14 Ways of Splitting Equity With Co-Founders or Employees Without Giving the Company Away

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

1. Founder Vesting 

jeff epsteinIt’s imperative to have founder vesting with multiple co-founders. Founder vesting implies that the longer the founders work together, the more they earn (typically over 3-4 years). It’s a pretty standard practice and solves a lot of potential problems that may arise if one of the founders chooses to leave or is removed from the team. – Jeff EpsteinAmbassador 


2. Vesting Over Time 

John RoodEveryone should be on a vesting schedule, including co-founders. The worst situation is to have someone quit and walk away with a bunch of stock. Unfortunately, this happens all the time. Protect yourself by having everyone on a multi-year vesting schedule. – John RoodNext Step Test Preparation 



3. Grunt Fund 

Lane CampbellInstead of signing a static agreement with your co-founders, it makes more sense to use something like the Grunt Fund by Mike Moyer to allocate equity based on who is contributing to the business. It’ll help set the venture on the right path. – Lane CampbellCreately 



4. Performance Incentive-Based Equity 

Dustin CavanaughA great way to structure equity assignments for early stage founders and employees without giving away the farm is to establish set performance-based metrics. This motivates and incentivizes all stakeholders to reach their performance-based goals while simultaneously protecting the company from assigning equity where it is not earned or deserved. – Dustin CavanaughRenewAge 


5. Contracts 

Nicole MunozEquity often dictates who makes the decisions within your company. Decide who’s in charge first, and then develop contracts that make it clear who is responsible for what aspects of the business. You can easily justify a higher equity stake if you are also responsible, as CEO, for the difficult work of growing your company. –Nicole MunozStart Ranking Now 


6. Discount to Market 

Nicolas GremionRather than flat out giving out stock based on position or performance, sell shares to founders and employees at a steep discount (AKA the insider deal). Perhaps go as far as making it a rule that, for example, during their first year, everyone has to invest 10 percent of their salary back into the company. They’ll be motivated to see it grow while the company itself benefits from the extra cash infusion. – Nicolas GremionFree-eBooks.net 


7. Equity Calculator 

Ajay YadavThe simplest way to do split equity is to use the co-founder equity calculator tool on foundrs.com. I recommend not splitting equity 50/50 because it will help prevent delays and conflicts in decisionmaking, allowing you to move the company forward more quickly and under a unified vision. – Ajay YadavRoomi 



8. Equally 

David CiccarelliMy partner and I are in a unique position because, not only did we found the company together, we’re also married. Since marriage is an equal union, we took the approach that equality should apply in the company as well. Our first agreement was a 50 percent split when we established the first legal structure, a partnership. When we incorporated, we kept the same 50/50 split. – David CiccarelliVoices.com 


9. Standard 10-15 Percent Stock Option Plan

Kristopher JonesAllocating equity to key employees assumes – in the future – you intend to raise capital, sell your company or take your company public. Therefore, it’s critical to align your personal interests with those of your team. Based on experience raising capital, as well as buying and selling multiple companies, I recommend that you implement a standard 10-15 percent equity pool in the form of stock options. –Kristopher JonesLSEO.com 


10. Four Years With One Year Cliff 

Hongwei LiuAs every founder knows, the challenges a startup faces are completely different every six months. It’s hard to know if someone, be it a founder or early employee, is going to grow with the company, if their skills on Day 1 will be as valuable on Day 1,000. Somake sure everyone is vesting (four years with one year cliff is standard). And don’t be afraid to have an annual heart-to-heart between founders. – Hongwei Liumappedin 


11. Hybrid System 

Joshua LeeWith co-founders, I like to split the company evenly. This aligns us because it’s in each of our best interest to apply 100 percent effort and creativity to the company’s success. For early employees, I like to award ”phantom shares” that vest based on timelines and reaching agreed on performance milestones. Chobani yogurt CEO, Hamdi Ulukaya, followed a similar path with his employees.  – Joshua LeeStandOut Authority 


12. Milestone-Based 

Raoul DavisDivvying up equity to team members can dilute the valuation of the company.  The best way to justify the equity that was shared to an investor is by tying it to performance.  If team members earned equity based on completing significant milestones, it becomes much more digestible. – Raoul DavisAscendant Group 



13. Deferred Rewards 

Brandon StapperYou can assign bonuses that are redeemable at any schedule you like. Shares can be non-redeemable until retirement, for example. On the other hand, you don’t want to give away too much fluff. Employees deserve to enjoy their compensation as they see fit. – Brandon Stapper858 Graphics 



14. Revenue Sharing Rather Than Equity 

Blair ThomasCo-founders should always have skin in the game, but early employees that are seeking wealth beyond their normal salaries can be incentivized with revenue sharing rather than with raw equity. This gives them the motivation they need to operate at high capacity and push the business forward without robbing the company of much-needed equity come time for investment or exit. – Blair ThomasFirst American Merchant 

15 Mistakes Entrepreneurs Make When Deciding on an Exit Strategy

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.


