Angel Funding. How to Fund Your Startup

Online Startup Camp #2 Video 3: Startup Funding Sources Part 2 Angel Funding 1 How to Fund Your Startup Startup Stages & Planning About Angels Indivi...
2 downloads 1 Views 766KB Size
Online Startup Camp #2 Video 3: Startup Funding Sources Part 2 Angel Funding 1

How to Fund Your Startup Startup Stages & Planning About Angels Individual Angels Angel Groups Angel Conferences Online Angel Forums (AngelList) Venture Capital Seed Funds

Stages • Idea • Discovery • Proof of concept • Product Development & Beta Test • Revenue • Growth

3

Stages & Sources of Funds Idea

Discovery

Proof-of Concept

Product Development & Beta test

Revenue

Growth

Idea

Founders Keep you Day Job Friends & Family Seed Fund Customers/Partners SBIR/STTR CrowdFunding Micro Loans

Angels Angel Groups VC Seed Funds AngelList Angel Conferences

4

Milestones and Funding Needed $2,500K $2,000K

Prototype

$1,500K

Beta

$1,000K

Production Release; Roll-out

Revenue Ramp

$500K $0 -$500K -$1,000K -$1,500K -$2,000K -$2,500K -$3,00K

2013

2014

2015

2016 5

How to Fund Your Startup Startup Stages & Planning About Angels Individual Angels Angel Groups Angel Conferences Online Angel Forums (AngelList) Venture Capital Seed Funds

About Angels • High net worth individuals • Invest their own money (unlike VCs) • VCs have no choice - they must make investments • Angels do have a choice • Accredited investor • $1M net worth or $200K income in the last 2 years

Angels - Are You Ready? • Typical requirements to get Angel funding:

• More than an idea • More than an idea and a business plan • You’re doing this full-time • You have some market validation results • You have a team • You have a prototype • Customer feedback

Angel Investment Options • Convertible note

• A loan that converts to stock • Usually a discount or warrants • May have a cap on valuation • Advantages to entrepreneur • Lower legal fees • No valuation required

Angel Investment Options • Priced round

• The angel(s) purchase stock (usually preferred) • Advantages to investor • They know what they are paying • Drawbacks • Can be higher legal fees (unless pre-set docs) • Valuation required

Preferred Stock • Preferred share owners have special rights • Typical examples: • Vote as a class on company’s major financial decisions

• Get paid first if there is an acquisition • Each new round of investors typically get a new class of preferred shares (with rights over previous classes)

Early-Stage Company Valuation • Determines the price of your shares & the dilution required for a particular amount of money

• Simple definition: it’s what someone is willing to pay • Typically not done by analyzing projected profits, revenues, etc.

• It may depend on: • How your company compares to others • How many $ you’re seeking • How good your relationship is with the investors • Milestones you’ve accomplished • The quality of your team • ...

Angel Investments - Size • Typical round size: • $200K to $2 million • Typical individual angel investment: • $20K to $100K

Investor Dollars are Costly • You will spend many months of effort raising money • You will have to “manage” your investors • You will have investors on your Board • You will give up equity • You will give up considerable control

But Investors can Add Value • Look for investors that can help

• Industry knowledge • Domain expertise • Introductions • Help with follow-on rounds

How to Fund Your Startup Startup Stages & Planning About Angels Individual Angels Angel Groups Angel Conferences Online Angel Forums (AngelList) Venture Capital Seed Funds

Individual Angels • High net worth individuals • The challenge: find/meet them • The answer: network! • They often collaborate • Find a leader

Angel Groups • Two basic types • Joint due diligence, but invest separately • Pool money and invest jointly • Advantages: • Easy to find • Meetup multiple angels • Drawbacks • There are usually application fees (large range)

Angel Groups • In Oregon: • Gorge Angel Investment Network • Keiretsu Forum, Portland Chapter • Oregon Angel Fund • Oregon Sustainability Angels • Portland Angel Network • Portland Venture Group • Southern Oregon Angel Investment Network

Angel Groups • In Washington • Alliance of Angels • Bellingham Angels • Puget Sound Venture Club • Seraph Capital Forum • Tacoma Angel Network • Zino Society

AngelList.com • Online investment marketplace • You pitch your company to qualified investors • Mostly Silicon Valley based - but increasing number of other deals too

Angel Conferences • • • •

Competitions Investor group vote picks winner Typically $100K - $200K to winner Positives:

• Finalists get great exposure • Good networking opportunities (even if you don’t pitch)

• Attendees see some good pitches • Drawbacks • There are fees (they vary a lot)

Angel Conferences • • • • •

Angel Oregon Bend Venture Conference Gorge Angel Conference Southern Oregon Angel Conference Willamette Angel Conference

Venture Capital Seed Funds • Venture Capital funds that invest early • They invest other peoples money • Many firms say they do seed investments • ... not all of them do that many

Stages & Sources of Funds Idea

Proof-of Concept

Discovery

Product Development & Beta test

Revenue

Growth

Idea

Founders Keep you Day Job Friends & Family Seed Fund Customers/Partners SBIR/STTR CrowdFunding Micro Loans

Angels Angel Groups VC Seed Funds AngelList Angel Conferences

25

Your Startup Camp Mission: Week 3 • Update your business model (lean canvas)

• Update your 2 year financial forecast (summer camp video 7)

• Identify fundable events for Angel funding

26

Fundable Events Some for “Angel Fundable Events”

• Working prototype • Positive customer feedback • Beta release • Adoption metrics • Early revenue

Resources



otbc.org/tag_cloud: • funding, funding_strategy • angel • angellist • term_sheets



Questions? Discussion forum: OnlineStartupCamp.com

28

OTBC Tag Cloud otbc.org/tag_cloud 29

30

31

Week 2 Meetup: Thursday, Oct. 18

• 3pm - 5pm (+ networking) at OTBC • Discuss angel funding • Get/give feedback

32

Online Startup Camp #2 Video 3: Startup Funding Sources Part 2 Angel Funding 33