
Pitching your early-stage startup - matthewhelm
https://stripe.com/atlas/guide/pitching
======
sebg
Also worth checking out Patrick's tweet storm following his tweet about this
new resource ->
[https://twitter.com/patio11/status/909800194509758464](https://twitter.com/patio11/status/909800194509758464)

------
ploggingdev
Since the guide is partly focused on the YC application process, I have one
thought (potentially misconception) that I would like others to weigh in on.
For context : I'm working on a Disqus alternative with a focus on privacy, so
no ads, no tracking scripts (
[https://www.indiehackers.com/@ploggingdev/building-my-
first-...](https://www.indiehackers.com/@ploggingdev/building-my-first-saas-a-
disqus-alternative---the-research-baa806bdfd) ). I started working on it a
little over two weeks ago and am a few days away from launching. So by the
application deadline, I would have only onboarded beta users. Being a single
founder who has been working on a product for less than 3 weeks, even if I
follow all the advice and craft a well written YC application, I just don't
see why YC would consider funding me instead of the numerous other applicants
with serious revenue and something that might resemble product-market fit. In
other words, I think when talking about crafting a YC application, it's
important to discuss that there exists a certain baseline above which such
guides really make sense. Sure, I could apply the actionable advice to my
application, but will it move the needle at all when I'm a single founder with
an MVP? On the other hand the only impressive part about the application might
be that I built it in under 3 weeks and onboarded beta users. Thoughts?

~~~
briandear
We need your product: email me at discusalternative@icouch.me

Your solving a big problem: having commenting that protects user privacy. We
are happy to pay if the product works in our use case.

Totally off the parent topic, but you do seem to be building something that is
incredibly useful, at least for us.

~~~
pchristensen
This is a great example of a company with a "hair on fire" problem that needs
a solution - his first words are "We need your product" and a solicitation to
a custom email address. And this is based on a one sentence description and a
link to a blog post.

This is the kind of reaction you want to see in your customers.

------
softwareqrafter
Great writeup, though I have to be completely honest here and say that I love
Patrick's writeups for independent hackers, makers, micropreneurs,
bootstrappers etc. His writings and practical case studies gave me the power,
as a nobody, to make tens of thousands of dollars in order to be more with my
wife and child, while doing the work I love. I kind of miss those essays.

~~~
patio11
Really happy to have helped. That kind of company is pretty near and dear to
my heart, for all the obvious reasons, and it is very, very in scope for us at
Stripe Atlas. Not everything we publish will be laser-targeted to the needs of
the Italian diner on the Internet, just like not everything will be
appropriate for the want-to-ride-a-rocket-ship folks, but I hope you like some
of the stuff coming down the pipe over the next few months.

------
lpolovets
I'm a VC, and this list is great. At a high level, VCs care about three
things: team, product/idea, and market. Every VC cares about all of these
things, but their prioritizations vary.

Most of Patrick's excellent advice can be lumped into these three buckets.
Specifically:

1) You have to establish the credibility of the team: you've done impressive
things before; you have a deep understanding of what you're working on now;
you can read your audience and know how to communicate effectively; you can
get a strong intro (nice-to-have); etc.

2) You have to establish the viability of the market: it's big; it has a real
problem; the existing competitors are not doing a good job in a clear way;
etc.

3) You have to establish the quality of the idea/product: you have a unique
insight or approach relative to competitors; the prototype/early validation is
strong; etc.

A lot of the pitches become mediocre when founders are handwavy in one or more
of these areas. For example, if the founder spends a lot of time talking about
the market and the product idea, but not enough time explaining why the team
is uniquely/extremely qualified to succeed. Or the founder has good answers to
product/team/market questions, but their answers show they don't know how to
read the audience or explain their idea. (Example of not reading the audience:
the investor is non-technical and the founder, who is productizing their PhD
thesis, spends 90% of the pitch geeking out about technical details.)

Also, I'll add a few tips:

\- Don't exaggerate or mislead. An investor will pass if they doubt one of
your statements ("silverware is a $150 billion dollar market!") or realize
that you're spinning facts (e.g. you say Dropbox is a customer, but later it
turns out you meant that one of your free users has an @dropbox.com email). If
it turns out that one statement you made is false, then investors will assume
there might be more.

\- Understanding risks is better than sweeping them under the rug. If your
competitor landscape is missing key companies (mentioned in Patrick's post) or
you dismiss some $1b+ company as a competitor without any rationale, your
audience will become very skeptical. Admitting something is a problem and
explaining how you will address is it much more compelling.

\- Really know the ins and outs of everything about your company -- at least
relative to the audience. If I ask a question or make a product suggestion
that the founder hasn't considered, that's a yellow flag. Someone who has been
living and breathing their startup for several months should have a much, much
deeper knowledge of their domain than an investor who is hearing about it for
the first time.