1. Trying to Exit as Fast as Possible 

Kim KaupeEntrepreneurs can get so excited about how quickly they can exit that they fail to look at the big picture. The mantra of start it, pour gas on it, and sell it fast isn’t always the best strategy. If Mark Zuckerberg had taken the first offer he received for Facebook, he wouldn’t have nearly as many zeros in his net worth. Take time to look at the big, long-term picture before selling fast. – Kim KaupeZinePak 


2. Not Understanding Cash Up Front Versus Earnout 

Nick ChasinovA buyer will often need the entrepreneur to stay on after the sale, which will dictate the payment terms, typically in the form of a performance-based earnout with future upside. Committing to an earnout with performance-based triggers that are out of your control can be catastrophic. Once you relinquish ownership you are not in charge, so it is critical to negotiate the cash up front. – Nick ChasinovTeknicks


3. Issuing the Wrong Types of Shares 

john ramptonEarly on in business you will decide on the types of shares that are issued. This can ultimately sink or swim your business into an exit strategy. Make sure you’re issuing the correct types of shares to founders, employees, investors, advisers and anyone else getting shares so that you don’t screw yourself out of an exit strategy. – John RamptonDue 


4. Giving Into Pressure From Others, Like Investors 

Peter DaisymeWhile investors do have a say in your exit strategy, it’s a mistake to just give into pressure from others when deciding on an exit strategy. Often, those pressuring for the exit are just looking for that fast return and not considering the health or benefit for the business. Waiting a bit longer for a better offer could even yield more return. – Peter DaisymeDue 


5. Taking the First Offer 

Murray NewlandsThe first offer may not be the best offer for your business. It’s easy to get excited and just say yes to the first bidder. A “wait and see” strategy is better as word gets around that someone is interested in your company. This may generate better offers and drive up the demand. This also gives you time to further study the offer. – Murray NewlandsDue.com 


6. Looking Only at the Money on the Table 

Andrew ThomasThere’s more to an acquisition than just the check you receive. This acquirer will now have control over your product, customers and brand. There’s also a great chance that you’ll be working for them the next couple of years. Avoid the mistakeof just selling for the money. Consider your mission and ask if this company will help you enhance your ability to reach the goals you set for yourself. – Andrew ThomasSkyBell Doorbell 


7. Not Understanding What Drives Value 

Mark DaoustI see many entrepreneurs spend a lot of time and energy building their companies in ways that add little to no value to their business. Worse yet, many plan for an exit but implement strategies that actually hurt their value. When planning your exit, keep in mind four principles: reduce potential risk, demonstrate growth prospects, make it easy to transfer and make it easily verifiable. – Mark DaoustQuiet Light Brokerage, Inc. 


8. Focusing on an Exit From the Start 

Jennifer MellonBuilding a company that is built to last, one you could still be running 40 years from now, is the greatest exit strategy you can implement. If you build a great company, the rest will fall into place. Focusing on an exit can lead to mistakes, sloppy processes and a faulty foundation. – Jennifer MellonTrustify 



9. Not Hiring a Banker 

Kristopher JonesThe key to getting multiple offers and the highest price for your business is to hire a banker. A banker or broker will have the requisite experience to prepare you for a road show, help you schedule dozens of meetings with prospective buyers and help you negotiate term sheets. Furthermore, once you decide on a buyer, the banker will help you through a successful due diligence process. – Kristopher JonesLSEO.com 


10. Over-Valuing the Business 

Nicole MunozIn order to earn the highest profit from the sale of your business, you need to directly correlate your valuation of the company to your book of business. When you prepare to sell, the buyer will not have the same emotional ties to your company that you do. Therefore, supporting the sale with excellent accounting records ensures you receive the full amount you expect for your business. – Nicole MunozStart Ranking Now 


11. Not Considering the Lifestyle Factor 

Jesse LearExit strategy plans are typically very money-centered and can fail to account for the possibility that you could end up loving what you do. Ask yourself why each potential exit strategy sounds attractive to you. For example, if your motivation behind pursuing acquisition is personal financial security, will you still be motivated to sell when you’re making a $1M/year salary? – Jesse LearV.I.P. Waste Services, LLC 


12. Being Afraid of Talking to “Competitors”

Andy KaruzaMany entrepreneurs are worried about getting close to competitors or even talking to them. In fact, these very same competitors could make for an easy acquisition. If you’re in the process of looking for an exit, start talking to the right people over at your competitor’s company. Don’t divulge critical details, but keep the discussion open at a high level until qualified interest is determined. – Andy KaruzaFenSens 


13. Not Thinking Two or Three Moves Ahead 

Doug BendRegardless of which exit strategy you pick, you are likely to go through a due diligence review. It is wise to work with an attorney to go through a mock due diligence process to make sure that all of your legal ducks are in a row before engaging with a potential exit partner, rather than having to scramble to get everything in order once you have found an ideal exit strategy. – Doug BendBend Law Group, PC 


14. Viewing the Value of Your Company Through Your Eyes Only 

Peter BonacIt is a mistake to view the value of your company through your eyes only. The true value of your company depends on the buyer, so it is best to view it from the buyer’s perspective. As every buyer will see different values in your business, ask yourself what areas of your company will add the greatest value to that particular buyer and grow those areas to make them more appealing. – Peter BonacBonac Innovation Corp. 


15. Not Adequately Training Key Team Members 

Andrew SchrageIf the company falls flat on its face after you leave, the person you’re handing it over to isn’t going to be very happy. Even worse, the transfer of the business may not happen at all if the other party sees this as a risk beforehand. – Andrew SchrageMoney Crashers Personal Finance 

The Pros and Cons of Marketing Automation for an Early-Stage Startup

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is one pro or con of marketing automation for an early-stage startup?


1. Pro: You Can Scale Quickly With Minimal Resources

Diana GoodwinMarketing automation can be a lifesaver for an early-stage startup that has to gain traction quickly because it allows a startup to quickly reach a large number of prospects with minimal manpower. Marketing automation has come a long way, and there are many hacks to ensure that yourcustomers still feel like they are getting a customized or personal message, despite the automation.

– Diana GoodwinAquaMobile Swim School


2. Pro: It Sets the Stage for Efficiency from the Start

Peter DaisymeWhile many stress that they don’t have enough hands to take care of all the work in a startup, it’s good to think lean and efficient from the start with as many marketing automation tasks as possible. This gives you more time to develop your messaging and personalization strategies as well as access greater amounts of data than if you had focused on manual marketing tasks.

