Staff Contributor | Five23 https://www.five23.io Make Your Data Powerful Fri, 27 Jan 2023 18:40:26 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.5 https://www.five23.io/wp-content/uploads/2018/11/Five23-Favicon.png Staff Contributor | Five23 https://www.five23.io 32 32 Understanding Equity Vesting in Startups https://www.five23.io/blog/understanding-equity-vesting-in-startups/?utm_source=rss&utm_medium=rss&utm_campaign=understanding-equity-vesting-in-startups https://www.five23.io/blog/understanding-equity-vesting-in-startups/#respond Fri, 27 Jan 2023 18:39:31 +0000 https://www.five23.io/?p=1723 Equity vesting in startups is a critical concept for founders and employees to understand. It is a process by which ownership of a company is gradually transferred to an individual over time, typically in the form of stock options or restricted stock units (RSUs). The...

The post Understanding Equity Vesting in Startups first appeared on Five23.

]]>
Equity vesting in startups is a critical concept for founders and employees to understand. It is a process by which ownership of a company is gradually transferred to an individual over time, typically in the form of stock options or restricted stock units (RSUs). The purpose of equity vesting is to align the interests of the founder or employee with those of the company, and to provide a retention incentive for key individuals to stay with the company over the long term.

One of the most common forms of equity vesting is the four-year cliff vesting schedule, which requires an individual to work at a company for a certain period of time before they become fully vested in their equity. For example, a founder or employee may be required to work at a company for four years before they become fully vested in their equity. After the four-year period, the individual becomes 100% vested in their equity, meaning they have the right to exercise their stock options or sell their RSUs.

Another common form of equity vesting is the graded vesting schedule, which allows an individual to become partially vested in their equity over time. For example, an employee may be 20% vested after one year, 40% vested after two years, and so on, until they become fully vested after four years. This type of vesting schedule is often used to provide a retention incentive for employees, as it encourages them to stay with the company for a longer period of time in order to fully vest in their equity.

There are also different types of vesting triggers that can be used to determine when an individual becomes fully vested in their equity. For example, a company may use a “time-based” vesting trigger, which means that an individual becomes fully vested in their equity after a certain period of time. Alternatively, a company may use a “performance-based” vesting trigger, which means that an individual becomes fully vested in their equity based on the achievement of certain performance milestones.

It is important to note that equity vesting is typically subject to certain conditions, such as the individual’s continued employment with the company. If an individual leaves the company before they become fully vested in their equity, they may forfeit some or all of their unvested equity. This is known as “repayment” or “clawback” provision.

In summary, equity vesting is an important aspect of startup culture as it aligns the interests of the founder or employee with those of the company and provides a retention incentive for key individuals to stay with the company over the long term. There are several different types of vesting schedules and triggers that can be used, and it is important for founders and employees to understand the terms of their equity vesting in order to make informed decisions about their ownership in the company.

The post Understanding Equity Vesting in Startups first appeared on Five23.

]]>
https://www.five23.io/blog/understanding-equity-vesting-in-startups/feed/ 0
Spatial Temporal Data for Crime Analysis: A Comprehensive Look https://www.five23.io/blog/spatial-temporal_data_for_crime_analysis/?utm_source=rss&utm_medium=rss&utm_campaign=spatial-temporal_data_for_crime_analysis https://www.five23.io/blog/spatial-temporal_data_for_crime_analysis/#respond Thu, 26 Jan 2023 06:23:00 +0000 https://www.five23.io/?p=1720 The use of spatial temporal data in crime analysis involves the collection, organization, and analysis of data that is both location-based and time-based. This type of data can include information on crime incidents, such as the location and time of a robbery or assault, as...

The post Spatial Temporal Data for Crime Analysis: A Comprehensive Look first appeared on Five23.

]]>

The use of spatial temporal data in crime analysis involves the collection, organization, and analysis of data that is both location-based and time-based. This type of data can include information on crime incidents, such as the location and time of a robbery or assault, as well as data on other factors that may be related to crime, such as population density or socioeconomic status. By analyzing this data, government agencies can gain a better understanding of where and when crime is most likely to occur and take steps to prevent it.

One of the key benefits of using spatial temporal data for crime analysis is that it allows for a more holistic view of crime patterns. Traditional crime analysis techniques, such as crime mapping, can be limited by the fact that they only provide a snapshot of crime at a particular point in time. Spatial temporal data, on the other hand, allows for the creation of dynamic crime maps that show how crime patterns change over time. This can provide valuable insights into the underlying causes of crime and help law enforcement to target their efforts more effectively.

For example, the analysis of crime data over time using spatial temporal data can reveal seasonal patterns in crime. This can help law enforcement agencies to anticipate increases in crime during certain times of the year and deploy resources accordingly. Additionally, the use of spatial temporal data can also help to identify long-term trends in crime, such as changes in crime rates over several years. This can inform policy decisions and help to guide the allocation of resources to areas that are most in need.

Another important aspect of crime analysis using spatial temporal data is the ability to identify hot spots of crime. These are areas where crime is concentrated and where a relatively small number of locations account for a large proportion of crime incidents. By identifying these hot spots, law enforcement can focus their efforts on the areas that need it most, rather than spreading their resources too thin.

For example, if a police department identified a hot spot of burglaries in a particular neighborhood, they could deploy additional patrols to that area and work with community organizations to increase crime prevention efforts. Similarly, if a hot spot of drug-related crime was identified in a specific area, the police department could work with other agencies, such as social services, to address underlying issues that may be contributing to the problem.

However, as with any type of data analysis, there are limitations to using spatial temporal data for crime analysis. One of the main challenges is ensuring that the data is accurate and reliable. This can be difficult when dealing with crime data, as it is often collected by multiple agencies and may not be consistent across different jurisdictions. Additionally, spatial temporal data can be complex and difficult to interpret, and requires specialized software and expertise to analyze effectively.

Moreover, as the crime data is often collected by different agencies and may not be consistent across different jurisdictions, which may affect the accuracy and reliability of the data. And also, There may be limitations in the data sources and the availability of data, which can influence the result of the analysis.

Despite these challenges, the use of spatial temporal data for crime analysis is a powerful tool that can help government agencies to better understand and prevent crime. By identifying patterns and trends in crime, law enforcement agencies can target their efforts more effectively, and ultimately make our communities safer and more secure. It’s important to continue investing in research and technology to improve the accuracy and reliability of the data and the analysis techniques used to make sense of it.

The post Spatial Temporal Data for Crime Analysis: A Comprehensive Look first appeared on Five23.

