Tonight was a roundtable discussion involving mostly technology based startups, basic challenges faced, and what entrepreneurs (especially first timers) could expect to face in terms of the funding process.
There was some lighthearted fun between the VC and Angels on the panel. But the consensus was that the VC's (or bigger funds in general) were having a difficult time getting returns. Most agreed that the economy and large scale funding (perhaps overfunding to reach certain thresholds) are the main reasons. It's actually the Angel investors that are more active and having better returns. They seemed to agree that the barrier for market entry has now become a lot smaller. The technology is relatively cheap (relative term here) to produce and essentially seed and Angel funding has been more frequent and successful. The downside is that the current trend for Angels to undervalue the worth of the company.
The other big topic was the emergence of incubators - or accelerator companies. These appear to have an immediate impact on companies and are typically a 3 month intensive boot camp. You typically have a built in mentor/advisory board as well as receiving valuable feedback from a trusted internal source. They give you the extra leg to stand on especially in regards to the mental stress involved. The downside here is having the necessary time to devote to an intense program. Apparently a full time job or class schedule is a major hindrance. Oh yeah, and if you don't mind surrendering up to 6% of your company then jump in with both feet. They do come highly recommended.
What are the Angels / Investors looking for?
- First and foremost you have to bring a good idea to the table.
- You must have conviction in your idea.
- You don't need a business plan - plan for the near term.
- Have a product/project roadmap if you haven't built it yet.
- Focus on distribution / distribution platform - scalable measures.
- Have a plan for feedback / usability testing.
Some good tips & challenges to expect:
- Running a startup is not for the faint of heart
- You will hit many barriers - keep crashing into them until you break through
- Mentors / advisors are key - but only in their SPECIFIC expertise (they don't know it all)
- They will help direct you if you need to change gears, assist in crisis situations
- Pick your mentors/advisors wisely - based on experience, specific competence, and contacts
- Don't worry about dilution (% of company to investors) - focus on where the amount of money provided will take you
- Make sure your exit strategy aligns with your investor
- A VC may be inclined to not sell and go for a bigger payday
- Most people want to get out if a deal will yield them $5M (after tax) - or some similar "life altering" amount.
- Make sure you discuss at the outset and if you can't align, include a provision that will liquidate some or all off your position. If there is no flexibility you may want a different investor.
You can find more of these types of events on our site http://www.myeventguru.com/
The Panel:
Sim Simeonov: http://fastignite.com/
Dave McClure: http://500hats.typepad.com/
Hermant Taneja: http://www.generalcatalyst.com/
David Cohen: http://www.techstars.org/
Laura Fitton: http://oneforty.com/Pistachio
