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angel investors

Watch Out for Dodgy Seed Capital Raising Fees

As many of you know, I’m not really a fan of using money middle-men to raise seed capital or any capital for that matter. Capital raising should always be the responsibility of a senior team member who hopefully has connections. When you hand over this key function to outsiders the results are rarely good.

These days the lone “middle-man” is often replaced by a group such as an angel investor club. The problem here is that these groups tend to create overhead that then needs to be covered. Moreover some are for-profit. This can lead to a Ticketmaster-style cascade of fees.  Some well-know entrepreneurs are now leading a charge against groups that overcharge cash-starved entrepreneurs for the simple opportunity to present. Continue reading

How many companies chasing outside capital actually raise any?

To me this is one of the most fascinating questions you can ask about startup financing. The figure I have been hearing regularly over the past 25 years is that venture capitalists invest in about one in ever 500 companies that approach them for funding.  It should be added that venture capitalists rarely invest in startups. They prefer later stage companies which have proven themselves in the market place.

The success rate for startups chasing angel investors is even more difficult to dig up. My best estimate is that with credible ventures the odds could be as good as one in 200 to as low as one in 400. I admit that I’m pulling numbers out of the air here but this estimate is also based on 25 years of experience with startups. Continue reading