Startup Fundraising Master class - Raise Venture Capital | Navdeep Yadav | Skillshare
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Startup Fundraising Master class - Raise Venture Capital

teacher avatar Navdeep Yadav, CEO Float ( MBA - IBS Hyderabad )

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

    • 1.

      Class Intro

      1:21

    • 2.

      Small business Vs Tech Startup

      8:28

    • 3.

      How to generate startup idea

      6:10

    • 4.

      Types of startup

      6:27

    • 5.

      Startup Road Map

      4:52

    • 6.

      Product execution road map

      4:34

    • 7.

      Reasons why startup fail

      3:57

    • 8.

      Business Model Canvas

      9:03

    • 9.

      Business Model Canvas Examples

      5:29

    • 10.

      Introduction to platform business

      4:18

    • 11.

      Uber business model

      5:08

    • 12.

      Amazon business model

      6:25

    • 13.

      3H strategy for Dream Team

      4:47

    • 14.

      Three Things investor look in a startup

      1:59

    • 15.

      Origin of a startup

      2:15

    • 16.

      Sole Proprietorship

      2:31

    • 17.

      Partnership firm

      2:37

    • 18.

      Corporation legal structure

      6:33

    • 19.

      Startup funding stages

      5:25

    • 20.

      Startup funding source

      9:27

    • 21.

      Startup ownership and equity basics

      5:35

    • 22.

      Bootstrapping your startup

      5:28

    • 23.

      How to get best out of bootstrapping

      11:07

    • 24.

      Inflection point in a startup

      4:26

    • 25.

      Common mistakes with inflection point

      3:34

    • 26.

      Incubators vs accelerators

      5:27

    • 27.

      Angel investor vs Venture Capitalist

      7:27

    • 28.

      Everything about VC investment and ROI

      5:55

    • 29.

      Vesting and Cliff for startup

      3:53

    • 30.

      Vesting Spread and types of vesting

      4:40

    • 31.

      Pre-money and post-money valuation

      5:39

    • 32.

      Startup stock distribution

      3:01

    • 33.

      Common Stock Vs Preferred stock

      5:46

    • 34.

      Convertible Notes in a startup

      10:33

    • 35.

      SAFE Vs Convertible Note

      4:47

    • 36.

      Startup Valuation basics

      4:08

    • 37.

      Startup Taxonomy

      3:15

    • 38.

      Startup valuation techniques

      3:40

    • 39.

      Berkus method for pre-revenue startup

      2:54

    • 40.

      Risk factor summation method

      2:35

    • 41.

      Scorecard Valuation Method

      4:06

    • 42.

      Comparable transaction method

      2:27

    • 43.

      First Chicago method

      2:58

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About This Class

Are you looking for fundraising for your startup?
Do you know how to make a pitch deck and attract venture capital for your business?

Then this is the RIGHT class for you.

Startup Fundraising Master class will help you navigate through the complete fundraising process for tech and non-tech startups. We will cover topics like business model, building Minimum Viable Product, Making Pitch deck for your startup, understanding investors funding strategy.

1. Introduction to Startup Basics

  • Course Overview

  • Startup Road Map

  • Building MVP for your Startup

  • Product execution road map

  • 5 reasons why startups fail

  • Types of Startup

2. Understanding Startup Business Model

  • Business model overview

  • Business Model Canvas

  • Introduction to platform business

  • Uber business model

  • Amazon business model

3. Legal Structure in the Startup

  • Origin of a startup

  • Sole proprietorship for Small Business

  • Partnership firm for medium business

  • Corporation Legal Structure for the Startup

4. Fundraising for Startup

  • Startup Funding Basics

  • Startup Funding Source

  • Startup ownership and equity

  • Bootstrapping your Startup

  • How to get the best out of Bootstrapping

5. Startup Pitch deck

  • Types of Investor in a Startup

  • The inflection point in a startup

  • Common Mistakes with the Inflection point

  • Incubator and Accelerators for startup

  • Angel Investor and Venture capitalist for Startup

  • How does Venture capital look for ROI in startups?

6. Vesting and Cliff in a Startup

  • Vesting and Cliff for startup

  • Vesting Spread and types of vesting

  • Pre Money and Post Money Valuation

  • Startup stock distribution

7. Stocks/shares in a Startup

  • Common vs Preferred stock

  • Convertible note

  • SAFE vs Convertible Note in a startup

8. Understanding Startup Valuation

  • Startup valuation basics

  • Startup taxonomy

  • Types of Startup Valuation

  • Berkus Method for pre-revenue startup

  • Risk factor summation method for valuation

  • Scorecard Valuation Method

  • Comparable transaction method

  • First Chicago valuation technique

Meet Your Teacher

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Navdeep Yadav

CEO Float ( MBA - IBS Hyderabad )