]]>
https://www.five23.io/blog/spatial-temporal_data_for_crime_analysis/feed/ 0
Spatial Temporal Investing at Five23 https://www.five23.io/blog/spatial-temporal-investing-at-five23/?utm_source=rss&utm_medium=rss&utm_campaign=spatial-temporal-investing-at-five23 https://www.five23.io/blog/spatial-temporal-investing-at-five23/#respond Thu, 05 Jan 2023 20:38:37 +0000 https://www.five23.io/?p=1714 In the world of investing, having access to the right information at the right time can make all the difference. Traditionally, investment decisions have been based on historical data and trends, with the hope that these patterns will continue into the future. However, this approach...

The post Spatial Temporal Investing at Five23 first appeared on Five23.

]]>
In the world of investing, having access to the right information at the right time can make all the difference. Traditionally, investment decisions have been based on historical data and trends, with the hope that these patterns will continue into the future. However, this approach has its limitations, as it doesn’t take into account the many variables and factors that can impact the market in real-time.

This is where Five23 comes in. As a leader in the field of spatial temporal investing, Five23 is utilizing advanced technologies like machine learning and big data analytics to analyze patterns and relationships in real-time data. By considering both spatial and temporal factors, Five23 is able to provide a more comprehensive and accurate view of the market, allowing investors to make informed decisions with a level of precision that was previously unimaginable.

But what exactly is spatial temporal investing, and how does it differ from traditional approaches?

Spatial temporal investing involves the analysis of both spatial and temporal data to make investment decisions. Spatial data refers to data that has a specific location, such as the location of a company or the location of a natural disaster. Temporal data, on the other hand, refers to data that has a specific time component, such as the time of day or the time of year. By analyzing both of these types of data together, it’s possible to gain a more complete and accurate understanding of the market and make more informed investment decisions.

One of the key benefits of spatial temporal investing is that it allows for a more comprehensive view of the market. By considering both spatial and temporal data, investors are able to take into account a wider range of variables and factors that can impact the market. For example, a traditional approach might consider the historical performance of a particular company, but a spatial temporal approach could also consider the location of the company and the current economic conditions in that region. This allows for a more nuanced and accurate view of the market, and can lead to better investment decisions.

Five23 is at the forefront of the spatial temporal investing movement, using advanced technologies like machine learning and big data analytics to analyze real-time data and identify patterns and relationships that traditional approaches might miss. By considering both spatial and temporal factors, Five23 is able to provide investors with a more comprehensive and accurate view of the market, allowing them to make informed decisions with confidence.

The potential benefits of spatial temporal investing are vast, and I believe that Five23 is leading the way in shaping the future of investing. If you’re interested in learning more about how Five23 is revolutionizing the world of investing, be sure to check out their website and follow them on LinkedIn for the latest updates.

The post Spatial Temporal Investing at Five23 first appeared on Five23.

]]>
https://www.five23.io/blog/spatial-temporal-investing-at-five23/feed/ 0
Why Trademarks are Important to Startups https://www.five23.io/blog/why-trademarks-are-important-to-startups/?utm_source=rss&utm_medium=rss&utm_campaign=why-trademarks-are-important-to-startups https://www.five23.io/blog/why-trademarks-are-important-to-startups/#respond Sun, 29 Sep 2019 16:08:57 +0000 https://five23.io/?p=1424 Being a startup, one of your most important assets is your brand and that brand is usually embodied in your startup name and logo. The valuable time that you invested in coming up with just the right creative name, developing the branding and marketing around...

The post Why Trademarks are Important to Startups first appeared on Five23.

]]>
Being a startup, one of your most important assets is your brand and that brand is usually embodied in your startup name and logo. The valuable time that you invested in coming up with just the right creative name, developing the branding and marketing around your startup is nearly impossible to measure. After creating signage, letterheads, and advertising materials the last thing you want to learn is that another company has sent you a cease and desist letter to stop using your company name.

This mistake can cost your new startup a fortune and can be easily avoided. Taking proactive steps in the beginning of your startup can ensure that you have all the right to your name. Things like trademark and registration searches are key. With this in mind, the following is a guide to help you with trademark and brand protection for your startup.

 

What Should You Trademark?

Often startup shave no idea what should protected by trademark registration, since it extends much further than just the company name. Here are a few items which you should consider trademarking to protect your startup. 

Company Name

First, as a small business you should always protect your company name. Your company’s name is how consumers and clients find you and your goods and services. Without protection a competitor can open shop under a highly similar name and begin to take business from you by confusing your clients. A Trademark on your name is the easiest way to protect against this scenario from happening. 

Product Names

Just like with your company name, consumers also locate your goods and services through your product names. As such, if you provide a product or a service under a particular name you must also protect the same to avoid competitors from using like names on their goods or services. A good example of this are device names, most of us know ‘iPhone’, ‘Android’, etc. These are simple ways to protect your product from infringement. 

Logos

In addition to the above, logos can also be protected by trademarks. This will stop competitors from using like images for their goods or services. For example, no one is able to use the Nike Swoosh but Nike themselves. This is an example of a trademark on a logo. 

Marketing & Advertising Slogans

If you use a particular phrase or slogan in your marketing, you may be able to protect it through a trademark on the words. You can see examples of this with many fast food restaurants, such as McDonald’s, “I’m lovin’ it!”, or Papa John’s, “Better ingredients, better pizza, Papa John’s”. 

 

Benefits of a Trademark

Often startups wonder if trademarking is worth the cost and effort in the early stages of the company. The answer is: Yes! In addition to the potential savings of avoiding a costly rebranding after learning that the name you have been using is trademarked by another company below are a few other ways you can save money. Vice versa, if you do not have a trademark, these items may affect you. 

Deterrence

Having your trademark registered with the U.S. Patent and Trademark Office makes them easier to uncover by those doing trademark searches to see if their own trademark is available to be registered. This in turn helps to prevent the adoption of confusingly similar marks by third parties who may not choose a specific trademark similar to yours if they see your trademark is already registered with the U.S. Patent and Trademark Office, or the equivalent authority in your respective country. 

Registration Symbol ® 

Only trademarks that have been registered with the U.S. Patent and Trademark Office have the authorization to use the ® symbol in their advertising and marketing. The right to use the ® symbol in connection with your trademark may deter potential infringers from adopting or using a similar trademark to yours. It is also a great way to communicate that your brand is legitimate and valuable in a crowded field of imposters and cheap knock off brands.

Damages

Unfortunately, the reality is that companies often have to resort to filing lawsuits to enforce trademarks against infringers that don’t respond to cease and desist letter. When your trademark is registered it increases the type of monetary damages you can demand in a lawsuit if it is later infringed upon such as the ability to recover lost profits associated with the infringement including the possibility of receiving treble damages in certain circumstances as well as recovering attorneys fees. Essentially, having a trademark registration can pay for itself many times over.

Block Importation of Infringing Goods

If your trademark is used in connection with goods this is a key factor. Once registered, your trademark registration can be provided to the U.S. Customs and Border Protection Agency to help block the importation of goods that infringe on your trademark. More and more with products we are seeing this becoming a necessary step to stop product infringement. 

