Stuck? Time to Improv! The Startup Launchpad

Define the Right Problem with Mark Richman from Skeleton Key

Defining Problems in Startups

Mary and Mark discussed the importance of defining the right problem in startups. Mark explained that many people tend to rush to solutions without properly evaluating whether they are addressing the root cause of the issue or if the problem is worth solving. He emphasized the need to slow down and assess the impact and value a solution would have for potential customers.

Problem Identification and Root Cause Analysis

Mark discussed the importance of properly identifying and understanding problems before seeking solutions, emphasizing the need to distinguish between symptoms and root causes. He explained that while some problems require complex solutions, others may be simple or not worth addressing due to low payoff. Mark shared a framework for problem-solving that involves slowing down to evaluate the problem's dimensions, impact, and potential consequences before considering solutions.

Problem Scale and Prioritization Strategies

Mark explained that understanding the scale of a problem is crucial for prioritizing solutions, emphasizing that problems affecting multiple people or teams often have a more significant impact than those affecting only one individual. He illustrated this with an example where a production issue affecting 10 people could save 500 hours annually, while a report missing an invoice number only affected one business owner. Mark stressed the importance of quantifying both the problem's scale and potential solution impact to make informed investment decisions, even when the solution might not completely eliminate the problem.

Problem Prioritization Four-Quadrant System

Mark explained his system for prioritizing problems using a four-quadrant chart that considers both the impact of solving a problem and the investment required. He described how to categorize issues into quadrants representing quick wins, major projects, time killers, and low-value/low-investment tasks. The discussion concluded with Mark suggesting that even within high-impact problems, one could consider simpler MVP approaches to reduce both complexity and cost.

Connect with Mark at https://skeletonkey.com

Book a 15 minute synergy call with Mary Scott at https://calendly.com/businessriff/15min

Arch Angels investors with Brian Kinman

St. Louis Archangels Investment Network

Brian Kinman from St. Louis Archangels explained that the organization is a network of accredited investors in their 23rd year, with about 75 active members who have invested approximately $130 million across 160 different enterprises. The group holds 10 meetings annually where they present three investment opportunities to members, who then indicate their interest in pursuing further discussions with founders. Each member makes individual investment decisions rather than collective group decisions.

Archangels Investment Group Overview

Brian explained that Archangels is a formal investment group in St. Louis with diverse expertise that allows members to collaborate on startup investments across various sectors including human health, medical devices, technology, and agriculture. The group started with a focus on human health and therapeutics but has expanded to include more medical devices, laboratory testing, and AI applications. While Archangels invests in a wide range of sectors, Brian noted they are more cautious about consumer products due to the challenges in marketing and distribution.

Sector Marketing Challenges Discussion

Brian and Mary discussed the challenges of marketing in different sectors, noting greater competition in consumer products compared to biotech or fintech. Mary highlighted the growing interest in FinTech applications aimed at improving financial literacy, while Brian mentioned an EdTech opportunity focused on enhancing communication between teachers and parents. Both emphasized the social impact of their investments alongside the capitalistic goal of creating jobs and generating returns for future opportunities.

Startup Investment Screening Process

Brian explained that startups can find them through their website, which provides examples of investments and connection instructions. He noted that their reputation as a lead deal maker has attracted many potential investments. Brian emphasized their screening process and coaching for founders, stressing the importance of presenting a holistic business plan rather than just ideas or science projects.

Arch Grants Founder Requirements

Brian discussed that Arch Grants looks for founders who have developed beyond the initial idea stage and can articulate their market strategy and business model. He explained that they consider founders from various backgrounds, including those from universities and those who have been through accelerators, though the accelerator experience is sometimes a positive factor and sometimes a negative one depending on the specific situation. Brian emphasized that Arch Grants prioritizes putting good deals in front of their members and will stop poor-quality deals early to avoid wasting founders' time.

https://stlouisarchangels.com

What Investors Want with Jay Goth from Redtail Capital

Startup Investor Engagement Discussion

Mary welcomed Jay Goth from Redtail Capital to discuss how startups can talk to investors. Jay explained his background as a serial investor who formed Redtail Capital to focus on impact investing, particularly in biotechs, medical technologies, clean energy, and social impact startups.

