Which Start-up Type are you?

07 Jun Which Start-up Type are you?

As a female Certified Public Accountant located in Weaverville, NC, situated in the greater Asheville, NC market, it is very common for me to interface with start-up companies. During this blog, I focus on the types of start-up organizations that Angel Investors / Venture Capitalists invest. These concepts are laid out in the book “Winning Angels the 7 fundamentals of early stage investing” written by David Amis and Howard Stevenson. Which of these types of start-ups match your business plan best? Within each of these four categories, I will highlight some of the key steps you will need to get in place in order to attract an Angel Investor who can support your business and get it to the next level.

Product based business: These companies focus on selling a tangible product such as Coco Cola or Opi nail polish. Some products require extensive engineering and would require a significant amount of capital to help get the product to market. Other products are very repetitive when produced, think jars of salsa or coffee mugs and have a high throughput. The valuation components that are unique to manufacturing and selling physical products would include the following:

· Defining the product

· Building the first prototype

· Generate the first round of sales to prove product is viable

· Scale required for economic production

Service based business: Personal services, such as accounting or consulting make a significantly different start up than other generic services such as car insurance. Insurance can generate cash quickly but are harder to scale. An example of a service based business is my own CPA firm, Alicia Sisk-Morris CPA PLLC.  The valuation components that are unique to a service based business would include the following:

· Finalize the service you plan to provide to customers

· Raise the first round of capital to set up the business

· Initiating Operations proving the concept is viable

· Product demonstrations at marketing events to show how large a market demand there is

· Raising capital or attain a positive cash flow

· Hiring a professional management team as your product is your people’s unique skills

Retail business: Selling products are already ready for market to the general public usually requires a brick and mortar storefront. REI or Earthfare would be companies that fall into this category. The valuation components that are unique to retail-based business would include the following:

· Concept of the retail shop

· Hire, a management team

· Raise the first round of capital

· Identify the location for the retail store

· Launch the retail store

· Open a 2nd retail store location

· Hire an expansion team to help scale up the business

E-business: This style of business focuses on selling items via the internet. You could sell your e-book via Amazon, or you could provide we based services or even have your Etsy or eBay store. One of my favorite local potters, Freeman Clay Works, sells her work at local retail stores but you can also purchase items directly from her via her website or her etsy store.  Many of her pieces are customize to the request of the buyer.  She has crafted some amazing pieces that I have used personally and given as wedding gifts.  Many large retail stores have incorporated an e-business model into their offerings. For example, you can go to Target and purchase your tube of lipstick, or you can order it on their website and have it delivered to your home. The valuation components that are unique to internet based business would include the following:

· Finalize the concept of the e-business

· Build a quality website

· Hire, a team of key professionals

· Find strategic partnerships

· Raise marketing capital

· Attain critical mass with market-making models

Other Blog Posts of interest:

Negotiation with an investor

Three ways to structure your new business

Methods Investors Use to Evaluate Companies

Funding for Small Businesses

Small Business Retirement Plan Options

Women in Business

New Business Start-up Tips from a CPA