The funding process and angel investors

As far as my understanding goes, this is the normal process for funding a startup:

1. Seed Capital: funding to get the initial concept off of the ground
2. Bank Loan: debt funding to get prove the business model works on a small scale
3. Angel Investor or Venture Capital: equity funding to take a proven business model to the next level and achieve dramatic growth and become profitable
   
4. Merger, Acquisition or Public Listing: Exit strategy that would include one of the following; at this point the founder could continue to lead the company or cash out.

The distance between these steps is widening, and step 3 in particular is beginning to favor Angels over VC for less established businesses.

As times change, so too does capital availability.  VC is closing their doors to new investments and focusing on developing their current portfolios.  This is making Angel Investors a more viable alternative, however, they are also becoming increasingly more picky.  A few things that I have gathered is that they are preferring the following:

• Shorter Sales Cycles in the business model
• Experienced Management over a brilliant newcomers
• Intellectual Property that can guarantee a competitive advantage
• A business model that will not require repeated cash infusions over the next several years

An example:

Meet the new breed of angel-backed entrepreneur. Donna Myers, president of software provider TowerCare Technologies, is in the process of securing $2 million in angel funding. But she’s no newbie: Her 22-person Wexford (Pa.) company has 160 customers and last year generated $500,000 in sales.

In years past, a firm of Myers’ size might have sought venture capital. But as venture capital funds have moved upstream, doing larger deals, angel investors are being pitched by much more established companies. Now it’s not just first-time entrepreneurs or those whose companies are in their infancy who are winning cash from angels, although those entrepreneurs are still pitching. Increasingly, successful candidates, like Myers, boast impressive experience and a significant customer base.

Click below for the slideshow on angel investors:

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Sources:
http://images.businessweek.com/ss/08/10/1017_sb_angel_investors/index.htm
http://www.businessweek.com/smallbiz/content/oct2008/sb20081016_778120.htm?link_position=link1

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Mark Cuban – What a great example of an entrepreneur

“when I die, I want to come back as me” – Mark Cuban

Great interview with the legend.  It seems like Mark can’t go wrong in anything he does.

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Chris’s comments:

Great interview, I have an infinite amount more respect for this guy after seeing him speak and get interviewed at TC50.  Here are some notable quotes from his interview with Jason Calacanis.

On his past goals:

I “retired” when I was 30. My goal was to drink with as many people in as many countries as possible. I sold a company and all I wanted was a lifetime pass for American Airlines. They had them for $125,000 for two people. I used to go into bars and ask women if they wanted to go on trips.

On ideas:

In the past people used to tell me to shut up a bit. But what I believe is to put out your opinion and let everyone else react. If I’m wrong I’m wrong. People are afraid to put our their opinions and get push back.

On entrepreneurial advice:

Ill tell you what I learned from Bobby Knight: everybody’s got the will to win but when it comes time to doing something, it’s always about someone else. Not many people have the will to prepare. You got to be willing to know your product and environment better than anybody. No matter what you do there is someone out there trying to kick your ass. You got to be the smartest guy in the room about your product. Then you need to have a revenue source. You need a company with a revenue to make money. Concept, competition, and where the money is — plus something you love doing. I’ve never had a day of work. When I die I want to come back as me.

On educating himself:

Pre-internet: stacks of books and magazines. I have PCweek magazines going back 10 years. I would read 2-3 hours per day of regular stuff.

Now online: I need a break because I spend so much time reading. If theres something I get into, I won’t stop. I read a lot of industry trade publications for cable now.

On reaching out to him:

Send me an email and in three paragraphs or less, tell me about your business. Dont say you need an NDA or want a call. Just tell me how youre going to make money and how I’m going to add value. Give me a URL if you have a website, I’ll figure it out. 5% of the people will hear back from me.

On assembling a startup team:

I’ve always been a driver from a tech perspective so it’s been easy to find people who complement me. Finding someone who you trust and who complements you is important. It’s easier to find people you trust who are cheap and can be trained. Believing in the business is important too. The worst place to hire is the Silicon valley because everyone’s a hero in their own mind. There are great people everywhere you can find. The poeple I dont like to work with are people like me. I need people who can compliment my skill set, people who can do the nitty gritty with me. People who will be good verse look good.

