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Tag Archives: Funding

“Wantrepreneurs Live On Hopium,” says NY Angels’ Chair Brian Cohen

“I love angel investing. I’ve been doing it since it was called ‘stupid investing’” said Brian Cohen, Chairman of the New York Angels, as he attempted to fill the information from his most recent book, What Every Angel Investor Wants You To Know: In Insider Reveals How To Raise Money For Your Billion-Dollar Idea, into his 20-minute keynote at the NY Founder Institute First Look Showcase of their latest class of startups.

 

 

The Founder Institute is an early-stage four-month accelerator program where participants are not required to quit their day jobs. FI has helped launch over 565 companies across 28 cities, 13 countries, and five continents – making it the world’s largest startup accelerator.

Cohen has been investing in startups in New York for 40 years, he said, preferring this coast to the other, as he sees New York entrepreneurs as being more willing to help each other.

“California has an alpha-dog mentality,” he maintained.

Some of our favorite sound bites/pearls of wisdom from the publisher (Information Week) turned publicist (TSI Communications) turned Angel Investor/Entrepreneur Mentor/Technology Marketing Strategist/Author:

“Do you know the difference between Angels and VCs? Angels spend their own money. VCs spend other people’s money.”

“M&A make up 90% of all exits. The average time for an exit is nine years.”

“There are 30,000 serious Angels in the US… which make your chances of getting funded 400:1 – and it’s getting worse.”

“VCs want to know how big is your market. They’re driven by large market potential. Period.”

“Ever hear the term ‘wantrepreneurs’? Wantrepreneurs live on hopium.”

“Don’t let ego, greed or fear be part of your business plan… When you’re pitching to investors, they don’t want to hear ‘I think’ or ‘I hope.’ They want to hear ‘revolutionary’ and ‘unique.’

“When you’re meeting with investors, use the time wisely. Ask them, ‘tell me who you wrote checks to and why.’ Investors don’t like to say ‘no,’ because they’re afraid of missing out on the next big thing. Get to ‘no’ as quickly as possible.”

For a full transcript. Oh, wait, there is no full transcript available. You’ll just have to read the book.

And now, your First Look at FI’s latest group of startups:

emozia is “revolutionizing the way we communicate emotion – in real time,” said founder Aleksandar Vukasinovic. Communicating emotion to our apps and devices is almost impossible. And that’s exactly what emozia is about. The company has developed technology that determines how you feel and empowers you to share that information with your friends, devices and apps. Imagine if Songza knew what kind of mood you were in – and could suggest music for it, or to counteract it. Uber is currently testing this technology.

Inkwell empowers authors to take control of the publishing process. Through crowd-funding, social tools, and a support network, authors can raise the funds they need to produce their books, and readers/supporters get a first look to see if they’d like to read more – and make it happen

HelpSource is a digital hub for behavioral health providers and consumers. According to co-founder Mavis Baird, People can get the help they need either online, or by reaching out nationally or locally. Revenue is derived through the company’s booking engine.

Builder Buzz “is an online home improvement marketplace where contractors come to you – Snap, Post, Hire, Done!” explained founder Michael Lisovetsky. You post your project and can compare contractors by looking at their profiles, work history, and reviews from previous customers. You decide who to speak to and get quotes from. Of course, it’s also a great platform for contractors to find their next job.

Viewsafar Ok, so you have your big screen HDTV and it’s taking up a lot of real estate, considering that it’s most likely not on 24/7. Viewsafar co-founder Michael Su wants to change that, by providing ambient videos that can run in the background. Wish you were at the beach? Imagine being able to look at the rolling tides in the comfort of your home, and not having to deal with all of that bothersome sand getting all over the carpeting.

One + Love is a social networking app for the LGBTQ community, connecting users to local safe spaces, supportive online community, entertainment, and news. Get a map that takes you right to advocates, hotlines, hospitals, and LGBTQ-friendly organizations and businesses. You’re not alone; One + Love connects you.

