Last week Jason M. Lemkin pointed to Marc Benioff’s TechCrunch Disrupt interview where he told his starting up story – how he went up and down Sandhill Road and no one was interested in his vision of cloud and how no one without exception offered him any money. Its his friends in US and Japan who stood by him and help him build Sales Force which is now 100Bn in market cap.
I love to dig through Jason Cohen’s (CTO WP Engine) posts and look what I found – The Fermi estimation for Startup business models. This is an interesting and quick method to figure if your estimates have any legs at all. So what is Fermi’s Problem? Wikipedia says “ The estimation technique is named after physicist Enrico Fermi as he was known for his ability to make good approximate calculations with little or no actual data. Fermi’s problem typically involve making justified guesses about quantities and their variance or lower and upper bounds.”
David Cummings recently wrote about re-evaluating the current methods of startup funding and proposed a structural change more conducive for funds to keep flowing for Startup investments. His solution is revenue financing – which is like a high (but adjustable) interest loan both in terms of interest and period that provides the much necessary cash to fund the initial stages without the Angles or investors loosing it all.
If you are planning to raise money from Angles of VC’s you need to understand how your venture is likely to be valued. Basically it is a black box with broad strokes. How each parameter corresponds to value is still unknown as it varies widely from one investor to the other. Specially if you have generated interest from multiple VC’s.