Ensure Your Startup Growth: Tips on Capital Raising Using Special Purpose Vehicle
Updated: Aug 18, 2021
and Strategic Development - The Journey of Tara Spalding
As a founder, you need to be strategic about your plans for startup growth. Capital raising alone won’t be the solution to your cash flow problems. Instead of focusing on this, you need to know if you’re building a sustainable and profitable business. Because no matter how successful you are at capital raising, it’s pointless if you don’t know how to deploy these resources.
BoomStartup's Tara Spalding joins us to discuss the important things you need to keep in mind when raising capital to ensure startup growth. She emphasizes the importance of communication and transparency between BoomStartup and its clients. Through quarterly business surveys, they can track their clients' progress and suggest improvements along the way.
Tara also shares the programs they have to help founders accelerate their startup growth. We also touch upon the importance of intellectual property and high growth potential. Finally, we learn the value of SPVs in the pre-seed round and CFOs in the seed round.
If you want to know how an accelerator can be helpful to your startup growth, then this episode is for you.
Here are three reasons why you should listen to the full episode:
Discover how BoomStartUp helps startups grow by giving them guidance and expert advice.
Learn the different evaluation processes BoomStartup conducts to determine the progress and growth of its clients.
Find out tips and strategies for intellectual property, capital raising, and when to hire a CFO.
Visit Christina Sjahli’s website for more stories on entrepreneurial journeys to success on the Her CEO Journey podcast.
Chat with Christina and set up a time here!
Are you getting ready for capital raising? Identify the financial gaps that can stop you from building a profitable and sustainable business. Download this quiz!
Download this Action Guide to help you ensure startup growth as you go into as you go into capital raising.
Connect with Tara: LinkedIn
BoomStartup — An action-oriented and change-making accelerator that empowers startup growth. Check out their programs:
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[06:18] Tara’s Background
Tara shares that she lived in several states in the US. She entered college at 17.
After graduating with a business degree, Tara got a sales job at a winery.
Tara discovered her fascination for coding and passion for startups.
Eventually, Tara co-founded a small software startup.
She is currently the managing director of BoomStartup.
[10:28] What BoomStartup Does
BoomStartup is an accelerator, not an incubator.
Incubators are more of service providers and often don’t take equity upfront.
Meanwhile, accelerators run like a VC firm. Market leader accelerators have a higher barrier to entry, which some companies may not meet.
BoomStartup creates a lower barrier to enter but higher expectations with transparency and communication.
“I'm not going to say we're (BoomStartup) the anti-accelerator. But we're certainly a different program, creating our own sort of lower barrier to enter, but higher expectations, with transparency and communication.”
Listen to the full episode to learn how BoomStartup is different from its competitors.
[12:59] What Low Barrier Means
BoomStartup is an open and online accelerator program. They welcome people from around the world to participate.
Founders are encouraged to keep their teams in their original locale.
BoomStartup also accepts companies from different industries.
They work to formalize their client’s business by improving business spends, revenue source, and go-to-market execution.
“What we're doing is we're working on how to formalize the business itself. And we have a very, very strong emphasis on improving the company's own revenue source, or optimizing business spends, or optimizing go-to-market execution.”
[16:20] How to Join the Accelerator for Startup Growth
Firstly, interested founders will complete a scorecard. BoomStartup asks seven questions to determine the position of the company.
From here, the strengths and weaknesses will be identified. BoomStartup also gives the founder a list of suggestions to help with startup growth.
BoomStartup also encourages its clients to complete a quarterly business survey. Through this, they can track the rate of change of these companies.
The scorecard also helps BoomStartup evaluate what’s happening in the market and adjust their programs based on that.
[19:17] Programs at BoomStartup
The aforementioned scorecard is the OpenUp program.
PitchUp is a competition that gives exposure and a cash prize to companies that improve the future.
Next, RiseUp is a series of one-week programs that teach founders to solve the issues they have.
Finally, there’s AmplifyUp. This program focuses on funding high growth potential startups with pre-seed capital.
[24:53] Building an Intellectual Property Strategy
IP is an increasingly important intangible asset that can help you diversify your investment and asset base,
Intellectual property is increasingly being seen as an asset when doing valuation. However, valuation methodology differs between lender and company.
Intellectual property drags a large segment in today’s global economy.
