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Clarity

Peter Kemball

Ottawa, Canada Area

Founded and grew a financial services company which provided more than $200 M to SME's across Canada over twenty years. We learned much from our clients and know we have not seen it all, yet.

We look forward to encounters with entrepreneurs who strive to make our society a better place accept three premises as part and parcel of their life: that using business as the vehicle, requires making profits; persistence through the dark nights of the innovator underpins success; and Lady Luck is the friend you need.

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Fundraising angel investing Private Equity Entrepreneur Business Strategy New Business Development Due diligence Valuation Corporate Finance Executive Management

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Answers

Peter Kemball answered

Term sheet is to be signed. In order to determine equity for my investors, what step-by-step approach for valuating the company would you recommend?

The first question cannot be answered as asked. The starting point is agreement on how the investors are to get their money back.

Neither you nor your attorney should attempt to value the business. Who you turn to depends on the business itself.

There are norms available even for pre-revenue firms but usually not term sheets for specific transactions.

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Valuation

Private Equity

Fundraising

Peter Kemball answered

Is there such a thing as raising too much money?

How will the money you obtain be "paid" back, do you want to make the payment in that way and can you afford to make the "payment" are the questions you should address to see if you are raising too much money from the wrong sources.

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Fundraising

Private Equity

Seed Capital

Peter Kemball answered

Ready to raise money from friends and family. What are the rules and possible pitfalls?

Your team's sense of the long run value of the relationships augurs well for your success. So I trust that the know your self know the other advice leverages that for you.

If at all possible raise money by selling a customer a product or a service. Second, try non-equity crowd funding, preselling your product as did Pebble provides a sound way to obtain cash. If you fail to raise the minimum amount of funds they will be returned; relationships preserved.

If you are going to raise funds from angels, who under securities legislation are likely to be accredited investors, first demonstrate to yourself that you (a) will be able to generate enough high margin ales three years after you receive the funds that you will be able to pay the angels as much as they advanced and continue to do so for twenty-four more years; and (b) you and your team mates will collectively have at least as much in your jeans from the business as the angels get. if you cannot satisfy yourselves of this do not waste your time and that of angels by asking them for money. Either change your business model or sell something to somebody.

A good way to start the process is to profile your business with the highly regards Critical Factors Assessment; profile yourselves as individuals; and imagine asking your Grandfather for money based on the feedback from the profiles.

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Fundraising

angel investing

Start-ups

Peter Kemball answered

Any creative approaches for raising capital outside of your immediate network on a stealth startup?

Complete the following sentence Stealth has developed or is developing .... that solves the problem of ..... for ......

When completed you should be able to identity venture capitalist firms who wish to and or have made investments in that space. Corporates are more problematic if your reasons for stealth are to avoid the industry they are in. Angels are also problematic we typically syndicate which raises more possibility of them doing due diligence where you might find your cover blown.

Hope this helps

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Fundraising

angel investing

Venture Capital

Peter Kemball answered

What are the terms of a "fair" convertible note?

Do not use a convertible note. Widespread as it's use is, what is critical is alignment of incentives between the parties.

Both should be clear with themselves and the other, what their target return is; for angels a multiple of the amount invested; and for founders the increase in net worth they seek as a result of the businesses success.

Fair has nothing to do with it. The word is a smoke screen for lack of hard thinking about whether or not there is a basis for a deal between the parties.

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Fundraising

angel investing

Peter Kemball answered

How important is it for a two month old startup to have a business plan and/or financial projections when seeking seed from angel investors?

Most firms are not able to create enough wealth to pay the going rate for angel capital, more than 10 time capital invested, and leave an equal amount for themselves and those in the firm.
What basis do you have for thinking your firm would be an exception? Have you received a Critical Factors Analysis profile from the CIC at Waterloo?

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Fundraising

angel investing

Peter Kemball answered

Do angel investors go through a due diligence process before investing in a first time founder? What does this process looks like?

It is well known in the angel community that it takes more than a person month of due diligence to have a reasonable prospect of a return on capital.

Anyone you want to work with over a decade or more will do tombstone due diligence on the past to ensure that its dead hand will not undermine the future.

At least as important is to assure themselves that the CEO has the capability to build the business and grow with it. As a founder it is in your best interests to have this done as if you were being hired to manage the money under very difficult and unforeseen circumstances. This is a case of an ounce of prevention. Have a look at the history of Google to see what is at stake for all.

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angel investing

Fundraising

Peter Kemball answered

Is it common for new SaaS products to be at a breakeven with just a dozen paying customers? Should I seek investment or be happy to be in the black?

Answers to your questions are interrelated through your personal capabilities and personal growth objectives in the context of the demands of building an organization custom fitted to the opportunity's potential, hiring the right people to sit in the right seats and tolerance of prolonged uncertainty. Answer these and the rout to getting the right kind of money from the right kind of people is greatly clarified.
Will explain further if you wish.

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Business Strategy

Revenue & Profit Growth

Business Growth Strategies

Peter Kemball answered

We will be going for Angel funding soon. We are a B2B SAAS company with a couple of customers. How can we improve our pitch?

Most pitches fail to address two fundamental issues faced by angel investors. In order of importance they are:

1. can these founders build this business so it becomes profitable; and
2. how and when will my capital be returned and how large a return is offered?

I suggest you not pitch anyone. Instead obtain a Critical Factors assessment of your business as the basis for inviting angels to discuss and shape the opportunity with you. Learn what they can contribute. Is it what you need and want?

In parallel, get some third party assessments such as the HBDI profile of each team member, sales aptitude and sales knowledge etc. How do the profiles stack up against the demands of the role they are expected to fill? The CEO role is critical: the wrong person will almost assure failure of the business.Most firms fail because of the people issues so tackle them systematically from the beginning.

There is more on this pitch replacement approach at www.thekemballgroup.com The Dog's Bark.

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angel investing

Fundraising

Venture Funding

Peter Kemball answered

How can I audit my startup idea regarding technically, business model, revenue model, marketing strategy, etc.?

The best means I know of is to use a Critical Factors Assessment available from the non-profit Canadian Innovation Center in Waterloo http://innovationcentre.ca/ under Tools. It was designed for exactly the purpose you seek.

By the way simply posing the issue augers well for you success

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Start-ups

Entrepreneurship

Business Strategy

Peter Kemball answered

How can I set an appropriate valuation for my startup's seed round?

As pointed out, there is no good answer based on business logic. What I would do is to ask the lead investor if there is one, what target multiple the want to obtain on their money, a 10 X is low, and when they expect to obtain it an how. The you can ask if the 1% per $25,000 will do that for them.

Avoid any attempt to do it based on projections, even if you have some revenue. The product will probably change so as to invalidate such a "promise".

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Business Valuation

Valuation

Reviews

I have known Peter for many years. He provides a valuable service to help companies grow and thrive. Those who work with him benefit from his prudent appraoch to busienss and sage advice. High integrity and highly professional, I would recommend dealing with Peter in any capacity.

Eliot Burdett Source: LinkedIn

Member since June 2013