At the Angel Capital Association (ACA) Summit in Austin in March, the Angel Resource Institute reported on angel group activity in 2001 in the first annual Halo Report. I found some of the results quite interesting. For example:
What do investors look for in an entrepreneur? This month I’ve been reviewing submissions for my local angel group. I found this excellent list of 14 Ways to be a Great Startup CEO, posted at OnStartups by Jason Baptiste. And that reminded me of my own list, 10 Traits of Successful Entrepreneurs, which I posted a few years ago, before I joined the angel investing group. Both of those lists, against the background of what I’m doing this month, remind me that what makes a successful venture, or a successful entrepreneur, isn’t necessarily the same thing that makes a good investment opportunity for outside investors.
Hint: there’s a difference between a good business and a good investment. There are a lot more good businesses. A good business can make its entrepreneurs happy, while a good investment has to make the investors happy. Investors aren’t employees. They aren’t building themselves jobs. They need to get actual money back, sometime in the future, to get a return. Read more
Modern investors love to first read a two-page summary of your business plan, formatted like a glossy marketing collateral sheet, with text well laid out in columns and sidebars, and a couple of relevant graphics. This one had better grab their attention, or they won’t look further.
You may have already found several articles, web pages, or books about writing the perfect executive summary. They all offer a list of requirements that might take 50 pages to address, but of course they ask you to write concisely. Take a look at my website for the Sample Executive Summary, which shows what can be done in one page (both sides). Read more
Most all the talk about the JOBS bill is about crowdfunding, seeding, and the ability to advertise private placements. In my mind, other provisions are the really big news for young companies.
Those are the expansion of the size limits for “Reg A” offerings, and the newly created “regulatory on-ramp.” Together, these have re-opened a door to capital that’s been boarded over and forgotten: small company public offerings. In a back-to-the-future way, companies with a proven model and modest revenues will have a new, realistic option for growth capital– one that doesn’t require capitulating to onerous terms from large funds, or begging bankers who prefer to make money by simply rolling over government securities. Read more
The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Reg D). A Private Placement Memorandum (PPM) is a special business plan defined to meet an SEC exemption. In most cases, those entrepreneurs choosing to raise capital using PPMs retain specialists (many of whom are lawyers) to write their PPMs – a rather expensive undertaking. Read more
Last week I penned an in-depth critique of the portion of the JOBS Act seeking to legalize crowdfunding in the United States. The bill, which may have more to do with political grandstanding in an election year than with actual job creation, was approved by a strong bipartisan majority in the House of Representatives. As I argued last week, the version of the JOBS Act approved by the House is a bold experiment in targeted radical deregulation of financial markets on the heels of one of the worst economic disasters in American history — itself attributable to deregulation with inadequate oversight — while the asthmatic U.S. economic recovery wheezes and stumbles through the smoldering wreckage of once mighty financial institutions. Read more
After struggling to create your business plan for months, every entrepreneur likes to think that their document is inspirational and will reach someone who is smart enough to see the brilliance of the idea, intuitive enough to recognize their business acumen, and enthusiastic enough to offer the money required to make it happen.
Every serious investor, on the other hand, has a stack of these in their in-basket (email or real plastic) awaiting review, and is looking for the flaw or less-capable entrepreneur in each that predicts failure, allowing them to discard it like another piece of junk mail. Many VC firms and investment banks receive as many as ten plans per day, so it’s hard to get them salivating. Read more