– Peter DaisymeDue.com


3. Con: Automated Tasks Are Too Easy to Forget About

jared-brownWhen you’re starting out it’s important to save time and work efficiently. Marketing automation makes sense, but it also makes it easy for you to forget the process. Unless you’re automating menial marketing tasks like data entry, I recommend doing your marketing manually until you get a good understanding of the process and everyone involved.

– Jared BrownHubstaff


4. Con: You Don’t Know Who You Are Yet

Murray NewlandsSending out automated messages about your brand before it is fully formed is a mistake. During this time, who you are and what you offer could change. Without a personal touch, you might only confuse your audience. It’s better to wait until a later stage when this identity if more fully formed.

– Murray NewlandsDue.com


5. Con: You Don’t Get to Know Your Audience

Nicole MunozBrands that automate too soon may risk the advantage that comes with getting to know your audience on a deep, personal level. People buy from people. So to sell to your ideal customer, you have to understand every single thing that motivates them to buy from you over yourcompetitors. Engagement is the only way to do this. Be certain you know exactly who your buyers are before you automate.

– Nicole MunozStart Ranking Now


6. Pro: No Audience Is a Bad Audience

Andrew Namminga (1)Using automation to grow social accounts is great for early-stage startups. Whether the growth is targeted or not, having a following in itself encourages growth. Of course, engagement will be low, but it’s better to have a decent following with low engagement than it is to have no following with no engagement.

– Andrew NammingaAndesign


7. Con: You Can Lose Focus on the Main Objective

Zac JohnsonAutomation is great, but it can also lead to distraction and lack of focus. A good example of this would be if you were focusing on customer support and built a knowledge base to essentially “automate” any and all support questions. If you completely automate this process, you’d be lacking in support and missing out on the user experience. This same principle applies when starting a business.

– Zac JohnsonHow to Start a Blog


8. Pro: It Helps Startups Define Engaging Language

Nick EubanksWhile direct human interaction is critical in the early stages of learning about a company‘s ideal customer profile, automation can also provide big wins in helping define engaging language and offers. With a thoughtful and well-defined conversion funnel up front, startups get the advantage of quickly gaining insight into what offers drive responses.

– Nick EubanksI’m From The Future


9. Pro: You Improve Efficiency

Marcela DeVivoWith the limited resources usually associated with early-stage startups, it’s important to maximize efficiency from the beginning in order to accelerate growth. Startups that invest in marketing automation from the very beginning can do more with less. Reducing labor overhead is a massive savings for startups, who can then use savings to invest in sales and marketing.

– Marcela De VivoBrilliance


10. Con: You Don’t Know What a Good Lead Looks Like

Vik PatelGood marketing automation requires an understanding of leads and their behavior, which differs for every company. The major benefit of marketing automatization is the ability to send personalized marketing content. But, unless your business understands what a good lead looks like and which content is likely to increase conversion rates, it’s difficult to design effective automation processes.

– Vik PatelFuture Hosting


11. Con: It’s Easy to Make Mistakes

Myles VivesIt’s easy to spread yourself out too thinly as an early-stage startup. Marketing automation might sound great, but it takes time and expertise to set up properly. If you have no experience with automation or cannot hire an expert, you risk sending your customers the wrong emails at the wrong times. Your customers will know that software is really behind your email messages.

– Myles ViveseREACH


12. Pro: You Get Valuable Data for Later

Patrick BarnhillUsing marketing automation as an early stage startup is the immediate collection of data. By automating your marketing processes up front, you will get data collection early on without having to spend too many hours on marketing. This data will become more and more valuable as you growyour company.

– Patrick BarnhillSpecialist ID, Inc.

How to Decide Between Venture Capital or a Small Business Loan

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

In what situations should I pursue either a small business loan or venture capital?


1. You Need Help Through Rough Times

Adam SteeleI look at VC funding if I have solid plans for development and growth and I have projections available already that suggest that’s a profitable option. Generally, I don’t go for business loans unless the opposite is true. Business loans for me are about riding through the rough spots. For that reason, I tend to borrow much less money in loans than I might try to raise as capital.

– Adam SteeleThe Magistrate


2. You Aren’t in a Hurry to Grow

Aaron SchwartzTaking venture capital is a slippery slope. You get cash quickly, but then your interests in possibly selling the company for a nice “personal win” need to disappear. If you want to retain ownership and grow slowly, take out a loan. If your goal is to build something huge, bring on the capital, expertise and network of a VC firm.

– Aaron SchwartzModify


3. You’re Expanding Rapidly

Manick BhanVenture capital is extremely helpful if you need to move fast, whether you’re developing a new product, scaling your company, or increasing the size of your staff. Venture capital can be a great for an influx of cash, but it often comes with clear expectations of where the company will go with the money. However, if you’re looking to bridge a small gap, loans can be a great way to stabilize cash flow.

– Manick BhanRukkus


4. You Already Have Steady Revenue

Brandon StapperProfits don’t come from growth; they come from efficiency. With that in mind, if you already have a revenue stream, why would you sell equity to a venture capitalist? You’re just giving away a share of your success. Venture capitalists are designed to help companies with major research and development needs — taking a gamble before revenues are in place. If revenues are solid, go for a loan.

– Brandon Stapper858 Graphics


5. You’ve Weighed Risk and Reward

Corey NorthcuttAs a three-time bootstrapped founder, I hate unnecessary risk. But I respect that some businesses can’t be profitable enough at every stage. There’s always a weighing of risk/reward with financing. Does the loan require a personal guarantee? How much equity and “breathing room” do the VC’s terms leave you? The answer falls entirely on the specifics, so read the fine print.

– Corey NorthcuttNorthcutt Inbound Marketing


6. You Aren’t Planning to Grow Very Big

Cynthia JohnsonSmall business loans are designed for those small business owners and freelancers who are not planning on growing very large but could use the capital to set up an office and cover expenses until they get some clients and revenue coming in. VC is really for those startups that are looking at a much bigger scale.

