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startup financing

This is the First Part of a Free Series on Raising Seed Capital from Angel Investors

This series should be of relevance to anyone looking at raising capital down the road whether it be from angel investors or venture capitalists.

However, before we begin the series, allow me to get something off my chest. The label “angel investor” is one of the most misleading names ever given to anyone or anything. It creates significant confusion which then leads to a great deal of wasted time. A lot of first-time capital seekers infer from it that these are people who basically use their savings as grants to fund all manner of loopy or at least half-baked ideas. They also erroneously believe that the main criterion used for giving away this money is the level of the entrepreneurial wannabe’s need. The more the wannabe thinks that he or she needs the money the more obligated the investor is then to cut them a check. Continue reading

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 to Quickly Raise Seed Capital

Entrepreneurship is like a 25-level computer game. If all that you can think of when it comes to startup financing is “write a business plan and shop it around to strangers,” you’re stuck at the bottom level. There are 24 more levels above you.

Savvy entrepreneurs know how to create startup funding using various tactics.  One of the classics entails using what is called “mobilization capital” obtained from the startup’s own customers. In a nutshell, you get your prospective customers or clients to supply you with the capital required for you to then deliver your product or service.

Here’s a story of a how an educational startup funded its launch using this tactic: 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