Startup Investment Requirements Discussion

Jay discussed the key requirements startups need before approaching investors, emphasizing the importance of having a solid business entity, a minimally viable product, and a successful team or track record. Mary noted that many new startups struggle to define the problem they are solving, which Jay acknowledged as a common issue, particularly in later stages of pitch presentations. Jay mentioned he would be releasing a report next week analyzing 82 pitch decks, highlighting challenges with investment terms and milestones.

Effective Pitch Deck Strategies

Jay emphasized that pitch decks should clearly demonstrate how investments will lead to higher valuations and investor readiness, including proper legal and accounting frameworks. He noted that many pitches lack sufficient information about competition and differentiation. Mary agreed that startups need to clearly articulate the problem, target audience, solution benefits, and competitive advantage.

Pitch Deck Strategy Recommendations

Jay recommended creating two types of pitch decks: a detailed version for cold emails to investors and a concise 10-12 slide version for verbal presentations. He explained that cold pitch decks should include comprehensive information about the problem, solution, moat, and investment benefits, while verbal presentations should use minimal text with large fonts for easier investor consumption. Jay also shared his experience with an impact technology company focused on plastic reuse, though he noted that attempts to reuse degraded ocean plastic were not economically viable due to high energy costs.

Investor Pitching Strategy Discussion

Jay advised Mary that when pitching to investors, the primary goal is to get them interested enough to want a follow-up conversation rather than securing immediate investment. He emphasized that getting investors asking questions is a positive indicator of engagement and success in the pitching process.

Jay's link https://redtailcapital.com

Book a call with Mary Scott at https://calendly.com/businessriff/15min

Basic Contracts for Startups with Mike LaBozzetta, The Laiderman Law Firm

Startup Contract Types Overview

Mike discussed various types of contracts that startup businesses need to be aware of, including insurance policies, employment agreements, contractor agreements, licensing deals, investor agreements, and operational agreements like bylaws and partnership agreements.

Business Structure and LLC Options

Mike explained that when starting a business, founders need to decide on the business structure, with LLCs being a popular choice due to their flexibility compared to corporations. He noted that while LLCs are typically easier to start with, there are options to convert between different business structures later if needed. The discussion then shifted to non-disclosure agreements, which Mary inquired about but the transcript ended before Mike could provide details.

NDA Best Practices Discussion

Mike discussed the common practice of founders using non-disclosure agreements (NDAs) to protect their intellectual property from potential investors and partners. He advised considering the audience when crafting NDAs, noting that many investors may not sign them due to time constraints. Mike also highlighted the importance of determining what information needs protection and implementing internal safeguards beyond written agreements. Mary mentioned licensing agreements as another important consideration, though her full point was not captured in the transcript.

AI Licensing Agreement Provisions

Mary and Mike discussed the importance of including exclusions and protections in licensing agreements to prevent AI from training on client data. Mike emphasized that many existing contracts lack these provisions due to AI being a new concept, and advised founders to consider how their information might be used by vendors or clients. The discussion was cut off mid-sentence as Mary began to ask about scaling considerations for founders.

Investor Contracts and Agreement Types

Mary and Mike discussed different types of investor contracts, with Mike explaining that SAFE agreements are streamlined but more speculative, requiring founders to have skilled attorneys review them. Mike noted that as companies grow, contracts become more complex, potentially involving different stock classes and corporate structures. The discussion ended with Mary asking about contract specificity for co-founders' job descriptions, but this part of the conversation was not captured in the transcript.

Early Buy-Sell Agreement Planning

Mike recommended planning buy-sell agreements and partnership agreements early in the startup phase when founders are getting along, as this avoids complications when disagreements arise later. He suggested having these conversations before issues emerge, as renegotiating terms during conflicts can compound problems.

