Early-Stage Startups Need Friends, Family, and Fools

Startup Professionals Musings

Since they don’t know you (yet), their first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed money for your new idea. Don’t take money from family or friends who can’t afford to lose it.

8 Key Actions for Entrepreneurs Needing Early Money

Startup Professionals Musings

Since they don’t know you (yet), their first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed money for your new idea. Don’t take money from family or friends who can’t afford to lose it.

Trending Sources

What every entrepreneur should know about financing right now

Version One Ventures

The ability to raise money no longer determines one’s fate. At the same time, funding opportunities have expanded for early-stage start-ups. More money is flowing in from a new crop of angels, newly wealthy from a number of tech IPOs. While the top of the funnel has grown with all the angel and early-stage activity, the bottom of the funnel is still roughly the same size (about 10-20 billion dollar companies/year).

How Investors Think About Valuation of Pre-Revenue Startups

SoCal CTO

A lot of my time is spent helping early-stage companies get to proof points so that they can raise capital. They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP). Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies. Bill Payne is an expert on how early-stage investors should look at valuation.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. ” They are running out of money. The term sheet converts all the convertible debt into a post-money valuation of $100, essentially making the convertible debt worthless.

Traction vs. Product

Rob Go

I’ve had a couple conversations with other investors recently around what a seed stage company needs to achieve to raise a series A. The early stage of a business is when everything is a blank canvas and you have maximum agility.

A Year in Review: 2016

Version One Ventures

At the same time, seed money is still abundant due to the proliferation of micro VC over the past few years. This can set up a perfect storm if early-stage companies don’t manage their expectations and reality properly. They started with a simple question: if 100 startups raise a Seed round, how many of those will go on to raise a Series A, and then a Series B ? This has been an important year for us as a firm, as well as the market in general.

Why You’re Not Getting the Most out of Your Board

Both Sides of the Table

If you’re a venture-backed tech company or even an early-stage business fueled by angel or seed money I assume you have a good group of board members or advisors who will give you time to be helpful and they want to be helpful.

Series Seed or Convertible Note? Which one is more founder friendly? Which one do investors prefer?

Gust

Assuming the company is able to make effective use of the seed money to greatly increase the value of the enterprise, all of that value therefore accrues to the founder, rather than the investor. For example, let’s say the “real” value of a startup is $900,000, a seed investor puts in $100,000 on a Convertible Note with a 20% discount, and the company then raises a Series A round of $1 million at a $4 million ‘pre-money’ valuation.

Making Sense of Seed Investment Data

Rob Go

There were a number of interesting articles published over the last week in response to Mattermark and CB Insight’s data around early stage financing activity. In particular, a number of people commented on what looks like a dramatic rise and fall in seed deal volume over the past four years coupled with an increase in seed investment dollars. As a team, we’ve been thinking about what has been going on in the seed market in recent years.

Seed and Later Investments for Startups are Booming

Startup Professionals Musings

The number of startups getting seed funding in 2012 jumped by 65% over the previous year to a total of 1749, according to a recent report by CB Insights. Seed investments” are early stage financings (typically less than $1.5 The Internet sector is tops for seed deals.

How long will the “seed stage bubble” last?

andrewchen.co

How long will the “seed stage bubble” last? It’s never been easier to raise seed funding, and there’s warnings that we’re in the midst of a “seed stage bubble.” @andrewchen. Read what Im reading · Featured essays.

7 Things You Should Know About Angel Investors

Inc Startups

You have more opportunities than ever before to raise seed financing. In fact, they''re shifting the financing landscape-- making it harder for a seed-funded firm to raise a Series A round of VC money. Here''s what you need to understand first.

Who exactly are angel investors?

Startup Economy

For example, (this is a very rough estimate) Later-stage VC : usually participates in Series B/C/D after having seen the market traction and significant customer ramp-up. Early-stage VC : usually particiapates in Series A (and sometimes seed round on rare cases) to prove out the business model and test out the customer traction. Angel groups : So who comes earlier than early-stage investors? Angel groups and seed investors.

