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Market penetration can elevate a business to new levels by tapping into existing products in current markets. This article will delve into what market penetration is, how it’s calculated, and the optimal strategies to achieve it. Whether you’re a startup or an established enterprise, understanding market penetration can help enhance market share and drive success. What is Market Penetration? Market penetration is a business growth strategy where companies aim to increase their market share of existing products or services in existing markets. Market penetration is crucial for businesses looking to solidify their presence in an industry and build a robust customer base. This is done by selling more products or services to current customers or by finding new customers within existing markets. It can be achieved through various tactics like pricing strategies, advertising, sales promotions, and product improvements or innovations. The primary goal of this strategy is to increase market share, revenue, and customer loyalty within a market where the products or services are already available. The degree of market penetration can be an indicator of the brand’s popularity, business growth, and the level of risk involved. It’s crucial for evaluating the success of products and services in the market and is also a critical factor in developing effective marketing strategies and plans. Images source How is Market Penetration Calculated? Market Penetration is calculated to understand the existing sales or market share of a company in comparison to the total market potential. It provides insights into how much of the potential market a company has been able to capture. Formula for Market Penetration Rate Actual Market Size is the current market share or sales volume of the company. Total Addressable Market (TAM) represents the total sales revenue opportunity available for all companies in a particular market. Example: Let’s say a company sells 500 units annually in a market where 10,000 units are sold in total by all competitors. The Market Penetration Rate would be: This calculation implies that the company has captured 5% of the total market. Additional resources: Total Addressable Market Template– In order to help calculate your market share and your potential to build a large business, it helps to calculate and understand the total addressable market and sensitivity analysis. Check out our free total addressable market template below When & How to Calculate Market Share (With Formulas) Suggest Market Penetration Rate for Startups Once you’ve calculated the market penetration rate, it’s essential to analyze it in context. A high rate may indicate a strong market presence but may also suggest market saturation, limiting growth. A lower rate can point to significant growth opportunities, but it could also reflect poor market fit or strong competition. Companies often use market penetration metrics alongside other market analysis tools and industry benchmarks to develop effective market strategies and identify growth opportunities. For startups, achieving a market penetration rate of 2-3% is often considered commendable, and it can serve as a strong foundation for further expansion and growth. 8 Best Market Penetration Strategies To achieve greater market penetration, various strategies can be implemented. The selection depends on the business model, industry, and target audience. Below are eight effective market penetration strategies: 1) Dynamic Pricing Dynamic Pricing can be a powerful tool for companies looking to penetrate existing markets more deeply. It is a strategy where companies adjust the prices of their products or services in real-time, or near real-time, in response to market demands, competitor prices, and other external factors. This strategy can be pivotal in achieving higher market share in existing markets as it allows businesses to quickly adapt to market conditions and customer behaviors. By adjusting prices to meet market conditions and consumer expectations, businesses can optimize their sales and profits, attract more customers, and enhance their market share. However, it’s crucial to manage this strategy carefully to maintain customer trust and satisfaction. How It Works: Dynamic Pricing leverages advanced technologies and algorithms to analyze multiple factors that influence demand, including seasonality, competitor prices, inventory levels, and consumer behavior. Based on this analysis, prices are adjusted to optimize sales, revenue, or margins. Pros Maximizes Revenue: Enables businesses to adjust prices to meet demand, maximizing revenue during high demand and possibly stimulating sales during low demand. Competitive Advantage: Allows for real-time response to competitors’ pricing strategies, helping companies stay competitive in the market. Optimizes Inventory: Helps in managing inventory more effectively by increasing prices when stock is low or decreasing prices to move surplus inventory. Customer Segmentation: Offers the possibility to segment customers and offer different prices based on customer willingness to pay, optimizing revenue and customer satisfaction. Market Responsiveness: Provides the flexibility to quickly respond to market conditions like changes in demand or supply, ensuring optimal pricing at all times. Cons Customer Dissatisfaction: Customers may perceive dynamic pricing as unfair, especially if they find out they paid more for the same product or service than others, potentially leading to loss of trust and customer churn. Complex Implementation: Requires sophisticated software, algorithms, and expertise to analyze data and adjust prices accurately and effectively, which can be resource-intensive. Brand Image Risk: Frequent price changes, especially upward revisions, can lead to a negative brand image and accusations of price gouging. Price Wars: Can lead to destructive price wars with competitors, resulting in decreased profit margins for all market players. Legal and Ethical Considerations: In some industries and jurisdictions, there may be legal restrictions and ethical considerations around dynamic pricing, and violating these can lead to fines and reputational damage. 2) Adding Distribution Channels Adding distribution channels refers to the strategy of increasing the number of ways or locations through which customers can access and purchase a company’s products or services. By making products or services available through a variety of channels, companies can reach a broader audience, adapt to customer purchasing preferences, and ultimately increase sales and market share within existing markets. This strategy requires careful planning and management to ensure consistency in brand image and customer experience across all channels. Pros Increased Sales: Access to more customers through varied channels can lead to higher sales and subsequently, increased market share. Enhanced Market Coverage: More channels mean broader market coverage, enabling the business to reach different customer segments and geographic locations within the existing market. Customer Convenience: Providing multiple purchasing options caters to diverse customer preferences, potentially improving customer satisfaction and loyalty. Risk Diversification: Distributing through various channels reduces dependency on one, mitigating risks associated with the underperformance of a single channel. Brand Visibility: Presence across multiple channels enhances brand visibility and awareness, contributing to brand equity. Cons Complex Management: Managing multiple channels can be logistically complex and administratively challenging, requiring additional resources and efforts. Inconsistent Brand Image: Maintaining a consistent brand image and customer experience across varied channels can be challenging, potentially affecting brand perception. Channel Conflict: Different channels might compete against each other for the same customers, leading to potential conflicts and affecting relationships with channel partners. Reduced Profit Margins: Some channels might require price reductions or additional expenditures, such as commissions for third-party sellers, impacting profit margins. Customer Confusion: Offering products through too many channels, especially with varied pricing or promotional offers, can confuse customers and dilute the brand value. When adding distribution channels, companies need to strategically assess the potential impact on the brand, customer experience, and overall business operations. Proper integration, management, and consistent monitoring of all channels are crucial to addressing the challenges and reaping the benefits of this strategy. Balancing the added complexity with the potential advantages is key to successful implementation and sustainable growth in market penetration. 3) Geo-Targeting Specific Locations Geo-targeting specific locations involves tailoring your marketing and sales efforts to target customers in a specific geographical area or region. This technique is often utilized by businesses to focus resources on areas where they are likely to gain the most traction, allowing them to reach and serve customers more effectively and efficiently. Geo-targeting can be implemented using various tools and platforms like online advertising services, SEO, and social media, which allow businesses to specify the geographic locations they want to target. Additionally, analytics and data analysis can help in identifying the most lucrative regions to focus on. Pros Enhanced Personalization: Allows for more personalized and locally relevant marketing campaigns, improving engagement and conversion rates. Resource Optimization: Focuses resources and efforts on high-potential or high-performing regions, ensuring better utilization and improved ROI. Improved Customer Experience: Offering localized content, deals, and products caters to regional preferences and needs, leading to higher customer satisfaction and loyalty. Market Insight: Provides valuable insights into regional market trends, consumer behavior, and preferences, aiding in better decision-making and strategy formulation. Competitive Edge: Establishing a strong presence in specific locations can provide a competitive advantage, especially in areas with less competition. Cons Limited Reach: Focusing on specific locations might limit the overall reach of the business, potentially missing out on opportunities in other regions. Resource Intensity: Developing localized strategies and content can be resource-intensive and might require significant investment in research and adaptation. Market Variability: Different regions may exhibit varying demand patterns, requiring constant adjustments and refinements to the targeting strategy. Cultural Sensitivity: There’s a risk of misunderstanding local cultures and preferences, which might lead to ineffective or even offensive campaigns. Data Privacy Concerns: The use of location data can raise privacy concerns and regulatory issues, potentially leading to legal challenges and reputational damage. 4) Continuous Improvements of Products Continuous improvements of products refer to the ongoing effort to refine and enhance products based on customer feedback, market demands, technological advancements, or competitive dynamics. This strategy is crucial in market penetration as it helps in maintaining and enhancing the appeal of the products, addressing evolving customer needs, and staying competitive in the market. Pros Increased Customer Satisfaction: Addressing customer needs and resolving issues lead to higher satisfaction and loyalty. Enhanced Market Position: Ongoing improvements help in maintaining a competitive edge and solidifying market presence. Revenue Growth: Enhanced features and quality can justify higher pricing, leading to increased revenue. Brand Strengthening: Demonstrating commitment to excellence and innovation enhances brand reputation and equity. Cons High Costs: Constant refinement and development can be resource-intensive and costly. Overcomplication: Adding too many features or making too many changes can complicate the product, potentially alienating users. Customer Overwhelm: Frequent changes and updates can overwhelm and frustrate customers, especially if they are not well-communicated. Market Misalignment: Without proper market research, improvements may not align with actual customer needs, leading to wasted resources and missed opportunities. 5) Launch a New Product or Rebrand Launching a new product or rebranding refers to the introduction of a novel product or a significant transformation of existing brand elements, respectively, to appeal to the current market. This can be a pivotal market penetration strategy, aiming to renew consumer interest and address evolving market demands, preferences, and competition. Pros Increased Market Share: New or revitalized offerings can attract a wider audience and capture additional market segments. Enhanced Brand Image: A successful rebrand can modernize and elevate the brand’s image, improving perceptions and attractiveness. Revenue Growth: New products and improved brand image can drive sales and potentially allow for premium pricing. Adaptation to Market Changes: Enables the business to stay relevant and responsive to evolving market trends, demands, and consumer expectations. Cons High Risk and Uncertainty: The success of a new product or a rebrand is not guaranteed and may not resonate with consumers, leading to financial losses. Substantial Investment: Development, launch, and rebranding processes can be costly, involving substantial investment in research, marketing, and implementation. Potential Customer Alienation: Existing customers may react negatively to significant changes in products or brand identity, potentially leading to loss of loyalty. Implementation Challenges: Executing a rebrand or launching a new product involves logistical, operational, and strategic challenges, requiring meticulous planning and coordination. 6) Build Relationships With Business Partners Building relationships with business partners involves creating and nurturing mutually beneficial connections with other businesses, suppliers, distributors, or stakeholders in your industry. This strategy is crucial in market penetration as it can open up new avenues for growth, co-development, and expansion, allowing businesses to leverage collective resources, networks, and expertise to enhance market presence. Pros Expanded Reach: Access to partners’ networks and resources can significantly extend market reach and presence. Increased Innovation: Collaborative efforts can lead to innovative solutions and offerings, enhancing competitive advantage. Cost Efficiency: Sharing resources and responsibilities can lead to reduced operational costs and increased efficiency. Enhanced Learning: Exposure to partners’ expertise and insights can lead to valuable learning and growth opportunities. Cons Potential Conflicts: Divergent goals, values, or management styles can lead to conflicts and strains in partnerships. Dependence Risks: Reliance on partners can pose risks in case of disagreements, underperformance, or termination of partnerships. Loss of Control: Collaborations may require concessions and shared decision-making, potentially leading to loss of control over certain aspects of the business. Resource Diversion: Managing partnerships can be resource-intensive and might divert focus and resources from core activities. 7) Buy a Smaller Competitor in Your Industry Buying a smaller competitor, also known as acquisition, refers to purchasing another company to control its assets and operations. This market penetration strategy can be powerful, as it allows a company to quickly increase its market share, expand its product or service offerings, and eliminate competition. When considering acquiring a smaller competitor, thorough due diligence is paramount to assess the compatibility, valuation, and potential synergies accurately. A well-planned integration strategy, clear communication, and cultural alignment are crucial for realizing the full benefits of the acquisition and ensuring smooth transition and consolidation, thus enhancing market penetration and long-term success. Pros Rapid Market Expansion: Provides immediate access to new market segments, geographic areas, and customer groups. Enhanced Resources and Technologies: Acquisition brings in additional resources, technologies, and intellectual properties, enhancing overall capabilities. Cost and Revenue Synergies: Merging operations can lead to cost savings and additional revenue opportunities, increasing profitability. Strategic Positioning: Reducing competition and leveraging combined strengths can strengthen market positioning and dominance. Cons Integration Challenges: Merging different corporate cultures, systems, and operations can be complex and challenging. High Costs and Risks: Acquisition involves significant financial investment and carries risks of overvaluation and unanticipated complications. Potential Culture Clash: Differences in organizational cultures and management styles can lead to conflicts and employee dissatisfaction. Regulatory Hurdles: Acquisitions may be subject to stringent regulatory scrutiny and approval, potentially impacting the feasibility and timelines. 