~~~
graycat
From the OP, by the time my solo, sole founder startup has $10,000+ a month in
revenue, my startup will have plenty of cash for very rapid growth; cash for
growth will not be a tight constraint; and no VC need call!

The OP is significantly about applying to YC: From what I've heard, YC doesn't
much like sole, solo founder startups!

Why should no VC need call? For my startup, a PC server from $1500 in parts
kept on average half busy 24 x 7 should generate well over $200,000 a month in
revenue. Thus there would be plenty of cash for more PCs at $1500 each. Even
$10,000 a month in revenue would yield plenty of cash for more servers.

SUSA Ventures claims to want "technical founders". Alas, it doesn't look like
the SUSA partners are very technical!

"Warm introductions"? SUSA and many want "warm introductions": But VCs and I
do not have associates in common. So, I can't get a "warm introduction" to a
VC, and no VC can get such an introduction to me. E.g., I might be able to get
a "warm introduction" from one of my Ph.D. dissertation advisers, at one time
President of one of the world's best known research universities especially
famous for their STEM field graduate programs, including computer science and
AI. However I doubt that that person knows any information technology VCs.
E.g., recently Tom Magnanti, Dean of Science at MIT, gave a technical lecture
on the foundation of the Internet at a lecture series named for Professor X.
Well, Professor X was the Chair of my Ph.D. orals committee; maybe I could get
a warm introduction from him; but likely he knows no information technology
VCs. Net, my background is technical, but VCs are not qualified to be my
technical colleagues or associates -- VCs don't _measure up_.

For the people I know, the best form of an introduction is a good peer-
reviewed paper of original research in a STEM field, preferably applied math
complete with significant theorems and proofs. It appears that there are few
or no such information technology VCs anywhere in the US and similarly few who
could accurately evaluate such a paper.

SUSA Ventures claims:

"We seek out highly defensible companies that leverage data, economies of
scale, or network effects to build value and achieve longevity."

"Seek out"? My experience is that SUSA ignores such things even when they land
in their e-mail inbox.

IMHO, for the OP again, all the advice on pitching information technology VCs
is noise and filler and useless except just one word, "traction", preferably
in the form of after-tax earnings significantly high and growing rapidly. But
for a sole, solo founder startup, by the time the business has traction enough
for a VC to write a check, the founder likely will no longer accept such a
check.

~~~
lpolovets
Not sure where you're getting your data, but:

1) $10k/mo is not even close to enough for most US companies that want to grow
quickly. If it were enough, then way fewer founders would want to fundraise.

2) I'm a partner at Susa and I'm technical. And even if I weren't, being
technical has little to do with being a good partner to technical founders.
Most basketball coaches can't dunk, but they are still good coaches.
Furthermore, if a founder is technical, then a non-technical
VC/advisor/mentor/friend that can help in other areas can be more useful than
someone who is technical. Most technical founders I work with have no problem
with building tech, but many struggle with the business side.

3) Our website says we prefer warm intros. We don't require them, we just
prefer them. I reply to cold emails frequently and often meet people after
they cold email me. But the cold emails should be good/well-targeted, and
unfortunately most are not.

4) Traction is not the only thing that matters. For example, I just did a
quick calculation, and over half of our investments in the last 12 months had
$0 revenue when we invested. Many of those investments hadn't even launched
yet.

