....thoughts and advice from a bunch of angel investors on all kinds of topics!
Foothills Angels Wisdom ;-)
This blog post from Jason Calacanis really resonated with us and we thought it was worth sharing. We don't charge any fees for entrepreneurs that pitch us, and our educational seminars and workshops are also free. We don't think anyone in the greater Sacramento area should be charging entrepreneurs either!
Keep an eye on www.sacstartups.org for their launch. They are hoping to put together some events/resources for entrepreneurs who are at the very early stage of their thinking and planning. Not a funding source, rather a facilitator of connections to good startup resources with no strings attached!
When you sell any product you need good marketing materials to communicate all the salient points that will convince a buyer to look closely at your product (company stock) – those materials are needed to get a meeting with your buyer (investor) to present your case.
To sell stock in your company your marketing materials are the Executive Summary, elevator pitch, and PowerPoint presentation (a business plan will only normally be needed after you have attracted investor interest). Your goal is to get an investor interested enough to get that meeting.
It's worth spending time on these materials to get them right since normally you only get one shot. And make sure that they are oriented towards the kind of investor you are seeking (see Part II of this series).
Those of you who have attended our entrepreneur workshops know that we have advised entrepreneurs generally to avoid engaging consultants who offer to assist you in the fund raising process. In our experience, most of these consultants do not have track records of success. Further, to investors downstream, having hired a fund raising consultant is often a signal that a company has failed to attract any investors, and more often than not it's the sign of a bad investment opportunity.
Below is a link to an LA Times article that ran today which sheds some additional light on this subject.
Angel investment groups on average invested 9% less last year than in 2007, according to a new survey by the Angel Capital Association (ACA). Despite a 4% increase in the average investment per deal ($276,918), the average number of investments per group fell 16%. Angel investors cited a decrease in individual member wealth, the overall decline of the economy and a lack of exit opportunities as the most prominent reasons for the decrease. "Heightened selectivity by angels and venture capitalists has clearly amplified the financing challenge young ventures are facing today, even at collapsed valuations," said John Huston, chairman of the ACA. "However, highly capital efficient start-ups that can reach cash flow break even with just a few million dollars of investment are having no trouble attracting capital."
It is really good to see entrepreneurs that attend our bootcamp use some to the advice we impart and the help we offer. Brett Owens, the CEO of local startup, Chrometa, was one of our first attendees and we recently found mention of him and his company in an Inc Magzine article, Get Your Wings. It looks like our Stay in Touch thoughts in this blog and in our bootcamp are paying off for Brett.
For any product you need to understand the various market segments that exist for that product. Then you need to focus your limited time and money on the (largest) segments that bring you the fastest revenue, with the lowest cost at maximum profitability. It's no different when selling stock as an entrepreneur. The market is the investor community, and the main segments include Family and Friends, Individual Angels, Angel Groups, and VC firms.
The stage of your company, your markets, your type of company, and the amount of money you need will dictate the best segment (investor) to approach to optimize your time and chances of successfully raising money. For example, if you need $50K it is not a VC deal but more likely a deal for Family and Friends, or Individual Investors. If the amount is $500K, then focus on Angel Groups, and if $5MM or greater, it's VCs. Amounts between $2MM and $5MM can be tough; too large for Angel Group, and too small for most VCs. So the real key is how much you need and for what -- the real business milestones we discussed previously.