From Accelerators to Venture Capital: What is best for your startup?
MARCH 21, 2016
The post From Accelerators to Venture Capital: What is best for your startup? How To Fundraise Starting Your Company accelerators angel funding incubators venture capital
6 Steps to Raising Venture Capital in 6 Months
OCTOBER 8, 2014
To raise capital as a very early-stage business, you have to convince investors that your current size isn’t indicative of where you will be in the future. A woman you don’t know tells you that she’s going to run a marathon of 7-minute miles. She’s never run a long distance race before.
Valuations 101: The Venture Capital Method
NOVEMBER 1, 2011
The Venture Capital Method (VC Method) was first described by Professor Bill Sahlman at Harvard Business School in 1987 in a case study and has been revised since. It is one of the useful methods for establishing the pre-money valuation of pre-revenue startup ventures. Most angels understand that half of new ventures fail and the best an investor can expect from nine of ten investments is return of capital for a portfolio of ten.
Right Entrepreneurs In The Right Place Get Funded
OCTOBER 12, 2014
Obviously, a key factor is always the state of the economy and the mood of the venture capital community. On the other hand, venture capital doesn’t get smoothly spread across the geographic and demographic landscape, and the number of active firms has dropped sharply.
Why are some venture capital firms not funding women?
MAY 3, 2014
The facile answer to this assumptive question is “because some women are not seeking funding from venture capital firms” But there is actually quite a bit of truth in both statements. Women-led ventures definitely account for a smaller percentage of venture investments than do ventures led by men, but women-led ventures also account for a MUCH smaller percentage of ventures seeking funding in the first place!
7 Questions Test Entrepreneur Focus Before Funding
DECEMBER 22, 2013
Will you be able to persevere and build your new venture into a success? Professionals will tell you that the sequence is friends and family first, angel investors second, and only then venture capital. Image via Entrepreneur.com.
How do venture capital firms make money by investing in startups?
MAY 7, 2014
The venture capital fund itself makes money… …by investing early in a startup company’s life, when success is not at all assured. In exchange for investing capital to help the company grow, the fund receives an ownership interest in the company. In either case, the venture capital fund sells the shares that it owns, for more money than it originally paid for them.
10 Startup Shortcuts That Will Be Back To Haunt You
DECEMBER 29, 2013
Some entrepreneurs can’t decide if they want to be a Limited Liability Corporation (LLC) or a C-corporation, or they don’t have the money, so they put off doing anything until the first venture capital round, or until the first lawsuit occurs. Image via HealthyBodyLife.com.
Which books would you recommend to a VC analyst-associate?
OCTOBER 25, 2014
The Business of Venture Capital. Raising Venture Capital for the Serious Entrepreneur. A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms. Venture Deals. Be Smarter Than Your Lawyer and Venture Capitalist. Venture Capital, Private Equity, and the Financing of Entrepreneurship. Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies.
Bad Notes on VC
SEPTEMBER 17, 2014
Me: So, you raised venture capital? I have never come across a sophisticated A, B or C round venture capitalist who thinks convertible notes are a smart move for entrepreneur or investor. But do you want to start a relationship with your most important supplier – that of capital to fuel your business – by avoiding talking about his or her expectations in terms of rights or privileges? This week. On the phone …. Him: Yeah. We raised a seed round. About $1 million.
Valuations 101: Scorecard Valuation Methodology
OCTOBER 20, 2011
Individual accredited investors in typical angel deals put personal capital at risk for an equity share of growth-oriented, start-up companies. Experience proves that half of these companies will fail (returning nothing or less than capital invested), another 3-4 will provide a modest return on investment of 1X to 5X and one or hopefully two of the ten companies will return 10X to 30X on the initial investment over a five to eight year period of time. – Need venture capital.
Why Startups Face Increasing Competition In Raising Series As And Bs
MARCH 11, 2014
By Tomasz Tunguz , Partner at Redpoint Ventures. Despite the noisy data, it’s reasonable to conclude the financing market has become more competitive, driven by an increase in the total number of startups raising seed capital and a relatively constant inflow of capital into venture capital. Tomasz Tunguz is a Partner at Redpoint Ventures where he works with Axial, Looker, Electric Imp, Expensify, ThredUp, Quantifind and Erply. .
Convertible Debt, Priced Equity Rounds and Deal Timing
OCTOBER 15, 2012
Invested Interests angel investment convertible debt convertible note deal terms due diligence financials fundraising priced equity priced rounds tactics valuation valuations VCs venture capitalAn impromptu Twitter debate arose among Fred Wilson, Dave McClure, Mark Suster, Chris Dixon and others about convertible debt, priced equity rounds, and the nuances of early stage financing. It was such a good discussion that Fred asked that someone Storify it.
