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The situation: At the moment there are no standards for early phase startup categorization causing an inefficient funding process – an industry wide issue for investors, startups and supporting parties.

The need: A profile template for startups so that the investors can see a meaningful overview in the same format. This categorization is needed to be built from the scratch.

Startup Commons is helping by gathering and consolidating the best practices. Therefore, your comments and feedback on the following questionnaire are highly appreciated.

Any type of comment is helpful, starting form comments on the relevancy of the questions, what is missing and should be added, or what is not relevant and can be left out.

Thanks in advance on behalf of SC team!

Arlinda

Questions for discussion:

1. Founders: How many founders you have? (one, two, three, more); Age of founder(s)? How long have you known each other?

2. How much money you need to get your first offering to market? (Euro 10-50t; 50-200t; 200-500t; 500-1000t; 1000t+)

3. If you have the money, how long will it take to implement the idea?

4. At what stage is your idea? (presentation, demo/ prototype, available beta, have paying customers; cash flow)

5. What expertise is needed? (anybody can do it; relevant experience in the area; Specific qualification e.g. Lawyer, doctor ) Do you have this expertise?

6. What is your competitive advantage? (patent/ pending; industry position/existing user base; unique science based on the latest scientific research; none of the above)

7. Growth aim geographical: Local; international (several countries); global

8. What is your projected revenue in 5 years?

9. How much will the product/service be priced per customer?

10. Ambition level: first in our niche (global, international, national); top 5; there is no niche

11. What is your offering (man hours; physical product; software product; online service; SAAS)

12. Business model: How will you generate revenue: Sell product or service (subscription based; one time deal; license; man hours); advertising

13. Is your business to the consumers or other businesses?

14. How do you plan to grow? Mainly: Organically, M&A, VC injection?

15. What is your evaluation now? what's the lowest offer you'd take?

16. How are the existing shares divided between the founders? Evenly/ Clearly Unevenly

17. What is the percentage of shares you are offering?

When I was working for one of the large telecom network providers in product marketing, I had to go through a scrutinizing exercise every time we planed a product launch. This exercise was called called “The One-Page Plan”. After spending a lot of time and effort in workshops, thinking, planning and writing the perfect product marketing launch plan I had to boil it down into one single page. I did not enjoy this exercise, I have to say, mainly because it meant I had to give up all the cool details that made the plan so special. However, I loved the end result. With that one page, I could go to anybody in the organization and professionally summarize what we were going to do for the upcoming six months and why it was important. It made perfect sense. Most of the people in the organization, apart from the team and probably my boss, did not have the time to read a full plan.

So, I'm glad to see that investors prefer the one-page planing too. If you are an entrepreneur seeking funding this is a valuable document to give to investors. It will also help you think your idea through at an early stage.

Here are some practical tips for drafting your One-Page Business Plan:

• What is your best idea? As an enterpreneur, you probably have a lot of good ideas so this planning process should help you to focus and get your best idea on paper.
• What is your vision? You need to know where you are taking your ship first and you need to articulate it. So, you need to summarize and articulate your vision.
• How you will get to your vision? Link your vision to concrete actions that will enable you to make your vision a reality.
• Keep sharing. Every time you share your vision it becomes more of a reality. Be prepared that people will not always agree. It is however important to stay true to your vision.

Also, take a look at this helpful tutorials by business coach Chad Gibson at Watercooler 101 and Babak Nivi at Venture Hacks for further inspiration:

I wrote the first post of Startup Commons on August 24th, but the actual association was "officially" initiated at September 13th of 2009, when we filed the papers to Finnish National Board of Patents and Registration. The process of getting an official "non-profit" status for association in Finland takes several months.

Few days back, when I check the official records I noticed that all registrations had finally passed and I'm now proud to announce, that as of last day of 2009, Startup Commons Association is a officially registered non-profit association.

Official details can also be seen via Association Registration database and from business information system of the National Board of Patents and Registration and the Tax Administration.

As we continue our efforts, we have also added few pages to our site. A page for those that want to show their support Startup Commons and a page for those that we want to show our gratitude.

This is yet another small step forward in our mission. As we move forward we need all kinds of resources and people to help us, so if you are interested on working to support our mission, please share your ideas in comments below or send us and email.

Just as we are getting ready for 2010, I'm happy to announce two new key members, Stefano Bernardi and Arlinda Sipilä joining to Startup Commons Association.

Stefano Bernardi joins our Board Of Directors

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In this post I will focus on the second item, in our three point action list. List of typical terms.

This item is the "hottest" item online, when it comes to area that we are looking to cover with Startup Commons. Not sure if Y-combinator is "the one" that started this momentum, but they for sure are one of the first ones to "get the big wheel turning" in this subject, when they "open sourced" their Funding Legal Docs for anyone to use.