Teacher
Level: All Levels

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Transcripts

1. Class Intro : And starting your own startup is hard. You first have to count with an idea. Then you have to go into business model to generate some revenue. And finally, you have to read some capital to scale your business. If you already have a business idea or maybe a bit of revenue than raising capital from investor is the most difficult part of your business. And that's why in this course, I'm gonna give you a step-by-step process from generating a business idea TO finally raising capital for your startup. Now, I have divided this course into multiple sections. In section number one, we're gonna talk about Business Model Canvas. Business Model Canvas is a single-page framework which will help you understand all the moving parts of your business. Then we will talk about the different types of business mortar. In this section, we will talk about business model like subscription business mortar or freemium business model, or pay-as-you-go business mortar. Now in this section I'm going to discuss almost seven to eight different types of business mortar that you can choose for your style. In section number three, I'm gonna give you a step-by-step process from making a pitch deck to reaching out to different investor. And in this section we will understand how exactly will you make pitch deck of your stock, because pitch deck will help you convince all of your investor to invest in your business and about frontpage tech. We will also understand some basic concepts like different source of fundraising. How exactly you will find these in restaurants. So I'm super excited for this course and let's dive in. 2. Small business Vs Tech Startup: Hey everyone, let's understand the difference between a small business and IT x dot dot. Now if you're planning to open a small business like a bakery shop or a car wash? Well, these are small business. On the other side, you have tech startup like your amazon, Airbnb, Stripe, Uber, slag, and Facebook. Now, obviously these are not startup anymore. All these companies, or I would say majority of the companies are public. And that's why these started as a small business, but now they are big public giant. But what is the basic difference between a bakery shop and a car wash? If you started both these companies, like maybe a bakery shop or a car wash in 2007. And any of these companies, you can understand that all these tech companies are scalable. They can go from $0 in revenue to a billion dollars in revenue within four to five years. If they have proper business model, proper technology, product, and scalable business at least. But if you started any of these small business like a bakery shop or a car wash, it's really difficult to scale the business. So that's why we will understand boo qualities of startup. Now you can start a small business. Anytime you want. Small business are successful, they can make good profits. But startups are very different from small business. Let's understand the two important qualities of startup. Small businesses have their own audience. You can start a good bakery shop. You can start a car wash, you can generate profit, you can on money. But their business model is totally different from startup. Let's understand the two important qualities of startup. The number 1 is x scalable. Now, all these tech companies have a technology product if the product is good and that product is used by a lot of people, that startup tech scalable and that start-up have high growth potential. Now, if a startup have bought these qualities, that startup can go from $0 in revenue per billion dollars in revenue. Now let's understand why I'm so bullish about these two things, scalable and high growth potential. So these are your traditional businesses, beauty shop and car wash. Now you can make these businesses profitability. You can on good amount of money, not doubt about that, but these are your tech startup which are little unique. So let's understand why your tech startup are scalable, can expand very fast, and why your traditional businesses are not scalable. And let's understand this with the help of this characteristic. So let's say you wanted to open a store front. So for a small business, you have to pay a rent anywhere between 5000 to 10000 dollar depending on the location. But for all these businesses, once you end up building a mobile application, then you do not need to beer any cost, any additional cost for opening a new store because everything is on the internet. You just have to expand into a new city. And then you can some sort of advertisement and tell people to use your mobile application to order any specific team, or do you use any of the product? Let's look at the reach. So if you wanted to have additional five people in your store, whether it's car wash or bakery shop or any small business, you have to pay somewhere between 3000 to 5000 dollar to every single person. So five-person, you have to pay them 3000 to 5000 owner to every single person. Let's say you started your e-commerce store to a specific CD and now you are expanding to a different city. And that situation, you just need to maybe hire one new person for that specific city. And that personally manage some of the operation. In terms of inventory. In all of the small business, you have to maintain a separate inventory. But for e-commerce store like Amazon, you can maintain a centralized inventory. So in short, if Amazon wanted to expand in good density, they can quickly expanded, go 50 different city by just hiding couple of people and then they can start selling their product. Why don't other side, if this business wanted to expand in good defense city, for every single store, they have to set up a storefront. They have to hire people for every single store. They have to maintain a separate inventory for every single store and their operational cost is also very high. That means because these businesses are asset heavy business assets having means, they have a lot of Lang, lot of labor. They have a lot of real asset. It is really hard for these businesses to expand into different territory or different city or different location. But for tech companies, you just have to hire additional people. Let's save slack wanting to expand into a different country. He just have to hire one or two salespeople for our different concrete let's say if all the employees walking in Slack or knows English and they wanted to expand into Germany, ordinary front. So in that situation, they just need to hire two or three additional people who can sell their product in those two different countries. That's it. That's the power of all these technology company. They are scalable and they have a low-cost scalable structure. And if you ask me about some other constraint which Amazon and these businesses when phase is the time constraint, honestly, you can open our bakery shop maybe for eight or 10 hours. But on the other side, amazon is up and running 24, 7. Now this is the scalable pipe. Let's understand the growth potential. Why these tech companies have higher growth potential and bakery shop have a log-log production. So these tech companies can go from maybe 10 percent growth rate year on year to a 100 percent growth rate year on year, which is really difficult to achieve using these bakery shop. Let's understand this with the help of an example. So a bakery shop can clock maximum of maybe one hundred, ten hundred or those ugly. And after that you will find it difficult to process more than a thousand or those again, because now you have limited staff, limited space, and limited people to process that or low. But for all these tech product, whether you saying one message or you order 20 different product, or you do whatever you want there, it doesn't have any limit. They can quickly expand their operation. So you can do as many payment is we want using stripe. You can book as many cab as you want using Uber, because all of these are technology product and no one is manually processing does stuff. And you can send as many message as you want using Slack. Then space constraint. Obviously if you wanted to maybe let's say store 60, 70, 80 SKUs, so-called stock keeping units in that specific bakery shop, then you are done. You cannot store original totally 40 or stock if you have R. So Dean, space limit. While in all these tech products, they are running on Cloud and you can maybe store as many products as you want. You just have to list on your product and couple of pictures and your product is there on your e-commerce store. In terms of capital, in the previous video, we had a description that these are asset heavy business, which means you need a lot more capital to purchase land, to setup the store, to hire people, to buy some machines like maybe sorting stuff to cook the food or something like that. For all these tech companies, you just need to hire a couple of engineers who can build the product and then you can quickly scale these product and reach a sodium revenue might strong. So obviously the growth potential for these tech companies are high. And if you personally asked me, these tech companies have the potential to increase their growth rate by five x. They also have a very large dam, dot-dot-dot adjustable market. And we'll talk about damming of ion. And then they also have technology integration to solve billions of people at once. And some were also a marginal cost because they have technology integration do not have to be extra cost to expand into a new city or maybe to expand into a new concrete. They just have to hire couple of people and they just need to deploy original solver. And then they're ready to solve additional 1 million or 10 million or 100 million customer. That's it. 3. How to generate startup idea: Hey everyone, In this specific section we'll talk about how exactly you can think about new ideas. So whenever people ask me that, how can we generate new ideas? And we can build our own technology company based on DOD specific ideas. But my only response to those people who always focus on solving a problem and it gives you a personal problem, you can solve it much better than other people. And that's where I always recommend people saw your post on problem because you have a much deeper insight for that specific problem. If they did something that you are facing right now. And if that is a postman problem and you know that you can solve that specific postman problem with the help of a startup. Well, that's the best opportunity you can get in your life. Start working on it. There is a proper framework by which you can start that business. You can go step-by-step. You have internet. I am also there for you and you can set up your business. Now I'm going to show you how exactly you can vary the business by solving a postman problem. So always keep a problem journal. So from the time you wake up to the time you sleep, you will face more than hundreds, if not thousands of problem. So always more done those problems on a piece of paper or maybe in a small diary so that you can revise on specific problems. And maybe if you understand those problems really well, you can start solving all of those problems. Let's understand this with the help of an example. Let's say you hate scraping your windows. Well, one of the solution is that you can maybe outsource a single piece or a single unit of this cleaner from Alibaba, and then you can start selling this product on Amazon in your country. So if you are in US, you can import the specific product from China using Alibaba and then you can start selling this product on Amazon. Well, if you hate waiting for taxis, you can build a mobile app like Uber. Obviously, this market is saturated right now, so you can't really do much albedo, but there is always a new way to travel. There is always a new way to build something like Uber Berliner different segment that is always an opportunity. And if you hate her dance, you can build companies like Airbnb. The next way you can look for problems and not ideas is by finding a product gap. But you can only get product gap if you are walking for any specific industry. So if you're already working in a software company, maybe you understand the software domain much better than me, or maybe other people. If you're walking and supply chain industry, well you will have a much deeper insight than me and then other people. So when you're working for one specific industry, you understand the strength of all the products which are outdated in the market. And then you also need the strain couple of functions, which are a couple of things that those products can not do. Well. All those things that doors product cannot do is your product cap. You have to find a good product gap or are good short of problem, which is not sold by the existing product. So let's say you love using Excel, but you can't really automate. Excellent. So let's say if you're filling all the details of 10 different students, and as soon as the exam is done, just go to browser, put their enrollment number, and just try to fill all of their details in this specific Excel sheet. That's a hard problem. You can't really automate Excel sheet, and that's why you have startups like IR table. So with air table, you can quickly integrate the API. Api is your application programming interface, which will do the function that you want that specific APA to do. So it will fetch data from some other application. It will go somewhere, take the data and then compiling a specific format, also known as you'll see JSON. So it will give you a response, then you can put that responds, show it in a different format. And you can do so many different types of things. If you're working for a tech company and you're really finding it difficult to manage your team. Well, you have different products like ClickUp. So let's say you have a task where you need coordination of five different people, and that does count five different element or paths to it. Let's see the part a of that specific tasks will be done by post and wand and post and then post and three. So that specific tasks will move from one person to another person Valley for that specific purpose, you can use product left-click up if you're finding it hard to be using your credit card every single time you shop somewhere on an e-commerce store or maybe in a grocery store? Well, you can use for recollect Paytm, which will allow you to pay quickly using a smartphone. Then you have your disruptive innovation. Disruptive innovation always need massive amount of capital because now we are going after a big industry or a big problem. Obviously you can't solve this specific problem, but I'm just covering you so that you will have a good understanding about how exactly you will go around problems. So self-driving car, if you are facing this problem and you do not have time to drive your car, or if you are someone who don't really enjoy driving, or if you need someone who can help you reach to a different place automatically. That's why you have your self-driving car. Companies like Tesla, even Google and Uber Eats solving the same problem. Then maybe taking people to the Mars. This might not be a problem to a lot of people, but that's an ambition. You can also solve our ambition if people have that ambition that they wanted to travel, or maybe live on a different planet altogether? Well, that's also an ambition or a problem. Have Mr. Moscow solving this problem with SpaceX? So the main idea is you can solve any problem you want from any specific industry, but you need to have a good insight in that specific industry if you understand the problem really well. And if that problem belongs to you personally, when you will have a much deeper insight in that specific problem and you can solve it much better than other people. But remember, when you're solving any problem, just try to build a strong team. 4. Types of startup: So hi everyone. In this video we'll understand the different types of startup or different categories of startup. So before directly jumping into fundraising or finance, you first have to understand the different types of startups we have. So you have B2C startup, P2P, B2B, and B2C. So B2C is business to customer. So if you're selling a product to customer, then it's a B2C startup. All of these food tech company like Uber Eats, AAD, B2C startup. Then you have P2P. Now P2P is Peer-to-Peer. This can be a P2P lending platform or a P2P sales flag mom like OX, then you have B2B startup, also known as business to business. So if you're building any software company or if you're dealing directly with businesses, that it's a B2B stocked up all of your online software. All these are B2B startup, your CRM software and all these things. Then you have B2C startup, which is very rare, but they really exist in the market. Now B2C even have two different categories. You have aggregators and you have marketplace. Now inside aggregators, you also have service aggregators and so social aggregators. And inside Marketplace, you also have service marketplace and e-commerce marketplace. And in B2C, you also have subscription platform like Netflix. And in B2B you also have subscription. So companies like Shopify, all these up B2B SaaS subscription business model. And you also have solvus as a B2B model. Now within SAS, you also have horizontal SAS and particle size. Now let's quickly understand all these categories of startup with the help of some example. So in B2C, you have aggregators, you have marketplace, you have P2P, which is Peer-to-Peer, and you have all those service-based B2C companies. So in aggregators, They have a common brand and they maintain the service quality. So companies like Uber, Airbnb, all these other aggregators, that means all the cab drivers, all the property owners, they do not hold that individual branding value. If you book uber, any random XYZ gar will come at your doorstep without worrying about the name of the driver or the guard agency which is running the different cars and on. Then you have social aggregators, companies like Facebook, Instagram, Snapchat, or social aggregators, and that's a B2C segment. Then you have Marketplace, Marketplace. All the products have their different identity. So if you are purchasing an iPhone or any random XYZ product for your hair care or anything. You can go to marketplace and marketplace. In marketplace, all these different brands have that distinct identity. And all these quality standards are made by all these market, where we're going to understand marketplace and Uber alerting later in this course in the business model section. Then you have P2P platform like Oil X, where all these people can sell their product each other and they can also purchase this product. And then you have your solvus, B2C companies. So companies like Postmates or Gojek, all these are super apps. And super apps are the best example of B2C service kind of business model, where you can order your food online. You can book a spouse US alone. You can also send any sort of parcel to your, to your friend. And you can do a lot of things on these super apps, from payment to food delivery to anything that you can imagine. So these super apps are B2C services. Now let's quickly have a look at the B2B segment. So in B2B you have SAS software as a service and B2B commerce. Now SAS is nothing but all the software that you use online. So if you use Canva to design all of your graphics or images, you may be using Gmail. You might be using any CRM or customer relationship management software or Google Drive, all these up SAS Software as a Service. They're selling new software in the form of service. So SAS even have two different category, horizontals and verticals as in horizontal says You have companies like Slack, HubSpot, intercom, threshold, male chain, Zoho, Salesforce, horizontal SAS can be used by any company from any domain. That means, if you are a pharmacy startup or digital agency, or let's say a manufacturing start-up. Any of the startup can use all these software or horizontal cells, so they are not domain-specific. Any company of any size in any domain can use all these product. These are the best example of horizontal says like let's say you can use intercompany, a website, no matter URLS, pharmacy start-up or a manufacturing start-up or a digital agency. But when it comes to vertical says vertical says our industry specific, like let's say is NOT. So if you are the owner of a spar or salon or any form of a barber shop, you you can only use NOT so there's generally is purely for spa, salon, barber shop. If you are from other industry, you cannot use an Audi. I mean, they have very specific features. Then you have Capillary Technology, which is spatially for reading. So if you have a retail chain, you also have a website. You can use Capillary Technology. Then you have B2B commerce, which especially for businesses. So you have Amazon business, which means if you're a business owner, you have a small retail shop and you want a basic item for your business. You can use Amazon business and you can order those same items in bulk quantity. And you can also get an extraordinary found. And I think you are already aware of Alibaba. From Alibaba, you can order your business items in bulk quantity from China, also from other countries. You can also do that from Southeast Asian countries, India and from US and UK as well. So it is basically nothing but it will allow you to purchase your product for your business in bulk quantity. 5. Startup Road Map: So here we want in this video, let's quickly talk about startup execution roadmap. Obviously, if you're building a startup on the answers of your startup, getting fail is very high. And that's why you have to walk really hard and make a complete roadmap so that at least you have something to achieve down the line in the future. So the first thing that will come to your roadmap is the validation stage. Obviously this is the very early stage of imagine. You only have idea in your mind and you did not have any startup or any real business at this stage, you have to make sure that you first have to validate the hypothesis that you have in your mind. Let's say you just have a startup idea. You do not know how to build products or you do not know how to even God, When you first have to build the MVP of your product, MVP is nothing but minimum version of your product, AKA minimum viable product. Now you can easily build MVP on a piece of paper or maybe in any sort of online tools like Figma or Canva. And once you have an MVP in your hand, then you can show that MVP to your founder, to your friends, to your family members, or even to some investors, just to ask about their feedback. Once you show this MVP to some co-founders are some team members, they will have a good understanding of what's, what's there in your mind because you first have to omit out the information from your brain to a piece of paper or to any online software or good, then you have to quickly validate or I3, the MVP, or maybe build a better version of MVB. Let's say if you are building the MVP on a piece of paper, transferred that MVP from a piece of paper who may be in Figma. Or maybe if you're building it and Figma transfer the Figma file into a webpage or any sort of lending page so that you have at least some form of iteration or validation. And then you will build a business model around it. How exactly you want to make money, what all bodies you have in your business. So let's say you have consumer, you have distributor, you have manufacturer, and all those people who are there in your business. And you have to bring strong all these things with your co-founders of Ethiopian members. If you have the second stages, deformation stage, which is the legal formation structure of your company. So right now you might be registered as a sole proprietorship company or an LLC, but now you have to change your legal structure in the form of corporation. If you're living in the United States, then it's a Delaware C-corporation kind of legal structure. Living in India. It's a Private Limited kind of legal structure. In UK, it's different. In Indonesia main Mar, its PTE limited. So the legal structure is very complex. You have to talk to a lawyer or to someone who can understand your requirement and it can help you, or maybe make some form of legal structure for your startup or for your company. But make sure you have all the founders, equity holders in your company. One of the reason we are doing, or we are separating you with the legal structure is the liability. So you will not be liable in the future. If something goes from, the company will be liable. Obviously, you hoard majority of the equity share, but you're still not liable for any shut off Ms. Happening or wrong thing that happens in the company. And the top stage of execution roadmap is the growth. Obviously, once you have a legal structure in place, once we are building products for your company, and once you read some amount of capital for investors, now you have two phosphine, your seed investors, that can be some form of accelerators or incubators or family members or any angel investor. So that comes under pre-seed seed category and then you have to make sure that your startup is growing and you're selling product to customers. Now that's a very short roadmap you have in front of you. But we can also go, and we can also learn a very complex toward men. So remember, you first gulf from a minus2 stage to a three-stage, which means you'll first have a problem or solution, review, or let's say a startup idea. Then basically you go from a problem or a solution startup idea to a vision and founders fit, which is choosing your co-founders, hiding some initial people in your team. And then you always look for incorporation and then you try to find a product-market fit. We will understand how will you define product market fit. And then from product market fit, you will try to go into business model or a market fit or fundraising or growth stage. That's the overall roadmap you can follow. Now that's of any shorter version of the Lord map. We're going to go in and understand the very complex roadmap in the next video. 6. Product execution road map: Now this is the formulation of a startup and how exactly we will go from 0 to maybe Stage 1. And then you will go from stage one to Dan. So kind of 0 to one and 12, ten kind of strategy. So whenever you have an idea in your mind, you always live in the future. You will see the future trend or you will have a gut feeling inside you, which makes you feel like this is the problem and that's how someone can solve this problem. So you always think about future and you sold your problem in your brain for us, then you comment out that information on a piece of paper. Build MVP, find someone who is also really excited about the problem. And then just do a lot of prototyping, dot-dot-dot different people doing iteration and you'll finally found a, find the founder, then you register your company. Once you are done with the legal registration and all these things, then you always look for fundraising options. So in fundraising you have different incubators, you have different accelerators. Once you're done with fundraising, then you will launch your product. You will do some newsletter, e-mail sign-ups only product launch. So many different things. Let's say if you have a hardware product, you will launch in Kickstarter Indiegogo. And if you think that people are coming back, then you will try to get your foster a 100 users or let's say phos 1000 users. And then you will set a target for your team members that how can we grow anymore than 5% week on week, which will translate into around, which will translate into around 250 percent growth rate year on year. And that's the minimal growth rate you have to have in your startup if you're not growing 5% week on week, you are in a very bad situation. And then you will basically grow at the same rate for next four years to reach 25 million users. But let's say if you're not getting enough traction for your startup, if people are not really excited about your company. In that situation, you will again come back and do the same level of hydration changes. You will again do brainstorming, find a better problem for yourself, or let's say find a better solution for your startup and then reach out to people again. So that's the basic startup strategy from idea generation to prototyping, to finding a co-founder, to registering and legal entity or a structure to getting only email sign-ups, to getting your FASFA 100 users or 1000 users to maintain the growth rate. And maybe if these things are not happening, then again come back and do the same thing an hour. So that's the basic setup roadmap that you have to follow. If I give you a roadmap in the form of an arrow, that's how the arrow will bones on your screen. So you have to validate your idea. And if you want to validate your idea and you do not have any short of money in your pocket, you have to bootstrap your company. So whatever savings, whatever fun funds you have in your pocket, you have to invest in your own startup. I know it's a very risky investment, but you have to do it. In case if you want to make these things a reality, then you have your traction stage. So you will go to different incubators, different accelerators, who will incubate your startup will give you some amount of capital. Now some of these incubators and accelerators will give you capital for free. And because they are run by different state government. But majority of the incubators or accelerators always take 57, 10 percent of equity and then give you some amount of capital in your startup. We will talk about equity structure incubation and all these things are later in this course. Then I'll be going to talk about how exactly you will raise capital for your company. So once you are done with your incubation or incubators and accelerators, then you will go and Dr. different angel investors and venture capitalists to raise your pre-seed seed round. Cds ACTs be kind of rounds. And then in the end, once you grow or to a very large scale level, or you have millions of customers, then all these investors always look for either modulus and acquisition or any sort of exit. That can be IPOs, mergers and acquisition, a form of dividends. But usually all the investors favor Moses mergers and acquisition or either IPO because they willing to exit from that startup and wanting to put their money into some different companies. 