Takedown Notices

In the age of digital commerce where brands are distributed in online marketplaces around the world. One of the most powerful tools at your disposal is the ability to use takedown notices against counter-fitters and unauthorized distributors. This allows you to have the product / service removed based on registered trademark. It’s a fairly straightforward process that all major retailers and service providers adhere to. 

 

How to Protect Your Trademark (Process)

#1 Check if Your Name is Available

If you have yet to begin to use your product or service name, it is imperative that you research to see if it is available. A properly conducted research report will let you know if the name you seek is available to be registered before you incur the expense of the non-refundable government filing fees required for registration. Also, a research report will ensure you are not adopting and using a name that is infringing upon another’s trademark. If this occurs, you could be forced to give up use of your name and even pay damages to the entity you have infringed upon. A research report will avoid these issues and make sure your name is available. 

#2 Register Your Trademark

Once you have determined your desired name is available to trademark you should immediately apply to register it with the U.S. Patent and Trademark Office. Since trademark rights can be acquired either when you first use your trademark or first to file for an intent to use the same, it is imperative you get a trademark application on file with the USPTO as soon as possible to secure your rights in the trademark before someone else does. 

#3 Monitor For Infringement

Once you have a trademark you need to make sure that no one else adopts and begins use of a confusingly similar trademark. Trademark infringement costs businesses hundreds of millions of dollars each year in lost revenue. Even if a competitor begins use of a similar, albeit not identical trademark to yours, if can still funnel clients away from you business. In essence, competitors create confusion between your and their goods and services by adopting a similar trademark to yours. They then use the good will you have created in your trademark through your marketing to otherwise steal your clients and / or products. 

#4 Police Your Trademark

When infringement of your trademark is discovered, you must act quickly to stop the same. There are numerous ways to enforce your trademark depending upon how it is being infringed upon. For instance, if a competitor has registered and is using a domain name that is similar to your trademark, a domain name dispute may be the right tool to use. If a competitor is simply using a similar trademark on their website, then sending a cease and desist letter or possibly suing them in court may be the best option. Or if they have applied to register a confusingly similar trademark with the U.S. Patent and Trademark Office. 

 

Final Notes

For many businesses, their brand is their most valuable asset. Through a few judicious steps in seeking trademark protection, monitoring use by others, and policing infringement, you can ensure that your company brand is secured and flourishes with the growth of your business. You can learn more about trademarks and intellectual property protection by visiting the U.S. Patent and Trademark Office (USPTO) here

To see what Five23 can do for your startup. Please feel free to contact us here, or by email: contact@five23.io

The post Why Trademarks are Important to Startups first appeared on Five23.

]]>
https://www.five23.io/blog/why-trademarks-are-important-to-startups/feed/ 0
Internal Revenue Service (IRS): 409A Valuation https://www.five23.io/blog/internal-revenue-service-irs-409a-valuation/?utm_source=rss&utm_medium=rss&utm_campaign=internal-revenue-service-irs-409a-valuation https://www.five23.io/blog/internal-revenue-service-irs-409a-valuation/#respond Wed, 25 Sep 2019 05:34:42 +0000 https://five23.io/?p=1412 INCLUSION IN GROSS INCOME OF DEFERRED COMPENSATION UNDER NONQUALIFIED DEFERRED COMPENSATION PLANS. (409A) “(a) Rules Relating to Constructive Receipt.—  “(1) Plan Failures.—  “(A) Gross Income Inclusion.—  “(i) In general.—If at any time during a taxable year a nonqualified deferred compensation plan— “(I) fails to meet...

The post Internal Revenue Service (IRS): 409A Valuation first appeared on Five23.

]]>
INCLUSION IN GROSS INCOME OF DEFERRED COMPENSATION UNDER NONQUALIFIED DEFERRED COMPENSATION PLANS. (409A)

“(a) Rules Relating to Constructive Receipt.— 

“(1) Plan Failures.— 

“(A) Gross Income Inclusion.— 

“(i) In general.—If at any time during a taxable year a nonqualified deferred compensation plan—

“(I) fails to meet the requirements of paragraphs (2), (3), and (4), or

“(II) is not operated in accordance with such requirements, all compensation deferred under the plan for the taxable year and all preceding taxable years shall be includible in gross income for the taxable year to the extent not subject to a substantial risk of forfeiture and not previously included in gross income. 

“(ii) Application only affected participants.— Clause (i) shall only apply with respect to all compensation deferred under the plan for participants with respect to whom the failure relates.

“(B) Interest and Additional Tax Payable with Respect to Previously Deferred Compensation.—

“(i) In general.— If compensation is required to be included in gross income under subparagraph (A) for a taxable year shall be increased by the sum of— 

“(I) the amount of interest determined under clause (ii), and

“(II) an amount equal to 20 percent of the compensation which is required to be included in gross income.

“(ii) Interest.— For purposes of clause (i), the interest determined under this clause for any taxable year is the amount of interest at the underpayment rate plus 1 percentage point on the underpayments that would have occurred had the deferred compensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture. 

“(2) Distributions.— 

“(A) In general.— The requirements of this paragraph are met if the plan provides that compensation deferred under the plan may not be distributed earlier than— 

“(i) separation from service as determined by the Secretary (except as provided in subparagraph (B)(i)),

“(ii) the date the participant becomes disabled (within the meaning of subparagraph (C)), 

“(iii) death, 

“(iv) a specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation, 

“(v) to the extent provided by the Secretary, a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, or

“(vi) the occurrence of an unforeseeable emergency.

“(B) Special Rules.— 

“(i) Specified employees. —In the case of any specified employee, the requirement of subparagraph (A)(i) is met only if distributions may not be made before the date which is 6 months after the date of separation from service (or, if earlier, the date of death of employee). For purposes of the preceding sentence, a specified employee is a key employee (as defined in section 416(i) without regard to paragraph (5) thereof) of a corporation any stock in which is publicly traded on an established securities market or otherwise. 

“(ii) Unforeseeable emergency.— For purposes of subparagraph (A)(vi)— 

“(I) In general.— The term ‘unforeseeable emergency’ means a severe financial hardship to the participant resulting from an illness or accident of the participant, the participant’s spouse, or a dependent (as defined in section 152(a)) of the participant, loss of the participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.

“(II) Limitation on distributions.— The requirement of subparagraph (A)(vi) is met only if, as determined under regulations of the Secretary, the amounts distributed with respect to an emergency do not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

“(C) Disabled.— For purposes of subparagraph (A)(ii), a participant shall be considered disabled if the participant—

“(i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

“(ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the participant’s employer. 

“(3) Acceleration of Benefits.— The requirements of this paragraph are met if the plan does not permit the acceleration of the time or schedule of any payment under the plan, except as provided in regulations by the Secretary.