Mile-High disruption: Why Denver should be on your tech radar next year

The Next Web

Stuart Wall, CEO of Signpost , a local advertising platform funded by Spark Capital and Google Ventures.

Why the New Seed Might Be a Bad Seed

This is going to be BIG.

About a year ago, I started hearing about the existence of a "pre-seed" round. The term "seed" implies the very beginning to me. If you can''t go to "seed" investors for your very first investment because you''re too early, that just seems weird to me.

Top Startup Advisor Paul Graham Just Warned Against Taking Google's Money

www.businessinsider.com

Your Money. Top Startup Advisor Paul Graham Just Warned Against Taking Googles Money. Grahams startups go through a months-long process of coaching to help them build products and raise money. The pattern is: youve already raised some money at a cap of $x. Your Money.

Ungerminated: Trouble with Seeds

Passionate Intensity

Quantity, quality, and size of early-stage seed financing has recently given rise to speculation about a seed funding bubble. Money is available, some will say, easy to get. I have witnessed angel investors flash their cash and write checks on stage. Tweet.

What’s the problem with too much funding?

Version One Ventures

With the influx of seed money, much has been written about the fact that start-ups that are taking far more funding than they need. Being swamped with funding is a problem that most early stage companies would love to have. In the early days, you’re going to go through a lot of manual, laborious steps to get things moving. For example, check out Fred Wilson’s post where he compares funding a start-up to walking up a flight of stairs.

What’s the problem with too much funding?

Version One Ventures

With the influx of seed money, much has been written about the fact that start-ups that are taking far more funding than they need. Being swamped with funding is a problem that most early stage companies would love to have. In the early days, you’re going to go through a lot of manual, laborious steps to get things moving. For example, check out Fred Wilson’s post where he compares funding a start-up to walking up a flight of stairs.

How does Convertible Debt work?

Gust

Debt is a fancy word for a “loan” That is, I lend you money, and you agree to pay back the money that I loaned you at some known point in the future, along with a specific additional amount of money (called “interest”) which is your payment to me for having been willing to loan you money in the first place. Equity is a fancy word for “ownership” That is, I give you money and you give me part ownership of the company.

Why the Series A Crunch Might Be a Good Thing

Inc Startups

In 2012, Rust and co-founder Garrett Johnson raised $2 million in seed funding in two weeks. Share of seed-funded companies that won''t be able to get follow-on funding: 61%Source: CB Insights That''s the story, anyway, and it has the start-up community vibrating with angst and debate.

The Series A crunch is hitting now. Have we even noticed?

pandodaily.com

We know this: As many as a thousand companies who’ve received seed rounds won’t be around in a year — maybe six months. The number of seed and angel investors has exploded in recent years, buoyed up by a number of factors. Pando Daily. PandoMonthly. Video. PandoDigest.

Why LA Is the New, Hot Place to Launch

Inc Startups

” He says there also is more angel money in the market and larger venture capital firms that historically didn’t do early-stage funding are investing much sooner than ever before. A boom in new incubators is helping to fuel a boom in new tech start-ups.

The best advice startups will never follow

Berkonomics

Let me tell you a few short hair-raising stories of entrepreneurs who have raised money and regretted it later. There’s a common expectation among entrepreneurs that seed money from family is great – letting close relatives in at the ground floor. Starting up Raising money

Why you shouldn’t keep your startup idea secret

cdixon.org

People at large related companies almost always think they have already built or are in the process of building all the good ideas – so your idea is either something they are already building (which is a good thing to discover early) or else they will dismiss it as a bad idea. (I Another benefit of talking freely, is that you may also find potential partners or future employees–other key components beyond investment money. cdixon.org - chris dixons blog. Follow @cdixon.

Understanding the Risks of VC Signaling

Both Sides of the Table

I recently wrote a blog post on understanding how the size and age of a venture capital fund might affect you when you’re raising money. invested in the seed round they have more inside knowledge than I do. Why are VC’s really doing seed deals? Seeds deals.