Contract Management and Risk Assessment

Mike explained that contracts have two main aspects: risk management and how they are presented to stakeholders. He emphasized the importance of founders consulting experienced contract drafters and suggested that contract drafters should understand the relevant industry.

Industry-Specific Legal Expertise Importance

Mike emphasized the importance of industry-specific knowledge for legal professionals working with clients, noting that understanding a client's industry and supply chain is crucial for risk management and effective communication. Mary agreed, highlighting the need for specialized expertise in different sectors like biotech, aerospace, and retail. Mike concluded by reminding viewers that contracts serve as both risk management and marketing tools.

Network for Teaching Entrepreneurship with Dr. Ashley Hemmy

Network for Teaching Entrepreneurship Overview

Ashley Hemmy (she/her) explained that the Network for Teaching Entrepreneurship (NFTE) is a global organization celebrating its 40th anniversary that brings entrepreneurship education to young people worldwide, particularly in communities with limited access to such opportunities. The programs serve students from kindergarten through post-secondary levels, with core programs targeting high school students and extending to middle school, while also offering digital challenges for younger participants.

Youth Business Program Survival Rates

Ashley Hemmy (she/her) explained that their programs support a variety of businesses created by young people, including nonprofits focused on social issues, for-profit companies, and typical small businesses like baked goods stands. When asked about business survival rates after graduation, Ashley Hemmy (she/her) shared that approximately 25% of alumni become entrepreneurs, with some continuing businesses started through NFTYS programs and others developing new ventures after the programs.

NFTE Entrepreneurial Programs Discussion

Ashley Hemmy (she/her) discussed NFTE's programs focused on developing entrepreneurial mindsets in young people through durable skills like problem solving, creativity, collaboration, flexibility, and risk assessment. She explained that while the organization primarily works with school programs and organizations globally, they have recently launched direct programs like "Next Level Startup" targeting homeschooled students and those seeking additional business experiences. The organization is approaching its 40th anniversary, having been founded by Steve Mariotti in 1997 in the Bronx.

Here are a few links: NFTE.com/what-we-do http://NFTE.com/what-we-do

to learn about how we launch the next generation of entrepreneurs ABOUT NFTE YouTube playlist http://NFTE.com/get-started

to get involved with NFTE The Entrepreneurial Mindset explained - https://nfte.com/resources/nfte-emi-what-is-it/

About NFTE's merger with BUILD.org https://nfte.com/nfte-and-build-announce-merger-to-drive-systemic-change-in-education/

Investor Pitch Practice with David Weaver, Transitions Law Group & AngelLab

YouTube Live Stream Planning Meeting

Mary and David discussed going live on YouTube, with thGre content being edited before distribution through RSS feed and LinkedIn. They confirmed a link for the event, which was shared in the Zoom chat. Mary prepared to set up the YouTube live stream, ensuring the audio was properly configured to avoid feedback.

Mock Angels Program Revival Discussion

Mary and David discussed the revival of Mock Angels, a program where founders could present their businesses to potential investors and experts for feedback. David explained that TechSTL received a grant from Missouri Technology Corporation to promote angel investment education and restart Mock Angels. They are also developing an investor community to bring together angels and VCs.

Retaining Successful Startups in St. Louis

David discussed the challenge of retaining successful startups in St. Louis, noting the common joke that companies often leave for the West Coast seeking funding. He emphasized the need to change this pattern by preparing both companies and investors to keep successful ventures in the St. Louis area.

AngelLab Startup Investment Criteria

David explained that startup companies suitable for AngelLab should be ready to raise money, with experienced founders, developed MVPs, traction, and a compelling business strategy. He emphasized the importance of being able to communicate a clear problem statement and value proposition within the first eight seconds of a pitch, whether seeking venture capital or seed funding.

