YA @ Sadko Mobile

If you look at Sequoia’s business plan standard and encounter this:

Market Size

* Identify/profile the customer you cater to.
* Calculate the TAM (top down), SAM (bottoms up) and SOM.

- WTH is TAM-SAM-SOM ?

Do not panic. It is extremely simple:
Total Available Market - the absolute maximum that can be reached by the product
Served Available Market - the fraction of the total available market that is accessed by the product now
Share Of Market - the fraction of the served available market that the product controls
(see more —

http://windowmanager.blogspot.com/2005/05/wth-is-tam-sam-som.html)

For example, for Android software:

TAM is Android-based phones (non-phone devices such as GPS receivers are not included),
SAM is Android-based phones that allow to install third party software (some may be locked by manufacturers or belong to corporations),
and SOM … Well, given there are NO Android phones on the market yet, and even the Android is still in preview/alpha, this is zero for everyone. Or 100%, whiever you like. Opposites match where the market does not exist yet.

Marc Andreessen wrote some time ago a series of post on startup that I could have written myself:

there are many more reasons to not do a startup.

First, and most importantly, realize that a startup puts you on an emotional rollercoaster unlike anything you have ever experienced.

You will flip rapidly from a day in which you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again.

Over and over and over.

And I’m talking about what happens to stable entrepreneurs.

There is so much uncertainty and so much risk around practically everything you are doing. Will the product ship on time? Will it be fast enough? Will it have too many bugs? Will it be easy to use? Will anyone use it? Will your competitor beat you to market? Will you get any press coverage? Will anyone invest in the company? Will that key new engineer join? Will your key user interface designer quit and go to Google? And on and on and on…

Also:

The Pmarca Guide to Startups, part 2: When the VCs say “no”

The Pmarca Guide to Startups, part 3: “But I don’t know any VCs!”

The Pmarca Guide to Startups, part 4: The only thing that matters

The Pmarca Guide to Startups, part 5: The Moby Dick theory of big companies

The Pmarca Guide to Startups, part 6: How much funding is too little? Too much?

The Pmarca Guide to Startups, part 7: Why a startup’s initial business plan doesn’t matter that much

The Pmarca Guide to Startups, part 8: Hiring, managing, promoting, and firing executives

The Pmarca Guide to Startups, part 9: How to hire a professional CEO

This all is certainly not everything you NEED TO know, but definitely everything you MUST know (plus much more).

As I said, I could have written this myself, but I cannot write this much, because doing things you would want to use on your Android phone takes all the time you can contribute. But once I have my own story to tell, I will. Rest assured.

In the meantime, read Marc Andreessen, it is worth the time.

When I just started Sadko Mobile, I thought that to deal with my investors, all I need is a sample convertible note template from http://docstock.com My bank, however, persuaded me to hire a law firm. It is not as awful as it sounds. Established law firms can offer you a deal to give you some free service (usually $15K) in exchange for a warrant to buy some shares or simply for a promise to pay once you get revenues or venture funding. A very good deal.

Docstock is a great site, however now I understand that it has its own limitations. You need to really understand the legal process side of financing to pick the right documents there. If I just took a template without knowing what other documents must accompany it, I could have been in trouble. The stack of document, I have now includes in addition to regular incorporation documents (bylaws, incorporation certificate and tax id application):
- Convertible note
- Convertible note purchase agreement
- Board action authorizing the company to issue a note
- IRS forms for investors to confirm they are accredited
This all you need to have to properly close the angel financing. What are the risk if you do it improperly at start? The least is that you will spend several more weeks or months in due diligence doing housekeeping. The worse - the venture funds will see the legal mess you created and pull back the term sheet, and you will be left with good company but without investors, left to die in the cold. And the worst (God forbid), someone will sue you.

Plus, there is a document called “Founders’ stock purchase agreement” also full of uncommon things, and “Indemnification agreement” that is fairly much beyond human comprehension. More in some other post.