– Cynthia JohnsonAmerican Addiction Centers


7. You Need $1 Million or More

Daniele GallardoIf you have committed customers but you require cash to purchase materials to fulfill the orders, then go for a business loan. You know you are going to get your money back, and you know when. I see the loan as an instrument to give you some elasticity in short terms. For anything else, especially if the sum is the scale of $1 million and higher or longer time scale, I would look into VC firms.

– Daniele GallardoActasys


8. You Want Someone to Guide You

Jayna CookeThis decision ultimately depends on if you want additional resources or not, and if you do need additional resources, make sure you are connecting with a venture capitalist that is able to provide this. You have the opportunity to get investors that have invested in similar industries, they know the struggles and can from there connect and help guide you. Business loans are more hands off.

– Jayna CookeEVENTup


9. You Expect to See a Large Return

Chris BrissonIt’s all the rage to get a VC firm to back you, when in most cases you just need capital to grow your business. Keep in mind that most VCs will want to see a 10 times return on their investment. So unless you have a business or startup that will see large returns, don’t even waste your time. We got a loan from American Express and a line of credit from the SBA to grow our business.

– Chris BrissonKickaConference


10. You’re in a Hurry

Anthony PezzottiRaising money from VCs can take months, sometimes years with strenuous efforts. Small business owners with poor or non-existent credit can have a very difficult time obtaining a loan from a bank, and may even have to give collateral in order to secure the business loan. With Kabbage, you’ll find out instantly if you’re approved. They offer flexible funding, and have fewer requirements than a bank.

– Anthony PezzottiKnowzo.com


11. You Want the Less Expensive Option

Mark CenicolaWhen cash flow is sufficient to cover loan payments and repayment in full is likely, a loan is going to be a much less expensive option. If you borrow $1 million, you may pay 10 percent per annum. With venture capital, you’re going to give up a minimum of 10 percent equity in your business. If you increase the value of your business tenfold, you’ve effectively given up $10 million in value to a VC.

– Mark CenicolaBannerView.com


12. You Want Full Control

Andrew SchrageThe biggest factor would be the amount of control you want regarding how the money is used. A bank will let you spend the money basically as you wish, whereas a venture capitalist may have certain conditions. Plus, a VC will probably want or have a say in the growth and direction of your operation. If you want to be the sole influencer, choose a small business loan.

– Andrew SchrageMoney Crashers Personal Finance

15 Unusual Ways to Find an Investor

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

Name one unusual way I might find an investor.

1. Your Former Boss

Brian PallasHaving known you professionally from a previous work experience, your former boss might be the best person to invest in your company in case he or she likes the idea.

– Brian PallasOpportunity Network


2. An Angel Group

Nick ChasinovThere are angel investing groups all throughout the United States that are actively seeking prospective new members. One unusual way to find an investor is to attend an angel group meeting as a guest to evaluate the opportunity as a prospective member. You will have full access to all attendees and an opportunity to network with a potential future investor in your company.

– Nick ChasinovTeknicks


3. Friends and Family

Nicole MunozThose closest to you might be more inclined to invest in you. Offer them a fair return on their investment, and make sure you stick to it. When you start small with those you know and who know you, you can fine-tune your process so that when it’s time to reach out to larger investors, you’re confident, professional, and well aware of what it takes to do business.

– Nicole MunozStart Ranking Now


4. An Adventurous Hobby

Adam SteeleFinding an investor who is passionate about your work is the holy grail, and finding them is easier when you already share a passion. Active hobbies like skiing have made it easy for me to meet people who work as hard as they play, and some of them have been in a good position to invest if I wanted to pursue that.

– Adam SteeleThe Magistrate


5. Customers

Nicolas GremionThey know your products and/or services. Hopefully they also enjoy using them, and they have some money to spend. So who better to ask? Done the right way, your customers should also appreciate that you’re trying to grow and offer better products/services. By demonstrating you have their best interest at heart it’s a win-win.

– Nicolas GremionFree-eBooks.net


6. Thought Leadership Articles

Brittany HodakI write regularly for Forbes — and semi-regularly for several other outlets — and although I’m not explicitly writing about my company, every piece is a reflection of it. I’ve had multiple VCs inquire about ZinePak because they landed on an article I wrote and saw that I have a marketing company. Writing is a wonderful way to boost your profile and reputation as an expert in your field.

– Brittany HodakZinePak


7. Social Clubs

Peter DaisymeSocial clubs are reemerging in major cities around the country and world for professionals and entrepreneurs to meet up and socialize. This offers a more low-key way to network that could potentially connect you to an investor over a social event, game of tennis or round of golf.

– Peter DaisymeInvoicing


8. First Class

Carter ThomasWhile this isn’t groundbreaking, it’s definitely not an actively pursued strategy for startups and founders. I’ve met some of the most influential people in first class simply because I have no competition for attention and the environment is self-qualifying. They know I’m legit because I’m there and I have to time to build a relationship before the pitch because I have more time than others would.

– Carter ThomasBluecloud Solutions


9. Someone You Don’t Expect

Christopher KellyTreat every person that you meet as being, at most, one degree removed from being your future investor, because they probably are. Next time someone asks, “What do you do?” answer as if they asked, “How can I help you?” This format works for investment, but it is just as applicable to business development or any other thing that you are trying to develop.

– Christopher KellyConvene


10. Vendors

Piyush JainWe are an IT services company and work for lots of startups. Sometimes, when a project is really good and our client lacks some funding, we also take some equity in the project. Lots of IT (also non-IT) vendors provide this option. Talk to your vendors and see if they would be interested in investing. It not only brings you money, but can reduce your cost.

– Piyush JainSIMpalm


11. Local Business Owners

Ismael WrixenIt might seem counterintuitive if they have a brick-and-mortar store and you’re starting a business in the online space, but you might be surprised to find that there are owners out there with enough capital and enough interest in modern business to want to invest in a startup.

