This morning I read a great post by Venture Spring. Venture Spring is a hugely well respected ‘venture development’ company which “helps Fortune 500 companies innovate like startups” according to their company mantra. The article is about the differences between venture capital funding and funding from angel investors.
Startups are often all too eager to take one option over the other based on their own preconceptions. It’s important to realise that one may be more suited to one type of startup over another (and vice versa. So, understanding the points of difference could be crucial to the way in which you approach your fundraise; and how your company ends up being run down the line. So it’ll be worth your while familiarising yourself with the key points…
You can read the full article on their site here. (It’s a 5-10 min read).
Or, I’ve summarised the key differences for you here and (added in a few that they missed!):
– are private individuals investing their own money
– can make quick decisions regarding investment
– can be flexible in the amount they invest
– can provide expertise, contacts and support as well as capital
– can feel personally attached to your business
– can be as hands-off or hands-on as you require
– can qualify for tax breaks like SEIS and EIS
– do not have to be given board positions
Venture Capital Firms:
– are whole companies that invest in startups
– are run by professional investors investing money from corporations, individuals, funds and foundations
– take board positions and have a strong say in how the company is managed and grown going forward
– invest much larger amounts than angel investors
– do not usually invest at seed stage
– generally invest not less than £1million
– take a longer time to make investment decisions and broker deals
What’s your take on the issue? Do you have any experiences you’d like to share? Comment below or hit me up on Twitter…
I just got sent this simple infographic from our friends at www.personalicome.org. It’s a great reminder of all the avenues open to you if you’re starting out as an entrepreneur for the first time. Some should be pretty obvious, but there are a couple of interesting ideas.
Pivigo (http://www.pivigo.com/), a data science marketplace and training provider based in London, has announced the successful closing of its funding round with investment secured from high profile consortia including Angel Academe, Craigie Capital, Dubai-based Dunamis Ventures Ltd and London Co-Investment Fund, the Mayor of London’s early stage business fund.
Angel Investment Network is delighted to have made a significant contribution to this success story through its introduction of Dunamis Ventures Ltd.
You can view the full press release on the Pivigo blog here
Now that they are fully funded, they are well placed “to reach a much larger audience, help connect more people with each other and work with companies to gain value from data…” as Founder and CEO, Kim Nilsson, puts it.
There’s a lot of dross on the internet. Too much of it. Too many people weighing in with half-baked, ill-founded opinions in an attempt to seem like an authority on whatever subject they’ve taken it upon themselves to spout about.
That said, the internet has gone a long way to help ‘democratise’ education; suddenly, people’s horizons have been opened up by the plethora of information available. If you’re bright and motivated, you no longer need a teacher, you can teach yourself with the web as your guide. You just have to be able to sift through garbage to find the gold.
Here I’ve attempted to do this for you. A lot of people like to offer their opinion on the subject of Angel Investing; a lot of people should be more considered. But every now and again it’s nice to get the view of a real authority with a track record in startups and in angel investing. Paul Graham started out as an entrepreneur, founding Viaweb (the first SaaS company) which was acquired by Yahoo in 1998 fora reported $49million. He then founded Y Combinator which has funded over 1000 startups since 2005, including Dropbox, Airbnb, Stripe, and Reddit.
In this essay, he offers his wisdom on how to be an Angel Investor which he describes as “mysterious and complicated” at first but “turns out to be easier than…expected, and also more interesting.”
Xavier Ballester, the co-director of our brokering division, appeared on Intelligentcrowd.tv offering some pearls of wisdom to investors and entrepreneurs alike, including:
– How we evaluate startups worth working with
– Why we exchange part of our cash success fee for equity shares in our clients
– Recent exits and hot prospects including Brightnorth, Superawesome and What3Words
– How we raise money for our clients
What’s the point of a proposal? Why use sites like Angel Investment Network? Why not just send your full business plan to people you want to invest?
Well, for a start, not everyone has the contact details of a large number of investors just sat in their inbox. Networking/Connection sites like Angel Investment Network hold the key to advertising your latest business venture to thousands of prospective investors so that you can find the right ones to suit the nature of the project. That sounds a little sales-y, I know, but it’s important to understand in order to realise the significance of the short proposal instead of the full-blown business plan.
When you’re marketing an idea to thousands of people, not just in the fundraising community but anywhere, you cannot simply take it for granted that people will actually take time to consider your idea; in any marketplace thousands upon thousands of ideas are competing to grab the attention of the onlookers. Precedence is not always, and certainly not necessarily, defined by merit, but rather by the ability to capture attention.