7. Reasons why startup fail: So here we won. I think almost do we expect someone was asking me that, what is the single biggest reason why startups succeed? And my response to that question was, well, timings and this is not Midas bones. There was a research study that was conducted just to analyze more than one hundred, ten hundred startup, both successful and failed startup. And they found out that one of the most important reason why if startup succeed was timing. And I explained the situation with the help of an example. Let's say today if you wanted to start Uber Eats, DoorDash, or any sort of food tech company which deliver food to the customer's doorstep. Now I'm not saying it's impossible to succeed in that specific domain, but the market is over competitive right now. You already have players in the market. So no matter how brilliant idea you have, how good your team is, of how good business more you have, or whatever amount of capital you have read so far. You are not timing the market. Well, you cannot succeed. And that's the single most important factor behind the startup success. Today, if you start, let's say, a new search engine and you hire all the people from Google, including the CEO and CXO, you still cannot succeed. Reason being you are starting late. Timing is not correct. So even if you hire sooner PHI or all the CXO people from the Google, you still cannot succeed in the search engine market because the market is hypercompetitive. Now, you already have monopoly in the market and it's really difficult to succeed now. Now, that doesn't mean that timing is the only single biggest factor. Obviously, theme is also very important. If you do not have a very strong beam. If you do not have the 38 strategy, we're going to talk about 38 strategy a little later in this course. But you need a hustler, a hipster, and a hacker in your beam, at least in early stage of your startup. So you have to have a very good team who can execute things ready foster. Obviously idea is somewhat very important. If you do not have a good idea and your startup, you may not succeed. And the idea should be unique. It should have a scalable technology or growth or bought or a runway. You have to have a very good business model which will support you. Because if you have a business mortar which will help you on Foster and your gross margins are very high. So answers of your startup on getting successful are very high. And funding is the least effective pedometers for majority of the people they always rely on funding. Obviously funding is important, but all the successful business are not grown out of funding. The mean success factors lies in their timings that deem their idea and their execution. Funding is just a supporting factor in desktop. So remember, if you're building your startup, just make sure you have a really strong team. You are timing the market with some wartime northern your hand obviously, but you have to have very unique insight. Or you have to have an understanding of how the future is going to look like. So remember, if you wanted to start your own business, you have to have a very strong team. You need a hustler, a hacker, and a hip store in your team. Obviously you cannot time the market. It's really hard to do that. But if you are following the technology very well, if you understand the technology, you can always predict the future. Remember, startups are always built ten years ahead. So you have to think almost 10 years ahead to build a startup right now. And apart from that idea is important, business model is important and funding in the end is the least important factor. But in your mind, this can be the most important factor right now. But remember, theme is the most important factor. Timing is important, but you cannot pay in the market. 8. Business Model Canvas: So hi everyone, My name is now deep in this video we are going to understand business model canvas. Now business model canvas is made up of these eight different types of boxes. And it will help you give a high-level overview about your business. So no matter you're talking to, are there for the investor or one of your employee, or even do your best friend. You can show this business model canvas to them and they can easily understand about your business. And a lot of entrepreneurs make this business model canvas for different investor. Now before talking about all these different element, Let's discuss the benefits of Business Model Canvas and then we'll start filling in the data into this specific business model canvas. Let's understand why we are making this business model canvas at the Foster, please. The first reason is focus. It will strip away all the 40 plus pages that honor of entrepreneurs make if they wanted to show their business model or the business plan to someone, uh, just a single base business model canvas, which will help you understand all most, all the different area or aspect of your business. Second reason is flexibly be. Second reason is flexibility. Because this is a single page business plan. You can quickly tweak something or you can change a couple of business mortar. Or you can try new things from planning perspective. And it's a single page of business plan. So it's really easy for you to change something or fill-in some additional details if you want them, then you have transparency. Now because we are not writing taught d plus page business plan or you're not making a complex PPD, just a single beach business model canvas. It's really transparent. Which means if you give this page 21 of your employees or one of your colleague or given to a different investor, they can easily understand about your business. Now let's understand this business model canvas in a much easier way. So we will audit startup business mortar from the customer segment box. Then we will move from customer segment two, value proposition. And from value proposition, then we will move boot javelins. So what are the different channels we have for our business? From channels, we will fill the customer relationship. Then you will move without revenue stream. Revenue stream we have. Then we'll go to Resources, the resources that we need. Then we will fill in all the details of all our partners. So let's say if we have some courier partners, we have some logistic partner or some contract manufacturers. We will fill all of their details in the key partners, then we have key activities. So what all major activities that we do on day-to-day basis, we fill all those details into that specific column. And then we have cost structure. Now let's quickly start filling in all these details in a simple business model canvas. And probably in the next video, I'm going to show you a couple of business model of different startups and different companies as well. So let's start our video by understanding your customer segment. So startup can target specific customer segment. Your startup can target a mass market. So let's say if you look at companies like Coca-Cola or Pepsi, or any food brand, they have a mass market because no matter what, a three-year or gig or a 55-year-old guy, anybody can consume Coca-Cola irrespective of your gender or age. That means Coca Cola is targeting on mass market. That's their customer segment. Then you have your niche. So there are so many companies who are selling their product to just one specific niche. So let's say if you look at all these lipstick or beauty brands, they only sell their product specifically to a customer segment of 20 years or I think 45 years old. Then you have your diversified customer segments. So if you look at companies like Amazon, amazon is targeting anyone and everyone. So you have to identify your specific customer segment. What is that customer segment you wanted to plug in? So let's say if you are starting our supplement brand or for the older people who are actively involving fitness, then your customer segment is from 20 years order to 40 year or people spatially of the one who are really active. And then you can just, if I had that specific segment and you can target using Facebook ads, google ads, or even when you do a campaign on a DV or any media. Then we have a customer relationship. How exactly accompanies maintaining relationship with the customer? So how you're acquiring your customer. So let's say if you have offline acquisition channels like retail store or do you have online acquisition channels like Facebook ads or Instagram ads or whatever, how exactly you are acquiring the customer. You will also mention that how you got retaining the customer. So let's say you can fill in the details like we will organize a thickness event every single year. That's a retention strategy. Then how you are when you boost your fields. One all the way by which companies can boost their sales is by tying up with different influencers, also known as influencer marketing. Then you have your channels. What are the channels that you are using? So let's say you can fill in the details like we have grindy offline store or VR, or acquiring these many customer every single day from all these different online mediums like Facebook, Pinterest, any, any medium that you have. Then you have our value proposition. In the value proposition box, you will fill in all the details like what is something that is new to your product? What is the set special stuff that you have in your product? You can see that our Florida scored, our quality of product is scored whatever one special thing that you have good in your product. What is that value proposition? Or let's say. Now obviously that can be a performance or a design or a quantity of product that can be anything. So you have to mention about that specific detail. Let's say if you're a smartphone manufacturer, we will mention details like our smartphone are super-fast, got amazing design. Or if you're selling any B2C product, you can mention that we have high-quality or maybe let say organic product, whatever, that unique value proposition that you have. You have to mention that into this specific box. We have our key partners. What all key partners who have. So if you are selling any sub-domain or any details or anything on online, then probably you have to have one logistic partner who will ship all of your products to different customer. So that's your key partner. So what all suppliers, strategic alliances, joint venture or acquisition channels that you have, then you have all of your PD sources. So let's say if you have three for really smart people in the product side. So you have to mention that we have for Product Manager 20 engineers or let's say tofurkey marketing or sales or whatever strength you have. You have to mention all these details into ketones. Now that your sources can be human, intellectual, or financial TV sources, let's say you have raised some form of capital. You can mention that we have a strength of 30 employees. We have raised a million dollars from these disease in restaurant. That's your key resource. Then you have your key activities. What is the one thing? Or let's say a couple of things that you do on day-to-day basis that will really decide a business. Let's say maybe shipping your product is what are the key activities that you do? Packaging those product is one, are doing marketing and sales is one. So you can mention all those details. What is the problem you are solving on day-to-day basis and how you're building your network or let's say selling the products, then you have your revenue stream. And this revenue stream will help everyone understand what is your usage. So let's say if you're building a social media app, well, then your revenue stream is based on the usage. Let's say if you're building a SaaS product or a software product, then your revenue stream comes from how many people are purchasing the product. Or let's say you're in a brokerage business. So your revenue stream will be decided by the type of business you do. So let's say if you are building a D to C or consumer brand, you have a different business. On the other side, if you are a software company or a brokerage firm, then you haven't different revenue stream. And finally, you will mention all of your cost structure. So let's say bureau. If you are manufacturing some product, you always have high fixed cost because then you have to purchase all of those machines, all of that raw material, and then you have to sell it. So if you are manufacturing something which have the high cost or high fixed cost, then you also have to mention all that details and swelling. And obviously then even also mentioned the variable cost and other details. So you have to mention all of these details in your cost structure. 9. Business Model Canvas Examples: Now let's look at the business model canvas of one of the company, let's say Uber. So let's look at the business model canvas or Uber. Now this is a super simplified version of Business Model Canvas, which I'm showing you. But you can make it a little more complex if you want to. But this is the much more simplified version. You can maybe write few bullet points that we have these many customers, this much of revenue, these many partners you can mention their names has really, but still, it's up to you because this is the idea stage business model canvas. If your company already have some revenue, then you can make it a little more complex. Do not. I'm overlord this business model canvas with a lot of information, but just try to make a few bullet points, a few points or something. So if you look at customer segment for Uber, so they are targeting two different segment, God owner who have the car. Obviously, these are nothing but their driver or partner. And they are also looking for customer who wanted to travel from one place to another, please. Now the way they're maintaining customer relationships is by rating and review. So if a customer is giving you one start reading, obviously the experience was not good. But on the other side, if he's giving a five-star rating, the experience was amazing. Then you have channels. What are the channels that you're using to solve your customer? When one is using mobile lab, Android, iOS, and the rabbit website. Then let's look at the value proposition. Obviously they are reliable transport company. They are convenient. You can book a cabinet DHAP, and people can generate additional income. Then you have they have key activities. So they have a platform development. So they had to develop and modify the platform. They have to write code every single day. And they also have to make sure that they are solving all the support tickets that people are generating somehow because of safety or expedience. If you look at the key, your sources, they haven't backed Platform. So they also need to maintain that deck platform to make sure that it's not getting crashed because of more and more user. And then they have the news or they have to 0 meeting, and then they have brand as a key source. If you look at key partners, obviously they need a payment gateway or a payment processor to process all these payments. So anytime you've been on Uber, they might be using Stripe and they have to be, I think 0.5 to one person condition to Stripe. And that's how they settled all of their money from Stripe to their own account. Then they also have EPA providers. So let's say Google Map is one of their API provider. And they also have a couple of more providers or MI, also machine learning and AI algorithm. Then if you look at the revenue stream of Uber, they are charging or sodium commission on every single ray. And if you look at the cost structure, they have to maintain the spec platform. They have to spend some amount of money in marketing and personal. Now let's look at the Netflix business model. I'm going to speed it up because I think video is already very long. So for customer segment, all the people who are watching movies in us, obviously they started their journey from us. So that was their customer segment over here. Now this is the business model canvas of Netflix. It's a baby or business modern template. I'm not going to explain everything. You can pause the video and read through it. Iv. And this is the super simplified version of Business Model Canvas. If you want to make it complex, judge, just put a couple of more bullet points. Now I'm not going to cover this because otherwise this video will become very long. Similarly, you can have are ready like business mortar. So you have to mention what is your customer segments. So all the internet users are our customer segment. They have also named these internet users as ready doors. Then they also had advertiser because they also have to generate some revenue. In terms of customer relationship. They have self go on communities. They respect all the people and their privacy, and they collect as discreet as possible in terms of channels, they have a mobile app and a website. In terms of value proposition, people can speak whatever they want openly on the platform. And they can also create subreddit and they have a good number of 330 million users. Back then. Obviously now the number is little higher, but this is all business model canvas template. In terms of key activities, they are moderating all of their engagement. And they are maintaining and developing a platform as when in terms of good resources, they have 330 million active users and they have a platform and data about interaction. These are the key resources in terms of key partners. They also need some moderators to make sure that whatever content that is going to the platform that can then doesn't have any bad photos or bad pictures or some hate speech kind of content. So they somehow do some web scraping or some sort of filtration using their own algorithm. Then they also have all these different brands who advertise on platform and some of the news and publishers or all of those houses in terms of cost structure, if you are building a website or if you are maintaining a website, you also need solver. So they might be using AWS or Google Cloud Platform or Azur in that purpose. They also have some platform maintenance. So our staff, because they have a team of developers and other things, and they have their own stuff because they have to pay them salary. Some of them are in marketing, HR, finance, all that tough stuff. And they also have some revenue stream. And I think this business model changes over time. 10. Introduction to platform business: Hey everyone, In this video we're gonna talk about platform business model. And I think this is used by almost all tech companies or e-commerce companies, you know. So from companies like Amazon, Uber, AirBnB, DoorDash, Tinder, almost all the companies use platform business model. So in this business model, you have consumer on one side, and then you have producer on one side. And then you have a platform who is connecting all the different parties. So let's say we look at companies like Amazon. You have customer or consumer on one side, then you have resellers on other side. Then you have a platform like Amazon app on an Amazon website, which is connecting both the customers with the reseller. And then Amazon is handling the payment, the logistic, and all these different types of things that is going on in the process. If you look at companies like Uber, you have customer or consumer on so-called writer on one side and drivers on other side. And then you have Uber as a mobile application who is connecting Bordeaux writer and the driver, or maybe a cable. And so that means your producer and consumer are connected to each other with the help of platform. And then your platform is providing value to both the consumer and the producer. Because obviously, it's really difficult for a producer to acquire customer because they have to do a lot more marketing. They have to build all these technology. And also it's very difficult for consumer to look around different options that they can have. And it's really easy for a platform to provide that technology or that option bought for producer and consumer. And then the platform is adding value to both the consumer side or on the producer side. And because platform is adding value to both these party, that's why they are charging a specific fees or so-called margin. The main purpose of having a platform business is to help both of these parties in having a matchmaking process, tools and services, audience building and rules and standard. Let's start with matchmaking. Obviously, if you're using apps like Tinder board, the people can connect to each other. That's a good match making process. Not only that, let's look at Amazon. You can easily search product that you like from all different types of suppliers that Amazon have. Well, that's also imagemaking process. You can book a gap. Let's say you have three options or three varieties of gap. And you can book any gap that you want. Well, that's also imagemaking process. Now let's quickly understand tools and services. Now, all the resellers which are using Amazon, they can always look for the keyword volume, which is the arena Amazon, based on that, they can develop new product or maybe they can make new products or whatever they want. And even they can also track their sales revenue. They can also run advertisement campaign. Amazon provide all these tools and services to all of the resellers and seem to us as well. They also provide us a mobile app and a website to browse through different product catalogs and everything. Then you have audience building process. Obviously platform will help all these producer or a reseller in giving them a lot of customers and obviously increasing their sales by the end of the day. And that's why platform is charging a specific commission or a margin because they are constantly acquiring new and new customer for all these producer or reseller or cab driver so that they can also make money. Then you have rules and standards. All these black foam have very strict rules and standards. If you're violating the rules and standards of the platform, no matter you are a consumer, customer, or maybe our reseller or a driver or anyone, chances are that they're going to throw you out of the platform because you are violating the rules and standard, let's say tomorrow if a driver is misbehaving with all of the customer, or let's say salary, say selling something unethical than platform have the authority and they can be released, although resellers or all the drivers from their specific mobile app or platform. Well, that's the basic platform of overview. We're going to dig deep and understand all the specific startup and companies in a very detailed way. 11. Uber business model: Now let's start a platform business journey by understanding Uber business model. And we're going to start with very specific business model that we have in our last video. So you have buyer on one side, a sailor on another side, and then you have a platform who is connecting these buyers and the sellers. In case of Uber, your Bible virus are your writers and your sellers are basically your driver. And then Uber is there in between and they are making 57, 10 percent of margin on every single writing. That's the business model. And obviously they create value and ended on off that they will make money from all these producer, consumer or rider or driver. Now let's quickly understand one of the most interesting and important concept in Uber business mortar and that is network effect. Now, I need a little bit off your attention to understand network effect because this concept might take a little more time to absorb. Now let's quickly understand one of the most important part or element of Uber business model, that is network effect. But before directly jumping into the network effect, let me quickly cover the growth loops. So these are the three growth loops. Let me quickly explain what these three broad group means. So if you have more number of driver in a specific area, you can have more number of writers because of waiting time is less. So let's say imagine two different scenario. In one scenario you have a driver and eight riders. In another scenario you have 16 drivers and just ate writers. In scenario number 2, the waiting time will be less because the number of drivers are more on the platform in a specific area. That means if you have more drivers, you can have more riders because the waiting time is less, not because you have more riders on the platform that drivers can meet more money. And because the drivers are making more money, Uber can always squeezed on the margin of the drivers. So if they're paying, let's say 17 percent, they can also pay 5% to those drivers. Just a hypothetical scenario. I'm not really in favor of the kind of policies all of these companies have, but I'm just giving you all these kind of strategy you can think about. So if you have more number of drivers on the platform, you can have more riders. If you have more writers on platform, you have less reading time. If you have more riders, your driver can make more money. And if you're a driver can make more money. They can squeeze down the margin of driver, and they can also charge less from customer because now network effect is there on the platform. So all these things are so well-connected that you will see something called as network effect. All these are growth loops. These are individual growth loops. Now let's combine all these individual growth loops and understanding network effect. Now this is the super powerful business strategy that you can see anywhere on the Internet. This is known as Uber virtuous cycle, and this is the perfect example of network effect. And in the middle of this growth loop there is something called as clot. Now what exactly will drive growth in your business? Well, local structure. Local structure will always give you growth. Well, if you have a local structure, you need to have low prices. Well, if you need to have a low prices, you have to have a good customer experience. Well, if you need a good customer experience, you need more and more number of people using your product or so-called riders. If you need more and more writers, obviously you need more and more drivers. If you need more and more drivers, you will have more and more number of rides. And if you have more number of rights, then you can have more growth. That means each and everything is so well connected with each other, you will see something called Les Uber virtuous cycle or network effect. This is the power of network effect. More customer, more riders, more or less cost, less reading time, and everything literally supports each other. That's the basic ideology behind network effect. And it's not daring over it's everywhere. And it's not only there in Uber. Network effect is also there in Google, it's also there in Amazon. It's also there in Tinder. Any successful startup that you can imagine, network effect is there at every single place. In Amazon. If you have more products, you will find more number of customers searching for those product. If you have more customers searching for those product, more and more third party, the seller will list their product more and more brand will come to the platform. If you have more customer purchasing, more product than you have higher transaction on your platform. If you have higher ticket volume or transaction on the platform, you can bear back the logistic services. If you can breed back the logistic services, obviously your per unit cost of shipping your product from location a to location B will come down. So every single thing will support the same way to any single company you can imagine network effect is one of the most successful element behind any startup success. 