– Ismael WrixenFE International


12. Meet Walter

Brian David CraneI really like Meet Walter, which is a powerful data-backed tool to help narrow down whom you should be pitching to. This is an “unusual” way to find an investor in that the tool can present people you’ve never heard of and who’ve invested in companies like yours.

– Brian David CraneCaller Smart Inc.


13. School

Drew HendricksIn more universities and colleges, there are programs and seminars led by investors and business people interested in moving into the investment world. As a student with a potentially good business idea, this is a good place to connect as the instructor may want to mentor and fund you after working with you over the course of a semester or other program.

– Drew HendricksButtercup


14. Outdated Advertising Platforms

Nathan HaleWith all the new ways we can get and stay in touch, we often forget there are still other avenues of communication. There are investors who aren’t on LinkedIn, Twitter or Facebook, who still read the local paper, and who may know how to use Craigslist but have never been on Instagram. Use those odd channels to fish out potential investors; you’ll be surprised with what you find.

– Nathan HaleFirst American Merchant


15. Your Parents’ Circle

Alexandra Levit 2Millennial business owners often have high-performing parents. These parents and their friends, who are usually members of the Baby Boomer generation, are retiring from traditional work and looking for smart and intriguing places to invest their time, expertise and money. Work with your parents to host a party or outing where you share information about your business without a hard sell.

– Alexandra LevitInspiration at Work

11 Reasons Crowdfunding Campaigns Fail

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What’s one reason why a crowdfunding campaign fails?

1. There’s Not Enough Buzz

Drew HendricksWhen it comes to a crowdfunding campaign, you have to hustle to create the buzz around it, convincing others that people are really “hot” on your idea. Once investors start rolling in, the momentum can take over, although you still need to continually leverage social platforms, influencers and all types of channels to remind people of your campaign. Talk about it continually.

– Drew HendricksButtercup

2. There’s Not Enough Incentive

Miles JenningsNo matter what your crowdfunding campaign is focused on, those contributing need some kind of incentive to give their money — product and/or service. They need to know that they will get something out of the deal.

– Miles JenningsRecruiter.com


3. You’re Not Understanding Your Target Audience

Stanley MeytinOften companies feel they have a great idea but fail to test it out before creating a crowdfunding campaign. It is important to first put in the research and understand who your target audience is. Create value, educate people and be sure your product or service is something people are really interested in, and market to them in the right way.

– Stanley MeytinTrue Film Production

4. You Have No Proof of Concept

Corey NorthcuttNot having a concise pitch can kill a campaign. So can a poor proof of concept. Before you ask for money, make sure you can demonstrate the value of your creation; not just talk. Even better, demonstrate its viability in the marketplace by drumming up demand and presenting evidence of as a part of the pitch.

– Corey NorthcuttNorthcutt Inbound Marketing


5. You’re Not Showing Your Audience How They’re Connected

Angela RuthBeyond the list of takeaways for certain contribution amounts, most campaigns don’t really connect with their audience of potential investors because they never say what the product or service will do for them. It may give a list of benefits, but there is no connection to an issue or problem the audience has or relates to. This connection would get them to invest or attract more people.

– Angela RutheCash

6. You’re Using Low Quality Video

Kristopher JonesIn most instances, I think it’s OK to pull out your iPhone, shoot some video, and post it to your Facebook page or YouTube channel. However, when it comes to launches a successful crowdfunding campaign, I don’t believe you should skimp on video production. In fact, I think you should invest several hundred dollars in making sure your video is shot professionally edited and polished.

– Kristopher JonesLSEO.com

7. You Fail to Build Trust

Andrew ThomasMost crowdfunding projects fail to deliver to their customers. Over two years later, our campaign is still one of very few crowdfunded hardware projects that fulfilled its orders. Visitors are aware of this, and crowdfunding projects fail because the campaign doesn’t build enough trust. Be trustworthy in your video, be realistic with your claims, and make a quality campaign page with good images.

– Andrew ThomasSkyBell Video Doorbell

8. Your Video Doesn’t Tell a Story

Derek CapoStories are the best way to sell anything and the only way you can effectively do that on crowdfunding campaigns is to have the right video to deliver the message effectively. Your video has to connect with the audience and has to feel genuine. If it doesn’t, then it will be difficult to get anyone to follow you or buy into your story.

– Derek CapoeFin


9. Your Product Doesn’t Solve a Problem

Obinna EkezieLet’s start with the No. 1 reason that crowdfunding campaigns succeed — your product solves a problem. If your product doesn’t solve a problem, you likely won’t succeed. Before you post your product, test it out on people who will give you honest feedback. If you’re leveraging crowdfunding to build a prototype, make sure to outline the product as much as possible and seek as much feedback as possible.

– Obinna EkezieWakanow.com

10. You Set the Wrong Goal Amount
Ayelet NoffIn crowdfunding campaigns, image is everything. If, within the first few days, your campaign is not able to achieve its funding goal, reporters coming to your page won’t write about it because it will appear like a doomed campaign, and backers won’t back you for the same reason. That’s why it’s better to set a conservative goal that you can actually succeed in raising. Once achieved, the sky is the limit.

– Ayelet NoffBlonde 2.0

11. You’re Relying Too Much on the Crowdfunding Platform

Fan BiNew entrepreneurs often tell me they’re going to launch their product on a crowdfunding platform — great. So I ask them how big their email list is, how many bloggers and publishers are ready to write about the launch. Huh? They think if they get traction on the platform, crowds will rush to their campaign. Even though that’s true, you need to first solve for the initial traction part.

– Fan BiBlank Label

14 Pros and Cons of Having a More Involved Relationship With Your Investor

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is one pro (or con) of having a more involved relationship with your investor where you actively seek or get advice?