8) Provide a Rewards Program or Promotional Program Providing a Rewards or Promotional Program refers to offering incentives like discounts, points, or special offers to customers to encourage loyalty, repeat business, and attract new customers. These programs are instrumental in market penetration as they help in increasing product or service usage among existing customers and drawing in new clientele. When implementing rewards or promotional programs, it is important to balance the incentives with the overall business strategy and ensure that the programs are sustainable, beneficial, and aligned with brand values. A well-crafted and managed rewards program can be a powerful tool for market penetration, building long-lasting relationships with customers, and creating a competitive advantage in the market. Pros Increased Sales: By incentivizing purchases, such programs can drive up sales volumes and revenues. Customer Data Collection: These programs often involve collecting customer data, which can be analyzed to gain insights into consumer behavior and preferences. Enhanced Customer Satisfaction: Customers receiving rewards or benefits are likely to be more satisfied and have a positive perception of the brand. Effective Word-of-Mouth Marketing: Satisfied customers, especially those benefiting from rewards, are more likely to recommend the brand to others. Cons Cost Implications: Implementing and maintaining rewards programs can be costly, impacting profit margins. Customer Expectation Management: Customers may come to expect regular promotions, potentially impacting perceived value and full-price sales. Complexity in Management: Designing, managing, and optimizing rewards or promotional programs can be complex and resource-intensive. Risk of Decreased Perceived Value: Regular and extensive promotions can lead to a devaluation of the product or service in the eyes of consumers. Raise Funds and Penetrate Your Market With Visible Market penetration is a pivotal strategy for businesses aiming to enhance their market share in existing markets with existing or innovative products. Whether it’s through employing dynamic pricing, adding distribution channels, geo-targeting, continually improving products, launching new products or rebranding, forging business partnerships, acquiring smaller competitors, or providing compelling rewards or promotional programs, each strategy carries its unique set of advantages and challenges. The key is to meticulously analyze and integrate these strategies, aligning them with the overarching business objectives, customer needs, and market dynamics, to drive sustainable growth and success. Leveraging such multifaceted approaches can aid in navigating the competitive landscape, fostering customer loyalty, and achieving a robust market presence, propelling your business to new heights. And, to successfully penetrate the market, raising funds effectively is crucial—discover how Visible can assist in making your fundraising journey seamless and successful. Related resource: What is Internal Rate of Return (IRR) in Venture Capital

How to Start a Successful Tech Company Starting a Successful tech company can be an exciting journey filled with new learnings, discovery, and, of course, a few challenges along the way. In this article, we’ll explore some foundational elements that drive success and resilience within the tech industry. We will cover why a user-focused approach, starting small, prioritizing growth over immediate profit, and leading with innovation are critical steps in building a tech empire. As well, we’ll walk you through 11 pivotal steps, including assembling a dedicated team, creating a robust business plan, and establishing clear KPIs that will help in navigating the complex yet exciting landscape of the tech world. So, whether you are a rising entrepreneur or an established professional looking to make your mark in the tech industry, you’ll gain valuable insights and actionable strategies to ensure your tech venture not only survives but thrives in today’s competitive market. What Makes a Tech Company Successful? To build a thriving tech company, understanding the key components that drive success is crucial. These elements are the foundation upon which resilient and innovative tech companies are built. Successful Tech Companies Focus on the Users User-centric companies are more likely to succeed. By understanding and addressing the needs and preferences of the users, companies can build products and services that resonate with the target audience, fostering loyalty and encouraging word-of-mouth referrals. A relentless focus on delivering value to users can be the differentiator in a competitive market. This approach mandates companies to meticulously understand and address the needs, preferences, pain points, and expectations of their users, leading to the development of products and services that are highly resonant with their target audience. Here’s how a user-centric focus becomes a catalyst for success: Enhanced Customer Satisfaction: By creating solutions tailored to users’ needs and solving their problems, tech companies ensure high customer satisfaction, which can translate to loyalty, positive word-of-mouth, and repeat business. Product Relevance: Understanding users’ needs helps in developing products and features that are relevant and valuable to them. Iterative Improvement: A focus on users encourages companies to continually seek feedback and make iterative improvements to their products or services, ensuring that they evolve based on users’ changing needs and preferences. Competitive Differentiation: Companies that prioritize users can differentiate themselves in a saturated market, offering unique value propositions and user experiences that competitors might not offer. Market Expansion: Delighted users become advocates for the company, leading to organic growth and expansion through referrals and recommendations, allowing companies to penetrate new markets and customer segments with lower acquisition costs. Revenue Growth: Addressing the genuine needs and wants of users generally translates to higher adoption and usage rates, directly impacting a company’s bottom line and paving the way for sustainable revenue growth. Brand Equity: Providing value and consistent positive experiences will enhance brand image and reputation, which are invaluable assets for tech companies in establishing industry authority and attracting partnerships and investments. Informed Decision-Making: User feedback and insights lead to more informed business decisions, helping in aligning business strategies, resource allocation, and development efforts with user needs and market demands. Innovation Drivers: The constant quest to meet and exceed user expectations pushes companies to innovate continuously, exploring new technologies, methodologies, and solutions that can deliver enhanced value to users. Risk Mitigation: Understanding user preferences and expectations helps in identifying potential issues and addressing them proactively, reducing the risk of product failure and negative customer experiences. Most Successful Tech Companies Start Small Starting small allows companies to be agile, adapting quickly to market needs and changes. It also facilitates a deeper understanding of the target market, enabling more personalized and effective solutions. Small beginnings often lead to refined, scalable models that are more attuned to the market’s pulse. Related resource: The Do’s and Don’ts of Rapid Scaling for Startups Successful Tech Companies Lead and Don’t Follow Innovation is the heartbeat of successful tech companies. Leading tech companies distinguish themselves by breaking conventions and setting trends, shaping industries and consumer behaviors. Their commitment to innovation, willingness to embrace risk, and focus on proactive problem-solving allows them to chart new territories and redefine possibilities. By fostering a culture of innovation, establishing thought leadership, and driving industry evolution, these companies not only achieve unparalleled success but also contribute to the broader advancement of technology and society. Foster a Culture of Innovation: Leading tech companies nurture an environment that encourages creative thinking, exploration, and experimentation. This culture of innovation is pivotal in developing groundbreaking solutions and staying ahead of the curve. Employees are motivated to think outside the box, challenge the status quo, and seek transformative solutions, thereby contributing to the company’s visionary endeavors. Embrace Risk and Learn from Failures: The journey of innovation is fraught with uncertainties and risks. Successful tech companies are not afraid to take calculated risks and venture into the unknown. They view failures as learning opportunities, refining their approaches, and gaining insights that fuel further innovation. This resilience and learning mindset are crucial for navigating the volatile tech landscape and discovering untapped potential. Proactive Problem Solving: By proactively identifying and addressing problems, innovative tech companies create value and fulfill unmet needs. They employ foresight, research, and intuition to anticipate challenges and develop solutions that not only resolve issues but also enhance user experiences and quality of life. Establish Thought Leadership: Successful tech companies establish themselves as authorities in their respective fields by sharing knowledge, insights, and expertise. They engage with communities, participate in dialogues, and contribute to the industry’s intellectual capital. This thought leadership enhances their credibility, influence, and impact, paving the way for shaping industry trends and consumer behaviors. Drive Industry Evolution: Leading tech companies play a pivotal role in steering the direction of industry evolution. They introduce disruptive technologies, redefine business models, and influence industry standards and practices. By pushing boundaries and challenging conventions, they drive progress and transformation across sectors, fostering a more dynamic and inclusive tech ecosystem. Customer-Centric Innovation: Leading tech companies prioritize their customers in the innovation process. They actively engage with users to understand their needs, preferences, and challenges. By aligning innovation with customer insights, they ensure that their solutions are user-centric, relevant, and value-driven. 11 Steps for Building a Successful Tech Company Incorporating these critical success factors, the following steps provide a roadmap to launch a successful tech company. 1) Start With a Unique and Strong Idea An innovative idea is the cornerstone of a successful tech company. It should address a genuine need or problem, offering a unique solution that stands out in the market. Validate your idea through research and feedback to ensure it has potential. 2) Build an Efficient Team Starting With Technical Experts Assemble a dedicated team of skilled individuals who share your vision. Technical experts are crucial for developing a robust product, while diverse talents in marketing, sales, and operations contribute to a well-rounded business strategy. Related resource: How to Build A Startup Culture That Everybody Wants 3) Create a Business Plan A comprehensive business plan outlines the company’s vision, mission, target market, competitive landscape, financial projections, and operational plan. It serves as a blueprint for your tech startup, guiding you through each stage of development. What Should Be Included In the Business Plan Executive Summary Company Description Market Analysis Organization and Management Structure Service or Product Line Marketing and Sales Strategy Funding Requirements Financial Projections Related Resource: The Business Model Canvas “The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. This method from the bestselling management book Business Model Generation is applied in leading organizations and start-ups worldwide.” 4) Choose a Name for Your Startup Selecting a suitable name is crucial as it represents your brand and leaves a lasting impression on your audience. It should be memorable, easy to spell, and reflective of your company’s essence. How to Choose a Name for Your Tech Startup Brainstorm a list of potential names that align with your company’s vision and values. Use online tools to check availability and consider the relevance, pronounceability, and uniqueness of the name before making a final decision. Related resources & tools: Shopify’s Business Name Generator & Guide Namelix name generator The 8 Best Startup Naming Tools 5) Choose a Business Structure The right business structure impacts liability, taxation, and regulation compliance. Consider your business needs, goals, and the level of control you wish to maintain when deciding on the structure. Should You Form an LLC? An LLC (Limited Liability Company) combines the liability protection of a corporation with the tax benefits of a partnership. It’s suitable for those seeking flexibility and protection from personal liability. Should You Form a Sole Proprietorship? A sole proprietorship is the simplest structure, ideal for single-owner businesses. However, the owner is personally responsible for all debts and liabilities. Should You Form a Corporation? A corporation is a separate legal entity that offers the most protection against personal liability but involves more regulations and tax requirements. 6) Conduct Extensive Market Research Thorough market research informs product development, marketing strategies, and business decisions. It provides insights into market trends, competition, and customer preferences, enabling you to tailor your offerings and identify opportunities. Related resources: Hubspot: 20 Tools & Resources for Conducting Market Research Neil Patel:19 Market Research Tools To Uncover Actionable Insights 7) Build a Go-to-Market Strategy Building a meticulously crafted go-to-market strategy is paramount for tech startups aspiring to carve a niche in the competitive landscape. It serves as a strategic roadmap, guiding startups to position their innovations effectively, communicate compelling values, and reach the right audience with precision. A well-executed GTM strategy paves the way for sustained growth, market penetration, and lasting success in the dynamic tech ecosystem. Define Clear Objectives: Establish specific, measurable, achievable, realistic, and time-bound (SMART) objectives for your GTM strategy. These objectives could range from acquiring new customers, expanding market share, to increasing brand awareness. Clear objectives serve as a guiding light, providing direction and focus for all GTM activities. Identify Your Target Audience: Deeply understand who your ideal customers are. Consider demographics, psychographics, behavior, and needs. The more nuanced your understanding, the better you can tailor your approach, messaging, and solutions to meet their specific needs and expectations. Understand the Competitive Landscape: Analyze your competitors, their offerings, strengths, weaknesses, market position, and strategies. Understanding the competitive landscape enables you to identify your unique value proposition and differentiate your solutions effectively. Develop Value Proposition: Articulate the unique benefits and values your product offers to the customers. A compelling value proposition addresses customer pain points, provides solutions, and clearly communicates the unique advantages of choosing your product over others. Price It Right: Your pricing strategy should reflect the value you’re providing, the market demand, and what the market can bear. It’s crucial to consider various pricing models, evaluate competitors’ pricing, and understand your cost structure to set a price that’s attractive to customers yet profitable for you. Create Persuasive Messaging: Develop powerful, concise, and clear messaging that resonates with your target audience. Your messaging should address the needs and aspirations of your audience, highlighting how your product is the solution they’ve been looking for. Select Appropriate Channels: Determine the most effective channels to reach your target audience, whether they are online or offline. These could include social media platforms, email marketing, content marketing, trade shows, or direct sales. The choice of channels should align with where your audience spends their time and how they consume information. Design a Comprehensive Marketing Mix: Leverage a mix of promotional strategies, including advertising, public relations, content marketing, SEO, and social media marketing, to create awareness and generate interest in your product. A balanced and well-executed marketing mix optimizes reach and impact. Optimize Sales and Distribution: Define your sales approach, whether it’s direct sales, inbound marketing, channel sales, or a combination, and establish effective distribution channels to ensure your product is accessible to your customers. Align your sales and distribution strategies with customer preferences and behaviors. Implement, Monitor, and Adjust: Once your GTM strategy is in place, implement it meticulously, monitor its performance against the set objectives, and gather feedback. Use data-driven insights to adjust and optimize your strategy, ensuring it remains aligned with market dynamics and continues to drive desired outcomes. 