12. Amazon business model: Now let's quickly have a look at the Amazon's network effect or Amazon's business model. It will be very precise. The reason I'm covering all these network effect and business mortar is to give you a perspective before you start looking for fundraising or understanding of finance. Because once you understand the basic ideology behind buttons mortar, you can make much better strategy. Now, let's quickly have a look at Amazon. So Amazon is there at the center. Obviously, you have AWS, which is one of the most successful unit of Amazon, AWS, Amazon web services. This is the Cloud computing, a product of Amazon, which have majority of the market share. So all your big websites, your server, your everything that you browse on internet have, are using AWS. So AWS's one of the market leader in cloud computing platform. And I think it is to integrating around 70 to 100 billion dollars every single year for Amazon. And this is the distribution side of Amazon. So you have Amazon and AWS, and these are very well connected with each other. Then you have businesses who are using Amazon business, and then you have customer. Some of them are prime customers, some of them are non-prime customer. And this is your demand side. This is your distribution side, and this is your demand site. Then you have obviously all these prime and non-prime members purchasing from Amazon. So obviously if you're a prime member, then you will end up giving, end up taking Amazon Prime subscription. And then you will purchase all these product. If you're a non-prime member, obviously you have to pay some amount of delivery fees and then you will be purchasing the product. So for Prime members, Amazon is making money from Amazon Prime membership plus every single product that people purchase from Amazon, from non-prime members, they are usually making money from the delivery fees and from the purchase among that those people are purchasing, then you have supply side, supply side. Amazon always tried to give you additional benefit to your Prime membership with the help of all these services. So you have Amazon Prime Video, You have Amazon music, you have ICO and Alexa. You have fire tablet five dB and Kindle books. Now, all these are bundled together in Amazon Prime membership. Saw that you will have on board more number of things when you take Amazon Prime membership, apart from purchasing product from Amazon. So this is your supply side that Amazon always try to add value to your Prime membership and they will make you feel special. But the help off supply side. Then obviously you have ads as a platform. So if you are a seller and if you're selling your product on Amazon, you can always advertise your products. So when anyone search for multivitamins, and if you're selling multivitamins, if you do a higher burden cost on Amazon platform, your product will come at the top, just like Google ads or Facebook ads. You can always bid about a specific keyword on Amazon platform so that your product will come at the top and people will purchase it. Now, Amazon ads is a very successful business model and it is really successful nowadays because a lot of B2C dense are facing a lot more capital. And that's why ozone is also getting a lot of money out of that. Then you have partners who is helping out Amazon in creating all of these content. So you have content creators who is making videos for Amazon Prime. You have content distributors, you have manufacturer who was making white label manufacturing product for Amazon. So I think you have heard of brands like Amazon basics, who is making all these electronic products and everything. So Amazon have tie-ups with some Chinese white label manufacturer who manufactured product for Amazon. And that's how Amazon makes money. So this is the complete business model of Amazon. They have demand side, they have supply side, they have partners, and they have ads as a platform. Now let's quickly understand Amazon virtuous cycle, in which we're going to cover Amazon growth loops and fly wheel concept. So obviously just like Uber, if you have more number of products on platform, you can have more number of customers because customers want a variety in a specific platform. If you have more number of products, you can have more number of retailers. Because if more and more customers are coming to your platform, if you have more products than more, retailers or resellers will come and they will list their product on Amazon. If you have more products, more retailers, more customer on a platform, you can have low prices because now if more and more people are purchasing the product, you are shipping more and more productive customer doorstep. Your part unit logistic cost will be less because knob you're operating an economy of scale. You have a lot of delivery boys. You have a very strong supply chain. You have optimized logistic. So you can always charge low prices if you shift from location one to location B or C, that means more customer. That means if you have more number of customers on the platform, you can have more resellers. More and more reseller will come and list their product on the platform. And if more resellers are coming to your platform and listing the product, you can have a very diverse portfolio of product. If you have more and more people purchasing the product from the platform, you can have less logistic cost because of economies of scale. And if you combine all these individual growth loops together, you will have a flywheel concept, which is the basic reason behind the growth. That means if you have a good customer experience on your platform, you will have more and more people purchasing your product. If you have more and more people purchasing your product, more and more resellers will come and they will list the product on the platform so that customer can have a diverse selection of the product. If they can have a diverse selection of the product, then obviously, obviously more and more people will purchase and they want a local structure which is again supported by Amazon because now more and more transactional happening, they have more delivery boy by the logistic network, better supply chain, and they can afford to charge less from customer so that they can have low prices, low cost structure loss, shipping costs, and everything works in hand, in hand. And that's the power of any business motor that you can imagine. Remember, growth loops are always individual. And when you combine all these individual growth loops, you have a half-life. 13. 3H strategy for Dream Team: Hey everyone, my name is not VIP. And in this video we're going to talk about the 38 strategy of a startup. And one of the most important characteristic of a good startup is having a very strong team. And usually investor define that as a dream team or found a market fit. That means you must have these three most important people, hipster, hacker, and Hustler. Let's start our journey with a hacker. Now hacker is the CTO of your startup. Now CTO, it's someone who will take care of your complete tech stack. That means from your consumer app to your dashboard, to all of your product development, to all of your deployment. Cto is taking care of each and every small thing that goes inside your code or inside your technology. That means you have to have a hacker in your company or in your startup. Then comes hipster. Now hipsterness, someone who understand the customer very Valley. Hipster is a UX UI designer or disposing can be a product expedience person who have a good understanding of product, who understand the pinpoint of different users. And you have to have hipster in your company. Because obviously hacker, it's someone who can build scalable technology product, encode who can do a lot more pins, but you also need hipster because now I'm getting one person who can understand the customer demand, who can understand how exactly customer are going to use your product and so many different types of thing. And obviously, you also need one hustler. Now Haslett, it's someone who is a business savvy person, will can take care of all of your sales and marketing campaigns. How many sales representative you have to hire? What is your sales team? What is your go-to-market strategy? Now, obviously, you also need one hustler. Now hostilely is a business savvy person who will take care of all your marketing, spend all of your sales hiding, new VP of sales, hiring, business development representative, and all these different types of sales marketing and performance marketing campaigns. Now you need all these three different people in your company. You're Hacker U or hipster and you Hustler. If you are a hacker, you have to find a hipster in hospital for your startup. If you are a hustler who understand the business domain very valuable, can sell product to different people and enterprise. Then you have to find the hips, turn a hacker for your company. Now you have to make sure that you will have all these three people in your team so that you can make a perfect founder market fit kind of stop. And if you haven't looked at the most successful startup, you will find all these three different kinds of people and you will find all hacker. Let's take an example of DoorDash. You will have one hustler, Johnny x2 is the hustler AND or DoorDash. He was a Stanford graduate who was walking in multiple companies and building a very strong Muslim for sales, for business, to plan for customer expedience. And you also have Stanley Banks, who was the co-founder and DoorDash, and he was the hipster. So he was taking care of all of the o costumer experience, that different kind of dashboard that you need in a startup although, or thing that goes into design and experience, into product uses, into stickiness, and obviously a little bit of technology. And then you have a core technology person. So in DoorDash, that was AND Feng, who is the CTO of DoorDash. So he was taking care of all the technology products. So he makes sure that they are building scalable technology product which are used by millions of user within a second. So this was the perfect 3H2 him for DoorDash. Let's take one more example for companies like Airbnb. So you have brain Chomsky who was the CEO of Airbnb. You have lunch. It's hard to pronounce. I don't know how to pronounce this name, but he was the CSO or keep Strategy Officer. And then you have Joseph Gambia, who was the CEO, Chief Product Officer. So he was the hipster. Joseph caveat was the obscure of brain. Jet ski was the CEO or the hustler. And probably, I think obviously it's not mandatory to have all these three different kinds of people. But investors will always look for all people who have all the complimentary skills and who can take care of their individual domain. And that's why I feel that if you have these three different kinds of people in your startup who can take care of their own domain. Chances of your startup being successful is very, very high because now you have three people who is heading their own particular domain. And then they can aggressively recruit more and more people. They can build a very strong pipeline of very strong army of engineers, salespeople, and customer experience people. 14. Three Things investor look in a startup: Apart from team investor, we always look for three important characteristic in your startup. The number one is scalability. Then you have market growth, and then you have investors. Now, if you have all these three characteristic in your startup, investor can easily find your company. Let's talk about scalability. Obviously, startups are designed to grow very fast. And if you do not have technology or scalability in your business mortar, it's difficult for you to grow really fast. That's why investor always field of finding good startup who have a very highly scalable potential. Now scalability simply means you have to grow at least 20 percent month on month. That's the scalability they always look for. Because if they're putting so many millions of dollars of capital inter-company, the hat to make sure that they will have at least 10 x or 20 X-ray done in next five to ten years. Because obviously in startups you have 95 percent failure rate than 50 percent success breed. So they always look for that 5% success rate, which can give them panics or 20 x multiplier so that they can multiply the money of whatever LPs they have. Because all these venture capitalists have LPs or hedge fund who is supporting from the back. In short, investor always look for a startup which have technology integration so that they can reach to millions of people by hiding lesson, Lesson number of people in the future. So let's say if you have been deemed members in your company, you can reach out to a 100 thousand users. If you wanted to reach out to a million users, you may need maybe 1520 more people. That's your startup is purely running on technology and you can easily scale your business. Obviously, you need a market growth. So investor always make sure that in whatever startup they're putting their money on, that startup is going very fast that have some short of prerequisite assumption knowledge or some past trend of growth. 15. Origin of a startup: Hey everyone. In this video we're going to talk about the legal structure of a startup. Now I know legal structure can be very confusing and a boring topic. And that's why to make it interesting, I'm going to take an example of two different people and I'm going to explain legal structure with the help of a interesting story. Let's say two people, not even Sophia, they wanted to start a startup and they are solving a real life problem with the help of technology. Now know the pallor good experience at seals. He's an MBA graduate, He's a hustler, but he have very less idea about coding. And that's why not deep instinct help from Sofia. Sofia is walking in IT company. Now Sophia have a good experience in IT domain, or she's walking in multiple companies. You have multiple startups, technology startups. And she had a good understanding about how to write code, how to build scalable technology product. So now if you have a hustler and hacker in your team, now you have hustler and hacker in your team. Now it's a good combination to solve a problem. So they started working on this startup and now they have five customer and $10 thousand in revenue. Now they have customers and revenue in place. Now they are planning to raise some capital, but obviously they have some problem in front of them. They have all these four option and they wanted to register themselves in these kinds of legal entities. So they are confused. We should register ourself as a sole proprietorship or a partnership phone, or as a legal liability company, or as a corporation. They do not have any idea about all these four different types of legal structure. And that's why they were talking to different lawyers, to different people to understand all these four different type of legal structure which is used by all the businesses or the startup. Let's quickly understand all these four different types of legal structure that you can use if you are starting your own business or your own startup. Let's start our journey by understanding sole proprietorship. But before that, this is not a legal advice. Please talk to your lawyer in case of any legal help. The main purpose of this course is to make you aware about all these basic terminologies that you have to understand if you're starting your own business or a startup. 16. Sole Proprietorship: Let's start our journey by sole proprietorship. Sole proprietorship is basically our business entity, which is owned and run by a single person. That means there is no legal distinction between an owner and a business. A business and the owner are combined together in a sole proprietorship, which means tomorrow, if you take some loan for your business or some deck for your business from some bank or from someone. You have to pay the debt. Which means if you become a default are in the directory. If you are not able to pay the debt, you are personally liable for that specific type or business loan that you take. All the small businesses like your bakery shop, your car wash, your retail store. All these businesses were destroyed themself as a sole proprietorship, which means one single person on the complete business. He put all his capital, all his effort or everything in this business, and he's running this business by himself. Now let's look at the features of sole proprietorship. Obviously, this is your business. You own this business, so you will receive all the profits that you make. You do not have to share the profits with anyone because you are someone who own this business, because this is opposed to that business. Next is legal compliances because it is a sole proprietorship. You own this business completely. So there is very less legal book. You just have to submit your basic identity proof and a couple of pictures and that's it. Third one is unlimited liability because this is your personal business, because you own this business, which means tomorrow, if you take any loan for your business, you will have unlimited liabilities, which means somehow, if you're not able to pay the loan for your business, the bank will recover your personal asset to make sure that they have enough money back in their account in case if you are not able to pay the loan for your business, which means you will have unlimited liability for all the losses and debts in your business. You'll be mostly responsible for each and every small thing. Obviously, you can not have any business partner in sole proprietorship. This is a one-person business and you're the only one who own this business. If you want some business partner in your business, then you have to register yourself as a partnership from instead of sole proprietorship. So in the next video, let's quickly understand partnership fun. 17. Partnership firm: So hi everyone. In this video we will understand the partnership firm. Now this is one of the most common legal structure, which is found if you are starting a legal business or a digital marketing agency or a consulting business. So all these small businesses, usually the district themself as a partnership firm. Obviously in partnership form you will have more than two or at least to business partner. So in partnership fund, pool parties, also known as business partner, agrees to cooperate on their mutual interest. And that's how this year profit. Let's say if you and your friend decided to start a digital marketing agency or let's say a consulting agency, you will bought, put at least let say 50, $50 thousand in that business. And that's how you will receive profits in the future. So let's say if you are putting $50 thousand and your friend is also putting $50 thousand and bought off. You are starting a partnership firm in future after one or two years, you will also receive the profit in that specific ratio. Because you own 50, 50% of the business, it will also receive your profit in 50, 50% percent way. So if you're making $10 thousand and future, both of you will receive $5 thousand every single month. That is the basic proposition of your partnership from which means you bought will decide dot profit sharing percentage index Pacific Partnership from now this can be 50, 50 or 60, 40, or 2017, depends on how much capital you have put in to setup this specific business. If you look at the features of partnership phone, obviously, this partnership farm is owned by both of you. So there's a very low cost of formation because you bought own this business and you also have unlimited liability. Because tomorrow if you and your friend will take any loan for this specific digital marketing agency or for this legal phone. You are liable for any debt or losses you make in this company. In this partnership from some countries will have a partner limit of around 22, 20 people, which means you can have a minimum of two people in the partnership phone, but you cannot go beyond 20 people in the partnership form. So if I continue this video in partnership form, you will have two different business partner who will put in some amount of capital to start this business. And they will decide their profit sharing percentage in the partnership agreement that they will make while establishing this business. And then we also have unlimited liability if the firm will make any losses and debts or in future. 18. Corporation legal structure: Hey everyone, This is one of the most important type of legal entity, all legal structure, and this is exclusively for startups. So if you wanted to start a business or a scalable technology startup, you have to register yourself as a corporation. Now in different countries you have different types of corporation. If you look at companies in US or startups in US, you will have Delaware C Corp, or an S corporation. In India, you will have Private Limited for startup. In Singapore. If you wanted to start a startup, then you have to register yourself as a PT while limited. If you wanted to start up in South Africa, you have to register yourself as a PDE limited. If you wanted to start up in UK, you have to register yourself as Ltd. So in different countries you have different form of legal structure for startups. And obviously I can't really cover all these different types of startup legal structure across different countries. But for this, you have to consult your lawyer or someone in this specific domain who have good expertise in registering your legal stuff. Now let's quickly understand C cooperation, which is one of the most famous legal structure which is there in us. Us, a lot of startup register themself as Delaware C Corp. And in this kind of legal structure, which is the most prevalent kind of legal structure. The owner, which is your startup founder, the shareholder, which is your investor, our text separately from the entity, which means tomorrow if your business is making $10 thousand in profit, so you have to pay someone cough, Texas where business. And if you are also pulling out the profits for yourself, you also have to pay taxes for that specific amount. Obviously, it's a double taxation problem. We're going to discuss about that soon. But normally in C Corp, which is founding us, you will have all these different features. In C corporation. Your personal assets are different from your startup acid. That means if you take any loan for your startup and if you're not able to repay the loan back to the bank, then you're not personally liable for that. Your startup is liable for that specific problem. That means your personal liability is different and your startup liabilities are different. We all know that more than 95 percent startup field and they do not make any money in the future. And that's why they have to register them self as a corporation where the startup founder is very much different and do not have any shorter unlimited liability in the company. In all these different startups, you have stockholders or equity holders. So you found those are equity holders in your company. Your investors also hold equity in your company, and then you also have board members and all of them combined together and make board of directors. And all these board of directors will have a general meeting. And this annual general meeting they will discuss about all of their annual sales figure, all of their sales forecast, the future plans, their mission, the vision, and all these different kind of stuff for the future. And one of the most flexible thing about cooperation is board of director can decide who will be the CEO of the company, how much of spending they wanted to have it in the next financial year? What is the expansion strategy? How much they want to invest, when will they go for IPO and all these different kind of strategy. In short, the corporations are designed in such a way that the startup founders do not have any link with a company and they just hold the equity share of the company. Whatever happens in the company will be decided by board of directors. And in this board of directors, you will have startup founders, you will have investors who will have board of directors or any board members. All of these people will decide about their future forecasts, their sales, their strategy, and that's how they also pull in money from different bands, from different private equity. And if somehow the startup is not able to make money or the startup will diet, then the startup founders do not have any liability. They can shut down the company, they can file for bankruptcy, and then they can start a new business. Because obviously more than 95 percent startup somehow fail and less than 45 percent startup succeed in the Joanie. So all these 95 percent startup will have to file for bankruptcy. And that's how this is the normal structure for all of the startup. So if you wanted to start your own business or you're starting up, you have to register yourself as a corporation. And if you're in us that it's a Delaware C-corporation in India, it's Private Limited in Singapore, main Mar, Indonesia. It's BY limited in South Africa at this BD limited. And if I summarize this complete video, you will be starting our startup by registering yourself as a cooperation. If you had an us, then it's a then B or C and S corporation. If you're living in some other part of the water, then that can be limited liability company. In India, it's Private Limited in Indonesia, main Mar, and Singapore. It's pretty limited. In Australia, it's PDE limited. And you have different types of legal structure for startup in different countries. So you can just talk to one of your lawyer or someone in this domain. So in the end, you were having four different choices with you. And finally, you end up registering your company as a corporation in your specific country. And once you are done registering your company has a corporation. You will have all these different people and a proper corporate structure. Now you have shareholders in your company. Now, obviously initially you and your founder are the only shareholder in your company. Ads. Soon as you raise capital, you will have investors in your company. You will also have board of directors. You will also have officers who will also have employees and all these different people. And every single person have a specific set of rules regulation to follow. And they also have someone whom they have to report. So as, as, as a startup founder, you have board of directors or your investors to report. Investor also have their liability partner or LPs are to report. Obviously your employees report to use. So you always help people who walk with each other and they also have someone above them. And that's how the normal startup or corporate structure, well. 19. Startup funding stages: Hey everyone. I think now once you're done with all the legal process, now you have revenue in place. You also have customers, and at this point of time you also have your legal compliances ready. Now this is the perfect time when you can start looking for fundraising. And that's why you have to start finding all the funding sources available with you. So you're bootstrapping sources, your pre-seed, seed incubators and accelerators. We're going to talk about that. But you have to find some funding sources. Then you have to find a perfect time. Then when you can bridge the gap Gou. So in startup you have different inflection point. And it's always advisable to raise gathered to when your startup reach to a specific inflection point, then you can find a funding vehicle. So normally when startup raise capital from the front and raster and they have multiple funding vehicles like your convertible notes, you're safe, you're direct equity. We learn, talk about all these three, safe convertible notes and direct equity. Then we're going to understand your funding funding target. So hey everyone, Now let's quickly have a look at the funding stage in your startup. Let's say you're at a different stage of your company. Let's say you're starting out with idea to MVP stage, where you just have an idea bubble. You are kind of a building a toy. So let's say you have some idea in mind and you wanted to solve this problem with your co-founder. Obviously that's an idea to MVP stage. And at this stage, you really find any co-founder. So you have to bootstrap your company. You have to put in whatever capital you have with you. Or maybe you can take the catheter from your family members and friends and all those people. Once you reach to a MVP do product stage. So let's say you started off with an idea. You meet some MVP on Figma on a piece of paper. And now you are making a real product hour of that simple MVP. And now you are bootstrapping your company by putting, let's say, $50 thousand each. Then obviously knob, you have to make a product and you have to find customers. Now at this stage, all are off. Incubators and accelerators will start coming in and they'll start beating you up. So let's say initially you have an idea to MVP, then you build a product out of that MVB. And now we are constantly acquiring customers for your product. At this stage when you have revenue in place, when you have everything in place, now you will start finding all these incubators and accelerators. The main purpose of these incubators and accelerators is to provide you some capital. Let's say Y Combinator will give you $125 thousand for 7% equity in your startup. And that seemed throughout, no matter your startup, have millions of dollars in revenue or it just an idea, they always skew 125 thousand dollars to all the startups that are coming through Y Combinator. And then you have customer to expansion stage. So when you acquire enough number of customers, then obviously you have to expand into different territories, different prison and him into different countries. And that's why you now have angels and small VC in place. Because all these people will now start putting in almost a million dollars to $10 million, have a small check size, but still these people can easily put up to 10 $1 million, but they will start off with 12 $1 million and then I think they will find each other and they will also connect with, connect you with some other VC and some other angels. So that you can create a complete portfolio of angels and VC, and you can raise combined capital of around eight to $10 million. Now, obviously, once you have enough expansion in your own geography, now you can expand globally. And at this stage, you will need some big VCS like your SoftBank, Tiger Global, and some private equity rounds like KKR and all these hedge fund. And because at this stage, the size of your capital will be somewhere around $50 million or a $100 million. And at this stage, I think go only the private equity and big VC can play the role. Angels and small VC did not have that much capital to finance you with these kind of ground. So this is the overall funding stage. You always start with idea to MVP stage, and then you build your product out of that specific MVP. Obviously, there are very less sciences. You can find any investors in these two stages. But as soon as you switch your hair from a product to customer, then you will have a lot of incubators, accelerators, pre-seed BBC kind of funding available to you. And obviously the primary focus or the primary piece of your product needs to be technology because all these VJ sees angels, incubators, accelerators, the old VCE, fine tech companies. Now obviously your company can be D, Deep Tech PR back partial deck, but you need to have some sort of tech integration in your startup or a new idea. These people do not really find non-tech companies because non-tech companies are not really scalable. 