Don’t think ‘I know my idea is brilliant, so why wouldn’t investors read my business plan? They’d be stupid not to…’ That attitude will help you raise the square root of nothing. Think instead ‘How can I make it so that investors literally cannot wait to get their greedy paws on my business plan and start properly digesting my idea?’
Here’s where your short proposal comes in. It is meant to be pithy and concise. Something that can be easily understood and result in them wanting to know more. It is the first rung on the ladder towards them investing; and that can often be the hardest part – getting them to step onto the ladder. Once they’re on, of course some may fall off on the way to the top, but at least you’re beginning to win them over and it becomes progressively harder for them to get off.
As such you should consider your proposal as a ‘hook’, to use Nir Eyal’s term, or in internet-speak a CTA (call-to-action). In your proposal make them love your idea enough to take the next step. Tell them the best bits. Don’t swamp them in superfluous detail.
It’s funny what working near a beach for 3 weeks will do to one’s ability to keep their blog updated! But I’m back in the office now, back to the grindstone so your weekly dose of pitching/proposal advice is back up and running.
The previous 4 tips have talked in general terms about the ideal structure for your proposal: Tip #1 advised you to put your achievements first, Tip #2 encouraged you to then articulate the problem you solve, Tip #3 how you solve that problem and Tip #4 told you to make it clear how big the market opportunity is.
This week I wanted to talk about tone. How should your pitch come across? Funny? Serious? Detailed? Light?
When I arrived in the office this morning one of my colleagues was bragging about how he had re-written someone’s proposal for them after they had got no interest from investors after 90 days on Angel Investment Network. Now the business wasn’t bad at all, but it wasn’t an Uber or Facebook by any stretch of the imagination. The reason the guy had done so poorly was that the way he had written his proposal was about as exciting as watching paint dry in prison.
My colleague made no drastic changes – the fact of the business and its products (innovative power tools) were beyond his control. And yet his changes resulted in 82 investors contacting the entrepreneur. 82. When previously he’d got zero.
What did he change? He injected some life, some enthusiasm, some excitement into the proposal. The subject matter remained the same, but he gave the proposal a buzz. He infused it with a sense of success just around the corner; and that’s what intrigued the investors.
So give yourself a fighting chance and make sure you strike the right tone…
Tip #4 “How big’s the itch and is it spreading…like a rash?”
To continue the itch metaphor from proposal tips #2 and #3 (which dealt with the importance of giving a clear explanation of the itch you scratch and how you scratch it), in this post I’d like to touch on the size of the itch and how it’s growing.
For those of you beginning to find my strangled metaphor tedious, I’ll stop. I’m talking, of course, about the market your business operates/plans to operate in.
It’s no use solving a problem – even if you solve it unbelievably well – if it’s a problem only extant for a single hermit on the remote island of Tristan de Cunha, then it’s great for the hermit, but not a viable business (unless he’s sitting on pots of gold).
The problem you solve has to be one that a large and growing number of people suffer from without a solution; and are willing to pay for.
The more statistics you have to indicate this, the more prospective investors are likely to give your idea credence! There are plenty of websites available to help you with this, so don’t skip this bit…
Some good news came in over the weekend in a press release from Atlantic Healthcare. It’s encouraging to see our Pharmaceutical companies flourishing alongside their arguably more trendy tech counterparts.
We raised circa £350,000 for Atlantic Healthcare as part of their seed round. It’s taken a few years, but that’s nearly always the way with pharmaceuticals; and now they’ve just closed a $24 million round with funds coming from the founders of Salix Pharmaceuticals, Inc.; Fullbrook Thorpe Investments LLP (the family investment arm of Andy Leaver, founder of Clinigen Group plc); and LDC (the private equity division of Lloyds Banking Group plc); alongside their existing investors.
This round will allow them to complete the pivotal Phase 3 of their product development and will make alicaforsen market-ready for the treatment of IBD pouchitis which currently has no approved treatments.
So far in this series we’ve discussed 2 of my 3 recommended first steps for starting your pitch in a way that makes investors instantly grasp the value of your idea.
Third up is the natural corollary of the problem, that is, the solution.
Tip #3 “How do you scratch that itch?”
Once you’ve made the effort, as set out in Proposal Tip #2, to give a cogent explanation of the problem, and the investors have started to relate to the pain point, then you hit them with your solution.
How you do this will depend hugely on what your solution is, but the key point is to make it super clear. No one will understand your solution as well as you do – so don’t expect them to. Set out your explanation in as simple as possible terms as if explaining to a total novice.
Entrepreneurs often make the mistake of being too technical at this stage under the mistaken belief that if they sound like a genius then the prospective investor will fall head over heels and want to invest.
If someone doesn’t understand your idea quickly they’ll look elsewhere for an idea they can understand and relate to quickly.