8) Figure Out How to Scale Successful Efforts Scaling is not merely about growing bigger; it’s about growing smarter. By refining and fortifying successful strategies, optimizing resource allocation, and embracing innovation and flexibility, tech companies can scale their efforts efficiently, creating a ripple effect of sustained growth and market leadership. The intersection of diligent evaluation, strategic adaptation, and relentless pursuit of excellence is where tech companies find the momentum to rise above and reshape the technological frontier. Develop Scalable Systems and Processes: Building scalable systems and processes is crucial. Invest in technology and automation to streamline operations, reduce manual workload, and enhance efficiency. Establishing systems that can handle increased load and complexity ensures consistent service delivery as the company grows. Regular Analysis and Evaluation: Continuously assess your business strategies, marketing campaigns, and operational processes. Use analytics and performance metrics to determine what’s working and what’s not. Regular evaluations pinpoint successful efforts that can be amplified and optimized for better results. Resource Allocation and Management: Effective scaling requires meticulous resource management. Allocate your resources—time, personnel, and capital—where they yield the most impact. Prioritizing high-return activities and reallocating resources from less productive areas are essential for sustained growth. Diversify Product or Service Offerings: Identify new markets or segments where your products or services can have a significant impact. Diversification reduces dependency on a single revenue stream and opens up new opportunities for growth. Customer Retention and Expansion: Focus on retaining existing customers while acquiring new ones. Develop strategies to upsell and cross-sell to your current customer base. Satisfied customers often become advocates, facilitating organic growth through word-of-mouth referrals. Talent Acquisition and Development: Hiring and nurturing the right talent are vital for scaling. Bring in individuals with the skills, experience, and mindset that align with your company’s culture and growth objectives. Investing in employee development enhances capabilities and fosters a culture of continuous learning and innovation. Foster Partnerships and Collaborations: Build strategic alliances and partnerships with other organizations. Collaborations can provide access to new markets, technologies, and resources, enabling mutual growth and expanding your company’s reach and influence. Related resource: The 16 Best Startup Newsletters 9) Create a Fundraising Plan Fundraising is vital for fueling growth. Explore various options, considering the suitability, terms, and implications of each. Related resource: The Understandable Guide to Startup Funding Stages Should You Pitch an Angel Investor? Angel investors are affluent individuals who provide capital for startups in exchange for ownership equity or convertible debt. Angel investors, often heralded as the saviors of early-stage startups, inject not only much-needed capital but also bring valuable insights, expertise, and networks to the table, propelling nascent ideas into actionable, scalable ventures. They are suitable for startups that may be too risky for venture capitalists and too small for traditional lenders. Typically, angel investors are individuals with a keen sense of market dynamics and a willingness to take risks. They tend to invest in companies in their early stages when the venture is shaping its core idea, refining its product or service, and establishing market fit. The investments from angel investors are generally more flexible and personal, allowing room for negotiation and alignment with the startup’s unique needs and goals. Should You Pitch a Venture Capitalist? Venture capitalists manage pooled funds from many investors to invest in high-potential startups, fueling innovative startups with the substantial financial injections they often need to scale and expand. They are most suitable for companies that have moved past the ideation and product development stages and have proven business models showcasing significant growth potential and a path to profitability. Venture capitalists typically focus on high-growth markets and industries, seeking companies that can deliver exceptional returns on investment. Their involvement usually goes beyond mere financial investment; they also bring a wealth of experience, industry connections, and mentorship to help startups navigate the complexities of market expansion, talent acquisition, and corporate governance. The collaborative approach of VCs can help in refining business strategies, identifying new market opportunities, and establishing partnerships that can be pivotal for sustained growth and success. Is Bootstrapping Right for Your Company? Bootstrapping involves building your business using your resources, allowing you to retain control but requiring cautious financial management. While bootstrapping requires meticulous financial management and may present a slower growth trajectory initially, it can yield a robust, customer-centric business model marked by sustainable growth and resilience. For founders who value autonomy and are willing to navigate the initial challenges, bootstrapping can be a rewarding journey. 10) Market Your Company In today’s increasingly digital landscape, the significance of a multifaceted and dynamic marketing strategy cannot be overstated. Effective marketing goes beyond mere visibility—it is about creating meaningful engagements, building relationships, and fostering trust with your audience. It necessitates a holistic approach that combines various elements harmoniously, tailored to resonate with your target demographic. Developing a comprehensive marketing plan involves a meticulous understanding of your audience’s needs, preferences, and behaviors. It requires identifying the most effective channels and platforms to reach them, leveraging the potency of social media, email marketing, influencer collaborations, and online advertising to create impactful touchpoints. The integration of content marketing, enriched with value-driven articles, blogs, and multimedia content, can bolster your brand’s authority and drive organic traffic, aiding in building a strong brand presence. Search Engine Optimization (SEO) remains a crucial component of any marketing strategy. Optimizing your digital content for search engines can significantly enhance your visibility, driving sustained organic traffic to your platform. By focusing on relevant keywords, meta tags, and backlink strategies, you can improve your ranking on search engine result pages, increasing the likelihood of attracting potential customers. Partnerships, both strategic and collaborative, can be an invaluable asset in expanding your reach. By aligning with other brands, influencers, or platforms sharing a synergistic vision, you can tap into new audience segments, enhance brand credibility, and drive mutual growth. Joint ventures, affiliate marketing, and co-branding initiatives can create win-win scenarios, propelling brand awareness and user acquisition. Performance analytics and data-driven insights should guide your marketing endeavors, enabling a deeper understanding of your audience’s interactions and preferences. Regularly analyzing the effectiveness of your campaigns, engagement rates, and conversion metrics allows for continuous refinement of your strategies, ensuring that your marketing efforts remain aligned with your business objectives and are responsive to evolving market dynamics. User-generated content and customer testimonials can be leveraged to enhance authenticity and build trust. Encouraging your user base to share their experiences, reviews, and content can create a community around your brand, strengthening customer relationships and augmenting your brand’s image. Incorporating a blend of inbound and outbound marketing strategies can optimize reach and engagement. While inbound strategies focus on attracting customers through value-driven content, outbound strategies like targeted ads and email campaigns can proactively reach potential customers, enhancing brand recall and conversions. 11) Decide Which Metrics To Monitor Success Deciding which metrics to monitor is integral for steering the company in the right direction and making informed decisions. Established Key Performance Indicators (KPIs) act as a compass, indicating whether the business is on the path to achieving its goals. Besides the listed metrics, several other nuanced and contextual KPIs might be critical depending on the unique nature and needs of your business. KPIs That Measure Success Monthly Active Users (MAUs) Customer Acquisition Cost (CAC) Lifetime Value (LTV) Conversion Rate Retention Rate Revenue Growth Rate Each KPI serves a specific purpose. For instance, Monthly Active Users (MAUs) gauge the level of user engagement and the overall health of the product, while Customer Acquisition Cost (CAC) helps in assessing the efficiency and effectiveness of your marketing strategies. Monitoring Lifetime Value (LTV) aids in understanding the long-term value of a customer relative to the acquisition cost, guiding resource allocation, and retention strategies. The Conversion Rate is pivotal as it quantifies the percentage of users who take a desired action, offering insights into the effectiveness of your user interface and call-to-actions. The Retention Rate evaluates the ability of your company to retain customers over a specific period, highlighting the sustainability and appeal of your product or service. The Revenue Growth Rate is fundamental for assessing the financial trajectory of the company, allowing you to measure the pace at which your revenue is increasing, which is essential for evaluating the scalability and long-term viability of the business model. In addition, focusing on user satisfaction metrics, Net Promoter Score (NPS), and churn rate can also provide valuable insights. User satisfaction metrics reveal the overall contentment levels of your customers, allowing for enhanced user experience and product improvement. The NPS measures the willingness of customers to recommend your product or service, serving as a reliable indicator of customer perceptions and loyalty. A lower churn rate indicates higher customer satisfaction and better product-market fit. Get Fundraising Assistance for Your Tech Startup With Visible Just as a sales and marketing team has dedicated tools, shouldn’t a founder that is managing their investors and fundraising efforts? Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Let Visible help guide you in your Fundraising journey! Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. Related resource: Top 18 Revolutionary EdTech Startups Redefining Education

Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. Startup founders are responsible for many duties. — from hiring top talent, building and selling a product, fundraising, communicating with stakeholders, and everything in between. Founders often get pulled in many directions so overlooking certain roles or duties can be easy. When done right, an investor relations strategy can take up little time every month and pay off with added help with hiring, fundraising, strategy, and more. Related Resource: Investor Relationship Management 101 Learn how to get started with an investor relations strategy below: What is an investor relations strategy? As put by the team at Investopedia, “The investor relations (IR) department is a division of a business whose job it is to provide investors with an accurate account of company affairs.” Investor relations are typically associated with publicly traded companies to help investors make a decision to invest in a company. As you’ll notice in the definition above, they use a “division or department” whereas at a startup this is typically a department of 1 — the founder or CEO. However, an investor relations strategy can be a lever for success for startups and privately held companies. An investor relations strategy will help founders tap into their current investors’ capital, time, network, and experience to help scale their business. Challenges in investor relations Building relationships with investors is easier said than done. Building a startup is full of ups and downs so approaching the individuals and firms that are invested in your business can be intimidating. Like all things related to building a business, there are some challenges when it comes to investor relations: Sticking to a schedule Sharing bad news Finding the right information and data to share Learn more about overcoming these challenges in our post, The Complete Guide to Investor Reporting and Updates. Why an investor relations strategy is crucial for startups As we previously mentioned, keeping up with all of the roles and responsibilities can be difficult. Having an investor relations strategy is a good way to tap into your existing stakeholders to unlock help when it comes to hiring, fundraising, strategy, and more. Builds trust and credibility First things first, investors need to trust you and your business so you can lean into them for help with your business. Investors are a well-networked community so word will get around quickly how you communicate with investors. Something as quick as a monthly update to existing investors, will put you ahead of the majority of startup founders and help you stand out from the pack. Attracts and retains investors As put by Laurel Hess, the Founder of Hampr, “Taking the time to review your business with your stakeholders is actually a really great opportunity for growth – if you view it that way, there is a ton of potential to unlock. I have gained the following from my regular updates: Intros to potential investors Additional capital for a round I’m working on Intros to new verticals for expansion Advice on strategy for a problem we are working on Intros to new mentors/advisors to unlock the next phase of growth All this for just 1 hour of my time each month? That is the definition of “no brainer.” This 1 hour of monthly work can pay dividends when it helps to raise a new round of capital from existing investors or asking for introductions to potential investors down the road. Helps with hiring, fundraising, and strategy Startup investors are likely investors in 10s or 100s of other businesses and have a professional background of their own. Because of this, they are typically well-networked in the “startup world” and are able to help when it comes to hiring, fundraising, company strategy, and more. In order to tap into their network, they need to trust you and be willing to put their reputation with their network on the line. As put by Elizabeth Yin of Hustle Fund, “If you don’t write regular updates, your investors won’t want to help you. It’s hard to help a company and put your own social capital on the line with your network when you have no idea what is happening in your own portfolio company.” Essential components of an investor relations strategy An investor relations strategy will look different for every business. However, there are a few key components that most founders will benefit from including in their investor relations strategy. Communication plan Communication is at the core of any relationship. By sticking to a regular communication plan you’ll be able to strengthen relationships and build trust. For many early-stage founders a communication plan might look something like: Regular monthly updates at the start of the month Quarterly board meetings (in person or over Zoom) One-off communication and phone calls as needed Your mission, story, and vision Investors need to buy into your company’s mission, vision, story, and values. This is typically done during the fundraising process but it is important to continually hit on your mission and vision. Financial reporting and disclosures Of course, investors need to know how your business is performing. At the end of the day, if investors are not aware of your financial position and core metrics, they will not be able to help where needed. Check out the most common metrics that VCs expect from their portfolio companies below (read more here): Investor relationship management As we previously mentioned, investor relationship management will look different depending on the founder or investor. However, when it comes to communicating and sharing information it typically helps to include some or all of the following: Wins and mosses Key metrics Make specific asks Stay consistent Respond promptly Learn more about the importance of investor relationship management in our blog, Investor Relationship Management 101: How to Manage Your Startups Interactions with Investors. Crisis management and contingency planning A core part of an investor relations strategy is crisis management and contingency planning. For many startups, this will come to life during board meetings. However, having a plan for how to deal with a crisis is important. For some founders, this could be a one-off phone call to board members or the most engaged investors. It could come in the form of email, in-person meeting, etc. At the end of the day, having a plan in place for when emergencies hit is important. Investor feedback and engagement For an investor relations strategy to truly work, your investor needs to be engaged. An investor relationship requires work from both the founder and the investor. Sticking to a plan and regular communication schedule will lend its way to investors engaging and offering feedback. Being pointed about where you need help and how you can help investors is a great way to spur engagement. Another pro tip is to publicly call out the investors who are going above and beyond to help your business – this will help gamify your investor relations and encourage other investors to speak up. Related Resource: Investor Outreach Strategy: 9 Step Guide Maximize your investor relations strategy with Visible Visible is the home of investor relations for thousands of startup founders. Use our Updates tool to reguarly share your key qualitative and quantitative data with investors. Build relationships with potential investors using our pitch deck sharing and data room tools and ultimately keep tabs on interactions with every investor using our investor CRM. Give Visible a free try for 14 days here.

Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. The digital age has ushered in the rise of marketplace startups, changing the way we buy, sell, and interact. A marketplace now can take many forms but always connects buyers and sellers, facilitating transactions. These platforms can be vertical (specific to one industry), horizontal (across multiple industries), global, or localized. From Airbnb and Uber to niche platforms that cater to specific audiences, marketplaces have transformed industries. However, beyond creating a functioning platform, it’s essential for founders to build startups that resonate with investors. The Current Marketplace Investment Landscape According to the a16z Marketplace 100: 2023 report, the marketplace economy is growing rapidly, with the top 100 marketplaces generating over $2 trillion in GMV in 2022. Key Takeaways for Marketplace Founders Focus on solving a real problem. The best marketplaces address a real need that people have. They don’t just create a new way to do something that already exists. Build a strong network. The success of a marketplace depends on having a large and active network of buyers and sellers. Make sure you have a plan to attract and retain users. Be data-driven. Use data to make decisions about your business, such as which features to develop, how to price your products or services, and how to target your marketing campaigns. Trends Marketplace Founders Should Be Aware Of The growth of embedded finance, where financial services are embedded into non-financial products and services. This trend is creating new opportunities for marketplaces to offer lending, payments, and other financial services to their users. The increasing importance of data and analytics for marketplace businesses. Marketplaces generate a lot of data, which can be used to improve the user experience, optimize operations, and make better decisions. The rise of sustainability-focused marketplaces. Consumers are increasingly looking for sustainable options, and this trend is creating new opportunities for marketplaces to offer products and services that are better for the environment. The continued growth of cross-border marketplaces. The global marketplace is growing rapidly, and this trend is creating new opportunities for marketplaces to connect buyers and sellers from different countries. What Do Marketplace VCs Look for in Their Investments Traction & Momentum While this involves numbers, VCs also look at the qualitative aspects, like the pace of growth or the startup’s momentum in acquiring users or partnerships. Cultural and Social Impact Especially relevant for modern VCs, does the marketplace have a positive impact on society or the environment? Is there an alignment with broader societal values, like sustainability or inclusivity? Exit Potential VCs want to know the potential exit strategies, whether it’s an acquisition, merger, or going public. Strategic Partnerships & Alliances Does the startup have key partnerships that can accelerate growth or provide a competitive advantage? Feedback from Users Testimonials, case studies, or direct feedback that showcase the value and satisfaction of users. Market Trends & External Factors VCs assess external trends, economic factors, or global events that might impact the marketplace. Additional Resources: Kickstarting a Marketplace with Trey Closson, CEO of Amplio 25 Marketplace Metrics to Track By tracking these metrics, founders can gain insights into their marketplace’s health, growth potential, and areas of improvement. It’s crucial not just to monitor these numbers but also to understand their implications and how they interrelate. Adjustments and strategic decisions can then be based on data-driven insights. Positive unit economics are attractive to investors so make sure to highlight this in your updates. For instance, founders should understand the relationship between Customer Acquisition Cost (CAC) and the Lifetime Value (LTV) of customers. Related CAC Resources: Customer Acquisition Cost: A Critical Metrics for Founders Video: Formula Builder (Customer Acquisition Cost) Here are 25 metrics marketplace founders should be tracking: Gross Merchandise Value (GMV): Represents the total value of transactions on the platform. It gives a broad view of the marketplace’s activity. Net Revenue: This is the revenue the marketplace retains after direct costs (like refunds). For most marketplaces, this would be the fees they charge for facilitating a transaction. Monthly Active Users (MAU): Measures the number of unique users who have interacted with the marketplace within a given month. Customer Acquisition Cost (CAC): The average expense of acquiring a new customer, including marketing and sales expenses. Lifetime Value (LTV): An estimate of the total revenue a business can reasonably expect from a single customer account. LTV: CAC Ratio: A metric that compares the value of a customer over their lifetime to the cost of acquiring them. A ratio above 1 indicates a profitable customer acquisition. Take Rate: The percentage of GMV that the marketplace retains as revenue. Liquidity: A measure of how easy it is for users to make transactions on the platform. User Growth Rate: The speed at which new users are joining the platform. Churn Rate: The percentage of users (buyers or sellers) who stop using the platform over a specific period. Repeat Transaction Rate: The percentage of users who make more than one purchase or sale on the platform. Average Transaction Value (ATV): The average value of a transaction on your marketplace. Buyer-to-Seller Ratio: Represents the balance between the supply (sellers) and demand (buyers) sides of the marketplace. Time to First Transaction: The average time it takes for a new user to complete their first transaction after signing up. Conversion Rate: The percentage of users who take a desired action, like signing up after visiting the platform or making a purchase after browsing listings. Customer Satisfaction (CSAT): A measure of how satisfied users are with the marketplace. Net Promoter Score (NPS): Gauges user loyalty by asking how likely they are to recommend the marketplace to others. Average Resolution Time: Measures the time taken to resolve disputes or complaints on the platform. Supply/Demand Fill Rate: The percentage of demand/supply that gets successfully matched on the marketplace. Inventory Turnover Rate: Especially for product-based marketplaces, this metric measures how often inventory is sold and replaced over a specific period. Operational Efficiency Metrics: These can include the average time to onboard a new seller, average response time for customer queries, and so on. Engagement Metrics: Metrics like session duration, page views per visit, and actions per visit can provide insights into how users are interacting with the platform. Retention Rate: The percentage of users who continue to use the marketplace over time. Referral Rate: Measures how many new users are acquired through existing user referrals. Cost of Goods Sold (COGS): For product-based marketplaces, COGS represents the direct costs involved in producing the goods that were sold. How Founders Can Model Their Marketplace Startup for Success Modeling a marketplace startup for success involves a strategic approach to planning, execution, and scaling. Here are steps and considerations founders can undertake to increase the likelihood of their marketplace’s success: Clear Value Proposition Understand the core problem your marketplace solves. Ensure that your solution offers clear value to both sides (buyers and sellers) of the marketplace. Product-Market Fit: Conduct thorough market research to ensure there’s demand for your platform. Launch a minimum viable product (MVP) to gather feedback and iterate. Focus on Building Trust: Create a secure and transparent environment for transactions. Implement a robust review and rating system. Consider offering guarantees or refund policies for additional assurance. Achieve Liquidity: Ensure there’s a balance between supply (sellers) and demand (buyers). Consider strategies to stimulate one side if it’s lagging. Leverage Network Effects: Design the platform so that the more people use it, the more valuable and attractive it becomes to new users. Invest in Technology: Ensure your platform is scalable, secure, and user-friendly. Leverage AI and data analytics for personalized user experiences and to derive actionable insights. Adopt a Data-Driven Approach: Continuously monitor key metrics to understand user behavior, traction, and areas of improvement. Test and iterate features based on feedback and data. Effective Monetization Strategy: Determine the best revenue model: commission, subscription, freemium, advertising, or a combination. Ensure pricing is competitive and offers value to users. Community Building: Foster a sense of community among users through forums, events, or social media. Engage with your user base and encourage them to be brand advocates. Strong Marketing and Branding: Invest in building a recognizable and trustworthy brand. Employ a mix of content marketing, social media, partnerships, and paid advertising. Resources Finding the Balance While Building a Marketplace with the Founders of ChefPrep 13 Metrics for Marketplace Companies a16’s Required Reading for Marketplace Entrepreneurs All of a16’s Featured Marketplace Content VCs Investing in Marketplace Startups 1. VentureFriends About: VC fund based in Athens but investing across Europe, LatAm & the Middle East. We focus on FinTech, PropTech, B2C, Marketplaces & B2B SaaS. We are entrepreneurial investors, with strong experience, network and track record. We have been entrepreneurs, founders, worked at startups or angel investors in early stages and have a founder first & value driven approach. Stage: Pre-Seed, Seed, Series A Check size: $ 500K – $ 2.50M Check out their Connect Investor profile here. 2. Starting Line About: Starting Line invests in founders who are willing to take on substantial personal risks, out of fear of living a life of regret. That fear of wondering what life might have looked like if you’d just gone for it. Stage: Pre-Seed, Seed Check size: Around $ 1M Check out their Connect Investor profile here. 3. Version One Ventures About: Version One Ventures is an early-stage fund investing in outstanding consumer internet, SaaS, and mobile entrepreneurs. Thesis: Backing the next generation of mission-driven technology founders. Stage: Seed, Series A, Series B Check size: $ 500K – $ 750K Check out their Connect Investor profile here. 4. Benchmark VC About: Benchmark Capital is focused on one, and only one, mission: to help talented entrepreneurs build great technology companies. That’s what drives them and everything they do – from how they organize their firm to their investment strategy. Their investments range in size from as little as $100,000 to as much as $10 or $15 million. Typically, they invest $3 to $5 million initially and expect to invest $5 to $15 million over the life of a company. Stage: Seed, Series A, Series B, Growth Check size: $ 5M – $ 25M Check out their Connect Investor profile here. 5. Frog Capital About: Frog is a specialist European software scale-up investor. Our strategy is based on selecting the best scale-up phase investments and empowering technology CEOs to grow fast, by deploying our capital, our network and our support. At Frog we focus on ensuring long term commercial success for each and every business we invest in. A frog investment: – Headquartered in Europe – High-growth software businesses – Making a positive social impact – Generating over €3m ARR – Transactions of up to €20m Stage: Growth Check size: $ 5M – $ 30M Check out their Connect Investor profile here. 6. Global Founder Capital About: Global Founders Capital is a globally oriented, stage-agnostic venture capital firm that empowers gifted entrepreneurs worldwide. 01 // Global. We support founders in all geographies. 02 // Stage agnostic. We back companies across all stages and throughout the lifecycle. 03 // Operational. Our platform offers founders all the support they need to scale. Stage: Agnostic Check size: $ 50K – $ 10M Check out their Connect Investor profile here. 7. Market One Capital About: Market One Capital invests with a long term view in European startups across pre-seed and seed stages. European heart. Global mind. Thesis: Seed fund empowering network effects platforms across Europe Stage: Pre-Seed, Seed Check size: $ 2M Check out their Connect Investor profile here. 8. Peak Capital About: SaaS / Platforms / Marketplaces opportunities with multiple co-founders Thesis: Peak Capital is an Amsterdam-based venture capital firm. Stage: Pre-Seed, Seed Recent fund size: $ 71.70M Check out their Connect Investor profile here. 9. Piton Capital About: Founded in 2010, Piton Capital is a venture capital and growth equity firm headquartered in London and investing in businesses with network effects. We make investments ranging from €200k to €20m and since inception have invested in over 50 businesses, primarily in Europe. Piton focuses exclusively on network effects businesses as this provide one of the few moats or forms of defensibility to achieve dominance. Thesis: Investing in companies with network effects. Stage: Series A, Series B, Early Stage Recent fund size: $ 71.70M Check out their Connect Investor profile here. 10. White Star Capital About: White Star Capital is a global multi-stage investment platform built by a team of founders, investors and operators with a track record of entering new markets, expanding teams and exiting companies. Our approach to venture is characterized by a unique combination of international presence, perspective and people. With feet on the ground in New York, London, Montreal, Paris, Tokyo, Hong Kong, and Singapore, we partner closely with our portfolio to help them scale internationally from Series A onwards. Stage: Series A, Series B Check out their Connect Investor profile here. 11. Spark Capital About: Recognized as a 2022 Emerging 50 VC, Spark Growth Ventures is a community oriented, early & mid stage, vertical-agnostic, technology venture capital firm. Our mission is to support gritty and exceptional founders in their missions by bringing forth the combined value of our strong community. We are fortunate to have a global network of entrepreneurs, C-level relationships, subject matter experts, world-class talent, institutional investors, high net worth individuals and family offices, many of who are investors in our platform. Thesis: Spark Capital is an early and growth stage venture capital firm that partners with exceptional founders and the products they design. Stage: Seed, Series A, Series B Check out their Connect Investor profile here. 12. NextGen Venture Partners About: NextGen Venture Partners invests $1-2M in seed stage companies with the participation of 1,000+ Venture Partners. Stage: Pre-Seed, Seed, Series A Check out their Connect Investor profile here. 13. Right Click Capital About: Right Click Capital is a venture capital firm backing ambitious tech startups in Australia, New Zealand, and South East Asia. Thesis: We invest in and champion bold tech. Stage: Pre-Seed, Seed, Series A, Series B Check out their Connect Investor profile here. 14. LDR Ventures About: LDR is a VC firm based in Los Angeles investing In Female & Minority Founders, Consumer Product, Food, E-Comm, Marketplaces & Legal Tech Thesis: Female led and Los Angeles based, we consult to and invest primarily in female entrepreneurs at the Seed & Series A Stages. Stage: Seed, Series A Check out their Connect Investor profile here. 15. Strive VC About: STRIVE invests in early stage (Seed to Series A) internet and mobile companies in Asia. Thesis: We help fulfill each entrepreneur’s amibitions through continuous and proactive hands-on support understanding their true needs. Stage: Seed, Series A Check out their Connect Investor profile here. 16. Upfront Ventures About: We invest primary in the US but have a 20-year history of funding companies in Europe. Our