1 Video 3: Startup Funding Sources Part 2 Angel Funding Online Startup Camp #2 How to Fund Your Startup Startup Stages & Planning About Angels Individual Angels Angel Groups Angel Conferences Online Angel Forums (AngelList) Venture Capital Seed Funds
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Online Startup Camp #2 Video 3: Startup Funding Sources Part 2 · Startup Funding Sources Part 2 Angel Funding Online Startup Camp #2 How to Fund Your Startup Startup Stages & Planning
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1
Video 3:Startup Funding Sources Part 2Angel Funding
Online Startup Camp #2
How to Fund Your Startup
Startup Stages & Planning
About Angels
Individual Angels
Angel Groups
Angel Conferences
Online Angel Forums (AngelList)
Venture Capital Seed Funds
3
Stages
• Idea
• Discovery
• Proof of concept
• Product Development & Beta Test
• Revenue
• Growth
4
Stages & Sources of Funds
Discovery Proof-ofConcept
Product Development & Beta test Revenue
Idea
Idea
Founders
Growth
Friends & Family
SBIR/STTR
Customers/Partners
Micro Loans
Seed Fund
CrowdFunding
Keep you Day Job
AngelsAngel Groups
VC Seed Funds
AngelList
Angel Conferences
Milestones and Funding Needed
5
$2,500K
$2,000K
$1,500K
$1,000K
$500K
$0
-$500K
-$1,000K
-$1,500K
-$2,000K
-$2,500K
-$3,00K 2013 2014 2015 2016
PrototypeBeta Production
Release;Roll-out
Revenue Ramp
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)