It Doesn’t Matter How Much Money You’re Raising, It’s Still Hard

Instigator Blog

More and more companies are raising money , and valuations seem to be skyrocketing. And in many cases the amount of money you’re looking to raise isn’t particularly relevant. When VCs are ready to get a new fund off the ground they have to jump to our side of the table and raise the money. Big money. Alan Patricof of Greycroft wrote a telling article for Business Insider titled: You Think It’s Hard To Raise Money For A Company?

Why The Value Of The Fund-Raising Process Is Not Just The Funds

OnStartups

Raising Money Isn't About Raising Money. Our company has raised more than $600k in seed money over the summer. One of our early inflection points was a team trip to the Bay area for a week in late May. Looking back, these early meetings were invaluable.

How to Start a Startup

www.paulgraham.com

You need three things to create a successful startup: to start withgood people, to make something customers actually want, and to spendas little money as possible. The way a startup makes money is to offer people bettertechnology than they have now. Andyet theres a lot of money at stake. Microsofts originalplan was to make money selling programming languages, of all things.Their current business model didnt occur to them until IBM droppedit in their lap five years later.

From Nashville to Boston: How A Startup Accelerator Changed Our Lives

OnStartups

We're passionate about solving online support for small businesses and got great early feedback from customers. Raising money for your startup comes down to the same three factors. Early stage startups need that kind of support to manage all the ups and downs.

VCs in seed clothing: Chris Dixon, Mark Suster, and Naval Ravikant interviewed

Venture Hacks

The topic was VC signaling in seed rounds — and how these signals help or hurt your ability to raise money in the next round. SlideShare: VC signaling in seed rounds. Chris Dixon: The problem with taking seed money from big VCs. VC signaling in seed rounds.

How to Fund a Startup

www.paulgraham.com

A typical startup goes throughseveral rounds of funding, and at each round you want to take justenough money to reach the speed where you can shift into the nextgear. At Viaweb we got our first $10,000 ofseed money from our friend Julian, but he was sufficiently richthat its hard to say whether he should be classified as a friendor angel. The advantage of raising money from friends and family is thattheyre easy to find. The problems are different in the early stages.

Should Founders Be Allowed to Take Money off the Table?

Both Sides of the Table

If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. Not FU money, but “feed the family&# money. On a panel that I sat on with Ron in LA in 2008 he stated that there were no circumstances in which the founder should take money off of the table. You stop catching the early flight.

Disruption Comes (Finally!) to Commercial Real Estate

Inc Startups

For sure, they hope large New York real estate companies will eventually agree to share office-space listings with their start-up, though it's too early to ask for that sort of commitment. Plus, good entrepreneurs don't ask for money, he says.

To Follow On or Not to Follow On

This is going to be BIG.

That's why I constantly remind companies that when you do an outsized financing price or size-wise, you expose yourself to getting hit bad in a downtown unless you're conservative about how you use the money. So, the idea that it's a good or bad idea to follow on, or to play in certain stages versus others--honestly, it's a lot of marketing hype and anecdotal stories that really don't play out across the law of large numbers. If you're a multi-stage investor, I get this.

The Legal Side of Entrepreneurship

YoungUpstarts

This article highlights their advice on issues ranging from financing to patent trolls: While startups may believe lawyers are too costly, working with one early on avoids potentially serious problems later. by John Vrionis, partner at Lightspeed Venture Partners.

Why You're Not Getting the Most Out of Your Board

Inc Startups

If you’re a venture-backed tech company or even an early-stage business fueled by angel or seed money I assume you have a good group of board members or advisors who will give you time to be helpful and they want to be helpful.

Should you raise on convertible notes or do an equity round?

Hippoland

A reader named Turner Dean recently asked me whether it’s better to raise seed money on convertible notes or straight-up equity. In general, I’m a big fan of convertible notes or convertible securities for seed stage founders.

Angels or Devils?

Launching Tech Ventures

By Neda Navab At lunch this month, Ray Rothrock of Venrock threw out some crazy statistics: in 2012, 30,000 ideas received money from angel investors, while only 1,500 received Series A funding. That is, 5% of seed-financed companies were able to secure Series A! Obviously there is a lot of (not so smart) angel money out there, but is the proliferation of money itself the real problem? They could also take seed money from VCs.