managing partners (Yves Sisteron & Mark Suster) are both dual citizens of France & UK respectively. Kevin Zhang funds games companies and looks in Sweden, Finland, UK and beyond. And locally Julien Etaix is based in Paris and open to talking with anybody on the continent. Thesis: Early investors. Long-term partners. Stage: Seed, Series A, Series B, Growth Check out their Connect Investor profile here. 17. No Brand About: No Brand is a private investment company focussed on opportunities empowered by technology. Our focus is on backing mission driven leaders, who are building for a long term horizon and benefit from online platforms, community or network effects. Stage: Pre-Seed, Seed, Series A, Series B Check out their Connect Investor profile here. 18. Everywhere Ventures About: Global pre-seed fund backed by 500 founders and operators. Thesis: We invest $50-250k into pre-seed companies looking to raise between $500-$2M. We are happy to lead or partner with other investors. We are generalists at heart, but lean into three core areas: money, health, and work. We embrace first-time founders, and founders who may lack traction but have a distinct vision for a world that may not exist…yet. Stage: Pre-Seed Check out their Connect Investor profile here. 19. LAUNCHub Ventures About: LAUNCHub Ventures is a leading early-stage venture capital fund, investing in technology startups in the Seed and Series A funding stages. We invest in Central and Southeastern Europe (SEE & CEE), and in companies built by ambitious founders from that region who are based in the leading startup hubs such as London, San Francisco, and beyond. Our initial investment is between €500K and €2M, with capacity to continue supporting the funding needs of our portfolio companies in future rounds. We are looking for scalable businesses with initial traction and passionate founders, originating from South-Eastern Europe and the broader CEE region. Thesis: When evaluating potential deals, we place a strong emphasis on the team, market, and vision. Specifically, we look for: * an ambitious and talented team proven to execute, founder competitive advantage and path to a clear moat, a big market or one with the potential to grow or emerge. Stage: Series A, Seed, Pre-Seed Check out their Connect Investor profile here. Partner With VCs Investing In The Future of Marketplaces with Visible Venture capital has emerged as a powerful catalyst for progress in the Marketplace space. By bridging the funding gap, providing expertise, and fostering innovation, VCs enable Marketplace startups to thrive and create transformative solutions. Check out Visible’s investor database, Connect, to find VCs investing specifically within the Marketplace space. Also here two more of our list articles, 10+ VCs Investing in E-commerce and Consumer Products 15 Direct to Consumer (D2C) VC Investors You Need to Know Companies should leverage VCs expertise and resources to accelerate their growth, navigate regulatory challenges, and scale their impact. Also get access to Visible for free for 14 days: https://app.visible.vc/create-account

This year’s fundraising environment has been undoubtedly challenging for startups of all stages. Understanding today’s complex fundraising dynamics is critical to distinguish yourself from the competition. Join Visible and two fundraising experts from Antler for a recorded discussion on how to stand out to investors for the rest of this year and beyond. Webinar Overview You can check out a few of the topics we hit on below: Breakdown of current fundraising dynamics Standing out to early-stage investors Standing out with storytelling Standing out with investor communications Antler’s recommended Investor Update Template Watch the Recording Give the recorded webinar a watch below:

Check out Visible’s recorded product webinar to learn about the most recent updates to Visible’s portfolio monitoring and reporting platform. The Visible team demonstrates how to leverage recent product changes to improve your portfolio reporting in Q4 and beyond. Product webinar topics: Common use cases for one-time Requests and how to set them up Saving time by syncing company qualitative responses to Dashboards and One-Pagers Exporting data to Google Sheets for external analysis and reporting Embedding a dashboard in Notion to share with your team Q&A

In 19 years, Salesforce has transformed from a “startup” to a publicly-traded company with over 30,000 employees. They’ve managed to sustain incredible growth while maintaining strong organizational alignment and communication. As Marc Benioff puts it, “While a company is growing fast, there is nothing more important than constant communication and complete alignment. We’ve been able to achieve both with the help of a secret management process that I developed a number of years ago”. So what’s their “secret management process?” V2MOM. What is V2MOM? V2MOM is a management and communication process used by the team at Salesforce. It is an acronym that stands for vision, values, mission, objectives, and measures. It was implemented in the first few weeks of operation at Salesforce and has continued to ring true today. Benioff defines the different sections of the V2MOM below: What Does the V2MOM Process Look Like? The V2MOM process can be broken down by the individual inputs (or letters in the acronym). Learn more about each section below: Vision Claire Lew, Founder of KnowYourTeam, puts it, “A vision is a picture of a better place. You see this picture in your head: It’s what you want the world to look like because your product or team exists. In many ways, your team’s vision is your opinion on how you think the world ought to be. A vision answers the question, “What world do you want to create?” Or put even shorter by Marc Benioff, CEO of Salesforce, “The vision helped us define what we wanted to do.” The idea of a company vision can sound like a vague, ideal outlook to the world but it can help founders hire top talent, build a strong culture, and keep everyone aligned. Values Marc Benioff goes to describe values as, “The values established what was most important about that vision; it set the principles and beliefs that guided it (in priority)” The team at Lessonly takes a deeper dive and explains company values as, “Company values play a critical role in helping businesses to achieve their goals and objectives. These values shape the identity and principles of the organization, act as a guiding light for employees, and affect the way organizations conduct their business.” Methods Next comes methods. Benioff explains methods as, “The methods illustrated how we would get the job done by outlining the actions and the steps that everyone needed to take.” Methods can be used as a step by step roadmap of what needs to happen for you and your team to accomplish your organization’s larger vision. As an example, the Salesforce original V2MOM methods looked something like this: Hire the team Finalize product specification and technical architecture Rapidly develop the product specification to beta and production stages Build partnerships with big e-commerce, content, and hosting companies Build a launch plan Develop exit strategy: IPO/acquisition Obstacles If methods are the steps you need to take to accomplish the vision, obstacles are the things that might stand in the way of accomplishing your vision. As Benioff explains, “The obstacles identified the challenges, problems, and issues we would have to overcome to achieve our vision.” From the Salesforce example they lay out the following obstacles: Developers Product manager/business development person Measures Measures are the quantifiable results you’d like to achieve to achieve your vision. Generally speaking, this should be a number. As Benioff explains it, “Finally, the measures specified the actual result we aimed to achieve; often this was defined as a numerical outcome.” Continuing with the Salesforce example. They laid out the following metrics to measure and track: Prototype is state-of-the-art High-quality functional system Partnerships are online and integrated Salesforce.com is regarded as a leader and visionary We are all rich In order to help you track your vision, values, methods, obstacles, (and especially) measures, we created a V2MOM Update Template that can be used directly in Visible. Check it out here. The Benefits of Using V2MOM It is clear that V2MOM works well for Salesforce but the question is, "does it make sense to implement at my company?" Check out a few of the benefits V2MOM below to help understand if V2MOM is right for your business. Enhanced Clarity of Purpose V2MOM is a great way to continue to focus on your clarity of purpose. By laying out the vision for a particular project or goal, you are forced to understand how individual work ties into the overall purpose of the business. Seamless Alignment Across the Organization V2MOM creates alignment across individuals and the entire organization. By laying out the vision and values, you are forced to see how your individual and team's work fits into the organization as a whole. A written document also offers other team members insight into other individuals' work to see how they can encourage and support one another. Related Resource: How to Build Organizational Alignment Easily Sharper Focus on Strategic Initiatives Leveraging V2MOM is a great way to stay on top of strategic initiatives. It helps teams tie in their overarching strategic initiatives into documents that can be shared across the organization. Why V2MOM worked for Salesforce Many of the organizational decisions and directions at Salesforce are guided by their V2MOM. Since the inception of V2MOM, Salesforce has continued to use the management process for individuals and teams. As Salesforce continues to knock out their vision they go back to the drawing board and create a new vision the team can rally behind on an annual basis. You can check out the original V2MOM from April 12, 1999 below: However, V2MOM can be expanded beyond company wide alignment and can be used for team alignment and individual objectives. After Marc and the entire company define a new V2MOM it is then passed down to teams and individuals. From here, each employee is responsible for creating their own V2MOM. While having the corporate V2MOM to guide their own it’s easy for everyone across the organization to see how their role, goals, and projects can fit into the overall company vision (read: alignment). What types of businesses can use V2MOM Any business can use a V2MOM. However, there are certain use cases and types of businesses that generally will benefit most from a V2MOM. Early Stage Startups Early stage startups, especially those with lofty growth goals, can greatly benefit from setting up a V2MOM. In the early days of a startup, staying aligned and focused while you search for product market fit, your first hires, and your first customers can be a major challenge. V2MOMs can especially help early stage startups with the following: Hiring A V2MOM can help build the base of a strong startup culture. With the company vision being a picture of what you want the world to look like, it can be a strong tool when hiring and recruiting top talent. If a potential candidate feels strongly about your vision, chances are they will fit into the culture and will have a desire to work with you to accomplish your vision. Current employees will also be able to see the direct impact their work is making to the different components of a V2MOM. This will help give them the pride and ownership they want out of their work. Alignment Staying aligned while rapidly scaling headcount is a challenge. By having everyone hyper-focused on the vision, values, obstacles, methods, and measures, you’ll be able to keep everyone moving in the same direction. Fundraising V2MOM is a forcing function for leaders to lay out their vision and a rough road map of how they will get there. Even if you’re not pitching an exact V2MOM to a potential investor, it is a great backbone for different aspects of your pitch. For example, the vision and values will help paint the picture of what the company will look like and where you are headed. The methods and obstacles will help demonstrate the roadmap to achieve your vision and a clear demonstration of your understanding of the market (and competitors). And measures are the metrics and projects you’ll track to move forward. Related Resource: What do Investors Care About When it Comes to Culture? Internal Teams Salesforce expanded their V2MOM beyond as it is used for individuals and teams. Teams can lay out the vision they want to accomplish by using the company-wide V2MOM to guide them. From here, you can take it a step further and let individuals use the company-wise and team V2MOM to create their own individual plan to advance themselves forward. When V2MOM May Not Work Although we mentioned V2MOMs can work for all businesses — there are particular miscues, use cases, and businesses where it may not work as well. Lack of Communication Setting your V2MOM is only half the battle. To gauge your progress towards the company vision, you need to communicate and distribute your progress towards the vision (particularly the measures section). Companies that fail to communicate their V2MOM status properly, likely aren’t benefiting from the alignment that V2MOMs can offer. Incorrect Data When measuring any metric or goal, you must be measuring the correct thing. This stands true when tracking your measurables. For example, if you want to bring X # of people to your website but find out halfway through your Google Analytics data is wrong that can hurt your efforts over the previous months. Established Businesses V2MOMs can 100% work for established businesses, but it may not be the best use of time. If a shop or business knows exactly what they’re doing and have been operating in a certain manner for decades, there may not be a need for a V2MOM. If employees are happy and business is stable, there may be a better use of time for everyone involved then crafting an aspirational vision and roadmap. V2MOM’s should be shared, changed, and discussed regularly. The introduction of V2MOMs for individuals should lead to conversations with their managers around priorities and decision-making processes. Ready to step up your company alignment as you continue to grow? We put together an V2MOM Update Template you can check out here. How Do You Write a V2MOM? Tips to Follow If V2MOM sounds like a could be a good fit for your business. Check out tips to get started with V2MOM below: 1. Respect the Structured Order of the Elements First things first, you need to stick to the structured order of the elements. This means staying true to vision, values, methods, obstacles, and measures. 2. Use the SMART Framework The SMART framework is used when setting goals. This will help when it comes to setting the measurables for a V2MOM. As the team at TechTarget puts it, "SMART is a best practice framework for setting goals. A SMART goal should be specific, measurable, achievable, realistic and time-bound. By setting a goal, an individual is making a roadmap for a specific target." 3. Keep it Concise Keep your V2MOM short and sweet. Make it easy to understand for everyone in the organization. By adding too much information, it will likely add confusion and further questions. 4. Prioritize and Be Specific Prioritizing the methods you will use will help lead to the desired outcomes. By listing too many methods you are likely diluting the focus and hurting your chances of a desired outcome. 5. Regularly Review and Update A V2MOM is a living document. It should be regularly reviewed by managers and peers so you can regularly update what is working and adapt to the changing environments. Use Visible's V2MOM Template as a Roadmap to Success Having a way to share and iterate on your V2MOM is crucial to success. Check out the template from our team that can be easily shared via email, Slack, and link. Try the template and get started on your V2MOM document here.