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2008 TechCrunch 50 Company List

I want to keep a copy of this list (52 companies this year) on our site so we can use it as a reference later and track some of these company’s progress.  By clicking on the links, it’ll take us to the developers website, and the “CB” will take us to the CrunchBase profile.

Monday, September 8, 2008

Session 1: Youth and Culture. 9:00-10:15am

• Blah Girls – Backed by Ashton Kutcher, Blah Girls is a gossip site that features a group of animated teenage girls who provide opinions on what’s going on in the world of entertainment
• Tweegee (CB) — A hub for tweens, Tweegee offers the youth market a suite of online tools for social interaction and organization
• Shryk (CB) — Web-based financial software for children aimed at promoting financial literacy and good saving habits
• Hangout Industries (CB) — Blends social networking with virtual worlds by creating a 3D, online environment where 16-24 year olds can chat and share media

Session 2: Memes & News. 10:30 – 11:45am

• DotSpots (CB) — Tracks the memes spreading across the web, aggregates the content associated with them, and gives everyone Wikipedia-like control over that content
• Angstro (CB) — Lets you set up a feed of news about your friends, instead of news by your friends
• LiveHit (CB) — Tracks the music, videos, and entertainment sites people are clicking on right now
• Quant the News (CB) — Creator of StockMood.com, a service that tracks the sentiments of online news stories about stocks and then measures their potential impact on the direction of those stocks’ prices

Session 3: Enterprise. 2:30 – 3:45pm

• FairSoftware (CB) — Creates virtual shares around software projects that gives each contributor a portion of any resulting revenues
• Yammer (CB) — A web application designed for businesses and organizations that asks its users to answer the question, “What are you working on?”
• Connective Logic (CB) — Along with the company’s real-time middleware, Blueprint will make it easier for developers to design, generate code, and deploy complex multi-core software applications without requiring expertise in multi-threaded software development
• Devunity (CB) — A platform for writing code in a browser-based editor that doesn’t force developers to use a proprietary layer
• OpenTrace – Traces items through the supply chain and adds them together to show the impact of products on the environment

Session 4: Advertising & Commerce Monetization. 3:45 – 5:00pm

• Burt (CB) — Collects user data to tailor individual advertising campaigns and target users more effectively
• Adgregate Markets (CB) — Brings online stores to consumers through a display ad that is a fully transactional widget
• Adrocket (CB) — Contextual text-based advertising for email; assigns keywords to each address depending on known demographic and contextual data
• OtherInBox (CB) — Provides an easy way to quarantine the spam and the messages you receive from online services

Tuesday, September 9, 2008

Session 5: Collaboration. 9:00 – 10:15am

• Tingz (CB) — Offers a unified platform for delivering internet content across multiple devices including mobile phones and PCs
• MIXTT (CB) — A group based social network/dating site that encourages real world interaction that’s more comfortable than the 1-on-1 format of most similar sites
• Imindi (CB) — Based on neuroscientific principles, Imindi’s Thought Engine tries to exceed human thought and help its users find new ideas, concepts, and questions on the Web
• Popego (CB) — Surfaces the most meaningful information from within your social graph based on your interests and other factors

Session 6: Finance & Statistics. 10:30 -11:45am

• PersonalRIA (CB) — Allows users to shadow a professional investment advisor’s portfolio, automatically executing trades (which most brokerage sites cannot do)
• Emerginvest (CB) — Offers commentary and analysis on Emerging Markets and tools that provide you with information on how to diversify globally
• ExchangeP (CB) — Dubbed a “fantasy stock market,” ExhangeP’s service allows users to sign up for free and start investing in private companies
• Me-trics (CB) — Lets you see how mood, weight, and goals correlate with other metrics, including web services like Facebook or RescueTime
• iCharts (CB) — YouTube for embeddable, interactive charts

Session 7: Mobile. 2:15 – 3:30pm

• Mytopia (CB) — A gaming platform that lets players compete across mobile devices and social networks
• Tonchidot (CB) — Makes the Sekai Camera, a camera system that aims to merge the virtual and real worlds by using a digital device as a viewfinder
• Mobclix (CB) — An analytics and monetization platform for iPhone developers
• FitBit (CB) — Developing a small wireless sensor called the Fitbit Tracker, which automatically records data about a person’s activities, calories burned, sleep quality, steps, and distance throughout the day

