Startup Central
How the Shift in Startup Valuation Can Pose Financing Problems
Published
8 months agoon
If you’ve been reading up on startup valuation, you might have heard the line, “valuation is an art, not a science.” After all, investors consider how the business faired in the past and how it’s projected to perform. Not to mention, factors like market position, team, tech, and so many others also come into play.
However, with a new emphasis on growth valuation, businesses have been valued based on their growth potential instead of their financials or brand recognition. And this has caused major problems for startups and VCs alike.
What’s the problem with startup funding?
Startups are at their best when scaling quickly and generating large amounts of revenue. They can only do this for so long before they need to start thinking about expansion.
This is where growth capital comes into play. Growth investors are committed to helping a company grow its business and scale quickly if they are involved in financing a startup. In return, they are looking for high returns on their investments. This allows startups to hire employees, pay rent, buy materials, and buy new equipment while growing their businesses.
They may be unable to do this with their funds because they have limited experience or budget. They may not have the option to go public or sell equity to investors to raise capital either.
Jacked up startup valuation in 2021
As the economy recovered from the onset of the coronavirus disease pandemic in 2020, 2021 was a breath of fresh air for players in the economy.
For the first time, many were ready to move on and fuel up various industries that stood still in 2020. According to TechCrunch, this resulted in free-flowing funding and a rise in startup valuation.
For instance, VC funding almost doubled from $335 billion in 2020 to $643 billion in 2021. In addition, there were 586 new unicorns in 2021 compared to 167 in 2020. Though the funding seems awesome for founders, it could spell disaster in the long run.
For instance, the once-inflated startup valuation can be a big problem with 2022’s geopolitical issues, inflation rates, and normalizing tech conditions.
How VCs can help solve the problem
Venture capitalists are adapting to the changing landscape of funding for startups. They are now looking for earlier-stage investments that are more focused on a company’s growth potential. The new standard for valuing companies is based on their ability to generate revenue and grow their business.
VCs are now looking for companies with proven growth models, strong customer traction, and strong sales teams. This is a change in the investment approach. They used to only look for the best possible financial return on their investments. Now they are looking for promising growth companies that can generate revenue and achieve massive growth. This new standard for valuing companies is based on the ability of the company to grow.
Evolving investor expectations and the future of funding for startups
VCs now expect startups to be more liquid. This means they will need to be able to raise large amounts of capital from the public markets at any time. This is a significant shift in the investment approach. VCs used to only look for the best possible financial return on their investments. Now they are looking for promising growth companies that can generate revenue and achieve massive growth.
The public markets may not be able to provide the liquidity these companies need. This means venture capitalists must step in to provide liquidity for their portfolio companies.
In the end, it’s all about investors now looking to fund startups that can withstand the test of time. After all, it’s not about the art of seeing the startup’s potential anymore; it’s more on the science of what it has actually done before.
And for other stories, read more here at Owner’s Mag!
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Every new business owner wants to keep costs as minimum as possible. This will allow them to do more with the limited budget they have. If you are one of them, the following startup software can significantly help:
1. Hootsuite
An online presence is a necessity for new businesses. Hootsuite can help you create content and get more followers quickly and easily. It is one of the most popular startup software, with a user-friendly interface and affordable pricing plans.
It has a free plan that allows you to schedule 30 posts across any social media platform. Not only that, Hootsuite will help you monitor the Return On Investment (ROI) of all your social media campaigns. This will let you know which works and which doesn’t. Its three other plans start at $49 per month.
2. Google Analytics
Understand your website better with Google Analytics. This startup software will let you track the traffic coming to your website. This will allow you to tweak whatever strategies you have in place as it tells you what needs improvement.
You can use Google Analytics free of charge as long as you don’t exceed 5 million impressions a month. It will help you understand your customers’ journey and improve your marketing ROI. It will provide insightful data that can aid you with your marketing strategies.
3. SendPulse
Excellent communication with your customers helps build stronger connections and build loyalty. Whatever messaging channel you choose, SendPulse is a superb startup software. It includes lead generation tools as well as promotional channels such as email, SMS, social media, and messenger chatbots. It also offers a free CRM tool and many others features.
SendPulse has a free plan ideal for startups, but if you want to upgrade, there are three premium plans to choose from. Prices start at $7 up to $11 per month.