Emerging Company Investment Challenges

David explained that investing in emerging companies is challenging due to the risk and requires significant knowledge and understanding of the marketplace. He emphasized the importance of not being the last investor and highlighted that there is no hometown discount in the current investment landscape. David mentioned that in November, they plan to bring together startups for investors to see and practice mock angel presentations.

https://youtu.be/p9coKDe56qY

Funding Tips for Startups with Allen Kopelman, Nationwide Payment Systems

Startup Funding Sources Discussion

Mary asked about alternative funding sources for startups beyond banks and friends/family. Allen clarified that their company is in the payments business, not the funding business, and explained that startups typically turn to Stripe and Square for payments processing. He noted that startups can only access additional funding once they start generating revenue through payment processing, otherwise they need to seek VCs or angel investors.

AI and SaaS Business Challenges

Allen discussed the challenges faced by AI and SaaS companies in setting up their business operations, particularly regarding payment systems and revenue generation. He explained that having a demonstrated ability to generate revenue is crucial for attracting VCs and investors. Allen outlined the services his company offers, including a RESTful API, webhooks, developer support through a Slack channel, and consulting services for pre-revenue companies to help them get approved for merchant accounts and find appropriate banking partners.

Revenue-Share Payment Integration Solution

Allen explained that their product can handle various types of companies including SaaS, AI companies, and homeowner associations, with a focus on payment integration. He emphasized that their solution offers revenue-sharing opportunities for growing companies, particularly those generating monthly recurring revenue.

Startup Platform Security Requirements

Allen explained that startups need to provide website access and logins for testing, particularly for AI companies, to ensure their platforms are reliable and secure before banks will consider involvement. He highlighted common issues that can lead to payment problems, such as platform downtime, insufficient hosting, and chargeback issues.

Payment Processing Security Requirements

Allen explained the importance of using certified companies for payment processing and described their approach of semi-integration, where credit card data never touches the client's servers. He emphasized that direct payment integration requires maintaining expensive PCI level 1 compliance, which can cost hundreds of thousands of dollars annually.

Semi-Integrated Payments Overview

Allen explained that semi-integrated payments were created to provide companies with a faster integration process and reduced liability. He highlighted their company's 25-year history, experienced integration staff, and customer support capabilities, including direct phone contact and developer assistance through Slack channels.Book a 15 minute synergy call with Mary Scott at https://calendly.com/businessriff/15min

Alternate Funding for Startups with Greg Roberts, The Roberts Consulting Agency

Alternate Funding Business Entry

Gregory explained how he entered the alternate funding space while working with a firm that helped launch CPA businesses. He noticed that business owners consistently requested funding as their primary need, but traditional banking options were insufficient as 98% of banks avoid lending to startups. This observation led him to research and partner with vetted funding companies to start his own alternate funding business.

Alternative Startup Financing Structures

Gregory explained that when banks reject loans for startups, alternative financing structures can help by dividing the risk across multiple companies, allowing for 0% financing over 24 to 42 months with a monthly 1% fee. He noted that even long-term banking customers are often rejected for business loans despite approval for personal loans like car financing.

Flexible Loan Terms Discussion

Gregory explained that the loan offers flexibility compared to traditional loans with strict terms, featuring a 1% interest rate over 24 months with the option to renew or roll into a permanent loan. Mary expressed surprise at the fixed interest rate, and Gregory clarified that if the borrower chooses standard payments, they would move to typical bank or credit card interest rates.

Startup Loan Application Requirements

Gregory explained that for startup loan applications, he typically requires six months of business bank statements to assess business activity and may consider the individual's personal credit if the business is new but generating income. He emphasized that alternative financing should be flexible, particularly for businesses with large orders or predictable income streams, noting that this approach has worked well in cases where businesses have pre-orders or established vendor relationships.

Startup Consulting Loan Services

Gregory explained that his consulting agency provides startup loans similar to a line of credit with a flat fee structure, without taking ownership of the companies. He clarified that they charge a normal across-the-board fee that is tax deductible for the business owners. Gregory mentioned starting this service in September 2021 and has helped many startups over the past five years.