What is fund administration? Fund administration is a third-party service that handles the accounting, cash-flow movement, and LP reporting for Venture Capital funds. Hustle Fund argues that fund admins are the most important part of a VC’s back-office operations. Key fundamentals of funds administration in Venture Capital Fund Admins play an essential role in ensuring critical fund operations run smoothly and also can help VC firms maintain credibility with Limited Partners (LPs). Below we outline the key fundamentals of Fund Administration. Cash flow management and capital allocation Fund administrators are responsible for wiring money directly to founders. The main reason fund administrators handle this process and not the GP is to protect against fraud and ensure accuracy. Fund administrators also handle the capital transactions between LPs and the fund. This includes managing the call-down process, determining how much to request from each LP, and sending letters to each LP with wire instructions. After an exit event, the fund administrators are also responsible for figuring out how much to distribute back to each LP. That’s a lot of separate transactions to manage which is why this can be an extremely time-consuming process. It’s also a high-stakes process with no room for mistakes. An error in the numbers can even result in a lawsuit based on gross incompetence. Limited Partner management Since Fund Administrators are responsible for sending communications related to capital transactions and reporting to Limited Partners, it’s critical that fund administrators keep an up-to-date list of Limited Partner contact information. The fund should share updated contact information with fund administrators as changes occur. Reporting Fund administration also handles the formal LP reporting process as outlined in a fund’s Limited Partnership Agreement. This typically includes putting together quarterly reports of each company’s latest valuation on a quarterly basis but the reporting requirements can vary from fund to fund based on LP requirements. To put together this reporting, fund administrators will source the latest investment information from the VC fund which is why it’s important for firms to keep investment data and fair market value changes up to date and accessible. Preparing these quarterly reports helps streamline the annual audit at the end of the year. Visible provides investors with an easy way to maintain accurate investment records that can easily be shared with fund administrators and auditors. Compliance assistance An important role of a fund administrator is making sure funds are maintaining compliance with the terms outlined in their Limited Partnership Agreement (LPA). This can include terms related to the timing of distributions, what can be considered a fund expense, and the deadlines for reporting. Audit and tax A fund administrator will work closely with other fund service providers such as auditors and tax-related providers to ensure the fund is performing in accordance with regulations. Related resource –> Venture Capital Audit Process: What it is and how Visible can help Modern technology and software solutions There are a variety of fund administrators dedicated to serving the VC industry. As discussed, VC fund administrators play a key role in VC firm operations so it’s worth taking the time to select the provider that is going to be the best fit for your firm. A great way to start is by asking your community for referrals. From there, it’s wise to interview the administrators and actually speak with the representative who will be assigned to work with your fund. Fund administrators differentiate themselves by variables such as the level of sophistication of their tech stack, whether they offer an LP portal, and also by the quality of the service they provide. It’s important to note that the quality of service can be dependent on the representative you work with at the organization. This is why it’s a great idea to meet with the rep in advance of signing a contract. The benefits of working with fund administrators Working with the right fund administrator can mean fewer headaches and more time to spend finding and supporting the best investment opportunities. Below we outline the top benefits of working with fund administrators regardless of your fund structure. Saves your firm time and resources Working with a fund administrator instead of trying to manage accounting in-house can save a firm time and money. This is because fund administrators are laser-focused on all the back-office functions and can be less costly than adding a full-time finance expert to your team. Provides expertise and experience A great fund administrator can provide funds with expertise based on working with dozens or even hundreds of VC firms. This can save less experienced GPs from costly accounting, legal, or capital transaction mistakes. Assists with investor relations management A fund administrator should provide timely and accurate communication to LPs. When fund administrators are executing well it should make the lives of the LPs easier which reflects positively on the fund. Provides compliance and regulatory support Since fund administrators have worked with hundreds and potentially even thousands of VC funds of varying stages, they’ve been exposed to many of the edge cases that could cause an inexperienced fund to make costly mistakes that could hurt their reputation. Fund administrators are well-versed in Venture Capital regulation and compliance which means GPs can leverage their fund administrators’ expertise when questions arise. When is the optimal time to start working with a fund administrator While not always required, it’s a good idea to start working with a fund administrator before even closing your first fund. This ensures your back office operations are set up for success right from the beginning. Many fund administrators have special pricing for emerging fund managers that makes it more affordable to get started. Looking to improve your portfolio monitoring processes at your fund? Visible streamlines the way you keep your companies’ financial KPI’s and investment data up to date and organized so sharing key information with service providers like your fund admin becomes even easier.

The esports realm is more than just a digital battleground; it’s a convergence of passion, innovation, and immense business potential. Esports has seen a huge rise in popularity over the past decade and is continuing its upward trend. The global audience, both in terms of participants and viewers, has grown exponentially, making it one of the fastest-growing sectors in the entertainment industry. According to DemandSage, there are currently 532.1 million e-sports audiences worldwide, and the e-sports market is valued at $1.44 billion as of 2023. This number is set to reach $5.48 billion by the year 2029. The Esports Investment Landscape The investment landscape in esports is dynamic, reflecting the industry’s rapid evolution. Current trends indicate a growing interest from traditional venture capitalists, corporate investors, and even celebrities. As the industry matures, we’re seeing a shift from early-stage investments to more growth-stage funding, indicating confidence in the long-term viability of esports ventures. Valuation Valuing an esports company can be complex. Traditional metrics might not always apply, given the unique nature of the industry. Factors like team performance, audience engagement, and brand partnerships play a significant role. It’s crucial to understand how similar companies in the space are valued and to be prepared to justify your valuation with concrete data and projections. Remember, while you want a valuation that reflects your company’s worth, it’s equally important to negotiate terms that are both favorable and fair to ensure a harmonious investor-founder relationship. What Esports VCs Look for in Esports Investments The weightage of these factors can vary. An investor more interested in the technology side of esports might prioritize infrastructure and assets, while another focused on branding might emphasize partnerships and audience engagement. Team Performance and Potential: Success in tournaments, player talent, and robust coaching infrastructure. Audience Engagement: The size and engagement level of the fan base, including metrics like social media engagement and merchandise sales. Monetization Strategies: Diverse revenue streams, their sustainability, and potential for new opportunities. Brand Partnerships and Sponsorships: Existing relationships with renowned brands and the potential for future collaborations. Market Potential: Industry growth trends, expansion opportunities, and competitive positioning. Management and Leadership: The track record of the management team, their vision, and organizational efficacy. Infrastructure and Assets: Both physical assets, like training facilities, and digital ones, such as streaming rights. Regulatory Environment: Understanding and navigating the regulatory landscape of esports. Scalability: The potential to scale and the infrastructure to support that growth. Unique Value Proposition: What makes your organization stand out? It could be unique content, community strategies, or other differentiators. Exit Strategy: Potential avenues for investors to see a return, be it through acquisition or public listing. Why Esports is Good Business Many VCs recognize that esports is not just a trend but a sustainable industry. With its integration into educational institutions and the establishment of professional leagues, there’s a belief in its long-term viability. Strategic Partnerships: The potential for partnerships between esports entities and established brands, media companies, and even traditional sports franchises offers lucrative opportunities. Diverse Revenue Streams & High Return Potential for VCs: Esports offers multiple avenues for monetization, including advertising, sponsorships, ticket sales, merchandise, media rights, and online streaming platforms. Global Reach: Unlike traditional sports that might be popular in specific regions, esports has a global appeal. Games like “League of Legends” or “Counter-Strike: Global Offensive” have massive followings across continents. Mainstream Acceptance: With esports events being broadcast on major networks and even discussions of esports becoming an Olympic event, there’s a belief that esports is moving from niche to mainstream. Young Demographic: The primary audience for esports comprises millennials and Gen Z, a demographic that’s attractive for advertisers and brands looking to establish long-term loyalty. Technological Integration: The ability to integrate emerging technologies like AR, VR, and AI into the esports ecosystem presents opportunities for innovative startups. Community Engagement: Esports fans are highly engaged, often participating in online forums, fan events, and even contributing to crowdfunded prize pools. Potential for Innovation: From virtual reality to AI-driven analytics, the esports industry is ripe for technological innovations that can enhance player performance and viewer experience. Related Read: The Startup Metrics Potential Investors Want to See Related Resources: All-Encompassing Startup Fundraising Guide 15 Venture Capital Firms Investing in VR FinTech Venture Capital Investors to Know BITKRAFT Ventures Stage: Seed, Series A/B Investment Location: Global Key person: Jens Hilgers, Malte Barth, Scott Rupp, and Moritz Baier-Lentz Gaming investments: Epic Games, Manticore Games, Frost Giant, Anzu, Bit Fry, Carbonated, Koji, Voicemod, etc. Thesis: Built by founders for founders, BITKRAFT is a global early- and mid-stage investment platform for gaming, esports, and interactive media. We focus on Seed, Series A, and Series B investments in game studios, interactive platforms, and immersive technology. Velo Partners Stage: Pre-Seed, Seed, Series A Investment Location: Global Key persons: Connor Williams Gaming investments: Ninjas in Pyjamas, Tripledot, and Moon Active. About: Velo Partner invests in Gaming and Gambling globally across mobile, online, land-based, online, social, B2B and B2C assets. Thesis: Velo typically invests in Series A or early growth stage rounds. Our ideal investment candidates demonstrate strong early traction and a clear understanding of their unit economics and growth trajectory. We also work in association with a gaming accelerator called RNG FOUNDRY for earlier-stage investment opportunities. Once invested, we typically follow our rights for later investment rounds and work with management to define good corporate governance and reporting. We will opportunistically evaluate later-stage investments on an ad-hoc basis. Play Ventures Stage: Pre-Seed, Seed, Series A Investment Location: Global Key persons: Anton Backman, Harris Manninen, Henric Suuronen Gaming investments: Thirdwave, Azra Games, Fractal Thesis: We are a global early-stage gaming fund, founded by two gaming entrepreneurs. We invest globally and early into ambitious mobile & PC free-to-play game studios and games services startups that are looking for more than just money. Makers Fund Stage: Seed, Series A, Series B Investment Location: North America Key persons: Jay Chi, Jiang Li, Lia Zhang, Matthew Ball, Michael Cheung Gaming investments: Theorycraft Games, Smitten, Xterio Thesis: We support innovative, ambitious founders. Our fund helps visionary entrepreneurs create their initial foundation and support them as they navigate the waters of early-stage business. 1Up Ventures Stage: Seed, Series A Investment Location: Pacific Northwest Key persons: Chris Wheaton, Ed Fries Gaming investments: Lost Lake Games, Drop Fake, Lightforge Games Thesis: At 1Up Ventures we are building a diverse and inclusive community of the most talented, experienced, and creative independent game developers in the world. We believe that by working together we can help each other be more successful. Black Sheep Ventures Stage: Pre-Seed, Seed, Series A Investment Location: Global Key person: Nolan Bushnell, Ron Bauer Gaming investments: X2 Games Thesis: Black Sheep Ventures seeks visionary entrepreneurs who are unflinching in creating new realities for entertainment experiences and human interactions, including in eSports, Gaming, Blockchain Technology and Immersive Experiences, and other sectors, where disruptive technology such as Blockchain and visionary creativity can permanently shift the established order. CAA Ventures Stage: Seed, Series A/B Investment Location: United States, Canada Key person: Michael Blank Gaming investments: Streamlabs, Mobcrush, Dapper, & more. Thesis: CAA Ventures provides value beyond capital to company founders. These companies are largely in the consumer Internet sector with an emphasis on mobile platforms, social media, crowdfunding, online video, publishing, games, and eCommerce. Dune Ventures Stage: Pre-Seed, Seed, Series A/B Investment Location: Global with a focus on NYC Key person: David Brillembourg Gaming investments: First Light Games, Oooh TV, Kanga Thesis: Dune Ventures: a new early-stage venture firm investing in gaming, esports, and interactive technology. We invest globally and back founders building content studios, social platforms and infrastructure that will define the next generation of entertainment. GameFounders Stage: Pre-Seed, Seed Investment Location: Global Key person: Kadri Ugand, Paul Bragiel Gaming investments: First Light Games, Oooh TV, Kanga Thesis: GameFounders accelerate teams or companies with two or more persons with launched games/demos/slices from any country in the world. Gamerforce Ventures Stage: Seed, Series A Investment Location: Global Key person: Lance Quek Gaming investments: Resurgence Thesis: Gamerforce Ventures is one of the first venture capital firms that is set up specifically to create high-value companies in the Esports and Gaming scene. Our partners are successful entrepreneurs and high flying executives coming from diverse backgrounds to help our portfolio companies succeed. We typically invest between seed and Series A, but may come in at later stages should the opportunity arises. Konvoy Ventures Stage: Seed, Series A Investment Location: Global Key person: Jason Chapman, Jackson Vaughan, Josh Chapman Gaming investments: Bunch, GameFam, Hiberworld, Lootcakes, & more. Thesis: We invest in the infrastructure technology, tools, and platforms of tomorrow’s video gaming industry. London Venture Partners Stage: Pre-Seed, Seed Investment Location: Europe, North America Key person: David Gardner, David Lau-Kee, Are Mack Growen Gaming investments: Treehouse Games, Knock Knock, Singularity 6, Coda, & more. Thesis: LVP is a venture capital seed fund with a difference – we’re operating experts in the games sector, and we only ever invest in the games ecosystem. That means we bring real experience and deep understanding. We speak the same language, share the same references, understand the same challenges – and we believe in the same vision. Remagine Ventures Stage: Pre-Seed, Seed Investment Location: Europe, Israel Key person: Eze Vidra, Kevin Baxpehler Gaming investments: Hour One, Syte, Minute Media, & more. Thesis: We meet and invest in startups early, help them refine product-market fit and introduce them to our strategic partners in order to kick-off collaborations and accelerate time-to-market. Related Resource: 9 Active Venture Capital Firms in Israel SeventySix Capital Stage: Pre-Seed, Seed, Series A Investment Location: United States Key person: Jon Powell, Wayne Kimmel, Chad Stender Gaming investments: Nerd Street Gamers Thesis: SeventySix Capital invests in passionate, smart and nice entrepreneurs who are launching game-changing startups in sports tech, esports, and sports betting. Griffin Gaming Partners Stage: All stages Investment Location: Global Key persons: Phil Sanderson, Peter Levin, Nick Tuosto Gaming investments: Forte, Discord, Overwolf Thesis: Investing at the intersection of content, software, infrastructure, and gaming-related web3 companies. Connect with esports investors with Visible Finding the right investors for your business is only half the battle. Having a system to track and manage your fundraise to help you get back to what matters most — building your business. Use Visible Connect to browse our investor database of hand-curated investors. Find investors and add them directly to your Fundraising Pipeline in Visible. Give it a try here.