Pathgather is an enterprise learning application that helps employees discover learning content, track their progress, and connect with coworkers around professional development. Employees learn more when they learn together. On Pathgather, employees share learning achievements, set public goals, and recommend helpful resources. The end result is a social learning environment that motivates and accelerates personal development – and workplace training.

For full coverage of startup events in New York, visit The Watch.

Funding Daily: Ten million bucks — who wore it better?

Two companies in the rather large roundup today raised $9 million (Apsalar and CareCloud) and two grabbed $10 million (Tastemade and Clusterix).

So we’re asking, who wore it better?

Tim Gunn, who writes a monthly who-wore-it-better column for some fashion rag or other, might say something like:

Apsalar paired the $9 million with a mobile ad product, but its 800 million users got the proportions all wrong. CloudCare focuses its $9 million on health technology, showing the value of careful editing when putting together a complicated look.

Or whatever. Let’s get it on!

Glam grabs $25M

Glam Media has raised an additional $25 million in a series F round of funding, VentureBeat has confirmed with sources familiar with the deal. Glam Media declined to comment on the funding. Glam Media has been planing to go public since 2011, and reportedly filed an IPO under the JOBS Act in secret back in February. (The regular IPO filing process is public record, while filing under the JOBS Act is not.) This new round isn’t huge, but it will help the company stay the course as it pursues a public offering, our sources say.

Seed Stage Valuation Guide

I find it strange that with all the VC and Angel blogs out there, nobody seems to explicitly talk about the single most interesting term in startup financing: Valuation.  Look no further than Chris Dixon’s blog for elucidation on such nuanced terms as founder vesting, convertible notes with caps, etc…but where do you go to find out how much you should expect to give up at various stages in your company’s development.  In the past week alone, I’ve regrettably passed on more than one deal because the valuation the founder was seeking was an order of magnitude off from what was appropriate, and frankly I am pissed.  I am pissed that the earliest “committers” to these rounds aren’t advising founders that they are pricing their rounds incorrectly.  Notice I am not saying I am pissed that the early committers aren’t doing a better job of negotiating.  It’s not about negotiation, it’s about pricing a round in a way that does not lead to adverse selection when a founder goes out to fill the rest of their round.

By definition, the investors with the best deal flow will have a higher bar on what they do and do not invest in, and will be less likely to pay 2x the appropriate valuation for a deal when there are 3 others they are looking at concurrently that are better bets from a risk reward standpoint.  Conversely, the “me too”, “here today, gone tomorrow” early stage investor who is clamoring to get into a deal with the big name angel who committed early and independent of valuation will gladly pay up to play, but is that really the best move for a founder?  Probably not.  The reason that I’m not willing to overpay for an inflated seed round has nothing to do with returns for our fund.  It’s not a math problem I’m trying to solve where I say at $3M premoney we’re going to make a lot of money, and at $5M premoney we’re not.  Rather, I view a founder’s attempt at closing on their first round of financing at an out of whack valuation as a warning sign of a more fundamentally dangerous datapoint: bad judgment.  Whether I bet at $3 or $5 doesn’t matter all that much, but whether I am betting on CEOs with good judgment vs bad is an extremely good predictor of our fund’s overall success.  If you are raising your first round of capital, you should be pricing your round at the valuation where the absolute best investors in the market will all be excited and willing to participate, not at the maximum price where you can find some investors to participate.  If you’re not sure what these numbers are, I thought I’d explicitly articulate some signposts.  This is by no means absolute, and the market changes month to month, but here’s how I’d be thinking about it by stage of development and setup:

do I really need to do a business plan?

