon’s Den https://www.youtube.com/watch?v=RidDRTl_SQs • Marketing your Startup – how to be heard above the noise 7/11/13 2:30pm • Furnace Technology Transfer Accelerator 7/15/13 2:30pm • Licensing IP from Universities – 7/17/13 12:00pm • Intro to Equity Financing -- 7/17/13 4pm Upcoming Presentations:

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