Watch the video above and talk about it with a group or mentor. Learn more.
Venture capitalists, angel investors, seed rounds, dilution...what is this crazy new way to start a fast-growing business?
Key Points:
- Starting a company begins with structure and incorporation, not just devising a catchy name and logo. There will be up-front fees and you will likely need investors.
- An early step is divying out shares of the company, usually out of one hundred thousand shares, and acquiring a seed investment.
- After about a year begins the “series A” round. You are seeking investment from angel investors and venture capitalists. This will require a lot of networking and research on your part.
- If series A succeeds, you will have to seek additional investors in seres B, C, D, and forward all while perfecting your product and selling to more customers.
- As the cumulative number of shares in your company increases, you as the founder will own a smaller and smaller percentage. This is called “dilution.”
- After several years, you may seek to sell your company in an “exit.” You can sell it to a larger company or you can list the shares on the stock market. There are benefits and drawbacks to either practice; it all depends on your goals.
Quote This:
It takes twenty years to build a [business] reputation and five minutes to ruin it. If you think about that, you’ll do things differently. -Warren Buffett
Talk About It
- What is your initial reaction to this topic? What jumped out at you?
- Are you interested in either starting a business or investing? What excites you about these possibilities?
- What are some of the risks and challenges of starting a company? Of investing?
- What startup/investment stories inspire you? Why?
- If you’re planning to start or invest in a business, what is your plan of action? What’s step one of that plan and what must you do to accomplish it?
- Write a personal action step based on this conversation.