~~~
graycat
> $10k/mo is not even close to enough for most companies that want to grow
> quickly.

I got the $10,000 a month from the OP.

I'm a sole, solo founder. So, right, my startup doesn't have five founders,
each with credit cards maxed out, each with a pregnant wife about due.

And, right, my startup has no co-founder disputes. And since I'm 100% owner, I
have no BoD disputes and spend no time reporting to a BoD.

Since I'm technical, I have no need to search for a technical co-founder.

To me, $10,000 a month revenue is a LOT of money for growth.

E.g., for my startup, the main opex is just my monthly ISP bill. From my ISP,
my upload data rate is 20+ million bits per second (Mbps), which for my
startup is a LOT (if on average half filled would amount to ballpark $4
million a month in revenue), and when I go live the only difference will be a
static IP address instead of a dynamic one (from DHCP or some such). The ISP
bill is less than $100 a month.

For now and well into a quite successful business, my main capex is just
servers, and there, again, for my startup $1500 in parts for a server kept
half busy 24 x 7 should generate $200,000+ a month in revenue.

My first server will go at my left knee. When that fills up, I will be awash
($200,000+ a month) in revenue for more and I can put a second one beside the
first one. Then I can start putting servers and higher end Cisco boxes (LAN
and/or router with whatever network security Cisco recommends) on shelves
and/or standard racks in any of three empty bedrooms. If I fill up those
servers in all three bedrooms, then it's millions a month in revenue, all
still from just one employee, me. Then, sure, go rent some space, say, much of
a closed factory, warehouse, or shopping mall, and start slowly hiring, first,
a good office manager to interface with the lawyers, accountants, auditors,
bankers, real estate people, security guard company, janitorial company,
business insurance agency, payroll firm, HR consulting company, interior
renovation contractor, ..., etc.

I'm "technical"? I saw the market need, designed the first good solution, an
excellent one, did the crucial, core, technological advantage, barrier to
entry, proprietary original applied math research, designed, wrote, ran,
timed, documented, and debugged the code. Some of the AI people would call my
applied math AI; to me, calling my applied math AI would be a gross insult.

To the users, the solution is just a Web site. I used Microsoft's .NET with
ASP.NET (for building Web pages) and ADO.NET (for access to SQL Server). I
wrote the code in Visual Basic .NET (as far as I can tell, compared with C#,
essentially a nicer form of syntactic sugar and otherwise close enough to
apparently Microsoft's most important language C#).

I've done serious software, mostly scientific and engineering, for a long
time, but this is my first Web site. My first code for my startup is also my
first production code (no throwaway prototype code), and, from the user
interface to the back end servers, it all looks fine -- no need for
_refactoring_. The code as is should be good for a major business, but then I
should likely put in some code for good real time system monitoring, sharding,
etc. The server farm and software architecture were designed to be scalable,
e.g., via simple sharding, and some of the sharding logic is running in the
code now. If the site gets north of, say, 10,000 users a second, then likely
will need some more work on architecture and some more code. Then maybe, as a
good Microsoft customer (Windows Server, SQL Server), I'll call Microsoft for
some high end consulting -- Microsoft has lots of people who long since have
been there and done that.