“(4) Elections.— 

“(A) In General.— The requirements of this paragraph are met if the requirements of subparagraphs (B) and (C) are met.

“(B) Initial Deferral Decision.—

“(i) In general.— The requirements of this subparagraph are met if the plan provides that compensation for services performed during a taxable year may be deferred at the participant’s election only if the election to defer such compensation is made not later than the close of the preceding taxable year or at such other time as provided in regulations.

“(ii) First Year of Eligibility.—In the case of the first year in which a participant becomes eligible to participate in the plan, such election may be made with respect to services to be performed subsequent to the election within 30 days after the date the participant becomes eligible to participate in such plan. 

“(iii) Performance-Based Compensation.— In the case of any performance-based compensation based on services performed over a period of at least 12 months, such election may be made no later than 6 months before the end of the period. 

“(C) Changes in Time and Form of Distribution.— The requirements of this subparagraph are met if, in the case of a plan which permits under a subsequent election a delay in a payment or a change in the form of payment—

“(i) the plan requires that such election may not take effect until at least 12 months after the date on which the election is made,

“(ii) in the case of an election related to a payment not described in clause (ii), (iii), or (vi) of paragraph (2)(A), the plan requires that the first payment with respect to which such election is made be deferred for a period of not less than 5 years from the date such payment would otherwise have been made, and

“(iii) the plan requires that any election related to a payment described in paragraph (2)(A)(iv) may not be made less than 12 months prior to the date of the first scheduled payment under such paragraph. 

“(b) Rules Related to Funding.—

“(1) Offshore Property in a Trust.— In the case of assets set aside (directly or indirectly) in a trust (or other arrangement determined by the Secretary) for purposes of paying deferred compensation under a nonqualified deferred compensation plan, for purposes of section 83 such assets shall be treated as property transferred in connection with the performance of services whether or not such assets are available to satisfy claims of general creditors— 

“(A) at the time set aside if such assets (or such trust or other arrangement) are located outside of the United States, or 

“(B) at the time transferred if such assets (or such trust or other arrangement) are subsequently transferred outside of the United States.

This paragraph shall not apply to assets located in a foreign jurisdiction if substantially all of the services to which the nonqualified deferred compensation relates are performed in such jurisdiction.

“(2) Employer’s Financial Health.— In the case of compensation deferred under a nonqualified deferred compensation plan, there is a transfer of property within the meaning of section 83 with respect to such compensation as of the earlier of— 

“(A) the date on which the plan first provides that assets will become restricted to the provision of benefits under the plan in connection with a change in the employer’s financial health, or

“(B) the date on which assets are so restricted, whether or not such assets are available to satisfy claims of general creditors.

“(3) Income Inclusion for Offshore Trusts and Employer’s Financial Health.— For each taxable year that assets treated as transferred under this subsection remain set aside in a trust or other arrangement subject to paragraph (1) or (2), any increase in value in, or earnings with respect to, such assets shall be treated as an additional transfer of property under this subsection (to the extent not previously included in income).

“(4)Interest on Tax Liability Payable with Respect to Transferred Property.—

“(A) In General.— If amounts are required to be included in gross income by reason of paragraph (1) or (2) for a taxable year, the tax imposed by this chapter for such taxable year shall be increased by the sum of— 

“(i) the amount of interest determined under subparagraph (B), and 

“(ii) an amount equal to 20 percent of the amounts required to be included in gross income. 

“(B) Interest.— For purposes of subparagraph (A), the interest determined under this subparagraph for any taxable year is the amount of interest at the underpayment rate plus 1 percentage point on the underpayments that would have occurred had the amounts so required to be included in gross income by paragraph (1) or (2) been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such amounts are not subject to a substantial risk of forfeiture.

 

“(c) No Interference on Earlier Income Inclusion or Requirement of Later Inclusion.— Nothing in this section shall be construed to prevent the inclusion of amounts in gross income under any other provision of this chapter or any other rule of law earlier than the time provided in this section shall not be required to be included in gross income under any other provision of this chapter or any other rule of law later than the time provided in this section. 

 

“(d) Other Definitions and Special Rules.— For purposes of this section:

“(1) Nonqualified Deferred Compensation Plan.— The term ‘nonqualified deferred compensation plan’ means any plan that provides for the deferral of compensation, other than—

“(A) a qualified employer plan, and

“(B) any bona fide vacation leave, sick leave, compensatory time, disability pay, or death benefit plan. 

“(2) Qualified Employer Plan.— The term ‘qualified employer plan’ means— 

“(A) any plan, contract, pension, account, or trust described in subparagraph (A) or (B) of section 219(g)(5)(without regard to subparagraph (A)(iii)),

“(B) any eligible deferred compensation plan (within the meaning of section 457(b)), and 

“(C) any plans described in section 415(m).

“(3) Plan Includes Arrangements, Etc.— The term ‘plan’ includes any agreement or arrangement, including an agreement or arrangement that includes one person. 

“(4) Substantial Risk of Forfeiture.— The rights of a person to compensation are subject to a substantial risk of forfeiture if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual. 

“(5) Treatment of Earnings.— References to deferred compensation shall be treated as including references to income (whether actual or notional) attributable to such compensation or such income. 

“(6) Aggregation Rules.— Except as provided by the Secretary, rules similar to the rules of subsection (b) and (c) of section 414 shall apply.

 

“(e) Regulations.— The Secretary shall prescribe such regulations as may be necessary  or appropriate to carry out the purposes of this section, including regulations— 

“(1) providing for the determination of amounts of deferral in the case of a nonqualified deferred compensation plan which is a defined benefit plan, 

“(2) relating to changes in the ownership and control of a corporation or assets of a corporation for purposes of subsection (a)(2)(A)(v),

“(3) exempting arrangements from the application of subsection (b) if such arrangements will not result in an improper deferral of United States tax and will not result in assets being effectively beyond the reach of creditors,

“(4) defining financial health for purposes of subsection (b)(2), and
“(5) disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section.”.

“(b) Treatment of Deferred Amounts.— 

(1) W-2 Forms.— 

(2) In general.— Subsection (a) of section 6051 (relating to receipts for employees) is amended by striking “and” at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting “, and”, and by inserting after paragraph (12) the following new paragraph:

“(13) the total amount of deferrals for the year under a nonqualified deferred compensation plan (within the meaning of section 409A(d))”

(B) Threshold.— Subsection (a) of section 6051 is amended by adding at the end the following: “In the case of the amounts required to be shown by paragraph (13), the Secretary may (by regulation) establish a minimum amount of deferrals below which paragraph (13) does not apply.”.

(2) Wage Withholding.— Section 3401(a) (defining wages) is amended by adding at the end the following flush sentence:

“The term ‘wages’ includes any amount includible in gross income of an employee under section 409A and payment of such amount shall be treated as having been made in the taxable year in which the amount is so includible.”.