Our background info in this subject

While working in this subject at Grow VC, we naturally started by searching multiple sources for "free to use" term sheets, that we could just link to or have available for users within the service - that seemed like a simple and usable idea.

However after having a talk with our own legal counsel, we came to conclusion that it is totally possible that those can do more harm than good for the users. Since just one version doesn't fit to variable needs of different startups in random stages with multiple variables that go into each particular deal.

After this conclusion, we started to think for alternative solution to this problem, that eventually lead to "Agreeing tool" idea. A solution that is our focus list tem number three. The purpose of the "Agreeing tool" is to make logistics and process of "agreeing" easier to manage and more efficient. In future post I will explain this in more detail.

At this point we were quite happy with our solution, so we continued our developments in the other areas of our service and this was put to side. After some time passed this topic came up again and after reading one of the comments in Mark Suster's blog, Both Sides of The Table, in one of Marks replies, he was able to quickly and very shortly categorise one type of startup profile. After thinking about that for a while, we came up with the idea to identify and categorize startups in different stages, that would make it easier and faster to understand what type of startup would be in question (item one in our focus list), both for entrepreneurs and potential investors, before asking a single question.

Since coming up with this idea, suddenly the idea about "standard term sheet" started to look appealing again - because now, instead of "one size fits all" we could build "standard term sheets" for each of the specified category.

List of typical terms

So the focus item number two for Startup Commons is about building the "list of typical terms" to each category. So, instead of doing these as "agreement level", we focus only to most critical/typical set of the terms and limit the number of items to level that is "enough", keeping these as "communication items".

Now that we have covered identifying with categorizing and set number of matching typical terms, how exactly are these going to help?

As it's well known, often the fist time a startup entrepreneur sees any meaningful term sheet, it's most likely going to happen after meeting with an investor that is suggesting the terms. And typically there is no easy (or cost effective) way for entrepreneur to valuate these terms.

That's why we want to build these high level terms to match different type of startup profiles. So entrepreneurs can study and learn what type of terms are expected for different type of startup in different level, after being first identified in right category. Also, by enabling open communications and commenting about these categories and terms, both the investors and entrepreneurs of different type can communicate how do they feel about these "in general".

With your support, Startup Commons as independent and non-profit "third party" organization, we will develop these terms as fair as possible to all parties. And as it is written in our strategy, we hope to get the best and the most experienced people as possible, to help us build these terms, from investors and entrepreneurs with assistance from skilled lawyers in this field. Keeping in mind that we are not doing "full set of terms" and not in "Agreement level".

So why are we not trying to go all the way and do these as "agreements"?

We want to be realistic with our approach and build overall model that is "good enough", so that it can be really helpful to big audience and help save a lot of time overall, without trying to go all the way to 100% with this model. If even 50% of the process could be helped with these, that alone is already a BIG improvement in overall speed and cost, compared to ways of doing things today.

And as our focus item number three, will be the power tool to also help closing that remaining 50% faster, with assistance of an experienced and professional legal adviser - that should be plenty.

What do you think, are we on the right track? - Please share your comments below!

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PS. if you want to help us, the simplest action you can do is to click here to tweet about startup commons.

A short while back Stefano Bernardi from TheStartup.eu did this video interview about Startup Commons. In this interview, I explain what Startup Commons is about and how did it all got started.

theStartup.eu - Valto Loikkanen interview from Stefano Bernardi on Vimeo.

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After starting Startup Commons I have got great feedback from various people in many different situations. From different countries, different positions etc. Most people like what we have started and most say it's really needed.

Now we just need to start translating that support to concrete actions and participating, that will move things forward.  It's natural, that those that help others, at the same time create more opportunities for themselves.

When the time comes when you do need good connections yourself - say funding your new start up, finding partners or great leads, at that time, wouldn't it be great to turn towards your trusted network that YOU have helped to build? Full with great industry connections at reach.

For inspiration, I want to share these two videos about this subject:

Seth Godin on Social Networking

Jerry Maguire - Help me, help you

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In this post we will focus on the first item, in our three point action list

Throughout the history, we as people have created different ways to communicate  complicated matters, in format that is simple and fast to identify. We have these everywhere, we have letters, numbers, signs etc. we use these in traffic, biology, education, etc. basically we use these everywhere.

Many of these identifiers are also language neutral so those can be recognized quickly, like traffic lights. Yet when we talk about start-up's, we only have one unified way to describe them - Start-up (in different languages). That same term is used to describe companies of all sizes of their growth path.

With Startup Commons, the first item on our task list, is to build common language to identify these different type of start-up's, depending on agreed variables. To be able to do this, we need to first define and agree on these variables and then build categories based on these sets.

