Potential clients often pose two interesting and decidedly correlated questions.
First, what is the profile of a typical client for The Morgan Leigh Group?
Second, what traits does the Morgan Leigh Group consider in assessing whether
or not it can help a startup company?
While it is arguable as to whether a ‘typical’ client exists, there are
certainly a number of common characteristics shared by the startups
served by The Morgan Leigh Group and which can serve as an informal
checklist for potential clients evaluating the prospective fit between
our company and theirs. While not an exhaustive list by any stretch
of the imagination, a number of these traits are described below.
The underlying idea or core business concept is key. As with a terminally ill patient, a fundamentally weak
business concept is one for which we simply have no cure. First and foremost,
the core idea must work -- on paper, in prototype, and in reality. Potential flaws or
deficiencies must be satisfactorily addressed.
Second, the concept must address a real need of the
marketplace. Implicit in this line of reasoning is that there exists a true
market opportunity. Hence, there are real customers with
significant purchasing power who could reasonably be
expected to buy the end product or service in adequate volume
over time. Third, the idea must be protectable. A good
idea without significant legal, physical, or other protection
to secure its value over time against copycat competitors
is merely an empty academic exercise. (Top)
While there is much to pronounce about the desired attributes
of the entrepreneurs or founders, suffice it to say that it is preferable
that they exude exceptional enthusiasm for their core business concept and
foster immediate confidence in their abilities and competence.
Not only do the founders need a history and background that demonstrates
their ability to pull off this new venture, but they also need to tell
and sell this story to potential investors and partners. (Top)
LEGAL ENTITY: The legal entity that constitutes
the official company does not necessarily need to be formalized
immediately. However, it should be noted that most investors
are generally comfortable with a c-corp structure and much less
comfortable with alternatives such as s-corps or limited liability
companies. A legally recognized c-corp is the preferred structure
for investment purposes.
STAFFING PLAN: While a startup company by definition will
not have all personnel in place, it should at least have the core
management team committed and key future hires identified.
Such is best evidenced in a completed staffing plan. A further
personnel attribute, desired but not required, is to have members
of the board of directors committed. Especially worthwhile is to
have directors whose experience and success carry weight with
potential investors. (Top)
MONEY IN THE BANK: Potential investors often
talk about “skin in the game,” referring to the need for the
founders to have some financial investment at risk, above and
beyond the founders’ sweat equity. In part, they refer to the
need for the startup company to have some money in place for
critical initial activities-such as a complete business plan and
set of pro forma financials. While each company has different needs,
startups would generally want to have $20,000 - $60,000
in the bank to accomplish the full range of seed and pre-seed activities.
SEEKING FUNDING: In addition to the founders
“skin in the game,” some startup companies are in need of a
larger infusion of cash from an outside investor for necessary
growth. Companies using our investor services typically are
attempting to raise as little as $250,000 or as much as
$5,000,000 or more.
If your startup company has no need to raise outside
funds, it likely has no need of our investor services,
but can be well served by our marketing services. (Top)
While there is a whole host of activities and
tasks that are beneficial for the startup company to have accomplished,
there are a few of major importance.
MARKET RESEARCH: First, market research is a
crucial undertaking. At a minimum, the startup company
and management team should be able to articulate the
dynamics in its chosen market, including size, trends,
segments and competitors.
COMPANY VALUATION: Second, there should be some
basis for a company valuation. While valuation of startup
companies is arguably more art than science, the fundamental
components should be identified.
CAPITAL STRUCTURE: Last, there should be some
time and effort devoted to at least a preliminary understanding
of the proposed capital structure, which depicts the split of
ownership over time and considers relevant shareholder groups
such as founders, employees, directors, advisors and the
various investors. While admittedly a complex area, the
capital structure will take into account pre- and post-money
valuations, potential returns and anticipated dilution. (Top)