Session 8: Language & Communication Tools. 3:45 – 5:00pm

• Alfabetic (CB) — Translates any blog or Website into another language and places ads alongside it in the new tongue
• Postbox (CB) — Based on Mozilla technology, Postbox saves users time when looking for particular information within their email
• Swype (CB) — A new method of text input on touch screens; does away with traditional “hunt and peck” in favor of a more fluid motion
• DropBox (CB) — Provides an easy way to backup your files, share them with coworkers and friends, and synchronize them between computers

Wednesday, September 10, 2008

Session 9: Rich Media. 9:00 – 10:15am

• VideoSurf (CB) — A visual video search engine that allow users to search across millions of videos for a given actor and to view summaries of videos through a series of detected keyframes
• GazoPa (CB) — An image search engine developed by Hitachi that uses visual similarities between photos to suggest matches (rather than simply relying on keywords).
• Fotonauts (CB) — A photo sharing application that turns every album instantly into a Web page.
• Bojam (CB) — Although there are a slew of online music services already on the Web, Bojam is trying to do something a bit different: it wants to connect musicians and allow them to collaborate over the Web.

Session 10: Games. 10:30 – 11:45am

• Grockit (CB) – A “Massively Multi-Player Online Learning Game”
• Akoha (CB) — A web-based social game played with trading cards aimed at spreading good deeds around the world
• Atmosphir — A platform for creating 3D interactive games by selecting blocks (such as a sand castle tower, fireball-breathing bird, or trap door) and snapping them onto a grid.
• PlaYce (CB) — Provides a 3D virtual world inside the browser for games and social interaction that is based on the real world

Session 11: Vertical Social Networking. 2:15 – 3:30pm

• Birdpost (CB) — A social network for birdwatchers
• Closet Couture — Fashionistas need a social network too and Closet Couture is looking to give them one by connecting them to other fashion lovers, stylists, and retailers
• Footnote (CB) — For those looking to create historical records of loved ones or themselves, Footnote offers a timeline-based archive where you can upload photos and documents linked to historical databases
• Causecast (CB) — Causecast leverages social networking to connect nonprofits, leaders, celebrities and brands with those who want to make a difference through good causes
• Shattered Reality Interactive (CB) — A new massively multiplayer online game (think World of Warcraft) that lets the crowd guide the direction of future expansions

Session 12: Research & Recommendations. 3:45 – 5:00pm

• GoodGuide (CB) – Provides information on the health, environmental, and social impacts of products and companies
• GoPlanit (CB) — A one-click travel planner that assembles a customized trip itinerary with the click of a button; also supports mobile microblogging
• TrueCar (CB) – A site that allows users to assess the current market value of their automobiles in a given geographic area
• Goodrec (CB) – A mobile and online recommendation service that provides brief, to-the-point recommendations from friends and trusted sources

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How to Demo your Startup

Found this on TechCrunch, see the links at the bottom.  This applies mainly to the tech industry, but will be a good resource to keep handy none-the-less. 

Here is an overview of the 18 Tips:

1. Show your product within the first 60 seconds
2. The best products take less than five minutes to demo
3. Leave people wanting more.
4. Talk about what you’ve done, not what you’re going to do.
5. Understand your competitive landscape–current and historical.
6. Short answers are best.
7. PowerPoint bullet slides are death
8. How to use this new device called the phone.
9. How to handle questions you don’t know the answer to
10. Always confirm the time of your meeting/call, and always be 15 minutes early.
11. Show, Don’t Tell
12. Use inclusive words, live in the present
13. One driver, one navigator
14. How to handle technical issues
15. The Setup
16. Horrible ways to start your presentation:
17. Describe your product five times
18. Change up your style (i.e. shift your tone)

 

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References:

http://www.techcrunch.com/2008/08/09/how-to-demo-your-startup/
http://www.techcrunch.com/2008/09/01/how-to-demo-your-startup-part-two/

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