Why do we do this - how does it help?

It's very simple - to be able to dramatically cut down the time to identify what type of start-up (and stage) is in question. This identifying alone can potentially save millions of hours in wasted time, in early communications, when people are just trying to identify a start-up, either by start-up entrepreneurs them selves (what is their current position/stage) or by potential partner/investor looking for the right start-up to fit in to their strategy/portfolio - Think about buying clothing without any size (ot other) labeling, in a black & white catalog - now how long would it take to find the one you are looking for...

Naturally there are plenty of other benefits to this and what can be developed on top this, but the above sample alone is enough to justify the need for this.

To move forward, we together as a global startup community, need to agree what are the needed variables to be able to cover the most important and obvious areas, to quickly understand what type of start-up is in question. Ie. to agree on the level of detail, we want to achieve with these categories.

The definition of a Start-up by wikipedia is:

"A startup company or start-up is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry."

If we put the above to clothing terms - we have now been able to recognize the "shirt" and one specially identified type of shirt, like T-shirt. At Startup Commons, we think we can do much better than this, without going all the way to "tailor-made" level.

What next?

We have already started this process by opening the dialog with industry people on the topic of what these identifiers should be. One such can be found in LinkedIn Q&A section, where we have already some interesting answers:

So, if you would be considering to join or investing in a startup, what would be your questions to get a quick feel of "what type of startup is in question" when you meet with the entrepreneur?

If you could only choose five, what would those 5 areas in the startup be, that you would focus on. And percentually how important each of them would be to you?

1. Idea potential (low-high)?
2. Business plan (poor - very detailed)?
3. Numbers (clear budget plan/forecasts - rough estimates)?
4. Number of founders (1-5)?
5. Average age of founder(s) (young - older)?
6. Average experience and education (book smart - street smart)?
7. Ownership % split by founders (even - noneven)?
8. Clear "leader" (yes - no)?
9. Ambition (high - low)?
10. $$$ need (low - high)?
11. Cash flow (is - is not)?
12. advisory board members (0-5)?
13. Product stage (idea-proto-demo-live)?
.........
14. Something elese?

(If you can write down your own headlines with most necessary items and order of how important that is)

Once we have continued this dialog for a while and collected enough ideas, feedback etc. we can start to build our first model for this and then publish it for additional ideas and feedback. We welcome anyone interested to see this developed to join in the conversation.

What are the questions you use to quickly identify the start-up you meet?

PS. There are plenty of other roles to join and help us move SC forward, so if you are interested on helping, just let us know. Even on proof reading and writing

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The high level description for what we are focusing on is:

"Startup Commons is a nonprofit association dedicated to making start-up funding more understandable and cost effective and to make closing deals easier for entrepreneurs and investors alike, consistent with the rules of investing."

more details are listed in our bylaws, but to be more specific we aim focus on these three segments:

1. create categorizing model to identify different types of start-ups
2. find/build/attach high level sets of terms for different categories
3. develop efficient web tool to better manage the logistics and communication of the agreeing process (start with high level term sets by category with "blog style" commenting per each term)

Later, I will explain each of these three items one by one with more detail. - So what do you think?

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• Matching words and numbers (startupcfo.ca)

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While we continue to build up the association and it's activities and since there have been plenty of great feedback towards our efforts, I think it's a good time to share some ideas, how you can also help us move forward.

There are several levels and activities how you can partisipate:

• join our group at linkedin
• comment on our bylaws and plans
• share info about start-up commons with your contacts and network
• writite a post in your blog or tweeting about us
• add a startup commons button with link to our site to your site/blog, to show your support
• join as an actual member (request in comments, until we have some more formal way)
• make a donation of any size ->
• join our staff (sorry, no paid positions at the moment, but surely plenty to do and interesting people to meet)
• join or recommend someone to these roles/positions listed below

Sponsors

Grow VC has been our founding sponsor in launching the Start-up Commons, but neither the association nor Grow VC see this as an exclusive relationship. The details of our sponsor program are still being established, but we see an opportunity for startup companies, incubator, Angel networks an such to be part of the program.

Advisors

We need expert opinion from many corners of the start-up and seed investing ecosystem. Towards that end, the association will be looking to have an Advisory Board. What perspectives need to be represented? Who should be an Adviser? Give us your ideas and suggestions.

Board of Directors

Our Board of Directors is an interim board. While we are working hard to see that the board will have a community voice, we think one of the board's primary missions will be to act as a search committee to find a permanent board of directors that brings representation from startup companies and investor communities such that all parties feel confident the board can fairly represent their views.

Who should you suggest, who should we contact? Let us know. Participate.

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