(3) Other Reporting.— Section 6041 (relating to information at source) is amended by adding at the end the following new subsection:

“(g) Nonqualified Deferred Compensation.— Subsection (a) shall apply to—

“(1) any deferrals for the year under a nonqualified deferred compensation plan (within the meaning of section 409A(d)), whether or not paid, except that this paragraph shall not apply to deferrals which are required to be reported under section 6051(a)(13) (without regard to any de minimis exception), and 

“(2) any amount includible under section 409A and which is not treated as wages under section 3401(a).”.

(c) Clerical Amendment.— The table of sections for such subpart A of part I of subchapter D of chapter 1 is amended by adding at the end the following new item:

“Sec. 409A. Inclusion in gross income of deferred compensation under non qualified deferred compensation plans.”.

(d) Effective Date.—

(1) In general.— The amendments made by this section shall apply to amounts deferred after December 31, 2004. 

(2) Special Rules.—

(A) Earning.— The amendments made by this section shall apply to earnings on deferred compensation only to the extent that such amendments apply to such compensation. 

(B) Material Modifications.— For purposes of this subsection, amounts deferred in taxable years beginning before January 1, 2005, shall be treated as amounts deferred in a taxable year beginning on or after such date if the plan under which the deferral is made is materially modified after October 3, 2004, unless such modification is pursuant to the guidance issued under subsection (f).

(3) Exception for Nonelective Deferred Compensation.— the amendments made by this section shall not apply to any nonelective deferred compensation to which section 457 of the Internal Revenue Code of 1986 does not apply by reason of section 457(3)(12) of such Code, but only if such compensation is provided under a nonqualified deferred compensation plan—

(A) which was in existence on May 1, 2004,

(B) which was providing nonelective deferred compensation described in such section 457(e)(12) on such date, and

(C) which is established or maintained by an organization incorporated on July 2, 1974. If, after May 1, 2004, a plan described in the preceding sentence adopts a plan amendment which provides a material change in the classes of individuals eligible to participate in the plan, this paragraph shall not apply to any nonelective deferred compensation provided under the plan on or after the date of the adoption of the amendment. 

(e) Guidance Relating to Change of Ownership or Control.— Not later than 90 days after the date of the enactment of this Act, the Secretary of the Treasury shall issue guidance on what constitutes a change in ownership or effective control for purposes of section 409A of the Internal Revenue Code of 1986, as added by this section.

(f) Guidance Relating to Termination of Certain Existing Arrangements.— Not later than 60 days after the date of the enactment of this Act, the Secretary of the Treasury shall issue guidance providing a limited period during which a nonqualified deferred compensation plan adopted before December 31, 2004, may, without violating the requirements of paragraphs (2), (3), and (4) of section 409A(A) of the Internal Revenue Code of 1986 (as added by this section), be amended—

(1) To provide that a participant may terminate participation in the plan, or cancel an outstanding deferral election with regard to amounts deferred after December 31, 2004, but only if amounts subject to the termination or cancellation are includible in income of the participant as earned (or, if later, when no longer subject to substantial risk of forfeiture), and

(2) to conform to the requirements of such section 409A with regard to amounts deferred after December 31, 2004.

 

Link to U.S. Congress.Gov Tax Code: (https://www.congress.gov/108/plaws/publ357/PLAW-108publ357.pdf).

The post Internal Revenue Service (IRS): 409A Valuation first appeared on Five23.

]]>
https://www.five23.io/blog/internal-revenue-service-irs-409a-valuation/feed/ 0
Top 6 Mistakes Entrepreneurs Make with Investors https://www.five23.io/blog/top-6-mistakes-entrepreneurs-make-with-investors/?utm_source=rss&utm_medium=rss&utm_campaign=top-6-mistakes-entrepreneurs-make-with-investors https://www.five23.io/blog/top-6-mistakes-entrepreneurs-make-with-investors/#respond Sun, 01 Sep 2019 19:05:46 +0000 https://five23.io/?p=1405 Are you pitching investors for the first time? If so, you are probably excited about your first funding round and telling investors about your idea for the first time. However, raising your first funding round may be harder than you are expecting. On average only...

The post Top 6 Mistakes Entrepreneurs Make with Investors first appeared on Five23.

]]>
Are you pitching investors for the first time? If so, you are probably excited about your first funding round and telling investors about your idea for the first time. However, raising your first funding round may be harder than you are expecting. On average only 6% of investors you pitch to will be willing to investment (17% with Five23’s business reports). A lot of ground work is required in the startup ecosystem when it comes to making successful pitches. You need to present your company in a clear and precise way. Here are the top 6 mistakes entrepreneurs make when pitching investors for the first time.

1. Lack of Preparation

Perhaps the number one mistake that new startup entrepreneurs make is the lack of preparation itself. A “One size fits all” approach to you startup is a disaster. Just like clients, each investor is different. Study the fund’s background, understand their investment thesis, gauge their mindset, and know why you want an investment from them (outside of capital, what else can they provide you?). Many startup founders are completely unprepared when entering the board room. Business plans are not required in the pitch meeting (in most cases), however, you need to be able to answer questions about the business plan. Practicing your pitch with each type of investor will help you in the long run and give you ample opportunity to perfect your pitch. Giving you the preparedness you need to nail the meeting and close the investment.

2. Unrealistic Expectations

The majority of entrepreneurs set the bar too high with unreasonably high expectations. They think an investment will change their life and make the startup instantly successful. In reality, this is almost never the case. Founders must set reasonable expectations of growth, revenue, profitability, and financials; backed by strong market research. Even if your product or service may be unique, build a logical approach to why your assumptions are valid. This will help to set your own expectations at a reasonable level. Furthermore, it can give you a clear mindset when approaching expectations with investors.

3. The Drama of Fundraising

Being an entrepreneur is definitely an exciting journey. However, the majority of founders lose their focus when they get excited about the fund raising process. The ultimate goal of fundraising is to obtain enough money to be able to fund the stage of your process. This could be product development, client outreach, human capital, etc. Entrepreneurs need to keep this in mind rather than just closing an investor. The majority of investors will see this, and may lose interest.

4. Value Proposition

While many startups are built on a unique idea, some of them are a “copy-paste” of an existing idea. Many founders are inclined to thing their “copy-paste” idea will be funded, because several similar startups have been funded. The problem with this approach is the lack of a clear value proposition. Questions entrepreneurs can ask themselves; Why is your startup different? How is it unique from the rest of your competition? Are you offering the same product / service in a niche segment as others? Are you offering the same product or service? Has the market seen your product / service before? Having a clear value proposition, product positioning, and product differentiation increase your chance of receiving funding.