The code is only 24,000 programming language statements in 100,000 lines of
typing (lots of in-line documentation). I wrote the code with just a good text
editor (KEdit), and there have a lot of macros that help the work. E.g., in my
code, at a use of something tricky from, say, ASP.NET, one keystroke opens the
relevant Microsoft MSDN Web page of documentation (from pages on my disks).
And the code has lots of other references to my documentation outside the
code. And the code has cross-references in the code -- for a _key_ of such a
reference, I use just time and date; since I'm the only one typing the code,
those keys are unique. Then I have some macros that, given a key, will go to
the location with that key. Simple. So, I never used Visual Studio or any
other integrated development environment. I didn't need on-line debugging --
my bugs were too few and too simple.

The server farm architecture has a Web server (sure, using Microsoft's IIS), a
Web session state server (my own code, TCP/IP sockets, object instance
de/serialization, and two instances of a standard, likely at most O(n ln(n)),
collection class), soon to have (instead of Microsoft's solution I'm using
now) a Web log server, SQL Server, and two specialized applied math servers.

All the communications among the servers are just simple TCP/IP sockets.
Right, each of these _servers_ is just software and, thus, can run on anything
from one to several physical servers or virtual machines. So, sure, will get
to do some load balancing and resource allocation. Likely just use the
bottleneck principle: Find the main bottleneck and open up that one. Else
could do some applied math optimization, likely not necessary.

All the four servers from my coding are single threaded, and the queuing is
just from the TCP/IP stack -- if occasionally that doesn't work, say, from
just TCP/IP input queue stack overflow or a dropped packet from a TCP error,
then I'll see the evidence in the Web site log file and tweak the logic a
little.

In production the main data will be read as fast as possible but written only
once a week or so so can make great use of the solid state disk (SSD) drives.
Originally my back of the envelope arithmetic indicated that I could provide a
mature solution for the work for the world with about 150 TB of such data, and
now that much data can be in maybe just one server. Then one nice, easy,
simple approach to scaling is just to have multiple copies of the 150 TB.

Business experience? Done that at GE, two small companies near DC, FedEx, IBM,
and some consulting. Been a B-school prof -- so, can claim to have taught
business.

The problem I'm solving? Pressing for nearly every user of the Internet in the
world. Fully safe for work. Squeaky clean. Culturally uplifting. Can
contribute significantly to better government, alleviation of human suffering,
and world peace.

Initial users, likely the Chablis-Brie, BMW, opera-going, ski challet set. So,
right, good ad demographics. Later may do own especially effective ad
targeting (from the unique data from the site and some of my original applied
math).

For the problem, currently there is no good solution deployed. My guess is
that my first good, really, excellent, solution will be a "must have", for
nearly everyone on the Internet -- smartphone, ..., desktop, workstation.

For the revenue, initially all just from ads just in standard sizes, initially
likely just from ad networks, I'm starting with focus just on the US.
Eventually I'll go international but, to get good ad rates, likely only in the
more advanced countries.

So, sure, get good usage from a large fraction of all the Internet users in
the world and will have a company worth from a few old peanuts up to $1 T or
so, somewhere in there.

Users need only a Web browser up to date as of, say, 10 years ago. For
JavaScript, I have yet to write a single line of it; Microsoft's ASP.NET
writes a few lines of JavaScript for me apparently for some usage I've made of
ASP.NET; but users need not have JavaScript enabled. My site has only two main
Web pages, and they send for about 400,000 bits each (with the JavaScript).
The page layouts are simple -- just tables with everything positioned to the
last pixel -- so, no HTML div tags. The pages use just a few, standard HTML
_controls_ and are easy to read from large fonts and high contrast. Some of
the colors have been borrowed from some famous, very successful Web sites. So,
the pages load very quickly and don't jump around during loading. A user
doesn't need a fast connection to the Internet. The pages are simple with no
icons, pull-downs, pop-ups, roll-overs, or overlays. Simple.

My site makes no use of cookies, and there are no user IDs, passwords, or
logins. User privacy is very well protected.

Net, for users, it's simple, dirt simple. It's so simple a child of about
seven who knows no English should be able to learn to use the only version of
the site, in English, in about three minutes of tutoring or just figure it out
in about 15 minutes.