I’m often asked: do I really need to do a business plan? In short: yes, you really do. Here are a few reasons why:

 

1. Business Viability

 

Having a great idea for a business is one thing, but actually understanding what it takes to make a success of it is another altogether. Say you’ve invented a witchamajig – you can get it made for £1 and sell it for £5, that’s great! But if you want to make a decent amount of money out of it; you’ll have to make and sell your witchamajigs at scale. This means you’ll need to pay for storage, transportation, an office and staff. Your customers are unlikely to come running towards you bearing wedges of cash, so you’ll need to find them by spending money on marketing and advertising. To grow, you’ll need to sell your products to other retailers or distributors, who will expect to buy at wholesale.

 

When a business grows, its cost base rises. It’s really important to think about this in advance; putting it all down on paper can really help you to understand if the business is actually viable at scale. It can also help you to plan for any nasty surprises further down the line.

Is Crowfunding Right For Your Business?

Crowdfunding has taken the startup world by storm and has given business owners another choice at raising capital for their cash stricken business. Most start-ups are suitable for websites like Kickstarter or Indiegogo but some should be cautious! Outside investment can be hard and challenging but having an unsuccessful Crowdfund campaign could not only waste time and money, but also kill your drive. Ask yourself the questions below and find out whether your startup is ready to launch a Crowdfunding campaign to help reach your funding goal.

Is your concept innovative and exciting?

Crowdfunding is all about the journey for the backer!  They watch you build your project every step of the way and each backer is willing to wait months to receive the finished reward.   If they have seen your idea done before, that excitement for them is reduced significantly.  Your goal is to educate them on your new concept and give them a reason to fund YOU.  Only then, will they take a chance with you on this new and exciting idea.  Adding features people have not seen and including extra benefits will dramatically help your campaign.

Are your rewards tangible?

People love stuff they can touch, receive, and show off to others.   Your campaign is off to a good start if your idea/concept is an actual tangible product that you will eventually have to ship.  Many campaigns fail simply because people don’t want to wait 3 to 6 months to actually see the final version or watch it slowly built on the web.

Exceptions – movies/documentaries, app games, supporting a cause

What is the reason behind what you’re doing?

Backers want to support campaigns that have a real story behind them.  They want to know the “why” you are doing this and “how” you got started.  So give them what they want and make it easily understandable in your video. Let potential backers know the struggle that went along with making this dream a reality.  They want to feel like they helped you overcome the obstacle that was stopping you from bringing your product/idea to life. Also make sure to let them know “who” you are and even “where” you are located just to help people feel a real connection with you.

You Don’t Need Money to Make Money

Money won’t create success, the freedom to make it will.
—Nelson Mandela, former president, South Africa

 

Nothing is more irritating than hearing one of the many generalizations that permeate the business world and corrupt the minds of new entrepreneurs. You’ve heard them. You may even deal in   these false aphorisms: “Follow your passion.” “Fake it ’til you make it.” “Entrepreneurs are born, not made.” However, perhaps the most damaging to new entrepreneurs is the following: “It takes money to make money.” No statement is more wrong or misleading.

I vividly remember when, where, and from whom I first heard this phrase. I was barely in my twenties and in downtown Atlanta, meeting with an accomplished entrepreneur who owned her own graphic design studio. I don’t remember the context of our conversation, but when she said those six words I was perplexed. I was more impressed with the phrasing itself than its validity. At that point, I had started my first three companies with hardly any money at all. What she said just didn’t make sense and certainly wasn’t applicable to me.

My first company, a website for college students, didn’t require much money at all. If anything, it demanded only my time and computer programming skills. During the first few years of the business, I only spent money on web hosting and a domain name, although it certainly wasn’t necessary. Those costs were about $30 monthly. My second company, which produced a web-based content management system, had similar, nominal costs. Finally, my third company, a magazine, didn’t require money at all. I simply came up with the idea and went out to sell it before it existed. For each business, I assumed that raising money was not even an option, and I am glad that I did. Had I heard that awful phrase, I may have delayed or killed my ventures, thinking that I had to raise money. Instead, I figured it out and, most importantly, attacked my goal with the resources I had.