Nuts n' Bolts

Helping entrepreneurs, employees, and investors better understand what they own.

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Management Team

Assess qualities of CEO and founders:
  • Personal qualities as an entrepreneur, leader, strategist, and manager
  • Coachable, willing to work with investors as partners
  • Passion, enthusiasm, vision and self-confidence?
  • Experience recruiting, leading and managing people
  • Prior direct selling experience?
  • Domain expertise?
  • Willingness to share equity
  • Integrity, trust and leadership
  • Outside activities and distractions
  • Ability to attract/recruit advisors, investors, directors and experts
  • Relationships in target market
Assess qualities of team:
  • Organization chart, assess gaps in talent and positions to fill
  • Doman expertise
  • Motivation / Why?
  • Financial stake, ownership, commitment
  • Functional expertise
  • Professional (resume and track record in previous positions) and personal accomplishments
  • Prior direct selling experience
  • Prior P&L experience
  • Relationships in target market
Adviors & Directors:
  • What is existing board composition?
  • Financial commitment?
  • Time devoted to company
  • What is expected future role and extent of involvement?

Product-Market Fit / Growth

Value Proposition
  • How big is the pain? How well does product and service offering solve a problem? Buyer's motives?
  • ow compelling is the customer ROI?
  • Unique Offering: How well is product and service differentiated from alternatives?
  • What is the ability to disrupt the status quo?
  • Define product roadmap milestones; product road map and life cycle.
  • Ability to add value going forward
  • Describe the selling process. How much education or behavior change is required?
  • Review product line margins. High gross margins?
Customer Traction
  • Monthly / Annual Growth Rate
  • Brand awareness
  • Perceived value and general reputation vs. competitors
  • Pricing excites customers (and investors)
Customer References
  • Contacts for customers, strategic partners and/or channel partners.
  • Contacts for customers that have switched from competitors.
Questions they may be ask:
  • Do they like the product? What is nature of relationship?
  • What are some suggestions for improvement?
  • Intent to buy from company?
  • Perceived competitive advantages

Market Size

Market Segments
  • Identify market segments and projected growth rates
  • Total addressable market (TAM)
  • Service addressable market (SAM)
  • Market size enables 10x+return?
  • Who are current customers? Who are target customers? Can initial segment sustain a business?
  • Define target customers. Who are they? How likely to purchase?
Competitive landscape
  • Analyze competitor business models for comparative strengths and weaknesses.
  • Review management's competitive analysis; diagram or map the landscape (include competitor achievements, funding achievements and financial status). Consider existing and potential entrants.
  • What are competitors expected reactions?
  • Evaluate competitive or comparable web sites for design, functionality and traffic.
  • Determine adequacy of barriers to entry and degrees of protection.
  • Review different approaches to technology.
  • Substitutes and complementary products.
  • Quality trade‑offs.

Marketing & Sales Strategy

  • Determine customer acquisition costs.
  • How clear is marketing and sales strategy?
  • What are the costs for marketing & promotions? Are costs affordable?
  • How critical are channel partners?
  • Who are distributors, intermediaries or agents in various market channels?
  • How are technology and the web integrated with the marketing and selling strategy?
  • Prevailing industry business model? Switching costs?
  • Business model enables recurring sales?
  • What is selling process? Selling cycle (time for evaluation and buy)?
  • Review customer pipeline? What are assumptions? Detailed breakdown of what the pipeline looks like over the next 3, 6 and 12 months.
  • Competitive lead times?
  • Identify any pending contracts, alliances or significant orders.

Technology, IP & Barriers

Technology & IP
  • Proprietary technology – what is secret sauce?
  • Patent protection, filed and granted, otherwise protectable?
  • Perceived barriers to entry; protect able IP? Competing IP?
  • Role of customer in R&D process
  • Development materially complete?
  • Beta site results – work as advertised?
Barriers
  • Does technology differentiate the products and services? What is unique vs. competitors?
  • Trade secrets
  • Captive customers, channels or suppliers
  • Exclusive positions

Finances

Revenue, P&L and Balance Sheet
  • Evaluate cash flow model and review financial statements projections
  • Evaluate assumptions supporting revenues sources. Is the adoption sales cycle reasonable?
  • Review customer pipeline, both in terms of customers and products, and make sure they tie to the projections.
  • Evaluate cash flow model and review financial statements projections.
  • What is the time to cash flow break even? What is revenue at that point?
  • Classify revenue on various factors, top ten, categories or classes, recurring, services vs. products, pipeline backlog vs. new orders, channel partners, recurring vs. non-recurring.
  • Balance sheet and working capital changes/assumptions
  • Review any lease schedules for equipment and real estate
  • Review detail for current liabilities (i.e. deferred expenses, commitments, anyone trying to cash out). Excessive current or past liabilities.
  • Review monthly expense budgets. Is the overhead reasonable?
Use of Funds
  • Review proposed use of funds. Is the capital required reasonable?
  • Review proposed staffing plan and tie to budget in financial model. Does the staffing plan support revenue projections?
  • Evaluate adequacy of equipment budget.

Cap Table / Legal Agreements

  • Legal entity and capital structure – disruptive or complex shareholder issues?
  • Founder's have vesting schedule.
  • Equity Incentive Plan / Stock Option Plan?
    • Create hiring plan to determine appropriate if plan size is adequate.
    • Check for improper stock option grants.
  • Confirm any previous financing details.
  • Contracts and agreements with advisors, consultants, programmers and other third party service providers, if any
  • Tax filings
  • Intellectual property matters
  • Harmful pre-existing agreements or potential liabilities

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