But, from all I've seen, VCs and YC don't like solo founders. And by the time
my traction is $10,000 a month, no way will I get a Delaware C-corporation, a
BoD, a term sheet, and an equity check.

By $10,000 a month, my startup is already well up in the air and climbing
rapidly when it's too late to buy a ticket.

Besides, when I wrote SUSA all this stuff in an e-mail message, it was totally
ignored.

I have to conclude, VCs including SUSA (A) ignore their e-mail and (B) really
want to see traction, i.e., notice the startup from the traction, not a
contact from the startup.

The OP mentions accomplishments: Sure, I've got a bunch. E.g., I can literally
claim to have saved FedEx from going out of business twice, once from some
software with a little math and once from some math with just some calculator
arithmetic. Yes, my office was next to that of FedEx founder, COB, CEO, F.
Smith who remembers me; but I doubt that now he knows any VCs!

Do big stuff really fast? Been there, done that lots of times: (A) In grad
school, I took a one semester reading course to study a question; in two weeks
I had a solid answer to the question, with some nice, new results, that I
later published. One of my results solved a problem in the famous Arrow,
Hurwicz, Uzawa paper in mathematical economics -- of course, Arrow won his
prize long ago and Hurwicz got his a few years ago. IIRC Uzawa has yet to win
his! So, one semester, in two weeks, and didn't just study the problem but
solved it with a publishable solution. Strictly, my solution would have been a
Ph.D. dissertation -- two weeks, no faculty direction, maybe a record? (B)
Some engineers for the US Navy were processing some ocean wave data and were
confused about some points in stochastic processes. So, I got out Blackman and
Tukey, got smart in a day or two, and for the rest of the week wrote
illustrative software. On Friday evening I called in one of the engineers,
..., presto, bingo, our software house got sole-source on a nice development
project. (C) The Navy wanted an evaluation of the survivability of the US SSBN
fleet under a special scenario of global nuclear war but limited to sea, in
two weeks. I saw a continuous time Markov process subordinated to a Poisson
process, designed, wrote, and ran the code, had my code pass technical review
by a famous prof, and the Navy got their results on time. Ah, that prof likely
doesn't know any VCs either! (D) I've learned and used calculus and advanced
calculus, taught calculus in a university, and published peer-reviewed
original research that used calculus, but I never took freshman calculus and,
instead, taught it to myself. (E) For my Ph.D. dissertation, I identified the
problem before I went to grad school and worked out an intuitive solution in
my head on an airplane flight. I did the solid, original applied math
independently in my first summer in grad school. Then I designed, wrote,
debugged, ran, and carefully timed the software -- with some stuff I did to
make the software fast, it ran in about 100 seconds instead of about 64 years;
otherwise I'd still be in grad school. I never really had any faculty
dissertation direction. I wrote the software in two months, heavily during
Christmas at my wife's family farm, and wrote and typed the dissertation in
six weeks. I stood for my oral exam, and graduated. (F) As a ugrad math major,
I wanted to learn general topology, got the leading book, advanced, not easy,
got a reading course, taught the material to myself, and gave lectures to a
prof. One week I covered a chapter, and the next week, the exercises. The prof
taught me nothing. (G) From doing such math as an ugrad, my math GRE score was
800. (H) I've taught computer science to ugrads at Georgetown U and to grad
students at Ohio State, but I never really took a course in computer science.
(I) A computer sciences prof had written a statistics package but during
testing got poor accuracy from his polynomial curve fitting code. Well, he was
using the normal equations which for polynomial curve fitting are numerically
unstable. So, I wrote some code using orthogonal polynomials that gave very
accurate results.

Do those accomplishments count?

I still have some interest in communicating with VCs if only to get their
feedback. But the main feedback I get is just silence. Again, I don't have
$10,000 a month in revenue, and, again, when I do it will be too late for me
to accept an equity check.