1. You Get Brutal Honesty

Angela RuthWhile this can be a pro or con, a person who knows you better will tend to be more brutally honest about how they see things. The advice will hit at a much more personal level for this reason. While it may not always be something you want to hear, it is most likely something you need to hear. The tough love of a closer relationship with an investor can be what helps create change.

– Angela RutheCash

2. They Have Seen It Before

jeff epsteinGreat investors are happy to share advice from other portfolio companies. We’re fortunate to have a great relationship with our lead investors and provide insights from experiencing many of the issues we face. From high-level strategy to tactics, we can leverage to push forward as fast as possible.

– Jeff EpsteinAmbassador

3. They Want to Run Your Business

Blair ThomasInvestor advice is almost always welcome; so long as there’s a boundary between what is acceptable and what is not. It is important that an investor offers you advice in his or her area of expertise, but sometimes an investor can mistakenly feel that they know how to run your business, offering insight where it’s not needed, which could be detrimental to your operations.

– Blair ThomasFirst American Merchant

4. They Can Help You Network

Adam SteeleInvolved investors are probably the kind who have been working in your industry for a while. Their experience may have involved working with some of the biggest leaders in your field, and it’s possible that they’re willing to help put you in touch with them. The most experienced investors are often networking goldmines, and if you don’t know who you need to talk to, they likely do.

– Adam SteeleThe Magistrate

5. You Can Overshare

Miles JenningsAlthough its great to have a close relationship with your investor, you want to try and be sure not to overshare too much while seeking advice and being open with this individual. This doesn’t mean you need to hide things from them, but you shouldn’t be stressing your investors out with every little detail and up and down within your business. Keep conversation focused on your relationship.

– Miles JenningsRecruiter.com

6. They Support You During Tough Times

Nicolas GremionWe keep our investors updated in both the good and the not-so-good times. And while I was anxious to report bad news at first, I’ve learned that our investors are truly supportive. So don’t be shy to reach out to them in tough times. They may prove to be the help you need.

– Nicolas GremionFree-eBooks.net

7. You Might Take the Wrong Advice

Brian SmithSome advice you pay for, and some advice you’re paid to take. Taking good advice from an investor may make the next round easier to raise. But take the wrong advice and the next round may not happen. There’s a reason you have (or should!) set aside equity for advisors and board members. Surround yourself with smart guidance, not just rich advice.

– Brian SmithS Brian Smith Group

8. They May Know Too Much

Derek CapoSometimes it may be best that they don’t know everything. For example, if they get a sense that you aren’t getting along with your co-founders that may scare them from investing in the next round, especially if that said co-founder was a major reason for investing in the company. In a case like this, if they already know the issue, be transparent and ask for advice on what you’re struggling with.

– Derek CapoeFin

9. They Can Provide an Outside Perspective

Corey NorthcuttWe tend to be blind to ourselves. Nobody ever thinks they have an ugly baby. More than just an investor, any outside perspective helps, and getting feedback on how you’re doing from more angles is always a good thing.

– Corey NorthcuttNorthcutt Inbound Marketing


10. They Think About You in Their Off-Hours

Brennan WhiteGetting investor feedback is usually a great thing. However, the more powerful thing about a close relationship with an investor is that they are more actively thinking about you in their off-hours. For us, the investors we talk to most are constantly bringing leads, making introductions, and helping move the mission forward. They’re subconsciously working on the project at all times.

– Brennan WhiteCortex

11. They Help You Stay Focused

Brandon StapperI want investors to know that I do not operate in a vacuum and that seeking advice is part of my job. However, I tend to stay more focused dealing with investor input. I know what I want, get my questions answered, and then go back to work.

– Brandon Stapper858 Graphics


12. They Feel More Ownership Over the Investment

Andy KaruzaOne good reason to involve your investor by seeking advice is that they feel more ownership over their investment. This is one of the top two most important concepts for any investor. If they feel more involved, they will be more at ease and will trust you to make the right decisions. They will also be more likely to help you lead on your next round if they have a personal stake in the company.

– Andy KaruzaFenSens

13. They Don’t Have All the Context

Matt DoyleAn investor, as close as they may be, is still someone who has their livelihood to protect. You need to be very, very careful about venting about things that they may not be able to put in the proper context. You could accidentally leave them feeling threatened or conflicted about their investment even if there isn’t a real danger.

– Matt DoyleExcel Builders

14. They Share More of the Experience

Obinna EkezieChances are your investor has experience in many aspects of building a successful business. Therefore, it makes sense to keep your investor as close as possible at all times, and actively seek advice when his or her experience can help you make the best decision. Building a business should not be a test. You should do everything within your power to succeed, and one way is to keep investors close.

– Obinna EkezieWakanow.com

9 Questions That Will Determine Whether Your Startup Idea Is Worth Pursuing

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is one important question I can ask to evaluate whether a startup idea I have is worth pursuing?

1. How Much Time and Financial Investment Will It Take?

Jeff JahnHow much time and financial investment will it take to get the idea to an MVP (minimum viable product) stage? Generally speaking, I only pursue a concept if it can reach an MVP stage within three weeks of development time. That may seem short, but taking much longer puts you at risk of making too many assumptions. That can result in a product or idea that doesn’t come close to hitting the mark.

– Jeff JahnDynamiX

2. Will You Be Excited About It in 5 Years?

Ross ResnickWithout unrelenting passion and deep enthusiasm for the venture, it will fail. It doesn’t matter how solid the idea sounds on paper. Without an emotionally invested leader committed to succeeding at all costs over a lengthy period of time, it will fail. Starting a company becomes your life when you start a new venture — you have to want to live the life the new venture will bring along with it.

