Comments on: It’s the execution, stupid. http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/ The Startup Blog Network Sat, 13 Mar 2010 22:41:09 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Damon http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/#comment-557 Damon Tue, 31 Oct 2006 16:01:31 +0000 http://ColoradoStartups.com/?p=145#comment-557 Gotcha - I just have a different definition of angel. I consider anyone who is not one of the three F's and also not a professional investor to be an angel, no matter the size of the investment. What you say makes a lot more sense when you're talking about quasi-professional angels making that size of investment. Gotcha - I just have a different definition of angel. I consider anyone who is not one of the three F’s and also not a professional investor to be an angel, no matter the size of the investment.

What you say makes a lot more sense when you’re talking about quasi-professional angels making that size of investment.

]]> By: David Cohen http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/#comment-546 David Cohen Mon, 30 Oct 2006 22:24:02 +0000 http://ColoradoStartups.com/?p=145#comment-546 Hi Damon. The companies I'm talking about are asking for angel investment, which, typically is somewhere around $250k-$1m on a valuation of $1M-$5M. I belive that if you took a poll of unemotional angel investors (not FF&F), they'd tell you that if a company could not <i>potentially</i> become a $20M (annual revenue) company then the upside is not great enough to invest their personal dollars. I'm not trying to suggest that in general smaller companies should never receive an investment, nor that they are somehow not worthy of existing. Hi Damon. The companies I’m talking about are asking for angel investment, which, typically is somewhere around $250k-$1m on a valuation of $1M-$5M. I belive that if you took a poll of unemotional angel investors (not FF&F), they’d tell you that if a company could not potentially become a $20M (annual revenue) company then the upside is not great enough to invest their personal dollars. I’m not trying to suggest that in general smaller companies should never receive an investment, nor that they are somehow not worthy of existing.

]]> By: Damon http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/#comment-545 Damon Mon, 30 Oct 2006 21:53:06 +0000 http://ColoradoStartups.com/?p=145#comment-545 Since when does a company have the potential for $20 million in revenue (or even value, if that's what you meant) to be worthy of rational investment? That just doesn't make sense - you're making some gross assumptions as to risk, investment sizes, valuations, and exits to get to such a simplistic statement. Since when does a company have the potential for $20 million in revenue (or even value, if that’s what you meant) to be worthy of rational investment? That just doesn’t make sense - you’re making some gross assumptions as to risk, investment sizes, valuations, and exits to get to such a simplistic statement.

]]> By: Jim Pollock http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/#comment-501 Jim Pollock Thu, 26 Oct 2006 19:11:56 +0000 http://ColoradoStartups.com/?p=145#comment-501 One little nitpicky point of clarification that I think is important for first time entrepreneurs to get. David, you used "$20M" twice... once in the context of "... $20M in annual revenue ..." and a second time "... if you aren't building a $20M business". The latter use refers to the value of the company (ie, what it would sell for in an acquisition), which is generally a multiple of the annual revenue. With $20M of annual revenue, depending on the nature of your business you could have a company valued at $40M, 60M or higher. (How much revenue did YouTube have when it sold for 1.65B?? There are extenuating circumstances :cool:) David is totally right in that you need to bootstrap as long and hard as possible. In today's economic climate it is VERY difficult to raise angel money without at least a product prototype and first paying customer. (Unless your angel has known you from prior lives.) So you just about HAVE to bootstrap to the first customer point today. At that point, it is conceivable that you can raise angel money and the question becomes "why"? With the ability to generate revenue at that point... start selling product. The further you take it, the easier it will be to raise money if you decide to do so, and the higher valuation (less dilution) you and your founding partners have to take. I will still say that when bootstrapping a company, it is one thing to have a small nest egg that you are sucking on while you eat tuna fish sandwiches and rent DVDs instead of $10 tickets to first run movies. It's another thing to burn your entire safety net in one cash outlay to hire that first sales guy or buy the big server rack. There are times when $150K to $300K of cold angel cash can really be nice. Jim One little nitpicky point of clarification that I think is important for first time entrepreneurs to get. David, you used “$20M” twice… once in the context of “… $20M in annual revenue …” and a second time “… if you aren’t building a $20M business”.

The latter use refers to the value of the company (ie, what it would sell for in an acquisition), which is generally a multiple of the annual revenue. With $20M of annual revenue, depending on the nature of your business you could have a company valued at $40M, 60M or higher. (How much revenue did YouTube have when it sold for 1.65B?? There are extenuating circumstances :cool:)

David is totally right in that you need to bootstrap as long and hard as possible. In today’s economic climate it is VERY difficult to raise angel money without at least a product prototype and first paying customer. (Unless your angel has known you from prior lives.) So you just about HAVE to bootstrap to the first customer point today. At that point, it is conceivable that you can raise angel money and the question becomes “why”? With the ability to generate revenue at that point… start selling product. The further you take it, the easier it will be to raise money if you decide to do so, and the higher valuation (less dilution) you and your founding partners have to take.

I will still say that when bootstrapping a company, it is one thing to have a small nest egg that you are sucking on while you eat tuna fish sandwiches and rent DVDs instead of $10 tickets to first run movies. It’s another thing to burn your entire safety net in one cash outlay to hire that first sales guy or buy the big server rack. There are times when $150K to $300K of cold angel cash can really be nice.

Jim

]]> By: Devin http://www.coloradostartups.com/2006/10/25/its-the-execution-stupid/#comment-499 Devin Thu, 26 Oct 2006 15:28:24 +0000 http://ColoradoStartups.com/?p=145#comment-499 Texans, ha, consider yourself lucky. The snow today has left everyone here driving like... I don't know, Californians who have never seen snow? Texans, ha, consider yourself lucky. The snow today has left everyone here driving like… I don’t know, Californians who have never seen snow?

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