I just saw/listened to this ~90 minute video by the MyBlogLog founders, it’s full of some valuable nuggets; highly recommended to budding entrepreneurs.
Some notes below.
When talking to investors, there are 5 things to present:
- What it is
- Why it’ll resonate with people
- How it’ll grow
- How we’ll make money
Why 3-person teams are the best: (Note: I added the commentary below)
- You need a Bizdev guy — someone out there making deals happen; lining up appointments; etc.
- You need a Programmer guy — or someone managing your engineers.
- You need a Product/Marketing guy — someone speaking with the users of your service/product, understands it fully, can respond to customers, and lines up what fixes/upgrades to need to happen next.
So you’re adding someone new to the team and giving equity:
Eric and Todd added Scott Rafer to the mix a little late in the game. They consider him a founder. At the time, they had a bunch of users already. They basically determined what the business was worth right then — let’s say it was $1mm. From that point on, the 3 of them divided the worth of the business. So, assuming they exit’d at $12mm (and assuming there was no outside investment, which there was) — then Todd and Eric would get $500k each (that first $1mm), then all 3 of them get $11mm/3 each.