5. Lack of a Clear Strategy

The success mantra for a startup is having the right product, the right team, a clear product need, and a solid action plan. Many startups fail in these items due to a clear action plan. Missing a clear action plan leads to confusion, higher capital burns, and a higher chance of startup failure. All startups should have a plan of a set of dynamically changing milestones across all time frames (short, medium, long).

6. Justifiable Valuation

If you walk into an investor meeting seeking, $1.5mm at a valuation of $15mm (10% of the company), you have to be able to justify it. The vast majority of startups cannot, they say they need ‘x’ amount of money to obtain ‘y’. This model is backwards. Entrepreneurs first need to determine their value then they can properly decide how much money to raise. With this model, startups need to discover what they can do with the money they are able to raise. This gives more confidence to investors when they are analyzing your company for investment. They know what you are going to do with the money and are able to justify your value.

Understand the value of your company may be difficult, and many mistakes can be made along the way. Five23 helps entrepreneurs and startups overcome these six items and determine the value of your company. By being an unbiased third party, we can determine value and analyze without prejudice. To learn more about what we offer startups, please follow the link here or contact us via email: contact@five23.io.

The post Top 6 Mistakes Entrepreneurs Make with Investors first appeared on Five23.

]]>
https://www.five23.io/blog/top-6-mistakes-entrepreneurs-make-with-investors/feed/ 0
409A Valuation Safe Harbor Guide (2019) https://www.five23.io/blog/409a-valuation-safe-harbor-guide/?utm_source=rss&utm_medium=rss&utm_campaign=409a-valuation-safe-harbor-guide https://www.five23.io/blog/409a-valuation-safe-harbor-guide/#respond Sun, 25 Aug 2019 19:01:51 +0000 https://five23.io/?p=1390 If you know what 409A Valuations are, you probably know that Safe Harbor for 409A Valuations are of the utmost importance. But just how important? In this blog post we’ll take a strategic look into the details of what a Safe Harbor 409A Valuation means,...

The post 409A Valuation Safe Harbor Guide (2019) first appeared on Five23.

]]>
If you know what 409A Valuations are, you probably know that Safe Harbor for 409A Valuations are of the utmost importance. But just how important? In this blog post we’ll take a strategic look into the details of what a Safe Harbor 409A Valuation means, why it exists, and what’s at stake when you’re found in non-compliance.

To be honest, the penalties for 409A Valuation non-compliance are insane; hefty fines, irreversible reputation damage, and a potentially greater tax bill. But they are there for a reason. An inaccurate 409A Valuation can lead to another Enron. We all don’t want that. The IRS doesn’t want companies generating their own 409A Valuation because the likelihood of inaccuracies can by high. That is why there are Safe Harbor provisions for companies who obtain an 409A Valuation from third parties. It’s a win-win situation. The IRS doesn’t have to go through your 409A valuation with a magnifying glass, and in return, you get an accurate, non-biased value of your company. The Safe Harbor 409A Valuation is one of the best assets you can add to your company.

 

409A Safe Harbor Opportunities

 

IRS 409A Valuation (Link Here) has two opportunities for startups through which you can achieve a Safe Harbor 409A Valuation. If you meet the conditions of any of these three items, you are considered in “Safe Harbor”. Below is a description of each of the three opportunities:

Independent Appraisal

Binding Formula

Illiquid Startup Safe Harbor

Each of these opportunities are complex and unique. Each provides you with a clear path to achieving a Safe Harbor 409A Valuation. Let’s take a look at each:

 

Independent Appraisal Safe Harbor

 

When it comes to the matter of 409A Safe Harbor Valuations methods, the independent appraisal opportunity is among the most common and easiest to pursue. The IRS wants an independent 409A Valuation from a reputable firm that employs consistent, well-documented methodologies in their appraisals (like Five23). This is typically the easiest route to take in securing a Safe Harbor 409A Valuation. Find an independent, trustworthy valuation firm and pay them to do your 409A valuation. What’s so hard about that, right? Turns out, finding a quality fully-independent firm is more difficult than it seems.

Many companies turn to their cap table software providers for a 409A valuation package deal. This makes sense. Your cap table software has access to almost all the data you need to perform a safe harbor 409A valuation. However, even the leading cap table software providers stretch the boundaries on independence. And, in many cases you will run into a conflict of interest. Typically, your software provider doesn’t have the proper authority to provide you with an accurate 409A Valuation. They use old methods which do not require up-to-date financial data, which will eventually lead to an inaccurate 409A. If this is the case, you will find your valuation may be grossly mis-calculated. The IRS may find your company to be grossly mis-valued and take away your Safe Harbor exemption. At this stage you still may be on the hook for the inaccuracies.

 

Binding Formula Safe Harbor

 

The binding formula Safe Harbor applies to 409A Valuations based on the consistent use of one, generally-applicable repurchase formula in the company’s stock transfers. The legalese around this provision incomprehensible at best. The formula applies whether those transfers are compensatory or non-compensatory. It’s applied all of a company’s stock transfers and the stock transfers of at least 10% of the company’s shareholders. Additionally, the IRS specifies: any person or issuer holding more than 10% of the combined voting power across all classes of the issuer’s stock is void from this exception. Thus effectively making the provision unattainable for the vast majority of companies (any company which one shareholder owns 10%+ of the companies shares).

The big exception to the binding formula safe harbor presumption are “arm’s length transactions” related to the company’s stock. These are transactions for which both buyer and seller have no prior relationship and act independently of each other’s interests. The actual legislation covering this Safe Harbor presumption states that this generally-applicable formula should apply when used as part of a non-lapsing restrictions surrounding the company’s stock.

In essence, unless your company has a valuation of $100mm+ and more than 100 independent shareholders. You are not going to fall into this exemption opportunity.

 

Illiquid Startup Safe Harbor

 

The illiquid startup opportunity to Safe Harbor 409A Valuations is intended to accommodate the startup environment, where equity switches hands on a much more frequent basis. It applies only when both the service recipient and the service provider (typically the “employer” and “employee”, respectively) do not anticipate an IPO within 180 days or a change of control event within 90 days. A ‘Change of Control Event” could be a shift in voting power such that one person or entity holds more than 50%. It could be a liquidation; could be a substantial sale of assets; could be a board call. Point is, you’ll know it when you see it.


Under the illiquid startup presumption, your 409A Valuation must be performed by a “qualified individual”. The IRS specifies a qualified individual to be someone companies can reasonably rely upon based on some combination of knowledge, education, training, and experience (Five23 for example). They further specify this to mean five years of relevant experience.