Greg Roberts website: https://www.fundingyourway.biz/

Book a 15 minute synergy call with Mary Scott at https://calendly.com/businessriff/15min

Pitching to an Investor with Gary Tomchuk from Evolutionary Ventures

Startup Investor Discussion Preparation

Mary and Gary discussed sharing relevant links and contact information, including Gary's LinkedIn profile, Evolutionary Ventures website, and his role as California representative for Investor Circle. Gary mentioned his work with impact investors and his involvement in a round table discussion about what investors want to hear from startups. The conversation then transitioned into the start of an interview for "Stuck? Time to Improv," where Mary welcomed Gary and introduced the topic of startups talking to investors.

Startup Funding Key Considerations

Gary discussed key considerations for startups seeking funding, emphasizing that investors focus primarily on team composition and potential returns rather than just the business concept. He highlighted that a strong team with relevant experience in product, industry, and company building is essential, as a good team can pivot effectively while a bad team can ruin even a good idea. Gary also introduced his three-legged stool model for building stable companies, which includes product/service, marketing, and business structure components.

Impact Company Strategy Discussion

Gary discussed how impact company founders often focus too much on the social mission rather than balancing all three pillars of people, planet, and profit. He explained that part of his work involves determining whether impact companies should operate as for-profits or non-profits, and mentioned an upcoming webinar about using donor-advised funds (DAFs) to fund businesses, including for-profit entities.

Angel Investment Group Interview

Mary interviewed Gary Tomchuk from Investor Circle, an angel investment group that has been active for 34 years and invested over $300 million. Gary explained that Investor Circle focuses on pre-seed, seed, and Series A rounds with individual investments typically ranging from $20,000 to $200,000, and they maintain an 85% funding rate for companies presenting on their monthly calls. Gary emphasized that investors want to see traction, team in place, MVP development progress, and evidence of first money invested, particularly from founders who have skin in the game or are working with investors.

https://youtu.be/I4q6ERvRE8M

Contact Gary Tomchuk https://www.linkedin.com/in/garytomchuk/ www.evolutionaryventures.com www.investors-circle.org impactentrepneur.com

Book a 15 minute synergy call with Mary Scott at https://calendly.com/businessriff/15min

Insurance Facts for Startups with Pete Shemetulskis from Marquee Benefit Advisors

Startup Insurance and Benefits

Mary and Pete discussed the importance of insurance for startups, particularly focusing on employee benefits. Pete explained that the need for insurance depends on the industry and organization type, noting that benefits are more crucial for organizations with high employee turnover or those seeking to attract and retain staff.

Business Insurance Requirements Discussion

Pete discussed insurance requirements for businesses, emphasizing the need for health insurance and workers' compensation coverage. He advised startups to find a trusted insurance professional early in the business development process to help navigate benefits and risk management. Pete outlined common employee benefits including health insurance, dental, vision, and life insurance, noting that life insurance is particularly inexpensive for employers to provide.

Employee Benefits Overview

Pete discussed various employee benefits including pet insurance, critical illness and accident policies, and programs for nursing mothers. He explained that COBRA provides coverage for employees who leave the organization, and stop loss insurance protects employers from liability after a certain point. Pete also mentioned how employee benefits can help retain key personnel like chief scientists in biotech startups.

Business Insurance Options for Solopreneurs

Pete explained life insurance policies for business continuity and discussed health insurance options for solopreneurs, including group plans, ICRA arrangements, and chamber of commerce plans. He noted that while some solopreneurs may be covered under spouse plans, many employers now require eligible individuals to move to company plans. Pete also mentioned that two-person groups, including spouses, can sometimes get coverage but at higher costs due to lack of underwriting.

https://marqueebenefit.com

Book a 15 minute synergy call with Mary Scott at https://calendly.com/businessriff/15min