2011 Valuation Survey of North American Angel Groups
OCTOBER 12, 2011
Speaking with many angel leaders , I believe we have identified several possible explanations for group-to-group variations: 1) Clearly, startup ventures in some business verticals command high pre-money valuations that others. 3) Some groups invest $2 million or more in pre-revenue companies, while others typically invest less than $500,000 in these very early stage ventures. Invested Interests angel investment fundraising pitching venture capital
Angel Investors Do Make Money, Data Shows 2.5x Returns Overall
OCTOBER 17, 2012
Conventional wisdom dictated that they made reckless investments in very early-stage ventures mostly doomed to fail. This is absolutely competitive with venture capital returns. Valuable lessons learned from Andy’s personal experience venture investing in Silicon Valley.
Do venture capital firms or private equity funds offer debt financing for startups?
DECEMBER 21, 2013
For venture capital, this is typically ten times the invested capital, and those returns can only be achieved through equity appreciation, not debt service. Invested Interests debt financing private equity funds startup VCs venture capital firms The direct answer to your question is NO, VC and PE funds do not provide debt financing for any companies. Their entire business model is based on investing in companies that can potentially offer very high returns.
Crowd Funding – A Critique for Entrepreneurs and Investors
NOVEMBER 29, 2011
But, in the US, only wealthy accredited investors * have been allowed by the Securities and Exchange Commission (SEC) to invest in entrepreneurs and their startup companies (without extensive disclosure of the business plan and risks inherent to such new ventures). Online sourcing of capital would make fund raising much easier for entrepreneurs. It is not clear that angels and VCs will be willing to provide follow-on capital to crowd funded startups.
The 10 Best Sources of Cash to Start Your Business
JUNE 17, 2012
Venture capital. An investment from a venture capital firm is usually expensive, in equity and control. If you go for venture capital, don’t expect a quick fix, so prepare to spend at least six months searching for and closing the deal. Money to build the business is the number one challenge for most startups. Don’t believe the urban myth that you can sketch your idea on a napkin, and professional investors will throw money at you.
What are the biggest global events for Venture Capitalists and Business Angels where they can learn about their own business?
FEBRUARY 26, 2014
There are surprisingly few such conferences, for the very good reason that there are actually relatively few such people (venture capitalists and ‘professional’ angel investors) to attend them! Angel Capital Association (US) Annual Summit. Venture Capitalists. The big one for VCs is the annual meeting of the National Venture Capital Association.
How long does it take for investors to approve the idea and to grant the necessary investment?
SEPTEMBER 10, 2014
The question is based on a misunderstanding of how venture capital investment works. Now, with that as background, it will typically take one to three months to negotiate and diligence a venture investment, if the company manages to get one at all. First of all, VC funds do not invest in ideas. What VCs invest in are operating companies that are ready (or almost ready) to scale. There are many wonderful ideas, all of which are not fundable. Only companies get funded.
Nuts & Bolts of Intellectual Property for New Startups
DECEMBER 22, 2011
Industry Experts 101 advisors entrepreneurs entrepreneurship execution intellectual property IP legal startups team venture capitalSo you’ve chosen a name for your startup, product, or both.
Knowledge Is Power: Convertible Note Financing Terms, Part II
OCTOBER 5, 2011
At least one well-known Silicon Valley venture accelerator is using a document referred to as a “ convertible security ” rather than “convertible promissory note.” In most cases, an early stage startup will raise seed capital from more than one investor. In practice, given that (1) investors’ interests are mostly aligned most of the time, and (2) Series A investors generally put a much larger amount of capital at risk, this approach seems to work relatively well.
Second-Class Investor Citizens: Facebook’s IPO and Dual-Class Equity Structures
MAY 24, 2012
By contrast, venture capital and angel investments normally take the form of Preferred Stock with rights and preferences set forth in the company’s Certificate of Incorporation and other governance documents.
What are the best innovations to come out of the financial industry in recent times?
APRIL 23, 2014
Today, over 200,000 companies are using it to organize their materials for raising equity, over 1100 venture capital funds and organized business angel groups are using it to manage their deal flow and portfolios, and nearly 50,000 accredited investors are directly using it to discover early stage investment opportunities and connect with entrepreneurs.
What is the process of a (new) VC firm raising its first fund?
MARCH 22, 2014
Of course, this may not be quite a similar case to yours, as Alan happens to be one of the patriarchs of the venture capital industry, who in 1969 founded the firm that would become Apax Partners (which has raised only $35 billion so far) and was the one of the VCs behind AOL, Apple, Office Depot, and Cadence Design Systems.
IPOs, M&As, Liquidity, & You. (the entrepreneur)
DECEMBER 28, 2011
In the “good old days,” angels invested in seed-stage startups and teed up promising companies for subsequent venture capital financing. If the company was successful, this quickly led to an IPO – a very happy ending for the entrepreneur, the angels, and the venture capitalists. SOX and radically higher NASDAQ fees have limited those new ventures going public to much more mature and highly visible companies. Design your milestones around the capital sources available.
