Ironically, raising millions of dollars is usually easier than raising thousands.
The way the system works is that if you build something of value, the money will find you. Yes, there is a catch-22: you need seed financing, but no one will give you a cent until you have a marketable product and your company is producing revenue—which means that you don’t really need the money. But that’s the way it goes.

-Vivek Wadhwa, From the TechCrunch Article “Ditch the Biz Plan, Buy a Lottery Ticket”

Of late, I’ve been asked by people to shed some light about the Angel, Venture Capital, and Private Equity industries. People are absolutely fascinated and intrigued about early-stage financing. It’s sexy, right? To be able to invest thousands or millions of dollars into innovative ideas and turn them into millions or billions more is something not everyone gets to do everyday. But the rate at which I hear young, talented people wanting to be on “that side of the table” is alarming.
Let me digress for a moment. Every business needs …

“…what I found was that I was getting advice when I was asking for money, and getting money when I was looking for advice.”
- Laura Fitton, oneforty.com. Check out the interview here.
This is a great interview. Laura Fitton founded oneforty, an iTunes of sorts for Twitter apps. She was “highly unqualified” to start a company, but was able to raise $2+ million from investors and landed Guy Kawasaki as an advisor. The story is long, but it’s definitely a must hear for those who think they don’t have the right background …

Investors want to invest in startups that will be successful with or without them. And those who succeed don’t wait for investors before they begin to create. They can’t wait to carry their idea forward.
-Pitching Hacks, VentureHacks.com

This last video completes the three series post on projecting early stage capitalization and the effects a number of financing rounds has on an exit event.

EBITDA – Earnings before interest, taxes, depreciation, and amortization added back. EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions (i.e. varying levels of debt or mezzanine capital with varying structures or interest rates, capital expenditures, etc.).
EBITDA Multiple – sometimes also referred to as Enterprise Multiple, it is calculated as the …

Here is part two (of three) from my post yesterday detailing capitalization and ownership projection through three rounds of investment. I’ve added some commentary below the video about why projecting early stage capitalization is important.

Why are Early Stage Capitalization Projections Important?
Understanding early stage capitalization structure is important for company founders. It helps show the potential ownership structure sometime in the future based on capital needs during the operation of the business. The video above helps to illustrate the same methodology Brennan and I used to determine Pocket Tales early stage …

Below is a video demonstrating how to project the capitalization structure of your company. The video is in two parts, so look for another post finishing up the demonstration with more commentary (best viewed in full screen mode).