20. Startup funding source: So in the previous video, we had a discussion about funding stages. In this video, we're going to understand how exactly you will get your funding source. You're finding vehicles and all these things that start with funding source. Obviously initially when you do not have any capital review and you're just building a MVP or product. At this point of time, you need your family and friends. Obviously in startup, it's really hard to convince investor. So initially you have to convince your own family members. So if you have some rich uncle or some NADH member in your family, you can reach out to them and you can offer them a equity in your startup. Let's say you can be asked for a $100 thousand and you're gonna give them 10 percent equity in your company. Obviously, that person is your family member. So even if he is losing out on money, he can take a risk on you if you have the confidence. So you'll first have to reach out to your fat friends and family. You can ask for whatever they can do for you and you can give them equity in return. Then always you have some grants in some countries. So nowadays a lot of countries are running startup programs. And if you apply any of those programs, you will get some amount of grants from those government dilemma doc us for equity. They always give you equity free rent. So you have Start-Up Chile, which gives you around 35 thousand dollars. And they did not ask for any equity. So you have these equity free gangs from government. Then you have incubators and accelerators. So accelerators like 500 startup, Y Combinator, Sequoia surge. And you have so many incubators and accelerators. Now these incubators and accelerators will give you around a $100 thousand to $50 thousand. And they will all ask for around seven to 10 percent of your equity in the company. Some of these accelerators and incubators also have uncapped convertible notes on as their equity DOM. And we're going to discuss about that a little later in this video. But then once you're done with all these incubators and accelerators, then you can look for angel investor. So Indian investors are rich individuals who wanted to invest from their own pocket. Let's say I'm a rich individual and I sort my previous company to some XYZ big tech giant. And now I have a hundred, two hundred million dollars in my pocket. Now I'll become an angel investor and I will start putting my small amount of capital in different startup. Let's say I can easily put $500 thousand in 20 different startup, which is close to around $10 million in daughter. So I can always do that. So I'll become an angel investor and I will start putting my capital into small, small startups. So this is one of them. Then you have C drown. Obviously deed seed round are done by angels on mix-up, small VC and big VC don't VCs venture capitalist. Now VC also have there. Now VC2 have their LPs, which is limited partner who always asked for at least 25 percent IRR, internal rate of return. You may ask nobody puts did I tend to raise capital for your company? Obviously you can raise anytime you want. But obviously if you want better valuation for your startup, you always freeze at the inflection point of your company. So when you have product ready, when you have acquired 100 customer, when you have $1 million in revenue, when you have 30 million dollars in revenue. These are all big inflection point. When you have very high chances of getting good valuation. We're going to talk about inflection point as well it on the line in the video. Next we have the funding vehicle. Obviously you can directly dilute the equity of your company, but usually when startup raise capital, they really dilute any equity investors. But in place of equity, they always offer convertible notes or safe. We're going to talk about all of these to I think convertible notes and see both has some both the same, but there's one difference in that. So we're going to talk about convertible notes and see if down the line in other videos. But startup, but not directly offered equity with two investors, they always give them a piece of paper which will later convert into equity. Then you have funding target. Obviously, these are all your funding targets. So you can start with MBB to product, then you will product to a million dollars in revenue than 1 million to 10 million and then 10 million to maybe a hundred million, a hundred fifty million. Then you will finally end up doing IPO for your company. Then obviously when you added the MVP to product stays, you are now looking for PMF, which is product market fit. When you add a defined product to 1 million stage, now you are building a customer base for your company. When you are at 1 million to 10 million dollars in revenue, now you're scaling your company. And finally, 10 million to 100 million or to IPO is a hyperscale in process. So these are the own funding target and funding stages you can have in your company. So hey everyone. Now let's quickly start our journey by understanding funding sources, the different funding sources we can have for our startup. So these are all four different types of funding sources you can have for your STATA. Obviously, you can bootstrap your company out in that situation, you have to put in your own investment. Bootstrap is nothing but tying your own shoes or bootstrapping your shoes by yourself. Then you can also have your friends and family and you can also use some crowd sourcing platform like Indiegogo and Kickstarter. And these are all bootstrapping technique. So you have to initially put in your own character. You can also raise it from your friends and family. You can also use some crowdsourcing platform, but these are all the options you have in bootstrapping. Once you are done with bootstrapping, you can also use all these startup platforms initially if they are ready to give you some investment. But there are very less chances that all leads startup platforms will find you when you do not have revenue in place. Remember, startup should have at least some form of revenue or fraction if they wanted to raise capital from all these incubators and accelerators. But once you have your product ready, once people have shown interest in your product, and once you have at least some amount of revenue than there are very high chances that these startup platforms are going to take your startup for incubation or for acceleration of your growth. And that's why you will later apply to all these incubators and accelerators or maybe government grants. Because now you have revenue early validation in place. You have good amount of fraction and your startup have some unique source which will allow you to grow very fast and acquired customer very fast. And that's why now you have incubate those. So almost all big colleges, big campus and universities have incubators who help you formulate your idea into a stocked up on a business model or in a growth journey, incubators generally give you a very less capital like let's say $10 thousand or $30 thousand, maximum $50 thousand. Because the main purpose of incubators is to incubate your idea from an idea to a business model to, uh, early MVP to maybe a partial product stage. But accelerators are very important because accelerators will accelerate your growth and you have specific broad numbers in place. So you have accelerators like Y Combinator, 500 startup, Sequoia surge, all these are accelerators. Now they usually invest from a $100 thousand to around maybe $1 million in your company. So Y Combinator given X2, $101,525.7% equity 500 startup also have the same kind of split and then you have government grants. There's nothing more to explain. Also, you can have equity sources, but they will take some time to come. Equity shows like angel investors, venture capitalists, private equity downs. But these always happen when you have a good amount of revenue increase. So if you have less than a million dollars in revenue, usually angel can find you. If you have more than a million dollars in revenue, venture capital will be very to put in some amount of capital in your company. If you have more than $10 million in revenue than private equity will come, and then they will put in more amount of funding in your company. Then you have that sources. I don't really recommend because in that you have to pay them interest. And startups have very high chances of failure. So if you take any debt plus n pressed, it will further put boredom in your company's financial because now you have to pay them interest. And you might not be generating more amount of revenue initially because now you have to pump back the capital in your in your company. Obviously degress debt sources with NORC allows you to dilute or equity in your company. 21. Startup ownership and equity basics: Hey everyone. Now let's quickly understand how exactly you will calculate the ownership in a startup. So let's say two founders started their company, did registered this stocked up with 10 million shares. The reason why they are registering this data with a million share is because they always wanted to split down these number of share. It is really difficult to split one share into multiple robots. And that's why all these startups issue almost 10 million shares so that it is easy for them to redistribute the chairs between different investors, between different employees, between different founders. And that's why you always start with a very high number of shares. Obviously, you can start your startup with 1 million share, but usually all the startups start with N median number of initial shares. Now because as of now you don't even have employees. You don't even have any investors in your portfolio. So both of you will take 5 million shares. So you have 5 million share with one founder and five-minute share with another founder. So if you divide that by 10 million shares, both of these founders currently have 50 percent equity ownership in the company, and both of these founders hold 5 million shares. Obviously, your equity percentage is equal to the amount of profits that you will take home in the future. So let's say if you hold 20 percent equity in the company, and let's say after five years, seven years, 10 years when you start up will become successful and you will make some profit and share that dividend to different investors. Or to be specifically stake holders. In that situation, you will take 20 percent of profits or dividend that is decided by all of your board members. We're going to discuss all these confusing, don't like board members dividend, decided and regard, talk about that. But your equity potentates basically means the amount of profits that you will take that happens in the future. Obviously, startup doesn't work that way. They usually do IPO, they usually do mergers and acquisition, and they usually avoid taking any form of dividends, but instead put in their capital back to the company. So if I device back the concept, we both have 50 percent of equity in the company and 5 million shares, because the total number of shares in the startups are 10 million. And obviously, we both have 50, 50 percent equity right now. So this is our equity split and these are the number of shares we bought half. So now deep half 50 percent equity in the company and hold 5 million share. Sophia also have 50 percent equity in 5 million shares in this startup, let's say we run this data for a while and now we have hundred, ten hundred dollars in revenue. And you have such a good amount of revenue in your startup, this is the right time. You always look for investors. Let's say now we are ready to raise capital from some Renowned investors. And let's say somehow we end up convincing Peter Thiel to pour some amount of capital and Narcan, Let's say we had some conversation and now pitted, he is ready to put almost a $1 million for 20% equity in a startup based on the kind of revenue we had earlier. So in this situation, we will issue new 2.5 million shares to heal and we will give him 20 percent of equity in the company. Remember, we are not diluting our existing share. We're issuing new shares to be the T. So earlier we had five million, five million shares and 50 percent equity. So we have issued new 2.5 million shares for Peter T. And now we bought old 40, 40% equity in the company. And now Peter T hold, let say 20 percent of the company. So this is the equity structure when you have some investor in place. But if you closely have a look earlier, we had around 50 percent equity and 5 million shares, but are shared doesn't hold any value back then. But now, because we have Peter Teal with $1 million for 20 people isn't equity. So our valuation is $5 million because if $1 million is equal to 20%, then if you want to calculate a 100 percent of the company, that is equal to $5 million, because 20% is equal to 1 million, 100 percent is equal to 5 million. So now our startup valuation is $5 million. So this is the before and after situation. Let's understand this with the help of a table. So all legal bought gNodeB and Sophia have 50 percent equity in the company with 5 million share, but they have 0 investment, so they are shared doesn't hold any value. But as soon as PTT is ready to protests $1 million into the company for 2.5 million shares or let's say 20 percent equity. The complete structure is now changed because at this point of time, we bought of our co-founders have invested 0 mount of capital, but we still hold 5 million shares because now that valuation of company is $5 million because we bought or 40 percent equity of the company. So he bought half to $2 million of our network and obviously be the 311 restaurant, almost a million dollars. So his net worth is currently $1 million, which will further increase ads soon as we have new round of capital in a company. 22. Bootstrapping your startup: Now this is our first startup funding stage. Add soon as we have new investors joining our portfolio, we will issue new shares to those investors, which means our share count will remain the same, but our percentage equity in the company will go down because now our share value is increasing. Now before moving forward, we have to ask these questions from ourself. Now, all these questions can be very complex. So before directly answering all these questions, we will go back and revise couple of our topics. So in the previous video, we had a discussion about all the funding sources we have with us. So from bootstrapping to startup platforms, to equity sources, to debt sources we have, Let's explore bootstrapping a bit. And once we are done with all these different types of equity sources, then we'll go back and understand the startup equity at noon. So let's start our journey by understanding bootstrapping. Bootstrapping is a way by which you will start your business from scratch and building it up with minimum outside investment. And recently, I think Mail Chimp was acquired by Intuit for around $10 billion. Now MailChimp was a complete bootstrap company. And that is why if some founder always preferred bootstrapping, but remember, the different startup have different financial need. And if you are starting a business to consumer brand and that have some non-tech element, or you require a lot of operational capital, then it's not really easy task to bootstrap your company. So bootstrapping is a way by which you will put in your own capital and to the company, and then you will find your customer. You will drive organic growth for your company. Then you will take the free cashflow and reinvest that into the business. That is the basic proposition of bootstrapping. Remember from the name you can understand it. You have to strap your shoes by yourself. That means we'll pour some out of your initial capital into the business. You will find some customer but some product. And you will always, you know, somehow achieved organic growth. Obviously it's difficult to do that, but somehow let's say you have a good branding, you have got influencers. You exactly know what all organic channels out there. And you have a pure tech product, which means you do not need a lot of people do sell it. You do not need a lot of people to bury that. You have a lot of technology advantage for your product. So if you look at companies like Mailchimp, mailchimp is an email marketing tool. So obviously you have to put in a lot of effort to Barilla email marketing server and all those interface and APIs. Once you have the product ready, you can sell an email marketing tool online to businesses and you require very less people in operation. So you'll find a customer, grow your business organically, find a free cashflow, and then you will reinvest back into your business. That is the basic proposition of bootstrapping. So remember, for bootstrapping, you have to build a product, find a customer, drive organic growth free cashflow, and to investigate into the business. That is the basic bootstrapping strategy you can have. Those things also comes under bootstrapping, but you do not raise and the outside investment from some VC angel or incubators and accelerators. It's the basic team behind bootstrapping. Bootstrapping can be good or bad depending on the capital requirement of your business. Remember, all businesses are not same and they require different capital in different stages of their business. Because if you're starting a food tech company or an e-commerce company, you need millions of sometime billions of dollars for short, to invest in acquiring customers, retaining them, and expanding your offline business. Everyone, now let's have a look at all the bootstrap startup that we have. So all these startups for Bootstrap back in 2007, 2010, whenever they started. So you have enterprise SMBs and B2B startups, which were Bootstrap. And they add to your technology-based companies. So equation would started in 2002 and the current raised any basic evidence so far. And I think the con to IPO in 2015 and write down they have billions of dollars in revenue. Then you have GitHub. Github was started in 2008 as a bootstrap company until 2012, I think in 2012 they have raised almost a $100 million in the series, the funding. And later, we all know Git Hub was acquired by Microsoft in 2018. And then you have Pluralsight. Pluralsight would start in 2004 and it was a bootstrap company until 2030. And then prudence side goes for IPO in 2018. Then you have companies like squares, space, be stamp, and Meacham. I didn't meet him, was recently acquired by into it for $10 billion and Squarespace and be scammed part of still bootstrap B's campus for project management, you have to be $9 and then you can manage your team. You can manage all the projects that you want. And then you also have other companies that you iPad checkout, we're fear, Qualtrics and all these companies, all of these are bootstrap. If you look at some consumer marketplace kind of companies or a B2C companies, then you have companies like Wayfair, God gurus just eat, Shutterstock. And all these companies have B2C bootstrap companies. 23. How to get best out of bootstrapping: If you're starting your own startup and if you're bootstrapping, you have to understand these three important thing. I do not really recommend you to quit your job and start working on your startup until you do not have fraction or some revenue or some validation. So I usually wake up at around three o'clock in the morning. I usually go to bed around eight o'clock in the night. So I have six to seven hours of sleep and then I wake up early in the morning at around 34 o'clock, started making up only start investing for hours every single day. And if you closely have a look, if you invest for ours 20 days, which is your working days, you will have APRs in. Just read this now the remaining are then albicans. So in weekend you can spend ten hours every single day. So multiply 10 by 10, you have 100 hours and weekend and 80 hours on weekdays, you will have one API ours in one single month. Second advice which I wanted to give spatially to those people who don't really know how to call that P, start using low-code and no-code tools. Even if your developer please start using all these Nagaland local pools because they will help you to save a lot of time. So if you wanted to do any UX UI will, let's say you wanted to design a website or you're building a dashboard. So you have to do all these things in fasting UX UI on some specific tools like Figma Sketch, Adobe XD or Marvel. Also, if you wanted to build your website, please do not write core, or you can easily build a website within an hour or two with the help of tools like Webflow, element or WordPress, you have so many tools out there. You do not have to invest that much amount of time in building a website. You can easily do that within one or two Rs by using these kinds of tools. Then if you want to build your web application, obviously, there are boobies to go around with this specific problem. Either you can start coding and then you can start creating authentication and all these different complex features. And that thing is going to take almost, let say, three to four months. But you can also create your web application faster with tools like bubble. Bubble will have their own APIs. They have all their functionality in their product. You can easily create a VR application using bone. Now this one specific reason why I'm recommending this tool to everyone, because if you start using all these non-chord and local tool, you will have fostered GDM strategy. So obviously, if you are using all these low-code and no-code tune, you will end up saving a lot of your time. You are saving a lot of time, then you can develop your product faster. If you can develop your product faster, you will have a very good GDM strategy. Because now you have an idea last month, you quickly burg some MVP, some prototype. You took some customer feedback. And after a month you have your product ready. Now you have to show it to investors, incubators and accelerators. The reason why you are using all these low-code and no-code tools is to get some mitigation. Once you get some validation from all these different investors, then you can go back and start coding it from scratch. So use no core and non-core tools to get those validation and have a good GTM for investors. And once you read some amount of capital, then you can always go back and start building all these product from scratch. And that's not a proven strategy. Obviously, if your product is very complex to bury, you will always start with writing a piece of cord or you will create a man vertex tech. Instead of using these lower and knock or boots. But for most of the startup, you can always start with these kind of tools to save a lot of time, even a lot of capital as well. Because obviously if you have a key and if you wanted to start your own business, you can't really pay someone, let's say five thousand, ten thousand, eight hundred dollars to create a basic version of your application. You can always do that with the help of bone towards strategy, which I always recommend to all the founders who are starting the bootstrap company is use freelancers instead of full potential. I know you may have some amount of capital to bone, but always look for freelancers and in place of full-time employees, if you can replace them, obviously, you may have some book for which you need full-time employees. Let's say you need a full-stack developer for front end, and you also need a full-stack developer for back-end. Obviously, if you're building a tech product, you need to have a full-time back. I'm gonna first time Guyer. But for UX and UI and mock-ups, you can have a freelancer who can build all these UX UI templates for you and then they can give you an edit access so that in future you can make some changes. You can design the workflow. Do not need a full-time UX UI guy. Because obviously, once you have UX and UI ready, you do not have any work for those people. And there's no need to even have a full-time graphic designer because you may have at least, let's say seven to ten images requirement in a product. And after that the person is free. So you have to hire obviously a front-end and back-end guy to write all those individual piece of code. But you do not need other people. You can always outsource that work to freelancers and 54 and O'clock. In short, every single dollar in your startup is precious. Before hiring anyone in your company, always think about yourself. And do you really need that person on fourfold time when you can always replace that person's work with some freelancers because it is not really advisable to bone a lot of cash or you are in the startup, you need to save a lot of cash for the future. And obviously when you're burning cash, it will also build a lot of pressure on your shoulder or will help you to build your product. And then you can hire other team members. Let's say if you can't really afford to have some marketing people in your team, you can always outsource that process to some marketing agency and you're going to always pay them, let's say 20 percent on the complete seals that they are giving you. Let's say you can tell them that give me a higher $1000 and I'll give you $20 thousand as your margin, and I will take $80 thousand in my pocket. So you can always outsource other process, but it's really difficult to outsource the core development of your product. And that's why you need couple of people to build the product at a fast pace. Strategy number four for bootstrapping, always go above and beyond the oily customer. Because oligos tumors are like sales men, which we'll do word of mouth of your product. Because if you have some really good Ollie customers, these are also known as innovators because when you have a very new producting place and you do not have all these customers. All these oligos tumors will help you in sharing your information across all the social media handles. Let's say you have 10 customers and you have a lot of time. You can reach out to these 10 people and you can ask them for a favor. Hayman, we have these many customers. It's really great if you can do a small shout-out for our product on linkedin, or let's say if you write a little about our product on your Twitter or on your social media platforms. And then you can give them some sort of discount or coupons. So you're only costumers like salesmen. You can easily ask for favors. You can easily ask them to do some sort of promotion of your startup on their social media handles. And that's why they're the best source of impact. Because you can talk to these users as much as you can. You can ask them attainment, you're using a product from last two months that lasts which all feature you want us to improve to focus on. So you can always ask for best short. So feedback from these early customers. Also, if you're bootstrapping, you have to have that people. So you need to have all those people who invest in your mission. That means you always need to prefer the DNA over skills, because all these skilled people will cost you thousands of dollars if you wanted to have them. So you have to find people who have the right kind of BMI. Because if those people believe in your mission, if those people feel that you are doing something really nice for this word, you can always teach them skills. Skill is not going to be a big task if those people have the right kind of DNA. But on the flip side, if you're hiring someone who just have good skills, so just have good pedigree and that situation you're paying them more and more. They may not add value to your mission or vision that you have as a start-up or as a company. And if you have good people, they will build good culture down the line in the future. Because people were not really inspired by money. People who are inspired by mission and vision you carry as personal as a founder, they will always end up building good beam under them or with them. And these people are really important for your company. So remember, always hire people that could be any skill. Always look for people who have some goal to achieve in life instead of just chasing money in different companies. And if you end up hiring good people for your company, they will always very good culture inside the organization. So if your device, all of our learning from all these five steps that you have to follow if you are starting a bootstrap startup. So please do not read your job until you do not have fraction once you have enough traction or revenue or customers in hand. And you can always find your startup using the revenue you have from your customers. But before then, you can find your startup with a salary or with a daytime job. Use all these low-code and no-code tools if possible. If you're not a techie or tart step, always use freelancers over full-time employees. Obviously, if you can afford to have few full-time employees, please do that. But there are so much off. One for which you can easily have some freelancers from fiber, from Upwork. And always go above and beyond early customers because these are the people who will help you to acquire more and more number of customers without digging a hole in your pocket. Because all these early customer know someone who can also use your product. Because let's say if one project manager is using your product, they also know other product manager who might be interested in using your product as well. So one product manager will help you to connect up the other product manager. They can also drop a corn meal. They can just introduce a product. And so many things that those people can do if they are happy with your product. And also always invest in people who are motivated by omission or a reason, instead of just focusing on people with good pedigree because they will end up digging a hole in your pocket. If you had a bootstrapped company, if you have some capital in place, obviously you can always pay them whatever sally they want with the amount of capital you have raised from investors. 