The right investors for the right stage
NOVEMBER 22, 2011
Angel investors typically provide early-stage funding, while venture capital firms typically come in at later stages. This is the realm of venture capital professional investors, with funding amounts of $1-10 million, often referred to as the “A-round,” or first institutional funding. Additional funding rounds for growth are often called the “B-round” through “G-round”, with each being in the $5 million to more than $50 million from venture capital and other sources.
What is the maximum amount of money a pre-revenue mobile Internet startup can expect to raise from the VCs?
DECEMBER 25, 2013
To start with, a pre-revenue mobile company cannot expect to raise anything from “the VCs” Venture capital funds invest in only one out of every 400 companies seeking funding, so the odds of your particular startup getting funded are astronomically against you. For a true startup to be able to raise venture funding, you would need to be perceived as a better bet than virtually every company graduating from yCombinator, TechStars, DreamIT, etc.
What’s actually required to start or close a funding round?
AUGUST 6, 2014
a single venture capital fund putting in the full amount as Series A Convertible Preferred investment. The simple fact of the market is that there are many, many more entrepreneurs seeking capital than there are investors seeking to fund them. Technically, a “funding round” simply means a company accepting one or more investments from one or more investors on similar terms within a certain period of time.
What are the most valuable recommendations in order to raise money from VCs connected via Gust?
SEPTEMBER 27, 2014
To begin with, it is important to understand some basic facts about the world of entrepreneurial finance: There are many more entrepreneurs than there are investors, with the result that only one company out of every 400 that seeks venture funding actually receives it.
Scaling a Business by Cloning Yourself is Tough
OCTOBER 31, 2011
Another reality is that angel investors and venture capital groups almost never invest in a services-only company. Their perspective is that these entrepreneurs need only to sell themselves, but shouldn’t need capital up front for product development or manufacturing.
What tools can I use to manage relationships with investors?
SEPTEMBER 3, 2014
It’s the official collaboration tool of the Angel Capital Association (and the equivalent national angel investor federations in 20 other countries.) It’s also used by over 300 venture capital funds. Gust.com is the most widely used tool platform for both sides, with hundreds of thousands of companies and tens of thousands of investors using it to track and manage their relations with the other.
How do US venture capital firms view an entrepreneur who decides to go for funding to the US with a business plan, and then will need a visa?
MARCH 19, 2014
The most important is that venture capital firms simply do not fund business plans. But I wish you luck with your venture! Invested Interests business plan entrepreneurs startups US venture capital firms visa The disappointing fact is that this is a highly, highly unlikely scenario, for several reasons. They fund companies.
Valuation Methods 101
OCTOBER 18, 2011
Detailed descriptions will be published over the next few weeks: The Scorecard Method: This method compares the target company to typical angel-funded startup ventures and adjusts the average valuation of recently funded companies in the region to establish a pre-money valuation of the target. The Venture Capital Method. It is one of the most useful methods for establishing the pre-money valuation of pre-revenue startup ventures.
5 Good Reasons Not to Seek Angel Investment
OCTOBER 25, 2011
Invested Interests angel investment fundraising startups venture capitalAssume you have the right factors to get angel investment: experienced team, good product-market fit, growth potential, defensibility, and a reasonable shot at a successful exit. Have you asked yourself whether that’s what you really want? Have you considered the tradeoffs? This might seem awkward on this site, suggesting that you don’t want angel investment. That’s what we’re here for.
Make Sure Your Startup Domain is Investor Friendly
JULY 1, 2012
Generally, the same criteria applies to venture capital investors, although they invest other people’s money, at a later stage, in larger amounts. Even in today’s market, there is capital available from financial institutions at a lower cost for these purposes.
Probable and Improbable Lobbying Wins: The 1,000-stockholder Rule
NOVEMBER 23, 2011
SOPA would disproportionately alter the risk profile for new startups, which are thinly capitalized compared to the giants like Google and Facebook. As it stands, a privately held company with more than 500 stockholders or optionholders can be forced to become such a “ reporting company ” under the ’34 Act, essentially incurring all of the obligations of being a public company with none of the capital-raising benefits.
Is it possible for an idea to be funded by a VC?
FEBRUARY 15, 2014
While anything is technically possible, the reality is that venture capital firms do not fund “ideas” There are many wonderful ideas, and even many people having the same idea in the market at any given time.
Limiting the Number of Shareholders in Private Companies
JANUARY 5, 2012
But, this SEC limit has created some problems for these high-tech phenoms, both in raising additional capital and in private sales through secondary markets in which early investors resell shares to a large number of smaller US buyers. We have heard that SEC chairman Mary Schapiro “recently instructed the staff to review the impact of our regulations on capital formation” (according to CNN Money). The U.S.
What are some ways you can keep track of startups you are evaluating/diligencing/investing in?
JANUARY 22, 2014
This is obviously a softball question that I’ve been Asked to Answer, as I’m the Founder/CEO of Gust. The answer, of course, is Gust —because that’s exactly the purpose behind the platform!