Again, I wrote something like the above to SUSA, and it was all just ignored.
Totally ignored. Sorry for no "warm introduction" \-- we don't know the same
people.

~~~
imafish
Sorry but if you cold emailed this to a VC, it makes sense that you didn't
receive an answer. It's a rambling wall of text packed with irrelevant
technical information. I now know your tech stack, infrastructure and the text
editor you use, but I still have no idea which problem you are trying to
solve. All I know is that you're doing some kind of applied math that you
don't want people to call AI.

Instead try to look at your cold email like a pitch. If you apply the advice
from OP, I'm sure this post will be much shorter and actually explain the
product you are building and who the customers are.

Also, a pitch is two minutes. This post took me forever to read.

~~~
graycat
I start e-mail messages to VCs with a very short _pitch_ that explains the
problem I'm solving, the _market_ it is in, why there's a good shot at 1
billion devoted users, why my work is the first good solution, etc. Darned
short.

I've never explained the problem I'm solving in public -- not yet. When I have
an open beta, then it will be obvious, but I want to keep that much detail
non-public until my beta and going live.

Sometimes I stop there. Sometimes I include some more of what I gave above. I
never include as much technical information as above -- that is for an HN
audience.

I wrote the above for the HN audience to explain what I can that HN could
understand.

For the list of "accomplishments", some VCs, including SUSA, claim that they
like to see such.

My main point is, in conflict with the OP and with SUSA's remarks on their Web
site and in this thread, VCs including SUSA don't respond anything like they
claim to. I wasted HUGE time contacting VCs, sent them dozens of highly
polished e-mail messages, e.g., including very carefully written PDF _foil
decks_ , some with only 10 or so foils and only 250 words in total, and the
response was essentially always the same -- silence. Could call, get an
assistant, give her (always a female) a _heads up_ about the e-mail, could
leave phone messages, could send e-mail follow ups, etc., and in all cases,
nothing significant.

My conclusions: Flatly, VCs essentially never take unsolicited e-mail messages
seriously, no matter what the content, short, medium, long, highly polished,
formal, informal, technical, non-technical, etc. Nothing, not even zip, zilch,
zero -- phone calls, e-mail -- unsolicited counts.

Point: Don't waste your time. About all that counts is traction and publicity
enough that VCs hear about the company NOT from the company. Maybe "warm
introductions" count, but an entrepreneur like me just doesn't know the same
people as VCs. We just don't know the same people. I know some very high up
people that know me well, but those people don't know VCs.

The "warm introduction" idea is a bad joke on the VCs because the people they
would really like to meet don't have the same associates as VCs.

To VCs, everything from the company unsolicited is "from over the transom" and
regarded with contempt.

Now with the much lower prices of computing and Internet data rate and lots of
free infrastructure software, etc., it's a new day: A sole, solo founder can
bring the company to good traction alone. Then a solo founder can have such a
low _burn rate_ that by the time a VC firm wants to write a check, the founder
will no longer need or want the check -- because such a check has the BoD with
all the power in the company and has the founder essentially again an at-will
employee.

I can rewrite my pitch anyway I want, and I can promise you that from the 100
top US information technology VCs, an unsolicited, "over the transom" e-mail
contact will get a significant response from at most 2 firms but very likely
none. It's just an unspoken secret of Sand Hill Road: VCs ignore unsolicited
e-mail messages, no matter what is in them.

------
graycat
The OP is from Stripe, and their Stripe Atlas program seems to want to have a
startup pay $500 and, thus, have Stripe get the startup a Delaware
C-corporation.

Good grief: Why would a startup, prior to equity funding, want to be a
Delaware C-corporation instead of just an LLC?

~~~
pbiggar
If you are planning to do equity funding, the $500 to Atlas is cheaper than
the $4000 to a lawyer to convert your LLC to a C-corp later.

Disclaimer: happy Atlas user who did previous C-corps the old-fashioned way
and did not enjoy doing that.

