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The Entrepreneurial Equation

Insights For Success


By Eric Tyler and
Brian Sokol 

My close friend and golf partner, the late Brian Sokol and I, collaborated and
wrote this simple equation. Brian passed away in 2020 from a Glioblastoma,
the same horrible disease that made me a widower in 2009. The
Entrepreneurial Equation is dedicated to my dear friend, Brian. Together, we wrote The Entrepreneurial Equation to teach others who do not have the resources, experience and wisdom to fulfill their dreams of starting a business or scaling their existing business. The Equation also teaches would be investors what to look for when investing in early stage companies.

  • At the end of the day unless a new idea is completely funded by the entrepreneur, investors will be needed: Almost every entrepreneurial approach needs to understand the competitive investor landscape. The critical elements are the return on investment and duration of time that

        the capital is tied up.

  • Most investors will consider what you have to offer for a 3-5 X return on investment in 36 to 60 months.

  • Right now, you are undercapitalized, and the valuation of your company right now is its' assets.

  • Intellectual Property will be your most important asset. Your $25,000,000.00 valuation is extremely high because there is no patent.

  • Finally, every entrepreneur that takes on investors needs to look for that strategic exit partner which acquires the business or idea.

  • If you go to the large consumer goods companies, they will see typical evaluations in the $1-5mm with a raise of about 15-20% range for first round capital and 34-29% for Round 2, not to exceed 49%.


Most Entrepreneurs need to deal with three basic types of investors. They may come in at different stages and consequently require different degrees of control.

  • Accredited Angels - these investors take on the highest risk and offer the lowest capital amounts as a result. But they are required to start your business.

  • Family Offices - can offer significantly more capital, but want a voice on the Board and typically want to see solid proof of concept. 

  • Venture Capital - may take a majority interest in return for a significant capital position. Private Equity ownership may take out the original investors at a lower multiple than what is eventually possible.


Just what is The Entrepreneurial Equation?

  • What is the BIG problem you are solving and why should the ultimate consumer care about your solution (i.e.—will anyone pay for it)? Great companies exist to solve a tangible problem in the market. Keep in mind, many great products exist by eliminating a step in a problem-solving matrix-like the artificial Christmas tree. First, they tied the branches to eliminate the step of assembling each branch. Then they re-strung the lights at the factory to eliminate the step of applying lights. Step elimination is an effective problem/solution.

  • Traction raises value and attracts money. How can the entrepreneur       demonstrate that their solution will sell? Called proving concept feasibility,  this step is often solved by small crowd funding campaigns or showing industry buyers' renderings or prototypes to judge purchase intent. The best traction as often seen on Shark Tank—can be as simple as some company web site sales of the invention.

  • Team—does the entrepreneur have credentials that make the investor feel comfortable that they can get the job done?

  • Does the Entrepreneur have a team of advisors? The sure recipe for failure is not having enough advisors. (Pay to play) or (fees in lieu of equity).

  • Does the Entrepreneur have the proper team in place to handle   operations, sales, finances etc.

  • Any savvy investor wants to see a leadership team in place.

  • Working Capital: Does the entrepreneur understand that they may    potentially have to give up as much as 49% between the first and second  round?

  • Is there a protectable moat? Are there barriers to entry for competition?

  • Exit targets never start the entrepreneurial journey without the      destination.

  • Remember return on capital: Who will you eventually sell or license your  products to on-exit?

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