4. FreshBooks
Once your business is running, you’ll be needing an accounting and invoicing software. That’s when you’ll need FreshBooks, an app that automates invoicing, bookkeeping, payment tracking, and many other financial tasks. In just a few clicks, you can view your financial status through its Profit and Loss Statements (PLS) feature, do taxation summaries, and check expenditure reports.
FreshBooks offers four pricing plans which start at $6 per month and up to $22 for the premium plan. If you need more services, they offer a custom plan in which you’ll need to contact them for a quotation.
5. HubSpot CRM
Primarily a CRM (Customer/Contact Relationship Management ) tool, HubSpot CRM is a must-have startup software. It lets you manage contacts, sales, pipelines, lead generation, and digital marketing, among many others. It consists of multiple tools or ‘hubs’ that you can buy separately.
HubSpot CRM offers three pricing plans that start at $45 per month and can go up to $1,200 monthly. It may seem expensive, but if you consider what this startup software can do, you’ll know it’s worth every penny.
6. Penji
Starting your business involves advertising and marketing. And to do this effectively, you’ll be needing graphic design. It can elevate your business in ways you can’t even imagine. For this, you need Penji, an unlimited graphic design service that lets you request all your visual assets.
For as little as $499 per month, you can request logos, digital ads, social media graphics, and many other branding collaterals. They have two other plans, plus a 30-day money-back guarantee that lets you decide without making a huge commitment.
7. Piktochart
According to statistics, infographics are the fourth most-used type of content marketing. They can increase traffic to your website by 12%. To create interesting and engaging infographics, you can use Piktochart. With this startup program, you can add videos, charts, interactive maps, and many other elements to your infographic and embed them on your website or blog.
Piktochart offers a free plan that’s suitable for startups and medium-sized businesses. If you want to enjoy more of its features, you can get any of its premium plans that start at $14 a month.
8. WordPress
Join the over 455 million websites that use WordPress, the world’s most popular website builder. It is an open-source content management system, which means it’s free to use. You can build the website of your dreams using this startup software’s plugin architecture and template system. It can help you create a website with responsive design, SEO, social sharing, and many other features.
Aside from the free plan, WordPress has four premium plans with pricing that starts at $5 per month and up to $45 a month if you pay annually.
9. Salesflare
Another CRM tool ideal for startups, Salesflare automates many repetitive tasks to make handling your business easier and faster. It can help with your email applications, social media accounts, company calendars, and many other processes. It also provides you with crucial data such as sales funnel analysis, quota management, sales funnel analysis, and many others.
Salesflare offers simple and affordable pricing. It has three pricing plans that start at $29 per month and go up to $99 a month. It also has a free trial that lets you try the software without a credit card.
10. MailChimp
If you’re thinking of strategies to add to your marketing campaigns, you need to add email marketing. It is one of the most effective but can involve a laborious process. To make it easy, use MailChimp, a marketing platform that lets you manage and communicate with your clients, customers, and prospects. With it, you can customize your emails, generate leads for your database, and perform many other email-related tasks.
MailChimp has a free plan if you want to try out the service first. However, its three premium plans offer many valuable features you won’t get from the free plan.
Final Thoughts
Growing your business can be an exciting yet arduous endeavor. There is a multitude of concerns, issues, and tasks you need to take care of. Fortunately, there are startup software that you can get to make your life easier. Whether free or paid, these are absolutely helpful and worth looking into.
Side hustles aren’t unheard of. Zapier reports that a third of Americans (34%) have a side hustle. Many individuals rely on different sources of income due to increasing prices. Plus, it can help pay off debts and earn more money. Fortunately, more people are launching side startups or businesses because of remote work and flexible working arrangements. But how do people manage their full-time work and still conduct other activities through their side startup?
The Pandemic Side Gig Boom
Before we discuss how people manage side startups, which side gigs boomed during the pandemic?
Forbes, BBC, and Bloomberg reported that many people turned to these side gigs:
- Selling on Etsy
- Freelancing on Fiverr
- Delivering groceries and food
- Launching small businesses
- Managing social media
How Has Remote Work Contributed to Side Startups?
Due to the flexible nature of remote work, many have decided to launch their side startups. For example, one pharmaceutical company director has started a Web3 company.
However, it’s not easy for him to manage the side startup while working for the company. He sees an unfair transaction. Although he does work eight hours, he believes that he doesn’t owe his company the extra work hours he might have after finishing his regular work. After all, he doesn’t get paid overtime for working extra.