24. Inflection point in a startup : Hey everyone. In this video we're going to talk about inflection point. Or obviously if you are planning to raise capital for your startup, you have to understand this important topic. Now, inflection point is an event that results in significant change in the progress of your company. Now, we will understand inflection point would be heard above this jog. So in this chart you have on your x-axis and you'll have your company value or your startup value. Not. We will understand inflection point with the help of this beautiful job. So you will have pain on. So we will understand, so we will understand inflection point with the help of this beautiful job. So you have pain on your x-axis and you have your startup or your company value on the y-axis. When you have idea about your startup, you are at the initial stage of your inflection point when you turn your idea into your product, That's your first inflection point when you've done your product into a revenue making machine, that's your second inflection point. When you cross a specific revenue milestone, that's your total inflection point, and so on and so forth. So you have different inflection point in your startup. And for that reason we obsessively focused on these inflection point is to make sure that you are raising right amount of capital into all these different inflection point. Red dots are all your inflection point. And you have to make sure that you have all these different inflection point in your mind. At least you haven't discuss with your team members. And after these inflection point, you have to expand your team and you have to read some amount of capital. Let's quickly understand this inflection point or strategy with the help of an example. Let's quickly understand this inflection point with the help of this example. So in this specific job, you have a, B, C, and D. Now ABCD is your inflection. 0.1234 are your fundraising. Now, 1234 is your round of capital that we will raise for your startup. Now let's quickly take a beautiful example. Now, when you're starting your startup, you have to build some product. Once you have built a product from your idea, That's your inflection point. Once you have your product ready, now you have to reach out to all these incubators and accelerators. And you have to raise at least fifty thousand, a hundred thousand dollars to make sure that you will have some amount of revenue and growth. So a building a product is inflection point and raising your first investment, one is your inflection point, which means once you reach your inflection point a, you have to raise the amount of capital so that you will have some amount of revenue in future. Let's say you tried your best and after six months you have good amount of revenue with you. So at inflection point B, when you have some amount of revenue, then you will raise more capital to hire more people. An inflection point B, you will raise your pre-seed round, which is your fundraising down number two. So now you will raise some pre-seed round, let's say maybe $200 thousand or $300 thousand. This is your pre-seed round that you will raise after your second inflection point. After racing, let's say $200 thousand, you will again run your company for, let's say six months or a year, then you will read a certain milestone of revenue. Let's say now you have broken a revenue of $100 thousand. Now you have reached to our inflection point of C, when you have a revenue of a 100 thousand dollars, now you'll raise capital for your startup, which is your capital round number three, raise a seed investment of $1 million because now you have a revenue of a 100 thousand dollars. Let's say you will again bone that specific amount for six months or a year, and now you have $1 million in revenue. Let's say after running your company for six months or a year, you will now have our revenue of $1 million. Now this is your inflection point B. And after your inflection point B, now you will raise your fourth round of capital. Now this can be CDC, CDC, or whatever round of funding you have in your mind. Now this simply means you have all these inflection point and you have to raise some amount of capital from all these investors at these inflection point. 25. Common mistakes with inflection point: But the question is, what is the main problem behind all of these inflection point? I mean, why do we care about all these inflection point? Well, the first common mistake that a lot of people do with all of these inflection point is the money ran out of cash if you're not raising enough capital for your startup, imagine you have a $100 thousand in revenue and you have a very small sales team. If you have a very small sales team, you do not have sales muscle in your company. You cannot reach to a revenue milestone of $1 million a year because you do not have cash to pay salaries to your employees. Which means if you hit a certain milestone or the inflection point that you have decided in your company. At that point of time you have to raise capital and you have to dilute the minimum amount of your equity in your company. Second one is the low valuation. Obviously, if you do not have any revenue and if you're raising a lot more capital, you end up diluting more of your company with less valuation. Let's say you have $20 thousand in revenue. And if you're racing $1 million, you may not have good valuation and you are also diluting more equity. That means, please avoid diluting more equity when you have less revenue and you are raising more capital, always raise less capital when you hit a certain inflection point. Todd mistake is raising investment from wronging restaurant. Now let's say if you had a B2B SaaS companies software as a service company, and if you're erasing all of these capital from someone who is handling some traditional IT company. Let's say maybe a B2C, then that person may not be the right person to raise investment from because he will put a lot of pressure and he may not understand the correct market or in your vision and mission may not align with each other. Fourth mistake is excessive financial preference to investor. Obviously investor always hold preferred share and you will always hold or common share in your company. We'll talk about all of these different types of shares you can have in a startup. But investors always try to take more and more voting power. And if you give more voting power to investors just to raise capital a little oil in your startup, you may have some of these kinds of problems. Last one is found those getting over diluted. And this is one of the most important part. Let me clarify this with the help of an example. Let's say you are the founder of a startup and you are generating $10 thousand in revenue, you have two choices in front of you. Or whether to raise $500 thousand for 10% equity, or whether to raise a million dollars for 30 percent equity dilution. Now, I would always recommend you do raise less for a very less equity dilution. Because if you raise $500 thousand for 10% of your equity dilution, you can have much better valuation of your startup in the future. So you have to understand all of these inflection point. And remember there's no hard and fast rule for these inflection point. You have to sit with your team members. You have to make all of these inflection point, and then you have to decide at which inflection point you will raise capital, how much capital you will place, and how much dilution you can afford. And obviously you have to discuss all of these three things with the team members. But remember raising right amount of Katherine at the inflection point with right pane of dilution structure is always the key for all of the startups. So I hope you got a fair in the string. 26. Incubators vs accelerators: Hey everyone, In this video we're going to talk about the startup funding platforms. Obviously. In the previous few videos, we had a discussion about bootstrapping startup. How exactly you can start your company by putting in your own investment, by raising some amount of capital from your friends and family, from crowdsourcing platform like Indiegogo. So if you're starting your own startup, obviously, initially for at least six months to a year, you have to put your own capital. You can read some amount of capital from your family members, from your friends. And you can also raise some amount of capital from all of these crowdsourcing platforms like Indiegogo or Kickstarter. But in this video, we're going to talk about the equity sources you have and also the startup platforms. So let's start with startup platforms. So whenever you start your company from an idea to MVP stage, you can bootstrap your company. Even I've seen some founder bootstrapping their company from MVP to product stage. But somehow, if you're not able to find your MVP or fund your product building process in that situation, you will look out for incubators and accelerators. Let's start our journey by understanding incubators. Now, incubators are college programs or very small-scale program where they do not give you a hell lot of capital. They don't even take a very big chunk of equity. They usually help you educate, understand the business model and the startup in general, how companies walk, how can you build better product? How can you build a business model around this? That's it. That's the basic purpose of incubators. So you have startup incubators like startup school, which is a recombinant, an incubator program, then you have your Harvard Innovation Lab. So the main aim is not to fund you or not to take a lot of equity in your company, but to take a very small equity and give you, let's say 10 thousand or $50 thousand. That's it. That's the basic purpose of incubators, but they will help you a lot in making your business mortar, helping you out in building products or understanding growth, networking. So incubators are for that purpose only. Then you have accelerators. Now, accelerators are all those places which will help you accelerate your growth. So you have accelerators like your Y Combinator, your PEC star, your Sequoia surge, and 500 startup. Not all of these are accelerators. So usually white combinator take 7% equity in your company and they usually invest around 125, $1000. That means all of these accelerators take a very big chunk of equity and they usually invest somewhere between a $100 thousand to $500 thousand. Even sequencers invest around one to $2 million in the company. But they are late-stage Accelerators, Y Combinator, x-star, and 500 startup early-stage accelerators. Then you have your guns. Now you have Thiel Fellowship and SBA are some of the grants are public grants or government grants and some of them are post fellowship and all of these things. If you want the list of incubators and accelerators, you can visit this website, incubator list.com. I think this is one of the website where you'll find all the incubator and accelerator. So if you wanted to apply in any incubator or accelerator, or you wanted to see the deadline, you can always do that. Incubators list.com. Now let's quickly understand the different types of check sizes, equity dilution and success rate of all of these incubators, accelerator and grants. Now, obviously, incubator is spatially therefore your idea generation. And at MVP stage, they usually invest somewhere around $10 thousand to $20 thousand, and they usually take on one to 5% of equity. The success rate of incubator is very less, even less than 1%. Because obviously at the idea stage or at the MVP stage, chances of startup getting successful is very, very rare. Then you have your accelerator, which is there for startups who are looking for growth or who already have some product with them. Not accelerator usually invest somewhere around 50000, $1.2, $100 thousand. Even some can go up to maybe a $1 million as well. Now they usually take almost seven to 10 percent equity in your company and their success rate is around five to 7%. That means if 100 startups are joining any accelerated program, out of those, a 100 startup, five to 7% startup succeed and rest of them will fail. And that's the basic go normal behavior of all these startups or all these companies, then you have brands. They usually invests around $20 thousand to $30 thousand. They do not hold any equity in the company or a startup and their success rate is as close as incubator. So if you already have product and revenue in place, I would highly recommend you do joint accelerator. So this is all about incubator, accelerator and grant. If you are an early-stage startup, you can try looking for an incubator or accelerator, or I grind all of these three choices. Whatever choice you get are good for you. I'm Dan, unless they are giving you some capital and you have a good team to build these kind of products. 27. Angel investor vs Venture Capitalist : So here we want. In the last video, we had a discussion about incubators, accelerators, and grants. Obviously that is the stage one of your startup. Let's look at stage number two. When you have revenue in place, when you are growing very fast, at this stage, you have all these three people in place. You have your angel investor. So people like normal loving conduct cannot share all these are angel in restaurant. Now, angel investor always invest from their own pocket. They usually invest around maybe a $100 thousand or $2 million from their own pocket. So they are taking the most risk because they are joining the startup at a very early stage. But they also get a very high written in case if the startup gets amount of success after angels, you have your venture capital fund. So companies like Sequoia Capital, Lightspeed Venture, your dagger, drawable, Soft Bank. All these are venture capital firm. Now these venture capital firm have LPs and they usually invest somewhere around $5 million to $50 million. So startup gangrenous of capital from all of these venture capital firm as well. So they can base, let's say 10 million from 120 million from other, And let's say 5 million from other venture capital firm. And then they can also divide equity in that specific structure. So venture capitalists have LLPs, also known as limited partner. So you have all these big LPs, like you're Canadian Pension Fund, Hubbard, fine. So all these venture capitalists reach out to those LPs and they usually are big, let's say 80, 20 split and 25 percent fixed IRR, internal rate of return. So they usually have this kind of sales pitch to LPs that give us $100 million, we will return at least 25 percent IRR to you in case if some of the startup gets some amount of success, we will give you 80 percent of that success, and B will take 20 percent of that success. That's how typically all doubt venture capital firm deals with all of these NPS. If you're getting confused, you can leave this topic. That's an advanced topic, but usually venture capital firm invest 50, $50 million and all of these startups, then you have your private equity partners. So companies like Blackstone, KKR, and Apollo, not private equity partners, usually invest somewhere around $50 million to a $1 billion. Indeed startup. Now, obviously private equity partner have a very big check size. So in the next slide, let's quickly understand on the size of all these three different types of startup funding sources which come at stage number 2, their success rate and how much equity they usually acquire, all of these top-up. So you have your angels, venture capital firm and your private equity partner. Let's look at their check size. That equity, they usually taken the startup and their success rate. So usually all these angel investor invest some bitter own and then $1000 to $3 million in all of these startup, they usually take around ten to 20 percent equity in the startup. Obviously because angel investors are investing only in the start-up. So the chances of getting successful art and less, because early-stage startup always have some amount of risk. That's why the success rate in all of these startup are five to 10 percent. But these ancient investor, right, a lot of checks on day-to-day basis. That's why they somehow counterbalance their success. Because instead of writing tank when digit that you can even write 30, 40, check on you. Then you have your growth stage of Meniere's startup is growing. They usually look out for venture capital firm. And these venture capital firm usually invest somewhere around $3 million to $50 million. They usually take 10 to 20 percent equity in the company. And their success rate is around 10 to 15 percent. Because venture capitalists usually invest much more capital for a very less equity. And that's why they have very high success rate because obviously of a startup is going, if it is well established, then these venture government people can putting their money, they can take a little less equity because they know that the startup is already growing. They have a good track record. Chances of them getting successful are very, very high. Then you have your private equity partner. They usually invest when the startup is very, very successful in growing at a very fast rate, have good amount of revenue. And it is planning for an IPO or for a merger and acquisition and all these kind of exit strategy. That's why these private equity partners usually invest maybe somewhere between a $100 million to a $1 billion. They usually take five to 10 percent equity. But the success rate of all these private equity people are very, very high because obviously the businesses going for an IPO da, startup is going for important merger and acquisition. And at this stage, they can easily predict whether the startup is going to be successful or not. Now, if you wanted to know more about these angel investor or venture capital people or let say private equity. You can just go to CrunchBase and you can find the list of all the people which are there in the Internet in the interim VC space. And I think a lot of UFM already familiar with countries as well. So if we devise all of our learnings, you will find that you have your angel investor who put some amount of seed catheter, also known as angel funding. And they usually invest in the early stage of a startup. Then you have your venture capital people who usually invest in Series a, series B, and CDC, and all these series have progressive rounds of capital. So see these 0s have less amount of capital cities in cities be they usually there is more amount of capital in CDC. They usually raise much, much more complicated. It's not compulsory, but usually series means they are raising more and more rapidly. So as soon as they raise a new series or a new round of capital, they usually there is more and more typically just because they won't persist in that amount of growth. So if we summarize the complete startup fundraising video at the FAA states you have all of your angel investor who usually invest in the form of seed investment or angel investment. And at this stage you have your seed funding and angel funding. After that, you have your venture capital funding. So you can have your series a, series B and CDC kind of finding. So CDs a is usually around two to $5 million. Series B is somewhere between five to 15 $1 million, and CDC is above 15 $1 million. Obviously, there's no hard and fast rule. It depends on the kind of revenue structure and the kind of capital requirement you have for your business. Once you are done with your seed investment, you usually look out for some form of exit. So startup can do Moses and acquisition. You can do initial public offering, and you can also do management buyout. There are so many exit options available. We're going to talk about all of these exit options like your Moses and acquisition, your initial public offering, your management buyout. And we'll talk about all these things down the line in the course. 28. Everything about VC investment and ROI: Now some of you may have some question regarding the venture capital firm that why these venture capital people are investing in the startup and even if they're investing in so many different types of startup, how exactly they counterbalance their negatives and what are the metrics they usually follow. So let's understand this venture capital firm investment strategy with the help of an example. Let's say a VC is investing a hundred, ten hundred dollar of capital into 10 different startup. Honestly, obesity never invest such a low amount of capital, which is ten thousand, a hundred thousand dollar, and they are expecting a internal rate of return of 26 percent that they have promised to their NPS. Now remember, some startup can give you 100% of returns as well, while some startup and give you 0 investment as when you're investing, let's say $1 million and they are dead after one or two years. Let's say a venture capital firm is investing a $100 thousand into 10 different startup from startup number one as U12 x2, then startup number ten. And they are expecting our internal rate of return of 26 posing now IRR of 26 percent over a span of 10 years. And they are promising these things with their LPs. Now, LPs are limited partners. And if you take 26 percent IRR, which is internal rate of return for many years, you have Tenex growth. And so basically they want all their $100 thousand to turn into $1 million on an average. Now some companies can give you 100% of written as well, while other company and also give you 0% return because they might be dead after a year. Now, let's imagine Sequoia Capital as a VC and you have your limited partner like your Harvard education, fun or let's say Canadian Pension Fund. These are your limited partner. Now this is a very confusing table. On the left side you have all these 10 startup, startup on startup to startup three, up to start at number ten. And these VCs are investing a $100 thousand and all of the startup, startup one in year number 1 have done their $100 thousand to $47 thousand. Now when these VCs are investing their money in, all of these startup obviously did start off with higher, better and better people. They will hire some smart employee. They will build out the product and they will generate more and more of revenue. And the, we increase the worth of the company or the startup, let's say in year number 1, the value of a hundred, ten hundred dollar in startup number one got reduced to only $47 thousand. In year 2, it got increased by $58 thousand. In year three, it got increased by $84 thousand in year 4, 120, $1 thousand in year, $500 thousand in year 6, 7, 8, 9, 10, the first startup is dead. Let's look at startup number two. They have raised a $100 thousand in a specific amount of, let's look at startup number two, startup to have also raised a $100 thousand in year one, the value of the capital or decreased 256 $1 thousand in year number 2, 70000, year 3, they are dead, so they're dying. Year number three only. If you look closely, have a look at startup number ten, they have raised a $100 thousand. In year one, the value would increase to $188 thousand than 172, 247 through 22, 588980. They have reached to a $1 million than $2 million than three, then put the index. That means out of these 10 different startup, these red ones are all the startup which will be dead after nine or 10 year. These yellow startups are someone who is giving you an extreme level of returns. And you'll green startup, startup, which will give you a mediocre kind of return. So you can see that after ten years, fast for startup give 0 return. They are then start-up five startups six and startup give 0.8 x two x and 2.5 defects of radon. While startup 8, 9, 10 give 25 X TO T2X and total eight x of return. And if you find the average of all of these startup, you have Tenex opera Don over a span of 10 years. Now this simply means that all these venture capital firm usually invest in variety of startup from different domain with different business model. So that by the end of ten year, some of them will become super successful, while some of them will be dead after few years. But down the line they will have at least an average return of n-x and IRR of 26%. This is the kind of strategy all the investment firm follows. No matter it is your incubator or accelerator, or your venture capital or your angel investor. All of them look for five to 10 percent outlier, which will have massive amount of success in the future. Because they already know that 1995 percent of the startup will fail for sure in the future. They always look out for all these five to 7% of massive growth or successful stories, they will recover all of their other coast. Because you can see that this 25 x 32 weeks, 38 x gave them a pinpoint one x off. They're done in ten years. That will also translate into 26% IRR. That's the basic strategy. Vc angel and even incubator and accelerator follow him. And if you look at our accelerator like White Combinator, less than 4% start off will become successful. Remaining 96 percent startup will be dead after four to five years. And that's the basic investment thesis even before. 29. Vesting and Cliff for startup: Hey everyone. In this video we're going to talk about Aesop's, where sting and live, let's say me and solve EOM. We had a good idea. We started our business and now I'm putting my time, my money, sales and marketing F0, and I'm also doing fundraising part. And Sophia, I have also put in a harmony or dying. She's developing the product and she's deploying the boring day and night, let's say somehow in the future, Thanks, may not involve adult and the startup may not work out and one of us have to leave the company. In that situation, what will happen to the number of shares or equity or stocks that we both of us have in the company. And that is why you have vesting and live in a startup. So in this video, we're going to talk about resting and glyphs and why you should have resting and direct with your cofounder and with your team members. Now, resting and diff is a technique which is used to protect stakeholders to receive benefits after so being a legal entity for a specific duration, which means you will only receive equity or share in this specific startup once you spend enough time in the company. Normally startups usually have one year of birth and four years of vesting. Once you cross your cliff, then in those four years, your equity or your number of shares distributed or spread equally or unequally, depending on the terms and conditions of your startup. Let's understand this Western and Cliff with the help of this beautiful diagram. So on y-axis you have your number of tokens, or number of stalk or number of share, whatever you call it. On x-axis you have your time and duration. So you have your one year cliff. That means you will not receive any shares, any stock and this.tab for at least one year, no matter whether gNodeB is leaving the company or Sophia is leaving the company. You have to work for at least one year, receive any form of stocks or equity into this company. Then after one year, you will start receiving your stocks and equity equally across all these four years. That means all of your equity will spread uniformly across all these four years. Now, once you've crossed this glyph, Dan, only you will receive your equity or your stock or uniformly across all these four years. So that's how you will have a uniform spread of all your equity and stocks in next four-year, and that is your vesting period. But for one of grief, you will not receive any form of stocks and equity. This simply means the longer you stay with the company, you can take a larger percentage of your equity that you are resting from past so many years. And the complete equity will be vested after four years or 48 months to be very precise. So you have to work for at least 48 months if you want to take your ownership. This kind of same situation happened in Facebook as well, when one of their co-founder left a little early on in the start-up. He walked for around a year and do and then he left, but he would still holding the equity of the company. So you have to make sure that if you're doing a startup with the unknown or with a founder, who you feel will leave you in the future if the startup may not work out, and that's tuition, you can have this belief and vesting agreement. Please talk to your lawyer or someone in this domain who can help you out in making all these domes and condition for the startup. Because obviously this is a overview of fasting and cliff, but you have to dig deep and you have to write all those terms and condition. And you have to create a legal graft and all those things. 