Invested Interests

8 Reasons All Angel Investor Money May Not Be Equal

Image via FirstSeniorFinancialGroup.com

A few angel investors have slipped or fallen from their lofty perch, so entrepreneurs must take great care to validate the character and reputation of every prospective investor. The entrepreneur’s tendency to be in a huge hurry to obtain the funding can end up being disastrous, and play into the hands of these less scrupulous investors.

Many entrepreneurs believe all money is created equal. As long as somebody recognizes their million dollar idea and writes them a check, the source really doesn’t matter. In fact, most angels are pure, but there are some exceptions that may cost you more than an investment: Read more

Invested Interests

6 Strategies for Transforming Ideas Into Results

Image via blog.JohnSpence.com

Successful startups are all about turning ideas into action quickly and efficiently. These actions must be the hard part, since entrepreneurs always seem to come to me with ideas, and ask me for help on the actions. That has always seemed strange to me, since the magic is supposed to be in the ideas, and the actions are the same for every business.

In fact, the actions required to start and run a business are well documented, the subject of many books, and taught in college courses across the land. As confirmed to me by John Spence in his book on this subject, Awesomely Simple, turning business ideas into action consists of six essential strategies: Read more

Invested Interests

Angel Group Syndication of Series A Rounds

US angel investors have been a robust source of seed stage capital for years.  More recently, we have experienced significant growth in the number of funded seed stage deals, due to the emergence of accelerators, super angels and new seed stage funds.  Unfortunately, we are now suffering a Series A startup funding crunch, that is, a lack of seed stage follow-on capital in the range of $1.5 to $7 million, funding which a decade or more ago was the sweet spot for venture capital.

Over half of angel rounds reported recently by groups who are members of the Angel Capital Association were syndication among multiple groups (from the Halo Report).   Formal seed stage syndication activities are operating among US angel groups in the Northeast, the Pacific Northwest, the states of Ohio and Texas and elsewhere.  These syndication efforts routinely fund round sizes up to $2 million, but few larger rounds.  Can we devise a syndication model which would enable US angel groups to syndicate Series A rounds between $1.5 million and $5 million, or even higher? Read more

Bill Payne , Angel Investor , Frontier Angel Fund
May 8th, 2013 2

Invested Interests

If They Ask You to Judge a Business Plan Competition, Say Yes

I’ve had the pleasure of judging several dozen real business pitches in the past six weeks. Some were pitches for angel investment at the Willamette Angel Conference, an angel group in Oregon. More to the point, others were for the University of Oregon New Venture Competition, the Rice University Business Plan Competition, and the University of Texas’ Venture Labs competition. 

Rice Business Plan Competition 2013

The three business plan competitions I participated in were all MBA-level contests organized by the entrepreneurship-related faculties at the three schools. They all invited startups from dozens of different schools, including several from other countries. 

Judges read business plans first, then hear the pitches, then ask questions, and vote for winners. If you’re an angel investor you’re familiar with what works and doesn’t, you’re interested in startups, and you’ll enjoy judging in one of these competitions. You see some great plans and smart people. 

Unlike the old days of the early business plan competitions — University of Texas’ Moot Corp was the first, in 1984 — these are no longer academic exercises. These are mostly startups that will launch. Teams that competed in just the three contests I mention here in the last 10 years have raised close to a billion dollars in venture money between them. For example, Auditude, the 2005 winner of both Texas contests, was purchased in 2009 by Adobe for $120 million. 

And the entrants come from all over. A Thai company tied for first place in the University of Oregon competition last month, and an Indian company just won the University of Texas competition last weekend. A British company and several other Thai companies got into the finals of these three. 

And judges are a mix of venture capitalists, angel investors, and successful entrepreneurs. So if you are one of those, then I recommend you check with local universities or with bizplancompetitions.com to see what competitions take place close to you. 

(Image courtesy of Rice Business Plan Competition)

Tim Berry , Founder, Palo Alto Software
May 7th, 2013 0

Invested Interests

Is Your Startup Moving Fast Enough to Stay Ahead?

Kentucky Derby (AP/Photo David Goldman)

In today’s business startup environment, if you don’t move fast, you get run over. Without a sense of urgency, people and businesses just can’t move fast enough. Speed is the driver because customers have a zero tolerance for waiting, and there are always competitors gaining on you.

John P. Kotter, in “A Sense of Urgency,” delves into the how-to required of entrepreneurs on that first step, avoiding pitfalls along the way. He is convinced that increasing the sense of urgency is the toughest of the steps necessary for effective change. Read more

Invested Interests

True Story: Why We Turned This Deal Down

This is about a deal my angel group turned down. 

Tim Berry Good Investment Good Startups Venn Diagram

The software looks excellent. I wanted to use it immediately. There’s urgent and widespread market need. It’s obviously proprietary too. It’s a crowded noisy market, but it feels like this one has a real shot at it. Furthermore, the entrepreneur behind it is proven. The software grew out of the needs of a successful professional service business. There’s relatively low risk of failure. 

So why did we turn it down? Because this one doesn’t need our investment. It’s quite possibly better off growing on its own bouyed by the resources of that professional service company. The entrepreneur could get it past cash flow break-even and continue growing so it would never look back.

We don’t want to end up with a minority share of a company that has no incentive to exit. Not all good businesses are good investments. 

 

Tim Berry , Founder, Palo Alto Software
April 30th, 2013 2

Invested Interests

10 Tips For Entrepreneurs on How to Hang Tough

Image via WickedStart.com

In sports, mental toughness is defined as the ability to focus on and execute solutions, especially in the face of adversity. If anyone in business ever needed mental toughness, it’s an entrepreneur. Investors tell me that startup success is all about execution, all while facing determined competitors and overcoming customers’ resistance to change.

Dr. Jason Selk, in his book “Executive Toughness,” talks about mental toughness with analogies between sports and business, but he never takes it all the way to entrepreneurs, where I believe it can have the most impact. So here is my interpretation of the fundamentals he outlines, adapted to the language of a startup: Read more