Plus, whenever he’s up for a promotion, the company always brings up his family and how long he can take some time off after the birth of his children.
Shari Rose is another startup founder. Unlike the pharma company director, the dentist practice Rose was working for was more than okay with her startup. They have said they needed her to stay.
Should The Boss Know Or Keep It To Yourself?
For starters, many businesses aren’t too strict about their employees launching startups on top of their full-time work. However, having a side gig like a startup could contribute to their performance at their job. At the same time, it could affect their current professional relationship with their bosses. Plus, there are fears of employees being fired.
Vox interviewed a marketing director working on HR software and said he chose not to tell their boss about his side startup. Even if they searched on Google if they should or should not do it, they ended up not telling them. The marketing director says his current full-time work will help him develop his side startup because he’s not well off.
However, some bosses are open about having their employees start their business on the side. Kaitlyn Borysiewicz works at a nonprofit but is working on her startup, the Melanin Collective. She has received approval from her boss that she can work on her startup on the side but can only work on it outside the nonprofit’s operational hours.
The Employer Perspective
Some employers have voiced their opinions about the side startup arrangement. One manager, in particular, has mixed feelings about this. They don’t speak on behalf of the company, but they are 50-50 over the side startup because employee growth matters in their company. But they’re open to having their employees explore and discover what they want to do on the side.
Meanwhile, another employer, Chinwe Onyeagoro, is supportive of the side startup arrangement. What matters to her is so long as her employees are meeting their deadlines, they’re more than welcome to work on their side startup anytime.
Startup Central
Why Having an Advisory Board Could Make or Break Your Startup
Published
8 months agoon
July 22, 2022Facing severe challenges when establishing your startup could be an inevitable route. You won’t have any way to go past the challenge without going through it. And new entrepreneurs could rack their brains thinking of the best solution but will end up futile. This is why every venture would need a startup advisory board to help fill the gaps in knowledge and experience.
Here’s why a startup advisory board is vital and how to choose the right people.
What is an advisory board?
In a nutshell, an advisory board acts as your business mentor. These people are highly experienced and knowledgeable in business, which will immensely enhance how you operate the business.
By giving you business advice, you will have guidance in the following aspects:
- Inviting more investors
- Creating a compelling company culture
- Establishing growth techniques
- Attracting the right talents
- Retaining the right employees
- Planning and executing your exit strategy when all else fails
An entrepreneur’s relationship with the advisory board representatives is often informal and personal. This means communication is done via video chat, email, or text.
Why an advisory board is vital
Some entrepreneurs take an advisory board lightly due to the costs. But is it worth paying these individuals? Here are the benefits of having an advisory board:
- They can fill knowledge gaps that will enhance your performance as the CEO of your startup
- They will add credibility to your startup and boost trust among customers and investors
- They give you business advice that you might never think of due to a lack of experience
- You’ll become trustworthy in the eyes of external and internal stakeholders
How to choose the right members for your advisory board
Selecting the right members for your advisory board is crucial as you need people to add value to your business. Here’s how:
1. Assess your knowledge and neds
It’s crucial to determine why you’re choosing an advisory board in the first place. That said, look within yourself to find the right people. Assess your experience, knowledge, and needs. For instance, if you need someone knowledgeable about finding funding, choose someone with connections with investors.
2. Take advantage of personal relationships
The purpose of a business mentor is to have someone you can turn to when you need them the most. They act as your confidant and trusted ally. If you already have someone in your circle whom you think can add value to your business, see if you can leverage that relationship.
3. Do your due diligence
As responsible entrepreneurs, it’s your job to screen candidates thoroughly. Do your due diligence and perform background checks on each candidate. Do they have a proven track record? Have they garnered some positive testimonials from previous clients? What are their strengths and weaknesses? Do they have advocacies or different principles that might cloud their judgment? By aligning your values and beliefs, ensure that the candidate is the right fit.
4. Attend entrepreneurial events
Another way to find like-minded individuals is to attend business events and conferences. These are some occasions when business-minded people come together to share ideas and experiences. It’s also an excellent way to meet others who can potentially be your business mentor.
Conclusion
A startup advisory board is essential to your business, especially if you’re still learning the ropes. They add value to your company and improve the overall performance and operation, provided that you nurture these relationships.
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