30. Vesting Spread and types of vesting: Hey everyone. Now let's quickly have a look and understand how the vesting spread is the Arrhenius plot. So each month you are actively working full-time for your company, you will receive 148 of your total equity package. So let's say if you have to receive 5 million in share after 48 months or after 40 years, you will receive four pi of those 5 million share every single month for next 48 months. And that's how you investing structure will look like. Let's understand this with the help of an example. So obviously after one year left will be over, and after one year on every single month, you will receive 148 of those complete equity or stocks you have in your company. So let's say if I have 5 million stock or shares in a company, I will receive 148 of those 5 million stock or shares I have in the company. So if I run, I can walk away with one year and one month with 104 thousand equity share in the company. If I'm going in the second month after a year, I can walk away with 104 plus 104. And let's say if I'm leaving the company in the fifth month, after one year, I can walk away with it. Let's say 0, 4 plus 1, 0, 4 plus 1, 0, 0 plus 1, 0 for all of these are shares combined together. But usually I've seen all these co-founder stay with the startup for at least four years so that they can walk away with the complete equity or shares in the company. So if you wanted to calculate the number of shares westward per month, then you just have to divide the total number of stock or shares you own in the company divided by your vesting period in months. And that's how you have your number of equity or share or stock and accompany every single month that you can always walk away if you wanted to leave this company or a startup. Now, this is the typical example of a normal resting. Multiple types of testing. You have your front loaded resting your backlog are investing your normal resting. Let's quickly have a look. I'm going to color friend Lord vesting and back loaded vesting. So this is the normal structure of resting in a stopped up. But on the flip side you also have front or investing and backlog investing. Let's quickly understand Frank Lauren and traditional or normal resting that we had in the startup. So normally you distribute all of your equity or sharing a startup in 48 months uniformly. So let's say every single month you will receive a specific part of your. Now, this is a typical example of traditional vesting or normal resting you have in a startup when he will receive uniform equal amount of shares or equity in your company, indeed vesting period, you also have backlog investing. Let's quickly understand backlog investing. So previously in the traditional investing, you were receiving 25 percent share every single year for four years. And which equity translate into uniform share every single month. So in traditional vesting, you will assume 25 percent equity or share every single year for four years. And after that, you can leave the company if you want, and you can stay with the company if you want to increase your value of your company part in baccalaureate resting, obviously there is a one-year cliff. By the end of second year, you will receive 10 percent equity or sphere in the company out of those stories and share, by the end of third year, you will receive 25 percent contribution of your share or equity. By the end of fourth year, you will receive 65 percent equity or your percentage of equity in the company. Which means instead of receiving 25 percent, 25 percent equity across four year, now you're receiving 10 percent, 35 percent, and 65 percent kind of structure. This is a typical example of backlogged investing so that your co-founder will not leave your company after one or two year. They will stay with your company for at least three year. So this is the typical example of an agreement. Founder won't Other found law to stay with your company for at least three to four year. Otherwise, found that usually work for a year or two and they usually leave your company by taking 25 percent, 20 percent equity. And then you alone have to walk of your company for next one or two year. So this is a typical example of your normal traditional investing and your backlog investing. 31. Pre-money and post-money valuation: In the previous video, we were asking some caution that does all the stocks you have in a start-up have the same value? What if two different people are investing in a company? How would you divide stock between your investor, between your employees and between the co-founder. And what about the voting rights? If you have these three people who exactly can vote about decisions, like would it be the CEO of the company? Whether we need to expand outside a specific country or not, we will be taking all these decision based on the kind of voting rights. And then if tomorrow company goes out of business, what will happen? So in the previous video, we had a startup scenario like this. Me and Sophia started this business with 10 million of registered number of shares or stock. And then our equity structure was something like this. I'll be both have 50 percent equity in the startup with 5 million number of shares. So we registered this company by issuing 10 million share. And we both have 55 million share, but we have 0 investment so far. So we bought on 50% of the company. I'll be both have 5 million share and the total number of shares that we have issued when you are starting this startup or company, what 10 million? Somehow a new investor, PEDOT, invested in our company, let's say a $1 million. And then we issued 2.5 new share to be there till instead of diluting the existing 10 million shares. So you always issue new shares to the new investor instead of diluting your existing share. So we both had five million, five million share with us. We issued new 2.5 million share for Peter because Peter Thiel wanted to have 20 percent equity of the company in reference to a million dollars he have in restaurant. So earlier we both were holding 50 percent equity in the company. Now, an odd number of shares is same, but our equity percentage drops down to 40 percent. And now peter heals on 20 percent equity in the company and he bought 40.5% and 40 percent equity. So remember, whenever a new investor join your company or join your equity structure in your startup, you always issued new shares to the investor and you never dilute your existing share back. Your equity potentates will go down because now B to T owns 20 percent equity in the company and you bought, owns 40 percent, 40 percent equity, your investment at 0, but p that he is putting almost a $1 million and that's why you have to give him some part of the equity. Now you can always negotiate in terms of equity. Let's say if you have higher $1000 in revenue and then one of the investor is investing on billion-dollar, then you can always negotiate on 10 percent equity with them. You can clearly ask them that we cannot give you more than 10 percent because we already have this much of revenue in place. So let us know if you are investing on billion-dollar for 10 percent equity, you can always have these kind of back and forth conversation to negotiate these equity, the dorms and the conditions, and these investment. Now, this is the rough structure of how exactly a company can issue number of share and they can dilute the equity in your startup. Let's quickly understand pre-money and post-money valuation with the help of all these same number, you have this kind of ownership before somebody invested in your company. So you bought have 5 million share and you bought, owns 50 percent of the company, also known as your startup, before funding, when you don't have any shorter funding for your startup. This is your pre-money valuation and you always calculate your pre-money valuation by multiplying your number of share with the help of your base price or your face value you have. So let's say if you are starting your starter for maybe 10 million share, and let's say you have assigned our face value of $1 per share or EMI, let say. So pre-money valuation is your company's valuation before you raise any cavity. So let's say you have 10 million shares in your company. And the face value of everything that is share is let's say a single sang. So you multiply the face value of your share with the total number of shares, that's your valuation. Now you're running a startup successfully, and now you're thinking of raising capital for your startup. Now the founder, we issue 2.5 million share for this investor because he is investing almost a $1 million into this company. Now once the investor is investing $1 million in cash in your startup, you will issue him new Gu, 0.5 million share. And now you have to understand the pre-money and post-money valuation. Now if the investor will invest $1 million in your startup and he is taking 20 percent equity. So if 20% is equal to $1 million than 100 percent is equal to $5 million. Post-money valuation will become $5 million because now investor is investing a $1 million and he is getting 20 percent equity in your company. So if 20% is equal to 1, $1 billion than 100 percent of your company is equal to $5 million. So $5 million is your post-money valuation. And that's how you conclude your pre-money and post-money valuation. So now you have 80 percent equity with all your employees or your cofounder and 20 percent is owned by this specific investor. In our case, it's PW. 32. Startup stock distribution: Now so far we have a good understanding of how exactly a startup issue new stock or share to investor, to employees and even to found those at the early stage. But does investor always look for one specific type of stock? No investor always want this preferred stock instead of restricted commoner fungus talk, not before directly jumping into the stock, we first have to understand that different type of stock or shared. You will issue two different people in your startup. So this is your authorized stock you have in your company when you're starting your startup. Obviously, we registered our startup with 10 million share. Me and my co-founder, both of us have 5 million share. And we will also be issuing new shares whenever we wanted to raise more capital from some investor. So these are the share we haven't created yet. And obviously these will be preferred share. And these will be given to all the investor which will join us in the future. So we will issue these stock in the form of convertible notes and warrants. We're going to talk about and more than silicon later in this course. But these are the stalk which we will issue in the future in our company. So let's talk about the existing 10 million stock or share we have in our current startup scenario. So let's say in the previous case, we have already issued preferred stock to Peter T because he have invested almost a $1 million for 2.5 million share and 20 percent equity. So we already have the preferred stock. Preferred stock usually have a only dilution clause. We will talk about the audio dilation grows, but we already gave him 2.5 million share with hoard, 20 percent equity in our county. Then you have your common stock, which is they have video founder. So obviously both of us have 55 million share or stock with us, which are common stock. And then you also have some stock which are not yet issued. And these are basically does talk or the share which is owned by your employees. So these are your stock option pools, also known as Aesop's employee stock option pool. And obviously you have a vesting a cliff period for your employee. So obviously if you're employed, want to have some form of ownership into the company, they have to at least walk in your company for one year to cross the cliff period, and then they have to work in your company for next four-year to also receive the equity or the stock in your company once the vesting period is over. So some of the e-shop are already vested. Some of them are Northwestern yet. So this is your basic startup strokes or sheer structure you have. So you have your preferred stock, common stock, you're restricted stock for employees and some stroke that you haven't created yet. You will create that in future for different investors. 33. Common Stock Vs Preferred stock: So in this video we're going to understand the different types of stock in a startup. Now some people call these as a stalk, some people call these as equity or share. It's up to you. You want to call these as here or stock. So there are four different types of storekeeper and having a startup, so usually did something called as founders talk. Then you have common stock, then you have restricted stock and preferred stock. Now let's start our journey by understanding common stock. Now, obviously when you register your startup, your startup have so many equity or share or stock for different people, and they usually issue major B of the common stock. Let's start our journey by understanding common stock. So all the startup start the journey by having 100 percent of common stock. And later this dark than working these common stock and preferred stock and enter different types of stock. So common stock are the share of ownership in a corporation. And these common stock are usually formed by all of your startup founders and employees, but not by investor. Investor always look for these preferred stock. Let's say investors are putting their hard-earned money in your startup and your startup may not perform value in the future. That's why investor always flag who have preferred share, which we have. This liquidation preference means tomorrow, if your startup as filing for bankruptcy and it had to liquidate all the assets like your laptop, your table, any sort of Beta end or anything that they have, they can easily liquidate all those assets and those investor can squeeze out at least sample of money from your company. And that's why they usually have this preferred stock. Then you have restricted stock. Usually startup issue, all these restricted stock to all the employees. Now these restricted stock are also known as Aesop's or an employee stock options. Now let's understand the basic difference between common stock and preferred stock. So obviously we have these two different type of song. You normally all the startup stoppage only be common stock and all the investor, your employees sorting all the founder and employees have these common stock and industrial always look out for these preferred stock. Let's look at a special privilege. Obviously, of common stock doesn't have any special privilege while preferred stock have some special privilege, like liquidation preference. While Emperor on preferred stock, you have this liquidation preference of which means if in future your startup may not do well, then you have to file for bankruptcy. And in that situation, you have to sell all the assets you have. Startup like your laptop, your table, your chair, your proprietary technology or Beta and all the line of codes that you have written. And then investor will squeeze out as much profit as again by setting all of these acids. And that's why they have liquidation preference that if you are going to liquid all of your assets in the future via the people who will get all this money fast. And then if you have someone of military meaning, you can also take that money. And also a right of first refusal, which means if investor have preferred share and they have the right of first refusal in their pros. They can always refuse for the line of investment for your company, for your startup. So let's say if the phone that you are raising some huge chunk of capital and diluting a big portion of your company. They can also refuse that investment. So all these startup who have only in-lecture those industry usually asked for this clause in their preferred stock right of first refusal. And you also have preemption, prorate applause in preferred stock, which means investor can always participate in every single round in the future. So they usually have this preemption product applause. So they usually reach out co-founders in that happening. So a lot of capital, but we wanted to participate in every single funding round that you will have in the future. And that's why they put this preemption or progress applause in these preferred stock. Then they also have board of director clause, which means all these investor can appoint a board of director, the CEO, the CFO of the company. They can also take major decision like geographic expansion, the amount of budget or spending the molecule have in the company and all these high-level decision, then obviously they have angular relation clause, which means if you're racing for the role of capital from the first investor, their equity share should not be diluted. Now these claws are very complex. You have to spend a lot of time to understand these claws. But that's the basic different types of bees. Investor can always ask while you're registering or running a startup company. Obviously, your common stock are usually held by all of your employees, your CXO, people like your C CEO, your CEO, your CFO, your CMO, and all these people. Preferred stock are always granted to investor because they won't all these specific terms and conditions and their stock, then price per share for common stock are always less white in price per share for preferred stock is always high because preferred stock will also give you voting part and all the specific clause as well. So this is all common stock and preferred stock or common stock are always given to employees to see X1 preferred stock are always given to all of the investors. 34. Convertible Notes in a startup : Now let's start our journey and let's dig deeper understanding of variation. Obviously, valuation is a very complex topic and you have to focus a lot more on this specific topic. So I won't be your attention if you are doing something else, please leave that thing aside and feedstock making norm of this specific topic. Because this topic demands a certain amount of attention from you. And you have to give a little more time to absorb this topic completely by your brain. So We'll try covering this topic of convertible note with the help of this valuation Dima. So let's say you are planning to raise almost a $1 million from an investor. And you have, let's say, a $100 thousand in revenue for your company. And your investor thinks that the valuation of your startup should be around $5 million. But on the flip side, you feel that the valuation of your startup should be at around $10 million in that situation. Instead of heading back and forth negotiation, you usually ask your investor to d we do in the form of convertible notes. That's the overall situation. We're going to understand how exactly can we do and not swallow. What do you mean by convertible note? But let's actually clear out the situation would be hypoventilation diagonal. So obviously whenever you have any idea in your mind, you always have three options in front of you. You can go to a simple traditional bank. You can take a loan of a $100,200 thousand and you can pay some amount of interest to that specific bank. But the problem with the startups are that startups are designed to be almost 95 percent startup fee. And it's really difficult to pay back the loan. And that's why I never recommend any founder to pick known for their startup. Remember, startups are from traditional businesses. If you wanted to start a bakery shop account bush or any electron, go ahead and do that and take as much long as you can, but did not take any loan for any startup. And when I mean startup, that is a technology scalable business. So instead of going back to the bank and they can be lone, all these startup founder usually reach out to all these different types of investor. And then they usually ask for convertible note. Obviously we're going to come back and multiple lot alike later in this course. But mean by convertible loan behaved economization of the valuation dilemma that you have. Because if you think that your startup should value that another instead of $5 million valuation proposal which was given by the investor, they can always sign the b, take the money from investors in the form of convertible note. And usually all these convertible note have a discount. Our interest and our valuation cap and maturity date. Obviously, this startup really do good in the future. They have to risk for that all of capital. And in that situation, these convertible nor will get triggered and they will get converted into preferred stock, which is basically nothing but a type of stroke or sharing startup. And then the previous investor will have equity in this startup company. So in the next video, let's pretend to understand these and why these investor did not directly take equity in any startup, but instead go for the convertible note. So hey everyone, In this video, let's quickly understand convertible note. So when we're done, we'll notice nothing but a type of loan which we convert into ownership or equity after a certain period finding on valuation. And the main purpose of convertible note is to delay the condensation. And once they deliver condensation, startup can quickly these finance from all of these investor and later these investor will convert that finance into our equity. And obviously if you have equity, then you can have, writes about all of the decisions that you can take in the startup. Let's quickly understand this complex topic with the help of some example. Let's say our investor is talking to one of the founder and he wanted to invest $5 million Act put the million valuation in a specific startup. But the founder fields that my startup radiation should be $50 million and I think I'm ready to take your $5 million, but my valuation is $50 million instead of $40 million. So I will dilute less of my company and I will give you less number of share or equity percentage. So instead of hanging back and forth conversation, these investor and startup founder usually sign a convertible note at 45 million valuation. And the startup founder had to give when people isn't discount and 5% interest on the next round of capital to this existing investor. So let's say if they're racing the next round of capital or fundraising at 50 million variation, then this startup founder have to give 20 percent discount and 5% of annual interest to this previous investor at that renovation. This is the basic purpose of convertible note. So this technically means if you are raising $50 million next time from some other investor to this specific investor. You have to give him 20 percent discount, which is 1 fifth. So you will be giving your company's equity or stock at 40 million valuation because 20 percent discount of 50 million is 4040 million. So you will be giving equity for scientists to this existing startup investor at 40 million of, let's say they're investing 5 million, you have to give 1818 of equity. And then you also have to be him this interest in the form of equity or share. That's the basic purpose of convertible note. Let's also understand convertible note with the help of this beautiful diagram. So let's say this is your startup investor. Let me briefly a highlighter. I don't know. Laser point is good, I think. So this is your investor. This is your startup, and this is the equity you have in your startup. So our investor can always find your startup and you can give equity of your startup or issue the equity of your startup to the investor. But if you have some valuation dilemma or conflict with your investor, then your startup can issue a convertible note or a datanode, whatever you call it, to the investor. And David issued this naught. And then you also have to pay interest in this specific mode. So obviously, on the next round of funding, when your startup is raising a specific amount of capital from different than restaurant, this node will get triggered. And in that situation, you have to convert this not in the form of equity at a specific gap or capital at a specific valuation or at a specific maturity date. And then these investor can own the equity in your company. That's the basic purpose of convertible note. If you are racing good amount of capital at a good valuation, then you will give discount and interest to your previous investor and convert their convertible note in the form of equity. Because equity is the major outcome all those previous investor want in your startup. That's the basic purpose of convertible not lets you understand some of the feature of convertible note. So if you look at finance, convertible not have a specific amount defining them. So whatever money that you will be getting from the investor, those convertible note had a closing date, they have a maturity date, and they also have some interest rate guidelines, which means any specific Convertible Note have the amount of funding that you will get from investor when this convertible note should be converted into some form of equity. So you will have a closing date, you will also have maturity date, and then you'll also have interest rate on annual basis that how much of interest you have to be in the form of equity or share with US investor over the period of time. So if you raise funding after certain period of time, you have to pay more and more interest to that previous investor. In terms of conversion, these convertible note can be automatic. They will trigger on a specific amount of capital you raise. And these convertible not have discounts and adapt element. Now, understanding gap limit can be a little more complex, so I'm not going to cover in this video, we're going to call it that down the line in more videos. Now, if these convertible notes are not converted in the form of equity, because somehow let's say if you're not able to raise for the role of capital from different investor aldehyde evaluation, then you'll previous investor, investor have to either call the loan or they will extend the time period. So let's say you promise that you're going to raise next, you at a higher valuation within two years. And somehow we are not able to raise that amount of capital because of less revenue, your startup not performing goal, then they will extend the period of these convertible note. And then they will also have some form of optional convolution. Then obviously if somehow your startup with acquired by some big company, then they will have two extra them on your existing convertible mode. Now this is a very rare scenario, but this also happens in so many startups as well. And in the end, Convertible Note also have some of the right. So the previous investor can always look for your cap information or the capital information. So how much erasing and what valuation, how the distribution is going to look like. They will have all of your financial aid, the commission, your approval rights, aka of veto power. So they can always remove people, assigned people, add investment, remove some form of bank, something or the other. Then they also have board observer, soil, existing investor or your foster investor always want to sit on your board to a producer decision like your CXO's CEO of the company, your future expansion plan, geographic expansion, revenue, your usage and all these things. And then they also have pro rata clause, which means they wanted to participate in every single ground or in the future so that they can minimize their risk and maximize the output of capillary from the DOM. 35. SAFE Vs Convertible Note: So everyone, now let's return to understand the difference between convertible note