(Contributed by Gordon Daugherty, Capital Factory President)

When an interested acquirer approaches you, they will naturally ask for as much information as you are willing to give them.  But how much and what type of information should you provide before you know the terms of their proposed offer?  The answer is, it depends.  Also realize I’m always initially skeptical when another company approaches with the desire to talk about potential acquisition.  My experience suggests that 30% of the time the interest is mostly a fishing expedition and 95% of the time no LOI is reached.  Let’s explore further.

Read the full blog post here.

(Contributed by Jason Cohen, Capital Factory Partner)

Metrics summarize tons of processes, causes, and effects into a single number. It’s a two-edged sword.  It’s powerful because it lets you reason about complex systems, especially how it’s changing. It helps you focus on what’s important at a macro level.

But it’s dangerous when it combines so many disparate and disjoint processes and systems that the number loses precision. Because then you think you understand something that you don’t. That’s how bad decisions are made with confidence.

I argue that for many SaaS businesses, the incorrectness of the LTV metric outweighs the value it supposedly confers.

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

Startups commonly give 0.5% equity or more to attract an experienced advisor.  Sometimes after a few months they find themselves wondering if they are getting the value they expected for the amount of compensation provided.  This blog post focuses on things you can do to ensure you are extracting maximum value from your advisor throughout the duration of their engagement.

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

It’s not innovation or company culture or a desire to win.  Those are important but successful big companies have at least some of those things too.  It’s nimbleness (aka – agility).  Startups have a “turning radius” measured in inches whereas really big companies can barely turn around in a football stadium.  Tucked away in this glaring contrast is a unfair advantage for the startups.  Let’s explore further.

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

Experiencing rapid growth is different from having scalability.  Growth is an aspiration or end result while scalability is a capability that may or may not get exercised.  Growth can come in spurts and is most commonly thought of in terms of sales and marketing attributes.  Scalability is architected in and is commonly reflected in the “back office” or the technical architecture of the product solution.  In other words, not the sexy stuff but rather the “plumbing”.

It’s true that having genuine scalability can dramatically affect how your company is able to handle sustained periods of growth.  In fact, this is probably the right way to think about scalability – what is needed so that we can fully exploit sustained periods of growth with minimal risk and disruption to our company?  Going into an “all hands on deck” mode is one way of getting through periods of excessive growth but it comes at a cost of disrupting all sorts of things that are surely strategic and you can’t live in this mode for very long.

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

If you find yourself in the position of considering a sale of your company, the significance of the distinction between selling your company and someone buying your company is HUGE.  Sometimes the situation is clear.  If you’re struggling financially and hired a banker to seek a sale for the company, there’s almost no way to pretend otherwise.  Similarly, if a powerhouse player  in your industry (called a “strategic” in M&A parlance) pays you a visit to talk about acquisition, then it’s pretty clear they have interest in buying the company.  But there are various situations that you might find yourself in that should cause you to remind yourself of this significant distinction.

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

There’s a reason it’s referred to as an “elevator pitch” – it must be expressed in a couple of sentences and no more than 10 seconds.  And that might even be a little generous.  Psychologist Michael Formica reported that the average non-task-oriented attention span of a human being is about 8 seconds.  What is important to remember is the only thing your elevator pitch needs to accomplish is to cause enough interest on the part of the recipient to ask you any question that lets you expand a little further.  But also be careful about abusing the permission you’ve been given to continue.  Now you have 2-5 minutes to generate enough interest for a full-blown conversation, either then or separately scheduled.

Read the full blog post here.

(Contributed by Jason Cohen, Capital Factory Partner)

Marketo filed for IPO with impressive 80% year-over-year growth in 2012, with almost $60m in revenue.  Except, they lost $35m.  WTF?

It’s not impressive when you spend $1.60 for every $1.00 of revenue, force-feeding sales pipelines with an unprofitable product.  Don’t tell me this is normal for growing enterprise SaaS companies. I know the argument: The pay-back period on sales, marketing, and up-start costs is long, but there’s a profitable result at the end of the tunnel.  Just wait!

Read the full blog post here.

(Contributed by Gordon Daugherty, Capital Factory President)

I’m afraid the current “don’t waste time creating a business plan” mantra is doing unintended damage.  It’s leaving the impression on first-time entrepreneurs that they don’t need a plan of any sort.  What I think investors are trying to tell them is that the long-range financial projections, exit strategies and other future claims included the 30-50 page business plans of yesteryear aren’t going to be taken seriously, so don’t waste your time on that stuff.  They are also trying to tell them that they barely know if they’re going to make it another 9 months, so why spend too much time thinking about 3-5 years from now?  The investors are right but the startups aren’t hearing it that way.

 Click here for full blog post.

Welcome to Jan Ryan as our newest Capital Factory Partner.  See her biography here: http://capitalfactory.com/mentor/jan-ryan/.