Not having this beforehand can hurt your agreements, licensing, and revenue sources.
[30:25] High Growth Potential for Startup Growth
If a company in the pre-seed round is already in high growth, they’ll need more than what pre-seed can often do.
There is a need to have a clear designation of the funding expectation. Then, you will measure the valuation upside.
“So the funding needs to have clear designation at the pre-evaluation as to what the expectation will be from the contribution or how it will be applied. And then what you do is you also measure the valuation upside.”
A critical question to ask: What is the internal performance capability of a startup?
You need a designated amount for a specific application with a measurable outcome during the pre-seed stage.
“That's the importance of pre-seed: it doesn't need to be a ton of money. But it needs to be that designated amount for a very specific application with an expected and measurable outcome or hypothesis that you're measuring it on.”
[36:37] Assessing Capital and Progress
Once their clients get the capital, BoomStartup can monitor how the money is used.
They also examine different aspects to see how their clients' startup grows.
Tara shares that BoomStartup watches the pre-seed round very closely.
They also know that valuation tends to differ among locales.
There is a different group that deals with syndications called Assure syndicates.
[40:59] Using SPVs at the Pre-Seed Round
Through SPVs, you can get more people to support your company without them giving a big amount.
Through an SPV, you don’t clog up your cap table. There’s just one line on your spreadsheet.
Because of this, your company becomes more attractive to an institutional investor.
There are many more benefits to SPVs. Listen to the full episode to find out!
A downside to SPVs is that they can take a while to set up.
[47:13] What to Look Out for in the Pre-Seed, Seed, and Series A Rounds
During pre-seed, it isn't easy to get commitments from an early team.
Don't get too focused on how cool your product is. It would be best if you made sure that the market is eager to obtain your product.
In the seed round, examine how your business can influence or impact. You should also figure out how you can make your business sustainable.
For the series A round, focus on optimization. See how you can improve market penetration, internal aspects, operations, and culture.
[50:15] Why it Makes Sense to Hire a Part-Time CFO Prior to and After the Seed Round
Tara likes fractional CFOs because they help examine operations and predict growth.
“I like fractional CFOs. They should be a consultant that basically helps the whole controlling and operational aspect. And to predict reasonable growth.”
A skilled CFO can figure out how to pull in more cash through agreements and contracts with longer payment terms.
And so, the CFO serves an analytical role for cash flow forecasting.
Once you get to the seed round, you need to account for everything correctly.
Listen to the full episode to learn more about CFOs and their contribution to startup growth.
Tara Spalding is the Managing Director at BoomStartup. She received her business administration degree from the University of Colorado Boulder. Today, she specializes in SaaS businesses, lead generation, and CRM systems.
Tara provides business growth guidance and investment preparations for thousands of business owners worldwide. She also advises on capital structuring relevant to today’s profitability investment strategies.
As the President and Founder of Hen House Ventures, Tara helps technology and service companies. This consultancy firm assists companies with their growth processes. They aim to help companies find their voice, build their brand, and connect with customers.
Tara also held several positions at Commtrex from 2016-2018. She served as the Board Advisor, Chief Commercial Officer, and VP of Marketing. She also founded BenchPick, Inc. in 2013 and served as the Head of Products in this company. Aside from this, Tara also worked as the Marketing Vice President of Magnet Systems from 2010 to 2011.
If you want to reach out to Tara, you can find her on LinkedIn.
“Most companies are not fundable, but if they can be self-sustaining, because they're in fact finding the right market that they should be working with, or coming up with smarter or diversified revenue sources, that’s just as good as getting it. Actually, I think it's better than getting outside capital infusion.”
“There are so many things in this world where education is a peaceful protest. Yeah, inequality. And it's just one of these things that, like I said, we're trying to create a very transparent and also accountable sort of a platform.”
“There's like a fascination or an obsession around the innovation itself, or around the sales and that whole chase. The truth is, most people think that running a business is about those two components, whereas it's not. It's really looking at the revenue plan and the structure around it.”
“SPVs are really great, because it's like, ‘Okay, we can get more people to support your company. And they can write bigger checks, but they don't have to be ginormous, hurtful checks, like five to $10,000 to start.’”
“BoomStartup is only going to make one investment. And what we want to do is make the investment known to be very purposeful, with expected hypotheses, and then pull in other investors alongside of us that are going to support that startup to get there.”
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