– Ross ResnickRoaming Hunger

3. How Big of a Pain Point is This Problem?

Tim JahnYou need to determine how big of a pain point your solution solves. If the pain point isn’t big enough, your customers won’t care enough to pay you for it. If the point paint is huge, your customers will be shoving money down your throat to get their problem fixed. If it’s truly a huge pain, then pursue it.

– Tim Jahnmatchist

4. Would You Be OK if It Didn’t Work Out?

Faraz KhanWould you be willing to risk the time, money and energy even if the idea didn’t come to fruition? If your answer is yes, then you’ll have enough energy to push through the inevitable hard times, both personal and financial. On top of validating the idea, attaining financing, acquiring customers and delivering the product, you will have to deal with your personal stress and life — so brace yourself.

– Faraz KhanGo Direct Lead Generation

5. Does Your Product Create a New Habit or Improve an Old One?

Nick ReeseIt’s no secret that habits are both hard to start and stop. Anytime I hear a startup idea that requires the user creating a new habit, I’m always concerned. On the other hand, any time a new product or service is capitalizing on an existing habit and making it better, I know the adoption phase won’t be an uphill battle.

– Nick ReeseBroadbandNow


6. Would You Use It if It Had Terrible UX?

adam_RoozenValuable tools are valuable tools. If you strip away all of the glitz and glamour and it’s still something you would use (not “want to” use), then the idea has potential. Great UXs and positive PR help scale a user base, but it doesn’t define whether a tool is essential or not.

– Adam RoozenEchidna, Inc.


7. What’s Wrong With the Idea?

Andrew KucheriavyEven the world’s best ideas have flaws. You just need to identify them and understand how serious they are. Have an unbiased person play devil’s advocate and poke holes in your idea. Once you uncover potential problems, determine whether you can prevent or overcome them by patching the idea or finding a suitable workaround.

– Andrew KucheriavyIntechnic

8. Is It a Product or Only a Feature?

David CiccarelliIt’s hard to build a sustainable business around a feature. People buy solutions to their problems, defined as benefits and packaged as a well-rounded product offering. They don’t use single features for very long. Why? Because the startup that offers a better product will soon include your break-through feature. Double check that you’re building a product, not just a nice-to-have feature.

– David CiccarelliVoices.com

9. How Much of the Market Can You Capture?

Jayna CookeYou first need to understand the overall market size. Next, decide what you think you can realistically do to capture that market. Most people are confident they can capture at least 10 percent, but in reality they only get about one percent. Ten percent is a lot more than it looks like on paper.

– Jayna CookeEVENTup

13 Tips for Determining Your Company’s Valuation Prior to Starting Fundraising

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What top tip do you have for determining your company’s valuation prior to starting fundraising?

1. Determine How Much Cash You Need Over the Next 18 Months

Mark CenicolaTry to raise money at a valuation that will leave you and your founders in control and provide you with enough cash to execute your plan over the next 18 months. If you can’t do that, then either change your plan or seek other investors. It may take a lot of no’s before you find investors who say yes.

– Mark CenicolaBannerView.com


2. Look at Comparables

Jonny SimkinThe easiest thing to do is find comparable companies, see how much they raised and what their valuations were. A great resource is angel.co for tech companies. Once you have a sense of what the market will value your company at, start talking with investors and test that valuation. If they think it’s reasonable, proceed. If they laugh at your valuation, revise and try again.

– Jonny SimkinSwyft

3. Find Balance

Omer TrajmanThere’s no hard and fast rule for setting valuation. It’s a negotiation between the company and investor. The company needs to have several interested investors (multiple term sheets really) in order to negotiate. Most important is finding a balance between cash needs and the implicit expectations that come with the valuation. The non-financial terms of an investment are often just as important.

– Omer TrajmanRocana

4. Ignore Industry Buzzwords

Matthew MoisanValuation of a pre-revenue company will always be tricky. Avoid the industry pitfalls of focusing on buzzwords like “traction” or “hotness,” and instead consider the following: Calculate how much you need for 18 months of growth. Then, figure out how much of the company you are willing to give in exchange. Let’s say you want $200,000 for 20 percent — then the range of valuation will be around $1 million.

– Matthew MoisanMoisan Legal, P.C.

5. Have as Many “Friendly” Meetings as Possible

Aaron SchwartzEarly on, there is no easy way for you to independently set valuation. You might be profitable, or you might be growing, but there are no companies on your same trajectory. Before any formal fundraiser, I spend a few weeks with investors and founders whom I know will not invest. Multiple viewpoints will help you narrow in on value, and friends tearing apart your pitch makes you better for primetime!

– Aaron SchwartzModify Watches

6. Do Your Homework

Zohar SteinbergEarly on, valuations are a function of the impression you make on your investors. Investors are looking to make as much money as they can and reduce the risk they are taking. Showing examples of similar companies’ valuations in different stages will do just that. Show your investors that you did you homework and that you’re basing your valuation on a proven model.

– Zohar Steinbergtoken

7. Know What Details Are Important

Jordan FliegelRely on your investor to make an offer and place a value on your company. You don’t need to mention or hint at what you expect the valuation to be. You do, however, need to be prepared to say how much money you are raising, and what you plan to do with the new funding to grow your business. Once you have a lead investor, it’s easier to fill out the rest of the round on the same terms.

– Jordan FliegelCoachUp, Inc.

8. Focus on Growth Potential

Obinna EkezieWhen raising capital, focus on growth potential versus how your business is currently performing. If you are going to raise money from a VC, you’ll want to put together, at a minimum, 24-month revenue projections. If your business will take longer to develop into a revenue producing machine, you may want to project out 3-5 years. Leverage revenue growth to shoot for highest valuation possible.

– Obinna EkezieWakanow.com

9. Use a Third Party

Adam RootIt will have more credibility than pulling a number at random. Early Growth Financial is great for very early stage companies and Silicon Valley Bank is helpful after you have received funding and want a 409A valuation or deep analysis on what other startups similar to yours are worth.