 

Failing to Achieve a Safe Harbor 409A Valuation

 

As stated previously, you should view meeting 409A Safe Harbor requirements as a mandatory part of running your company. While it’s not actually required, the penalties of non-compliance aren’t worth the risk. Not even close. These penalties are exacted on each employee deferring compensation. The employees can be hit with a tax on their income, with the entire balance of their deferred compensation plan applied—for the current year and all past years for which their compensation was deferred. There’s a 20% excise tax on that. On top of that, the IRS charges interest on that 20%. That premium interest rate is roughly 1% plus the federal underpayment rate. Employees are hit with these tax penalties in tandem with whatever fees and fines they accrue in their efforts to pay off what they owe. Basically, get ready to pay a fortune to the government for failure to comply. Luckily, that is why there are Safe Harbor 409A Valuation, and they are cheaper and easier to get than you would imagine.

 

Safe Harbor 409A Valuation from Five23

 

At Five23, we pride ourselves on working closely with startups and investors to provide the best service possible. Our 409A Valuations are quick, straightforward, and painless. We give you a simple form to complete with minimal information required. From the time you start the process, we typically complete a 409A Valuation in just a matter of days. In addition, being an unbiased third party. We give provide the Safe Harbor 409A Valuation discussed in this article. 


If you’d like to get started with a 409A Valuation, you can view our packages here (all come with a 409A Valuation). If you’d like to learn more about Five23, please visit our website or send us an email to: contact@five23.io. We’d love to hear from you.

The post 409A Valuation Safe Harbor Guide (2019) first appeared on Five23.

]]>
https://www.five23.io/blog/409a-valuation-safe-harbor-guide/feed/ 0
5 Techniques that Help Entrepreneurs Make Hard Decisions https://www.five23.io/confidence/5-techniques-that-help-entrepreneurs-make-hard-decisions/?utm_source=rss&utm_medium=rss&utm_campaign=5-techniques-that-help-entrepreneurs-make-hard-decisions https://www.five23.io/confidence/5-techniques-that-help-entrepreneurs-make-hard-decisions/#respond Tue, 06 Nov 2018 00:59:04 +0000 https://five23.io/?p=1142 The typical adult makes 35,000 decisions each day. If you do the math (and account for seven hours of sleep), that’s about 2,000 decisions every hour — or one choice every two seconds. Most decisions are actually micro-choices, like clicking a link or taking a sip of...

The post 5 Techniques that Help Entrepreneurs Make Hard Decisions first appeared on Five23.

]]>
The typical adult makes 35,000 decisions each day. If you do the math (and account for seven hours of sleep), that’s about 2,000 decisions every hour — or one choice every two seconds. Most decisions are actually micro-choices, like clicking a link or taking a sip of coffee. But some choices feel momentous. An internal tug-of-war indicates that something big is at stake. You sense that the choice could significantly affect your happiness, freedom, pride, or personal fulfillment. If you’re running a business, there are even more decisions to make — and many are critical to the health of your company. The good news? Science is continually discovering new and better ways to make tough decisions. Here are five methods that will help you confront challenging decisions.

1. Make a “value-based” pros & cons list

Imagine that you’re considering a move. Will you relocate to another city? Pull out a piece of paper and write a classic pros and cons list for the move. Now, here’s where science has added a helpful twist. Assign every list entry a number from 0 to 1, based on your personal values. For example, if being closer to your family is a “pro” that’s extremely high on your list, you might score it at 0.9 or 0.95. If you listed “near the mountains” as another pro, but you’re more of a culture hound than an alpine hiker, then it might only rate 0.2 or 0.3. Do the same for the “con” side. Leaving a job you love could score 0.8, for example, if your career is an essential part of your life. Add up each side, multiply by 100, and see whether the pro or con side wins out. You can also make a separate pro and con list for staying where you are. Compare the final values and see how you feel about the outcome. Often, confronting a “logical” number (which was actually weighted with emotions) can illuminate subconscious feelings. If you see the numbers but still feel pulled in the opposite direction, it’s worth doing some deeper exploration. You can also use this technique for smaller, less personal decisions, like which project or feature to tackle next.

2. Explore future scenarios

Considering the best- and worst-case scenarios is a common way to make tough choices. What’s the very best future you can imagine? The worst? And how would you feel if that disastrous scenario became reality? To expand on this technique, psychologist Gary Klein has studied a twist he calls the “premortem.” In a Harvard Business Review story, Klein explains why a premortem is the hypothetical opposite of a postmortem.

       “A postmortem in a medical setting allows health professionals and the family to learn what caused a patient’s death. Everyone benefits except, of course, the patient. A premortem in a business setting comes at the beginning of a project rather than the end, so that the project can be improved rather than autopsied.”

       Imagine that your decision was terrible. The project you chose to tackle was a crash-and-burn disaster. Now, explore every possible reason for the failure. Once you address this worst-case scenario, you can take steps to prevent it — and make a better decision in the first place. In fact, research shows that premortems (which are also called prospective hindsight) can increase our ability to identify future outcome causes by 30%. On the flip side, try to visualize that epic, best-case future scenario and gauge how you feel. If you’re not happy or excited, it’s worth considering why. Amazon uses a variation of both these techniques. Company developers must draft a hypothetical press release and FAQ announcement before they even write any code. By working backwards, the team tackles the most difficult decisions upfront and clarifies the product’s value proposition.

3. Avoid binary choices

We often get stuck choosing between this or that. Should I go back to school or start a business? Should I move to Seattle or stay in Denver? It’s easy to see the world in black-and-white, but there’s typically a grey option in the middle — or several shades of grey. Maybe you could spend summers in Seattle and winters in Denver. Or, you could live in Denver for another couple years and move to Seattle later. Sometimes the right choice is not one of two opposites. It’s a more creative, nuanced, or flexible solution.

4. Consult with others

Sharing your dilemma with others can justify or reinforce a choice, but more importantly, it’s a valuable way to gather valuable information. If you can’t decide whether to move, for example, don’t just survey your friends and family (who will also have skin in your game); talk to someone who made the same move. Ask how they feel now about their decision. For professional or business decisions, try hiring a consultant. Find people who have deep, niche expertise and learn as much from them as you can. The extra information you gather will almost inevitably help you make better choices in the future.

5. Avoid hidden decisions

For nearly 6,000 years, North America’s First Nations hunted the plains buffalo by chasing them over cliffs and finishing the kill below. This method enabled tribes to gather and store large quantities of meat, hide and fat for the long winter ahead. I always wondered why so many bison would just run over the cliff. They were usually pursued by hunters on horseback, for one, but it’s also an example of herd behavior. All the animals are just following the group, letting the flow take them where it will. Buffalo jumps are a good metaphor for hidden decisions or non-decisions, which we’ve all experienced at times. When you procrastinate or delay an important choice, you’re still making a decision — and it’s rarely a good one. For example, maybe you need to part ways with an employee, but you put it off to avoid a potential confrontation. If the employee is negative, unpleasant, or ill-suited to their role, the choice to wait and delay can poison the whole team. Non-decision is a choice with real consequences.

