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...
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
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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
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)
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
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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
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Fundable Events Some for “Angel Fundable Events”
• Working prototype • Positive customer feedback • Beta release • Adoption metrics • Early revenue