– Adam RootSocialCentiv

10. Listen to the Market

Mattan GriffelIn the early stages, determining a valuation for fundraising is more of an art than a science. It’s more about what you can convince investors you’re worth than about applying a multiple or doing a discounted cash flow analysis. Start out with a fairly conservative number based on comparable valuations, and don’t be afraid to adjust it based on how the investors you talk to respond.

– Mattan GriffelOne Month

11. Seek Input From Peers

Douglas BaldasareIf this is your first round, get input from peers about what you can realistically raise based on your industry and stage. Then soft circle to a few friendly investors (friends and family) with your desired terms. It’s harder for new investors to change the terms once you have already raised some of the round. I also recommend Fenwick & West’s venture surveys. They offer data on average valuations.

– Douglas BaldasareChargeItSpot

12. Don’t Get Caught Up

Katrina LakeMost outcomes are binary. You’re going to make money, or you’re going to make none. I see a lot of entrepreneurs nickel and dime valuations and focus on dilution at the expense of a quality investor. You should focus on what is most likely to get you on the successful side. Valuation and dilution are only one element of the decision you are making and I encourage people to have a long-term approach.

– Katrina LakeStitch Fix

13. Know the Demand and Longevity

Fam MirzaCompany valuation should be determined by demand and longevity of a business. Most tech company valuation is built off the growth of a user database. The goal is to build up a massive amount of users to monetize on them somewhere in the future, usually in the form of ads and data capitalization. However, for product based companies, it’s based off demand for the product and lifecycle of the brand.

– Fam Mirza1:Face

11 Ways to Practice for a Pitch Competition

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What’s the best way to practice for a pitch competition?

1. Record Yourself on Video and Watch It Back

Brittany HodakWhile practicing for “Shark Tank,” one of the most intimidating pitch competitions on the planet, I found it very helpful to video my pitch and watch it back until I was satisfied with my performance. Watching on video with another person for objective feedback, if possible, is a great way torecognize and correct any flaws in your speech, hand movements, posture and more.

– Brittany HodakZinePak

2. Practice With a Time Limit

Andrew ThomasThe hardest part of pitch competitions is the short time you have to make the pitch. Plan for success by timing yourself while youpractice. There are two benefits. First, you can alter the length to ensure you‘re as concise as possible. Second, you can create mental “markers” so you know where you are in your pitch for each minute of the pitch. This helps keep pace when you feel nervous.

– Andrew ThomasSkyBell Video Doorbell

3. Write and Rehearse

Corey BlakeAs a frequent presenter, I set up time blocks in my calendar — one hour per day, four days a week for two weeks. During that time, I rewrite my presentation from scratch each time. Writing it over and over helps solidify the key points in my mind. Then I set up time blocks to actually go through it out loud and I’m ready to rock. The key to this formula is keeping those appointments with yourself!

– Corey BlakeRound Table Companies

4. Don’t Have Too Many Notes

Kofi KankamMost slide presentations have too many notes. Try practicing your presentation with an increasingly fewer set of words each time untilyou can whittle it down to seven words or so and give a consistent presentation. Then, you are ready.

– Kofi KankamAdmit.me


5. Practice in Front of the Meanest Friends You Have

dave-nevogtGet people from your circle of friends who have the most difficult personalities and tell them you want them to be really mean to youwhile you present. Tell them that if they make you lose your cool, you‘ll buy them coffee or something similar. Then don’t stop practicing until you can get all the way through without losing focus. You‘ll go into the pitch competition with total confidence.

– Dave NevogtHubstaff.com

6. Practice Using a Microphone

David CiccarelliSo many entrepreneurs obsess over their slides but fail to grasp the basics of a good performance. Project your voice by speaking louder than you think is necessary. If you can, practice with a microphone. Hold the microphone right up to your chin, literally against your face. And never point the microphone at the speakers. That’s what causes that screeching feedback.

– David CiccarelliVoices.com

7. Forget That It’s a Competition

Blair ThomasRather than trying to “beat out” your competitor, remember that the point is to win the pitch for your business. If your pitch is off, it doesn’t matter who you‘re competing against, you will have lost an opportunity without any intervention from anyone else. Refine your language and messaging; be passionate about what it is you‘re trying to communicate. Lastly, be clear, concise and confident.

– Blair ThomasEMerchantBroker

8. Learn From Others

Cody McLainIn order to make it less intimidating for yourself, watch how someone else presents a pitch — there are plenty of TV shows dedicatedto this (“Dragon’s Den,” “Shark Tank”). If you can see what went wrong (or right) in someone else’s pitch, you can just as well incorporate those properties into your own.

– Cody McLainSupportNinja

9. Practice With Distractions

Afif KhouryHave your kids run in front of your screen, have your Internet go out — create imperfect scenarios. You know your pitch, and if everything runs smoothly, you’re fine. But this is the real world. It’s not going to go smoothly. Every time I help an entrepreneur practice for a pitch competition, I close his or her computer halfway through and say, “Your computer just died, but please continue.”

– Afif KhourySOCi, Inc

10. Make Your Own Slides

Andy KaruzaYou will be much more well-versed with your presentation if you actually make it. Surprisingly, some people have others make portions or even all of the presentation deck. Spend the time to make the content yourself, but have somebody else make it look nice if you need it. Your memory retention is higher for something you actually write or create.

– Andy Karuzabrandbuddee

11. Practice Like You Play

Eric MathewsDavid Cohen of TechStars fame said it best: “Practice Like You Play.” Put yourself into the same context and setup as you will find at the competition. That means standing up without notes, do-overs or looking at the screen. You stand and deliver a pitch in practice as if the judges and investors were standing right in front of you. Otherwise, you risk practicing in mistakes and crutches.

– Eric MathewsStart Co.