Equity compensation, such as Incentive Stock Options (ISOs), has become a cornerstone of the compensation strategy for many startups. While these options offer a range of benefits for both employers and employees, they also come with specific tax obligations and reporting requirements. Enter IRS Form 3921—a critical form that serves as the linchpin for reporting ISO exercises to the Internal Revenue Service. This form not only aids the IRS in ensuring tax compliance but also helps employees keep track of essential information required for their own tax returns. What Is the Purpose of IRS Form 3921? The purpose of IRS Form 3921 is to inform the IRS of the exercise of an incentive stock option (ISO). ISOs are a type of equity compensation that allows employees to purchase company stock at a predetermined price, typically below the fair market value of the stock. When an employee exercises an ISO, they are essentially buying stock from their employer. Form 3921 provides the IRS with information about the ISO exercise, such as the date the option was exercised, the exercise price, and the fair market value of the stock. This information helps the IRS track the number of ISOs that are exercised and the amount of compensation that is received by employees. The IRS uses this information to ensure that employees pay the correct amount of taxes on the appreciation in the value of the stock. If an employee sells the stock within one year of the exercise date, they will owe ordinary income taxes on the entire amount of the appreciation. However, if they hold the stock for at least one year from the date the option was granted and two years from the date the option was exercised, they will only owe capital gains taxes on the appreciation. In addition to informing the IRS of the exercise of an ISO, Form 3921 also serves as a record for the employee. The employee should keep a copy of Form 3921 for their own records so that they can properly report the income on their tax return. Related resource: IRS- About Form 3921, Exercise of an Incentive Stock Option Under Section 422(b) The Difference Between Form 1099B and Form 3921 The main difference between the two forms is that Form 1099-B reports on the sale of stock, while Form 3921 reports on the exercise of an ISO. Form 1099-B is typically filed by the brokerage firm that sold the stock, while Form 3921 is typically filed by the startup that issued the ISO. Form 1099-B is an information return that must be filed by brokers and other financial institutions to report the proceeds of sales and other taxable transactions in securities, such as stocks, bonds, and mutual funds. The form provides the IRS with information about the sale, such as the date of the sale, the sale price, and the cost basis. Form 3921 is an information return that must be filed by startups with the IRS when an employee exercises an incentive stock option (ISO). The form provides the IRS with information about the ISO exercise, such as the date the option was exercised, the exercise price, and the fair market value of the stock. “If you sold stock, bonds or other securities through a broker or had a barter exchange transaction (exchanged property or services rather than paying cash), you will likely receive a Form 1099-B. Regardless of whether you had a gain, loss, or broke even, you must report these transactions on your tax return.” HRBlock Related resource: What is a Schedule K-1: A Comprehensive Guide How Does Form 3921 Impact Employees Who Exercise an Incentive Stock Option (ISO)? It provides the IRS with information about the ISO exercise, which the IRS uses to ensure that employees pay the correct amount of taxes on the appreciation in the value of the stock. It serves as a record for the employee, which they can use to properly report the income on their tax return. If an employee sells the stock within one year of the exercise date, they will owe ordinary income taxes on the entire amount of the appreciation. However, if they hold the stock for at least one year from the date the option was granted and two years from the date the option was exercised, they will only owe capital gains taxes on the appreciation. The employee should keep a copy of Form 3921 for their own records so that they can properly report the income on their tax return. When Should a Startup Owner Receive a Form 3921? For startup owners, Form 3921 is their responsibility. Whenever an employee exercises ISOs granted by the startup, the owner must provide them with Form 3921. To ensure timely filing of Form 3921, keep in mind these three crucial deadlines: January 31: The final date to distribute copy B to all employees who exercised their ISOs during the preceding year. February 28: The cut-off for submitting copy A to the IRS via paper forms. March 31: The last date to send copy A to the IRS through electronic submission. What Information Do You Need to Complete the Form? Filling out Form 3921 requires particular attention to details and collecting specific data. It’s crucial to identify the necessary information for startup owners and employees. You can find more information about Form 3921 on the IRS website. For Startup Owners Startup owners provide Form 3921’s data set so they must provide: The name, address, and taxpayer identification number (TIN) of the employee who exercised the ISO. The date the ISO was granted. The exercise price of the ISO. The fair market value of the stock on the date the ISO was exercised. The number of shares of stock that were acquired through the exercise of the ISO. The name and TIN of the company that issued the ISO. The transmitter control code (TCC), if filing electronically. The employee’s email address, if filing electronically. The fair market value of the stock on the date of exercise, if the employee did not hold the stock for at least one year from the date the option was granted and two years from the date the option was exercised. The company’s EIN (Employer Identification Number) The company can obtain the employee’s TIN from the employee’s W-4 form. The company can obtain the fair market value of the stock from the stockbroker or transfer agent. The company can obtain the transmitter control code from the IRS website. The company must file Form 3921 by March 31 of the year following the year in which the ISO was exercised. The company can file Form 3921 electronically or by mail. For Startup Employees Employees do not need to complete Form 3921. This form is filed by the company that issued the incentive stock option (ISO). However, the employee may need to provide some information to the company, such as their taxpayer identification number (TIN). The employee’s TIN can be found on their W-4 form. The company can use this information to complete Form 3921. The employee should also keep a copy of Form 3921 for their own records. This could be helpful if they ever need to file an amended tax return or if the IRS audits them. Do Startups or Employees Owe Taxes on Form 3921? The employee will owe taxes on the difference between the fair market value of the stock on the date the option was exercised and the exercise price when they sell the stock, unless they hold the stock for at least one year from the date the option was granted and two years from the date the option was exercised. In that case, the employee will not owe any taxes on the appreciation in the value of the stock. The startup does not owe any taxes on the exercise of an ISO. However, if the startup later sells the stock that was acquired through the exercise of the ISO, it may owe capital gains taxes on the appreciation in the value of the stock. How to File IRS Form 3921 as a Startup Owner Yearly tax reporting is a ritual, and for those with ISO dealings, Form 3921 is a significant part of this process. Here’s a breakdown: 1. File Copy A Through the IRS Form 3921 can be submitted to the IRS electronically or via traditional mail. Online methods are often more efficient and can offer faster confirmations of receipt. Regardless of your choice, ensure you’re ahead of the filing deadline, which typically aligns with other wage and tax statements. 2. Give Copy B to the Employee This isn’t just a courtesy; it’s a requirement. Distributing Copy B of Form 3921 ensures that employees have the essential data they need to file their taxes correctly. The timeline is tight, with the document typically due to the employee by January 31st of the year following the ISO exercise. 3. Keep Copy C for Startup Records In the world of business, documentation is king. Keeping Copy C of Form 3921 is not just good practice but vital for tax compliance. If the IRS ever comes knocking with an audit in tow, you’ll be grateful you retained these records. What Happens if You Miss the Filing Deadline? Oversights happen, but missing the Form 3921 deadline can be costly. Penalties can accrue, and these, over time, can become substantial financial burdens. If you realize you’ve missed the deadline, it’s crucial to act promptly: submit the form as soon as possible and consult a tax professional regarding any penalties and potential relief. The amount of the penalty will depend on how late you file the form and whether you have a history of filing late. The IRS may impose a penalty of up to $25 per day for each day that Form 3921 is late, up to a maximum of $15,000. The penalty will be reduced if you can show that the late filing was due to reasonable cause. In addition to the penalty, the IRS may also assess interest on any taxes that are due as a result of the late filing of Form 3921. The interest rate is currently 6% per year. To avoid the penalties for late filing of Form 3921, it is important to file the form on time. If you are unable to file the form on time, you should contact the IRS as soon as possible to request an extension. Resources Understand the difference between ISOs and NSOs here. IRS- About Form 3921, Exercise of an Incentive Stock Option Under Section 422(b) Copy of Form 3921 Instructions for Forms 3921 and 3922 Learn everything you need to know about accounting for your startup here. Dive into valuable business startup resources here. Visible Can Help Your Startup Stay In-the-Know Understanding and managing the intricacies of Form 3921 can be overwhelming, but Visible is happy to help navigate this and more! Leveraging tools and platforms, like Visible, can streamline processes, and let startups focus on what they do best: innovating and growing. See all the ways we help founders with free access to Visible for 14 days: https://app.visible.vc/create-account

We can all agree that first impressions matter. Onboarding a new investment into your VC firm’s community is a key step in setting up the investor <> company relationship for success. Join us Tuesday, August 29th for a discussion with two leaders in VC Operations, Steph Jones from Forum Ventures and Amelia Zack from M13, on how to set up effective portfolio company onboarding processes at your VC firm. This webinar is designed for people working in VC operations who want to improve the way they engage with their portfolio companies post-investment. Discussion topics: Defining the company onboarding process for your firm and why it matters Welcoming companies into your community Connecting companies to resources Setting expectations about portfolio data collection Q&A

VC Audit Definition Before we address best practices it's important to define what the VC audit entails. A VC audit is when a Venture Capital firm enlists a third-party auditor to evaluate its financial compliance. The auditor will review key fund documentation alongside recent portfolio performance to ensure the firm's valuations are accurate. Which VC Firms Require an Audit On August 23, 2023 the SEC approved new rules for private fund advisers. The changes will require all SEC-registered private fund advisers to have an annual audit regardless of size. Prior to this change, some funds were considered exempt but it was still common for VCs to conduct an audit to help better position the firm for future fundraising from potential LPs who want to see audited financials. Purpose of an Audit The purpose of a VC audit can be summarized in three parts: Ensure the fund’s General Partner(s) are operating in accordance with the fund’s LPA and that the financials reflect compliance Confirm the fund’s valuations of portfolio companies and the fund’s ownership position in them Give LPs confidence that a neutral third party validates the fund’s financial statements and assessment of its own success General VC Audit Timeline Audits are typically conducted on an annual basis using end-of-year figures. The audit process typically starts in the final month of the calendar year and wraps up during the first quarter of the calendar year. Although audits only happen once per year, it’s important to maintain clean records of things like company valuations, company financial metrics, fund expenses, capital calls, and other transactions throughout the year. Continual hygiene of fund records translates into a smoother audit process at the end of the year. Here's a general timeline for the VC audit process: Q1 - Q4 - Collect portfolio company KPI's and monitor valuation changes Q4 - Establish audit timeline with fund admin and auditor. Additionally, the pre-audit process should kick off so auditors have a chance to understand a firm's operations. Q1 - In January, firms should be doing year-end valuations and closing their books. During this month fund managers should also be reviewing the books before sending the final figures to an auditor. During January or February, the audit process officially begins. Q2 - April 30 is the official audit deadline but extensions to the deadline can be requested. For more audit best practices check this webinar co-hosted with Visible and Weaver -- How to Prepare for Your Fund Audit. How to Prepare for a VC Audit Choosing an Audit Firm This is an important step in setting yourself up for audit success. When choosing an auditor it's important to choose a service provider who specializes and understands the nuances of Venture Capital. Otherwise, you risk spending time during the audit process having to teach your auditor about your industry. You can do this by checking out their website and if they have published resources on Venture Capital then this is a great indication that they have knowledge of your industry. You should also ask the team you'll be directly working with whether they have experience in the VC industry. If you're an emerging manager and expect to need hand-holding during the audit process, make sure you choose an auditor who is open for ad-hoc questions. During the diligence process, you should ask the auditor about their policy for asking questions and if there is an additional charge. Related Resource: Five Simple Steps Key Venture Capital Staff Can Take to Support a Successful Audit Establishing a Valuation Policy It's a great idea to establish a valuation policy before your first audit. This policy outlines how your firm will justify its portfolio company valuations under different circumstances. Related resource: Establishing a Valuation Policy Preparing the Required Documents and Information While not a comprehensive list, here are some of the items that funds will likely be asked to provide to auditors: Limited Partnership Agreement Financial statements Fully signed deal documentation Invoices to prove the firm is charging LPs for permitted expenses Transaction records (capital calls, distributions, bank balances) Updated ownership positions in each company (cap tables) Proof of valuation calculations/policies Portfolio company contacts (name and email address) Portfolio company financials (year-end) Portfolio company financing documents from most recent rounds Portfolio company balance sheets Portfolio company revenue reports An established valuation policy Pro Tip: Ensure you are sending your auditor the fully executed (signed) version of the documents. Doing this will help cut down time during the audit process and help firms save money. Hustle Fund reminds investors in this article Fund Audit 101 – Everything You Need To Know that it’s the job of the VC to provide this information to auditors and that the required documentation can change from year to year. It can be helpful to ask your auditor to provide quarterly updates about what they will be asking for during the annual audit. Related Resource: 8 Questions to Ask Before Auditing Your First Venture Capital Fund Monitoring Portfolio Companies Using Visible One of the most time-consuming parts of the audit process is the back and forth that can occur when auditors need more evidence on how the VC firm arrived at company valuation figures. To justify valuations, it's important to have key information from your portfolio companies at the ready. Check out the list below to see what you need to have on file. Portfolio monitoring audit checklist: Revenue budget vs actual Cash on hand Burn rate Company performance vs business plan Details about the last round of financing Visible equips investors with a founder-friendly way to ask for key audit information from portfolio companies. Visible's Request feature allows for any custom metric, qualitative question, files, properties, and more. This streamlined approach to data collection helps VC firms keep up-to-date and accurate records about their portfolio companies throughout the year — leading to a smoother audit process. Check out an Example Request in Visible. More than 400+ VCs use Visible to streamline their portfolio monitoring and reporting.