and safe. So in the previous video, we had a discussion that how exactly, instead of having variation discussion with your investor, you can take convertible lot from your investor at some specific valuation and then you can give them 20 percent discount and 5% interest rate and those convertible note, we'll also have some valuation cap and maturity date. That's why I wrote the famous accelerator Y Combinator come up with safe. No, safe is simple agreement for future equity. Because as a startup, you don't want to take any form of law. So safe is removing this requirement of loan payback type of situation where you will sign this investment from your investor in the form of convertible note and later, this convertible note, which is also a type of loan, really get converted in the form of preferred stock. So swift will be move all of your lawn requirement or payback. See if doesn't have any form of maturity date, so inconvertible or not, we have some form of maturity date, which means you have to raise next round of capital within the maturity date if you wanted to convert these northern preferred stock, because otherwise investor will start putting pressure or they have to believe these convertible note. But safe doesn't have any maturity date. Also safe have a valuation cap, which means if you want this C to get converted into preferred share, you have to raise capital, a board evaluation so that they can also ask for discount. But obviously safe doesn't have any interest. Because as a startup, you shouldn't be any interest. Because obviously you can't pay interest, but somehow these investor will adjust your interest in the form of equity. And obviously you have to have some form of discount for safe because now investor, I'm negotiating with you for further arm of capital. So this is your basic difference between your convertible note and see if a lot of start a founder and investor are still using convertible mode to have all of these funding and valuation kind of conversation. But recently so many start-up also started using safe simple agreement for future equity, which is tablet or given by Y Combinator. This have some scope of improvement, but both of them are really got to delayed evaluation, condensation, or diorama you can have with your investor. Now let's repeat how I look at the similarities and the differences between convertible note and safe. So both safe and convertible note will convert into equity in future price wrong. Because obviously the main purpose of giving you capitalize the first place and asking for sculpt in the next round of funding is to build an evaluation condensation. And both of them will have valuation cap and the skull, which means next time you have to raise a capital at the higher valuation and then you have to give a discount to your previous investor so that they are safe or convertible, not really get converted or triggered in the form of preferred share. Now let's quickly have a look at the difference between safe and convertible note. So obviously, convertible note was a debt and you have to be interest on a debt. Why don't other side, safe is not a Dead Sea, is a warning of purchasing your stock in the future with some price from security, which means So next time you raise more capital, you will convert your saved in the form of stock. Obviously, a convertible note usually have more number of triggers, 10 sieve. So let's say Convertible Note have maturity date, they have valuation GAR, they have price wrong. Why is if we only get triggered when you are raising our new round of capital. So in short, convertible note is a form of loan which have interest rate and maturity date. While C is a convertible security, which do not have any interest, no maturity date, but both of them have discount and valuation cap. And a most favored nation kind of close. So this is the thing you have to remember when you are dealing with investor in default of valuation diagonal kind of situation. So if you have any sort of valuation dilemma, your investor will to value your company has a lower valuation, while pneumonic to value a company at a higher valuation, you can always have a discussion with those people in the form of convertible note and see if you can understand both of these topic by talking to your lawyer. Remember, it's not any real advice or knowledge or legal expert. But I'm covering all these basic topic just to make sure that you understand all these things in a much better way. 36. Startup Valuation basics: Hey everyone, My name is Navi, but in this video we're going to talk about valuation of a startup. Now evaluation is a complex topic and different people have different sorts of scenarios methods to calculate valuation of a startup. Now, honestly, VC and angels have different methods to calculate radiation of a startup. But before badly jumping into those valuation method, let's quickly understand about a startup how exactly that variation concept walk in a startup with the help of this funny example, or I would say a beautiful example. So a startup is like a box and it's a very special box. The box has a value. The more things you put in the box, the more its value increases at a Beta in the bulks, the value will increase at a biggest management daemon, the box and the value will increase. So if you put more and more things inside the box, the value of the box will increase the boxes also magically. So if you're putting $1 inside the box, the box will give you 23 or even 10 dollar after couple of year. That's the power of this box. And this box is your startup. Valuation is a process of quantifying the water company, aka dot valuation. So how much value does your company? That's your valuation. Now valuation have multiple deciding factor and there is one famous port for valuation. Beauty lies in the eye of the beholder, which means different people and value the same company or same startup at different radiation. It all depends on the kind of risk appetite those investor have with the startup. Now, obviously that couple of deciding factor for valuation. Valuation is obviously decided by the kind of being you have in your startup. The kind of technology are building for your startup and the kind of growth and revenue you have in your startup. And by degree, which means if you have started some company earlier, some successful company earlier, or you were a CXO and some successful tech company, or let's say even summing some membrane, the beam, we're having some good past track record. The answers are there, do valuation, will it increase? Which means if you have a good team in your startup, a good technology are good growth and revenue number, and a good pedigree. Chances are your start off. We have more variation than other companies. That's the basic fundamental of envision. The valuation of your company is decided by h, The John Great you have in your startup, MRR, which is monthly recurring revenue, year on year growth rate at a TV would just lifetime value of your customer, your market growth rate, and all these factor. And you can have a multiplier of all of these factor from a range of 5 x to edX. So let's say maybe your age have a higher multiplier. You John have a higher multiplayer. Your MRR can have a higher multiplier. And we're going to talk about this multiplier effect down the line in multiple methods that we're going to cover in the valuation concept. Now, obviously to calculate valuation, you have all these different types of methods, aka valuation methods, which are used by all these venture capital and angel investor. Starting from Barker's method, which is a value assessment of your startup based on five key success factors. Then you also have risk factor summation of which will help them calculate radiation based on 12. Then you have your scorecard, your comparable transition metal, your book YOU metal the liquidation value, discounted cash flow for Chicago method and venture capital method. So you have all these maybe 10 different types of valuation method which I've used by all these angel investor, venture capital beetle, and even accelerator to calculate the variation of your startup. Or let's say an idea or a revenue start-up or a boss revenue Stato, depending on the different stage of your company. So at different stage, they use different methods to calculate the valuation of your startup or company. 37. Startup Taxonomy: Before directly jumping into the complex topic, let's quickly cover some buzzword which you will see down the line if you're reading some blog article, or if you are talking to some investor or some founder, or if you're reading any form of magazine, if you are reading any blog article or maybe talking to any VC or angel, you will listen to these complex terminologies like unique on DACA gone. So let's quickly understand these animal names, which all these people use as metaphor to describe the plethora of startups. So let's quickly start though with Bonnie. Not only are all those startup which have a valuation of $10 million, then you have ST door. All those startup which have a valuation of a $100 million, then you have your unique on obviously unicorns startup have the valuation of more than a $1 billion. This is one of the most used, are most often keyword on infinite. Then you have Becker gone. So all good startup which have a valuation of more than $10 billion, then you have your hacked up on with a valuation of more than a $100 billion. So these are all valuation based taxonomy that is very oftenly used on internet. Now let's critique of our capital efficiency based taxonomy. So whenever VC invest in any company, they usually look for all these different types. Tsunami, so that they can expect some amount of return down the line in five to ten years. And that's why they will have all these complex terminologies. So first of all, they have dragon. Dragon is a startup which is a unique on, and they are given good Return to all these angels and VC. So that is dragon. Dragon usually outperform all of the index in the current portfolio. So let's say a VC invested in then different companies or in 2021 and one of their company is really successful in 2025 when compared with all the companies. Now that one company's dragon, then you have companies like Pegasus. Pegasus is our startup which outperformed all of your benchmark. So companies like WhatsApp, whatsapp give more than 100 extra return to their investor. Lexical whack at Purdue on WhatsApp was acquired by Facebook for $20 billion. So what's it like companies or Pegasus, which will outperform anything that you've ranked. Imagine for that specific company, then you have Deborah. Deborah is a sustainable, capital, efficient and profitable company. So if you have invested or if VC having vested in the company, which is getting them decent amount of Fricton or a mediocre kind of success that's general. Then you have rhinoceros, which is really prominent in the industry or a specific segment. So if VC, investor in a company which is really authentically dominant or dominating one specific award legal, that's the perfect example of rhinoceros. Then you also have gazelle. Now, if a VC investor in a company which has extreme competition in the industry and somehow they are able to leap frog or drawn scores rapidly between other competitor. Well, that's the magazine. And then you have bulk Roche now cockroaches a DOM which was coined by Paul Graham. 38. Startup valuation techniques: Now let's quickly understand the different types of valuation method. All these VCs and angels have four stop. Now, obviously, if you're a startup founder, you do not have to put yourself in their shoes. You have to understand the basic fundamental of all these valuation method. Saw that you can build your team, build your startup based on these valuation method. Of these, there is no hard and fast food for valuation. Remember, utilizing the beholder, if an investor feel that your startup have some unique sauce or some unique value on the, can always invest with the higher valuation. But I'm still covering couple of valuation topic, saw that you will have fair understanding on how exactly these VC value your company. So evaluation is the process of calculating the value of a startup or a company. And for valuation, you have so many different types of valuation method from bulk is method two, comparable transaction metal scorecard valuation method 2 goes to duplicate approach, risk factor summation, discounted cashflow, venture capital method and book value method to calculate Startup Valuation. Vc usually have two different categories, the fast, breeder and evaluation. So if your startup only have an idea or you have some product, but do not have any form of revenue, then they usually are major the valuation of your company with these kind of pre-revenue valuation method, like your scorecard, worker's risk factor, and for Chicago. But on the flip side, if your startup have some form of revenue, they can always use this venture capital and revenue multiplier method. Now let's briefly start our journey bit prettier and new valuation technique that goes VC use Wildbelly evaluation of your stopper. And there are a couple of things that you have to keep in mind before started calculating valuation of your company. Obviously, you first have to create balance sheet for your company. Obviously, what kind of revenue, what kind of numbers, what kind of expenses we are doing right now, saw that all these VC can read through your balance sheet. And based on that balance sheet, they can find out some valuation technique. If you are building a startup from scratch, we do not have any revenue, any costing place. You just have an idea or maybe then you have to explore different types of database to find all these angel investor. So you have platforms like your AngelList, CrunchBase. You can get the data off all these VC and Angel from both the state arises. Then obviously once you have some valuation investment in place and you have to calculate the investment scenario and dilution. And majority of the people who are watching this video, I think you are looking for an angel investment from 25, $1000.2, $100 thousand. And all those angel investor usually have a portfolio of around 10 to 20 companies. And the valuation of all those freedom and new startup that those angel investor invest is somewhere around $1 million over those angel investor usually invest ten to 30 percent equity in the company and the failure rate is around 80 percent, which means the remaining 20 percent startup out of those 20 percent successful startup, 50 percent startup will give those angel investor Somewhere around one X.25 certain, while the remaining 5% startup gave around 20 to 30 extra add-on to those engine investor. Which means these angel investor can expect an ROI of around x, 220 x and five to 10 years. That's the basic startup investment scenario. And majority of the people who are watching this video, I'm looking for. 39. Berkus method for pre-revenue startup: Hi everyone, My name is NumPy, but in this video we're going to talk about burgers method to create valuation of pre-revenue startup. So it was created by venture capitalists, day workers. And the main idea is to assign a dollar amount to five key success metrics which are there in early-stage startup. So these are those five, the success metrics. So if your startup have a good idea, then they will assign a value from $0 to $500 thousand. If you're a startup, also have a proper diet and then they will also assign a value from 0 to $500 thousand. Same with quality management team, strategic relationship, and loud or sales or revenue. So if you're a startup, have all these five-factor, they will assign an amount or a dollar value ranging from $0 to $500 thousand, and then they sum it up and then you can click the valuation of your company. Let's say you have an amazing idea. So obviously they can assign 500000 dollar value to your startup idea. Let's say you do not have a prototype, they may give you $0 over here. Then if you have a good quality management team, let's say you only have two people. Remember we have it, we get strategy, hustler, external hacker. So let's say you only have two people. So they're going to assign, let's say, three hundred and ten hundred dollar value. And if the sum it up, they will have some amount of sum, which is your valuation. Now let's quickly understand burgers method with the help of an example. So all these five success metrics have a range from 0 to $500 thousand. And investor can give any Among they won't based on the kind of All deeds success metrics, at which stage you are or how much value or dollar amount they should assign to eat success metrics in your startup. Let's say this.tab have decent idea. So industrial have assigned a 275 $1 thousand value to this success metrics out of 200 to 500, $1000. Then they also have some kind of prototype. So investor have assigned to $1000 value, but this success metrics, and they also have a quality management team. They have some form of strategic relationship. That's why they have a saying less value. They don't have much of product rollout or Cs, but they have all lead to action. And that's where investor view of them $75 thousand. Now if you sum it up, you have $1.1 million, $1.15 million as the valuation of your company. That's the basic ideology behind burgers method, where you will have all these five key success metrics when your startup doesn't have any revenue in place, and those investor will assign our dollar amount to all these five key success metrics. And then they will sum it up and then they will calculate the valuation of your company. That's the basic ideology behind burgers method. 40. Risk factor summation method : So hi everyone. Now let's briefly have a look at these risk factor summation method to calculate valuation of your startup. So this is the slightly more involved version of workers method where they already have some valuation forgot in mind for your company. And based on those standard valuation figured that they have, they will either increase the valuation of your startup or decrease the valuation of your company. Let's say they have decided the Bayes factor as $1.5 million for your company. And now they will take all these initial factor, all the risk factor, and then they will add and subtract these respective. Let's say you have amazing management team, which means risk is less and they can add $500 thousand to the valuation of your company. So from $1.5 million, now the valuation of your company's to a $2 million. Now they will look at the stage of your business. So you are kind of mode ODS well, and you're not having that much amount of revenue as well. So it's normal. So they do not subtract or add anything on that part. In terms of legislation and particle risks, It's also normal you are in a stable economy or unstable country. Then manufacturing list these and you are not on manufacturing heavy industry or a company. That's why it's not a big risk for them. Sales and manufacturing risks, not a big B. They do not even not subtracting or adding anything. Funding capital risk normal than not adding and subtracting anything competition risks. So you are in an industry which have very high competition, and that's why they will subtract $500 thousand. Now you came back to the same figure, which is $1.5 million. Technology risks. It's low, but it's still there. So they are adding 250 thousand dollars, which is $1.75 million litigation risk of very normal on so we are adding 500000 dollar tsunami or devaluation of coupon 25 $1 million international risk, it's not there. So then either adding it nor subtracting any number from it, then they have the reputation risk. Somehow if you start to fail in the future, that it's also known as reputation risk. So they do not have any reputation risk is very low. They are adding an extra $500 thousand. So now, if you cross me, have a look. That valuation of that magical box which was there, is now $2.75 million. So that's the risk factor summation method where they will either add and subtract these kinds of risks. We have assigned a value to these risks and they would like to add that specific amount or subtracted. That's the risk factor summation method to calculate valuation of your company. 41. Scorecard Valuation Method: So here everyone. Now let's quickly understand scorecard valuation method for freedom and new startup. Remember, we are talking about predetermined new startup. You did not have any revenue as of now. And that's why we're using all these valuation technique. Now in scorecard variation or technique, we usually compare your company we'd already funded company. Let's understand this with the help of an example. Let's say you have all these comparison factor in scorecard valuation method. And these comparison factors have a range, so-called the contribution percentage, which means strength of entrepreneurial team is the most important factor because it has the highest contribution percentage. Size of opportunities also very important, and this is also a very important factor with the contribution percentage of 25 percent in the second column of target company, 100 percent means you have average kind of performance. So if you have average developer, average management team, average of staff, you will have 100 percent. But on the flip side, if you have amazing developer, amazing management being amazing stuff, you can have 150 as the target company percentage. Now you have to multiply the range by target company and then you will have factor. And when you combine all these factor, you will have a sum. And if the sum is more than a 100%, you will get better valuation or investor in funding your company. Now let's quickly understand this with the help of this example. Let's say you have an amazing team of entrepreneurial team members. That's why you have 125 percentage. The contribution is 30 percent. You will multiply code people sent by a 125 percent. You will have plenty, 7.50% or 0.37%. Size of opportunity is also very big. It's a futuristic product. So that's why you will multiply 25 percent with 150 percent and you will have 0.37 or 37%. So for example, if you have 150 percent as a target company score, you have fully trained people for latrine staff marketing people. So you will multiply by 150 to get a score of 0.45. Now let's quickly understand this with the help of an example. Let's say you are an amazing founder. You have a good experience in the industry. You also have an amazing developer and you also have good team of staff member. And that's why they have assigned a score of 125 percent. And debate of this score is 30 percent, so they will multiply Cody by 1.25. You will have a score of 37 percent. In terms of marketing and sales, you have a decent team. You do not have amazing marketing and sales team in your company or in your startup. So they will multiply 20 percent, which is the contribution of marketing and sales with one and you will have 20 percent, then you have a decent kind of product and technology. So they read multiply 25, which is of product technology or the size of opportunity by one, because it's a 100 percent, you will have 25 percent. In terms of competition, you have a little more competition, so your income below the average. So they will multiply 25 percent by 0.9 and you will have 22%. If you combine all these success metrics which are there in Scorecard evaluation, you will have 10, 5%. Now if this percentage is more than a 100 percent those investor are in, they will invest in your company. Now, different investor have different scorecard. Some investor have only four or five metrics and their scorecard, why other investor can have 7810 metrics in their scorecard. They basically compare your company with the existing company. Based on that, they will assign a specific value. They will multiply the rate of that success metrics with that value. There we'll calculate the factor and then they will combine all these factor and decide whether they wanted to invest in your company or not. That's the basic value proposition of Scorecard valuation technique used for pre-revenue valuation startup. 42. Comparable transaction method: Hey everyone. Now let's quickly have a look at the comparable transaction method which is used by investor when your startup have some form of revenue or traction or customer base. So in this method, those Vc will compare your startup with one company which is already there in the industry or in the market. Let's understand this with the help of an example. So for instance, imagine that rapid of fiction and shipping startup was acquired for $24 million. It has been wired up and website with 700 thousand users. That roughly gives you 24 or dollar per user. Because if you divide 700 thousand user by 24 million, you will have 24 dollar but user, let's say our shipping startup, how one great 100 user, which gives us a valuation of $4 million. That means we will compare our number of user with their number of users. So if they have 700 thousand user, they were acquired by 24 million by some other company. And if we have 120 thousand user, we will have a valuation of $40 million. So in comparable transaction method, you compare your own box with somebody else's box. So let's say if those people have a 100 thousand users and you 1000 user, if their valuation is a $100 million on your valuation will become $50 million. That's the basic proposition behind comparable transaction method. Now apart from just comparing the number of user or the active number of user to calculate the valuation of a company that other's success. Ful metrics or so-called indicator or good proxy that those investor always look for. So let's say if you are a SAS company, they look for monthly recurring revenue, AKA and we'll reckoning that I knew. And then they also look for, let say you are a retail company. They look for outlet, how many outlets you have. Let's say if you are a med tech biotech company, they also look for how many patents you have fine if you are a messenger or a social media app, they look for DAU MAU or WU. So daily active user, monthly active user or VV active user and also the core, these are indicator which will act as a good proxy. So yeah, I mean, in comparable transaction matter, they will compare your box, your unique or magical box, with somebody else's box. And then they will calculate the valuation of your company. 43. First Chicago method: So hi everyone. Now let's quickly understand foster Chicago method to calculate valuation of your company based on three different scenario. Now let's imagine what if your stopped a box or that small magical box has a small chance of becoming a very huge company. But how exactly you will assess this potential? Well, that's why all these investor have this fosters Chicago method where we have three different scenario and they will assign a probability to these two different scenario. Let's say your startup, which have a valuation of 81, $1 million. This startup can have three different chances of becoming mediocre company, a bad company, or an amazing what a huge company. So let's say you have been posting chances of becoming a $300 million company. From a given $1 million company, you have 70 percent chances of becoming a 70 $1 million company from a D1 will be lower Company, which is a depreciation. And you also have some form of chances, 20 percent probability of becoming a 10, $1 million company. So these investor have assigned three different scenario and the probability based on your current valuation of your company. So in quasi governmental, you have three different scenario. The worst-case scenario, if the valuation of your company will decrease from 81 million to 10 million, a normal scenario, if the valuation of your company will remain the same or it will decrease by a red. Or the best-case scenario when do valuation of your company will increase by three x four x ten x depending on different scenario. So this is the basic overview of First Chicago. Obviously there is a lot more that goes behind calculating this probability. Obviously, you can look at the sales muscle, start-up, have the kind of product, very new technology market competition. You can look at all these small, small micro factors, but we will not dig deep and understand this. This is the basic proposition of all these valuation technique. Remember, as a startup founder, you do not have to understand what goes behind these valuation technique. But on the flip side, you need to have a basic understanding of how these feces are basically analyzing your startup. Because if you understand all these success metrics, then you can start working on those success metrics. Let's say you do not have three people in your team. You're walking alone in your startup. So then we will look out for other team members or other people who have some sort of expertise in the same domain so that you can build the product faster, you can ship it faster. You will have some amount of sales or revenue in place. And then when you're reaching out to investor, you can show them a strong beam. And let's say if you do not have any MVP in place, only just an idea, then you can build an MVP. You can also deploy the product. You can have some amount of revenue in place just to show those investors that we are meeting your success metrics that you have with, with you.