~~~
graycat
Then start with an LLC and, when have an equity check in hand, don't count
those chickens before they hatch, use Atlas to convert the LLC to a C-corp or,
simpler, just use Atlas to form a C-corp and f'get, or some such, about the
LLC.

~~~
pbiggar
Often, that LLC will have important IP that isn't trivial to convert. (Hence
paying the lawyers way more than $500 to fix it).

What's the advantage of doing it in 2 (expensive!) steps if you know the plan
already?

~~~
graycat
> convert?

I'd wonder about that. But, all the IP is on just a little portable, USB
interface, hard drive I own, so I bring a copy with me when the C-corp is
formed? Shhh, don't tell anyone!

For two steps, easy: For a solo founder and 100% owner, an LLC is a total
sweetheart and a C-corp. with a BoD is a forever continuing total pain in the
back side. So, very much do not want a C-corp until need it for equity funding
where the founder is no longer 100% owner, and such equity funding is chancy.
Equity funding is not easy to get.

I'm not counting on equity funding and, really, have given up on it -- by the
time VCs will write me a check, I will long since have not been willing to
accept it. My startup is deliberately designed to get to plenty of money for
growth with just my labor and my thin checkbook. And, I'd greatly prefer to
remain 100% owner of an LLC.

~~~
csomar
You seem to be complaining about a product that you are not the target market
for. The people who setup a C-Corp from day 1 are interested in raising funds,
potentially multiple funds; and later exiting. (or IPOing if they are lucky).

~~~
graycat
They should have the equity check in the bank before they setup a C-corp.

------
Kiro
> Do not cite gross merchandise volume (GMV) as revenue; if you facilitate a
> transaction between two parties and collect a fee then the total transaction
> is GMV but only your cut is revenue.

I thought revenue was a "protected" term, like how it's described in the
books. In that case isn't GMV the same as revenue? Since that's the money you
actually invoice. And your cut is "net revenue", profit or something instead.

~~~
mikeyouse
Uber deals with this by calling their topline "Gross Bookings" (which includes
the driver portion of each ride) and then starting a new P&L below that with
Revenue as the new topline.

The GAAP guidance instructs companies to make the determination whether
they're the principal or the agent with the following criteria:

 _1\. You are the primary obligor in the sales transaction. This means, are
you responsible for providing the product or service, or is the supplier? If
you’re doing the work or shipping the product, you can probably record at
gross._

 _2\. You have general inventory risk. If you take title to the inventory
before you sell it to the customer, and you take title to any returns from
customers, you can probably record revenue at gross._

 _3\. You can select suppliers. This one is important, since it implies that
there isn’t some key supplier operating in the background who’s actually
running the transaction._

 _4\. You have credit risk. This means that if the customer does not pay, then
you absorb the loss, and not a supplier. However, if you’re only at risk for
losing a commission if the customer doesn’t pay, then you’re probably looking
at recording the revenue at net._

 _5\. If you get to set the price, then you probably have control over the
entire transaction, and you can record the revenue at gross._

 _6\. The amount you earn is fixed. This indicates a commission structure,
which is sometimes set up as a fixed payment per customer transaction. If you
earn a percentage of what the customer pays, this is also an indicator that
you report revenue at net. In either case, you’re really just an agent for
someone else._

 _7\. The other two guidelines for reporting at net are just the reverse side
of some earlier guidelines. If a supplier has credit risk, or if a supplier is
responsible for providing products or services to the customer, then you’re
probably looking at reporting revenue at net._

There's a pretty comprehensive document from the 'Emerging Issues Task Force'
of the FASB here:

[http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=121...](http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1218220143525&acceptedDisclaimer=true)

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ricokatayama
Great stuff!

It isn't mindblowing, but insightful enough to take a look. "Focus on nascent
greatness" is particularly a great section, because tries to solve some
misconception about bizplan and ideas