What is TVPI In simple terms, ‘Total Value to Paid In’, also known as TVPI, communicates how much a VC fund is worth on paper compared to how much money Limited Partners (LPs) have put into the fund. To calculate TVPI you take the total distributions paid back to the LPs (realized gains) and add it to the residual value of the investments in the fund (unrealized gains) and then divide the value by how much Limited Partners have contributed to a fund. It’s important to remember that LPs do not contribute all their committed capital to a fund all at once but rather over time it is ‘called’ by the General Partner for specific reasons such as a new investment. Related Resource: Fund Performance Metrics 101 (and why they matter to LPs) Why does TVPI matter in VC TVPI is one of the earliest indicators current and prospective LP’s will use to measure the performance of a VC fund. It’s essentially communicating whether the fund’s performance is heading in the right direction. In other words, it demonstrates whether the value of investments have increased or decreased. Any TVPI value greater than 1x means that the fund’s value has grown over time. LPs use TVPI to compare the performance of funds against each other. The greater the TVPI, the greater the increase in the value of the fund. To better understand TVPI benchmarks check out Pitchbook’s Benchmark Report as of Q4 2022. Visible empowers investors to visualize, share, and communicate their most important fund metrics in flexible dashboards. TVPI within the current market context According to Hustle Fund, TVPI is the metric that investors are currently feeling squeamish about reporting to potential Limited Partners in today’s tough market conditions. The reason TVPI is low for many funds right now is because their portfolio companies are having a hard time fundraising. If portfolio companies are raising priced rounds at all, the increase in company valuations are marginal or even lower than before (when this occurs it’s called a Down Round). This means investors are not likely to be marking up any of their investments, causing TVPI to remain the same or even decrease with down rounds. Whether your TVPI has gone up or down in the last quarter, it’s important to maintain transparent communication with LPs in both good times and the bad. Check out Visible’s LP Update Template Library to inspire better communication with your LPs this quarter. Using Visible to track and visualize fund metrics With Visible investors can keep track of over 30+ fund metrics including: TVPI RVPI DPI IRR Multiple And more Fund metrics can be visualized in Visible's flexible dashboards alongside text, properties, variance charts, and portfolio metric data. Over 400+ VCs use Visible to streamline their portfolio monitoring and reporting.

Many Venture Capital firms struggle to efficiently collect updates from their portfolio companies and turn the data into meaningful insights for their firm and Limited Partners. It’s usually a painful process consisting of messy Google Sheets or Excel file templates being sent to companies. Then, someone at the VC firm is responsible for the painful task of tracking down companies and convincing them to send the metric template back to the investor. The end result is typically an unreliable master sheet that isn’t accessible or easy to digest for the rest of the firm. Visible has helped over 350+ VC firms streamline the way they collect, analyze, and report on their portfolio and fund performance. Keep reading to learn how. Streamlining Portfolio Data Collection To set up a more efficient portfolio data collection process at your firm make sure you: Don't require companies to manage another login Visible’s data Requests are delivered directly to your companies’ email inboxes and the secure-linked base form ensures there is no friction in the data-sharing process. Maintain founder privacy Visible supports over 3.5k founders on our platform and the consistent feedback we hear is founders do not want their investors to have direct access to their data sources. Founders prefer to have control over what and when their data is shared with investors. Customize which information you request from companies Visible allows investors to create any custom metric, qualitative question, yes/no response, multiple choice, and more. This provides investors with the flexibility to use Visible for more than just financial reporting but also impact or diversity reporting and end-of-year audit preparation. Related resource: Portfolio Monitoring Tips for Venture Capital Investors Related resource: Which Metrics Should I Collect from My Portfolio Companies Easy Ways to Analyze VC Portfolio Data While having up-to-date, accurate investment data is important, being able to extract and communicate insights about your portfolio data is when it really becomes valuable. Visible supports three different types of dashboards to help you analyze your portfolio data more easily. Flexible portfolio company dashboards — Visualize KPI’s by choosing from 9 different chart types and combine with rich text and company properties. These dashboards are a great fit to help facilitate more robust internal portfolio review meetings. Portfolio metric dashboards — This dashboard allows you to compare performance across your entire portfolio and easily identify your top performers and the companies who may need additional support. Fund analytics dashboards — This flexible dashboard lets investors control how they want to visualize and analyze their fund performance metrics. Choose from over 30+ fund metrics and auto calculated insights and easily add them to your shareable dashboard. View an example of all three types of dashboards by downloading the resource below. Sharing Portfolio Updates with Limited Partners It’s important to remember that while Limited Partners are primarily focused on financial returns they also care about insights. VC firms who empower their Limited Partners with updates about sector trends and high-level insight into portfolio company performance are setting themselves up to be both trusted and valuable long-term partners to their investors. LP Update Template Library — Visible makes it easy for firms to make engaging communication with Limited Partners a habit by providing free and open-source Update templates. Want to feature your LP Update template in out library? Get in touch! Tear Sheets — Tear Sheets or One Pagers can be a great way to provide high-level updates about portfolio companies to your LPs. Visible’s tear sheet template solution helps VC firms create reporting with ease by merging information and data into beautiful charts that are automatically kept up to date. View Tear Sheet examples to inspire your next reporting. Related resource: Tear Sheets 101 (and how to build one in Visible) Visible supports 400+ funds around the world streamline the portfolio data collection, analysis, and reporting process.

Managing company equity is a crucial part of a founder’s job duty. In the early days of building a business, chances are there will be countless advisors, investors, peers, etc. that help a business. However, most early stage businesses do not have the cashflow to compensate every advisor along the way. Founders need to get crafty with how they compensate their earliest advisors and experts — enter: advisory shares. We always recommend consulting a lawyer before taking further action on advisory shares. Learn more about advisory shares and how you can leverage them for your business below: What Are Advisory Shares? As put by the team at Investopedia, “One common class of stock is advisory shares. Also known as advisor shares, this type of stock is given to business advisors in exchange for their insight and expertise. Often, the advisors who receive this type of stock options reward are company founders or high-level executives. Advisor shares typically vest monthly over a 1-2 year period on a schedule with no cliff and 100% single-trigger acceleration.” Advisor Shares vs. Regular Shares (or Equity) Advisor shares come in different shapes and sizes. There is not a technical definition of advisor shares but is rather any form of equity in a business. Learn more about the characteristics of advisory shares below: Characteristics of Advisory Shares As mentioned above, advisor shares typically vest monthly over a 1-2 year period with no cliff. Advisory shares are typically granted as stock options but not every company grants their shares in the same way. This generally comes in the form of Non-Qualified Stock Options (NSOs). Related Read: The Main Difference Between ISOs and NSOs How Do Advisory Shares Work? While advisory shares can take on different forms, they typically can be boiled down to a few similarities. Of course, these can change depending on your business. Exchanged for advice or expertise Typically offered as NSO stock options Follow a shorter vesting schedule Learn more about how advisory shares typically work below: Implement a Startup Advisor Agreement As put by the team at HubSpot, “A startup advisor agreement is a contract between a startup and its advisor. This agreement outlines the terms of the relationship, including the responsibilities of each party and the compensation the advisor will receive.” There are countless advisor agreement templates online to get you started. The Founder Institute offers a free template called the FAST Agreement. Determine the Vesting Schedule As advisor shares are for advisors that offered their expertise, they are typically granted on a shorter vesting schedule because their value is given over a shorter amount of time. This is typically a 1 or 2 year vesting schedule (as opposed to the 4 year vesting schedule traditionally used for startup employees). Benefits of Advisory Shares Advisory shares come with their own set of pros and cons. Properly maintaining and distributing equity is a critical role of a startup founder so understand the benefits, and drawbacks, of offering advisory shares is a must. Related Resource: 7 Essential Business Startup Resources Learn more about the benefits of offering startup advisory shares below: Access to Real Experts When setting out to build a business, chances are most founders lack expertise in certain areas when it comes to building a business or in their market. However, most early-stage companies are typically strapped for cash and are unable to afford the defacto experts in the space. With advisor shares, startup founders can attract real experts to get guidance and strategic support in the early days in return for shares in the business. Related Resource: Seed Funding for Startups 101: A Complete Guide Better Network Credibility If hiring the right advisor, chances are they will be able to help beyond strategic advice or their expertise. They will be able to expose your business to their network and will be able to make introductions to new business opportunities, partnerships, investors, and potential hires. Cost-Effective Compensation As we previously mentioned, most businesses that benefit most from advisors are unable to offer them a salary or cash compensation. With advisor shares, startup founders are able to offer shares as compensation and conserve thei cash to help with scaling their business and headcount. Drawbacks of Advisory Shares Of course, offering advisor shares is not for everyone. While there are benefits to offering advisor shares, there are certainly drawbacks as well. Weighing the pros and cons and determining what is right for your business is ultimately up to you. We always recommend consulting with a lawyer or counsel when determining how to compensate advisors. Diluted Ownership The biggest drawback for most founders will be the diluted ownership. By offering shares to advisors, you will be diluting the ownership of yourself and existing shareholders. As advisors are fully vested in 1-2 years, they will potentially not be invested in future success as other stakeholders and could be costly when taking into account the diluted ownership. Potential Conflicts of Interest Advisors might not have the same motivators and incentives as your employees and other shareholders. As their ownership is generally a smaller % and their shares vest early, they are potentially not as incentivized for the growth of your company as employees and larger % owners will be. Getting in front of these conversations and making sure you have a good read on any potential advisors before bringing them onboard is a good first step to mitigate potential conflicts. Extra Stakeholder to Manage Chances are most advisors are helping other companies as well. This means that their attention is divided and you will need to ensure you are getting enough value to warrant dilution. This also means that you are responsible for managing a relationship and communication with another stakeholder in your business — what can be burdensome on some founders. The 2 Variations of Advisory Shares Advisory shares are generally offered in 2 variations — restricted stock awards and stock options. Learn more about each option and what they mean below: Restricted Stock Awards As put by the team at Investopedia, “A restricted stock award is similar to an RSU in a number of ways, except for the fact that the award also comes with voting rights. This is because the employee owns the stock immediately once it is awarded. Generally, an RSU represents stock, but in some cases, an employee can elect to receive the cash value of the RSU in lieu of a stock award. This is not the case for restricted stock awards, which cannot be redeemed for cash.” Stock Options As we mentioned, NSOs (Non-Qualified Stock Options) are commonly used for advisor shares. As put by the team at Investopedia, “A non-qualified stock option (NSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option… Non-qualified stock options require payment of income tax of the grant price minus the price of the exercised option.” Who Gets to Issue Advisory Shares? Issuing advisory shares is typically reserved for the founder or CEO of a company. Having a decision-making process and gameplan when issuing advisory shares is important. This might mean offering no shares at all, having an allocated amount of advisor shares from the get go, or something inbetween. Making sure your board of directors and other key stakeholders are on board is crucial to make sure that interest and strategy stays aligned for all stakeholders. How Many Shares Should You Give a Startup Advisor? Managing the balance between sufficient incentives and managing equity dilution is crucial for any business. Determining the number of shares to offer an advisor is subjective to the founder and advisor. When determining the number, a couple of things to keep in mind include: Advisor’s experience Time commitment Expected contribution As put by the team at Silicon Valley Bank, “An advisor may receive between 0.25% and 1% of shares, depending on the stage of the startup and the nature of the advice provided. There are ways to structure such compensation that ensures founders get value for those shares and still retain the flexibility to replace advisors, all without losing equity.” Let Visible Help You Streamline the Investment Management Process Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. Related resource: Navigating the World of QSBS: Tax Benefits and Eligibility Criteria Explained