Those 35,000 daily choices can be daunting, but quick action is the enemy of decision fatigue. Choose fast and whenever possible, tackle your choices head-on. Use as many methods as you need to pick the best solution. Just don’t follow the herd. Choose what’s best for you — and then stand firm in your decisions.

One final note: if you’ve started a business or launched a product and you’re feeling overwhelmed by all the decisions, please know that it does get easier. Additionally, Five23 can help you analyze your chooses. Our packages can help any stage startup reach its full potential and take the guesswork out of the process. Once your business is stable, many of the big, foundational choices are done and you will reach equilibrium. Then it’s time to focus on the constraints. Determine where you can make the most important, impactful decisions, and use them to grow or refine your business. Remember: decision-making gets easier with practice, and a new choice is always just seconds away.

The post 5 Techniques that Help Entrepreneurs Make Hard Decisions first appeared on Five23.

]]>
https://www.five23.io/confidence/5-techniques-that-help-entrepreneurs-make-hard-decisions/feed/ 0
Determining How Much Money to Raise (How to Startup Guide) https://www.five23.io/blog/determining-how-much-money-to-raise-how-to-startup-guide/?utm_source=rss&utm_medium=rss&utm_campaign=determining-how-much-money-to-raise-how-to-startup-guide https://www.five23.io/blog/determining-how-much-money-to-raise-how-to-startup-guide/#respond Fri, 24 Nov 2017 20:34:20 +0000 https://five23.io/?p=1078   For any entrepreneur, knowing how much money you need to raise is a big part of being ready to talk to investors. How you can determine the amount of capital you need to raise is key to getting the figures right. This post should...

The post Determining How Much Money to Raise (How to Startup Guide) first appeared on Five23.

]]>
 

For any entrepreneur, knowing how much money you need to raise is a big part of being ready to talk to investors. How you can determine the amount of capital you need to raise is key to getting the figures right. This post should help you solve the task of identifying how much capital you need to build your runway.

Identify Major Milestones

Investors usually look to fund a business to its next major milestone. These are milestones that show your business has reduced one or more key risks in its development, such as demonstrating market demand for your product or service through a critical mass of customers or users of your prototype, outgrowing current production facilities, or ideally, achieving consistent profitability. Start by identifying the major milestones for your business over the next few years.

Create a Plan

After you’ve identified those milestones, create a plan to achieve them. The process of developing a business plan will help you create a roadmap for achieving those milestones. Because the business plan is a big picture view of where you are going over the next few years, you should also dive deeper and create a more detailed project plan for achieving the next major milestone in your business — that is the milestone that you are looking to fund. Really spend some time plotting out each step, identifying how long it will take and what resources are needed to achieve that milestone.

Project Cash Flow

Now, translate your plan into numbers by creating a financial forecast. We recommend developing a monthly forecast for the initial year and an annual forecast thereafter. For each period, forecast your business’ revenue, expenses, delays in customer payments, and purchase of assets. Project cash flow by looking at the difference between cash inflows and outflows in each period. You can begin to see how much funding you will need by looking at the sum of the cash flow over the estimated time frame to achieve the next milestone.

Note: If you are having trouble with forecasting, we’ve offered step by step guides to getting started on financial forecasting and analyzing cash flow in previous blog posts (view them here).

Be Realistic

Go back and check your assumptions to make sure they are realistic. Ask yourself if your estimated time frame for achieving the next milestone is realistic based on the research you’ve done in your industry, the time you have available to dedicate to your business and your capacity to lead the business. Make sure the expenses you identified are necessary to develop the business over that time frame — that you are not inflating expenses nor are you missing any expenses. Also, add in a small buffer for inevitable mistakes or miscalculations in the implementation of your plan; we recommend a 5% buffer in either direction. Lastly, ask yourself if the forecasted revenue growth can really be achieved with the resources you will have.

Choosing the right amount to raise is critical to the success of your business. If you underestimate funding needs, you’ll end up raising less than you need and may find your business in a cash crunch. If you overestimate funding needs, you risk losing credibility with invests and may not be able to raise the funds you need on reasonable terms, if at all. So, before you start talking to investors, make sure you have identified your milestones and have put together a well-thought out plan and financial forecast.

If you’ve developed a plan and forecast, and you’ve identified how much you need to raise, you may be interested in our services to help you successfully raise funding. To learn more about how we help startups, click here. To see what is included in each of our packages, click here.

Still not sure exactly where to begin, feel free to contact us here.

The post Determining How Much Money to Raise (How to Startup Guide) first appeared on Five23.

]]>
https://www.five23.io/blog/determining-how-much-money-to-raise-how-to-startup-guide/feed/ 0
The Importance of Having a Mentor https://www.five23.io/blog/the-importance-of-having-a-mentor/?utm_source=rss&utm_medium=rss&utm_campaign=the-importance-of-having-a-mentor https://www.five23.io/blog/the-importance-of-having-a-mentor/#respond Tue, 14 Nov 2017 17:22:55 +0000 https://five23.io/?p=1072 As an entrepreneur, you may be the only person working on your business. And, without someone else to bounce ideas off of, it can get lonely. One way you can get the support you need is by finding the right business mentors. In this blog...

The post The Importance of Having a Mentor first appeared on Five23.

]]>
As an entrepreneur, you may be the only person working on your business. And, without someone else to bounce ideas off of, it can get lonely. One way you can get the support you need is by finding the right business mentors. In this blog post, you will find out how you can benefit from having business mentors.

Gain Experience

We learn a lot through experience. With the right mentors, you can gain experience from others who have already been there and done that and can provide insights from their own successes and failures. These insights are valuable assets that can save you time and money in developing your business.

Provide Perspective

When you are in your business every day, it can be hard to step out and think strategically. Having a mentor can give you a different perspective. Because your mentor is not caught up in the day to day details of the business, they can provide more objective feedback and guidance that is still grounded in experience.

Avoid Pitfalls

Because you’ve put a lot of work into the business, it can become easy to get very attached to your business plans. And, you might not recognize biases and blind spots that pose risks to your business development. Having mentors who constructively challenge your assumptions and identify weaknesses can help you avoid common pitfalls and minimize your risk.

Build Resilience

Starting and running a business is an emotional roller coaster. It’s encouraging to know you have a support network with mentors who believe in you and your business and are committed to helping you figure things out. And, calling on your mentors for guidance can re-inspire and re-energize your motivation to build your business.

Expand Your Network

A mentor can connect you with resources to grow your business. A good mentor should keep you in mind and think about introducing you to people who can support your business development, such as potential customers, partners, or investors. That’s not to say that a mentor is going to automatically open up their entire network — you still need to do the work to demonstrate you are ready to make effective use of those connections.

The post The Importance of Having a Mentor first appeared on Five23.

]]>
https://www.five23.io/blog/the-importance-of-having-a-mentor/feed/ 0