Where would I go to invest in startups or emerging companies?

The first question you need to ask is “What country are you in?” and the second is “Are you an Accredited Investor by that country’s standards?”

If we’re talking about the US and you are NOT at the Accredited level ($1 million in investable assets, or $200,000 annual income), then for the moment you are actually not allowed to invest in privately held startups (emerging publiccompanies, of course, you can buy on the stock market like everyone else.)

This will be changing next year, however, because of a new law called the JOBS Act of 2012, which establishes a new, limited type of Crowdfunding for small companies and non-Accredited investors. Once the U.S. Securities and Exchange Commission gets around to writing and releasing the rules for this program (aaaaaaaaaaaaany day now), you will be able to go online to one of many new ‘crowd funding portals’, where startups looking for equity investments will list themselves (similar to the way project crowd funding sites like Kickstarter work today.) Subject to specific rules and dollar limits (10% of your income in aggregate for all investments per year, etc.) you will be able to invest online, just as easily as buying books from Amazon :-)

On the other hand, if you already are an Accredited investor, you can legally invest in startups today without much hassle, putting in as much or as little as you and the company agree on (the average angel investment per company is about $25,000.)

The challenge with this, however, is that while you are allowed to invest, right now the company is not allowed to tell you that it’s raising money! That’s why one of the best options for you today is to join a local angel investor group, where you will work collegially with 25-250 other investors to hear pitches from companies, do your due diligence homework, and then—if you are interested—pool your money with the others to make meaningful investments.

Most angel groups today are connected on a single Internet platform called Gust(of which I happen to be the CEO), which allows their members to easily collaborate both internally and externally on finding and executing investments. As the primary international platform for angel investing, Gust is also used by over 200,000 startups to manage their investor relations, making the industry increasingly efficient.

If you want to strike out on your own, though, there are several online platforms that have recently begun to offer selections of curated startups to Accredited investors. While this has been a bit problematic given the current rules, as of late September 2013 (also thanks to the recent JOBS Act) it will finally be legal for companies to publicly announce that they’re raising money (technically this is called General Solicitation).

Some sites are already offering individual investments to Accredited investors, and hundreds more are gearing up to launch in the coming months. Among the better known ones already in business are AngelListFunder’s ClubSecondMarket,SeedInvestRealty Mogul, and Bolstr.

So, the bottom line is that this is a great time to start thinking about investing in high growth startup companies! Whether you’re an Accredited angel investor or a non-accredited crowd funder; whether you want to invest with a group or on your own; whether you want to meet founders in person or do everything online; whether you want to invest $1,000 or $1,000,000; whether you want to lead an investment syndicate or participate along with other investors; there are—or shortly will be—groups, platforms and services that will be delighted to help you get into the game!

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

Digital.NYC: The First Ecosystem Hub

On October 1st, 2014, after more than two years of partnership and development, Gust proudly joined the Mayor of the City of New York and IBM in announcing the launch of Digital.NYC, NYC’s new official hub for tech and startups. In the first 36 hours, mentions of the hub were viewed more than 42 million times on social media, and over 100,000 pages on the site were perused. News outlets from USA Today to Mashable to Brooklyn’s Technical.ly praised the hub and its place in the community. For the Gust team, we couldn’t be happier about the warm welcome.

The Digital.NYC hub (an “Ecosystem Hub” as we call it behind the scenes) features every resource and insight for the NYC tech and startup scene including news, jobs, courses, events, blogs, and even available workspaces. This timely information is complemented by searchable, user-managed profiles of every startup, investor, incubator, and accelerator in NYC. Every resource with an address is also integrated into a unified map, where users can peruse the City’s resources in relation to where they live or work.

Content on the hub is drawn from established resources in real-time, such as AlleyWatch, TheMuse, Meetup, CourseHorse, PivotDesk, and over a dozen others. Most of the profiles of startups and investors are provided by Gust. If any member of the community is not using these established resources they can add themselves to the hub via simple forms found on most of the site’s pages. All content is reviewed and ultimately posted by dedicated in-house editors. As the permanent online hub for NYC, Digital.NYC provides a valuable resource to every member of the community that has an interest in this burgeoning economy.

Digital.NYC is the result of a public-private partnership between NYCEDC, the NYC Mayor’s Office, IBM, and Gust. The concept originated with the City and was ultimately built by Gust. IBM partnered to provide sponsorship and hosting on it’s Bluemix cloud platform. The public-private partnership has provided an invaluable benefit to all parties.

For the City, including the de Blasio administration and NYCEDC, the partnership has yielded an enterprise level online platform, a private sector team dedicated to accountability and agile, ongoing improvements, and most importantly an invaluable resource for accelerating the economic development of the region.

For IBM, Digital.NYC provides exclusive community-building in the fastest growing tech ecosystem in the world. This exposure helps in recruiting entrepreneurs for their rapidly growing Global Entrepreneur Program, as well their integrated suite of cloud services targeted towards tech and startup community members.

The tremendous native equity inherent in the City of New York and IBM has been invaluable for pushing the initiative forward, from both a public and commercial perspective. Together, as a team with Gust, the initial results have been extraordinary.

For Gust, Digital.NYC represents a new paradigm for connecting the early-stage ecosystem. Our vision has always been to facilitate the connections between entrepreneurs and early stage investors. From our inception we have been perfecting this process from the perspective of deal flow. Digital.NYC represents our first MVP for facilitating these connections from the perspective of content, and invites new audiences on the fringes of the early-stage economy.

There is no greater power than what results from the seamless connection of physical communities to the information and knowledge that surrounds them. Digital.NYC is the first in the world to make this connection for a localized entrepreneurial community in a comprehensive, meaningful way, and certainly won’t be the last.

Justin Cina , Marketing Director, Gust
October 29th, 2014

Bootstrapping Organic Growth Makes Startup Sense

Image via Flickr from Food For Thought album

Image via Flickr from Food For Thought album

When someone asks me for the best way to fund a startup, I always say bootstrap it, meaning fund it yourself and grow organically. Bootstrapping avoids all the cost, pain, and distractions of finding angels or VCs, and allows you to keep control and all your hard-earned equity for yourself. Despite all the focus you hear on external investors, over 90% of startups today are self-funded.

I grew to understand this approach much more when I interviewed a popular serial entrepreneur, Rich Christiansen a while back, who has done almost 30 businesses wholly by bootstrapping. He published a book with Ron Porter, titled “Bootstrap Business”, that provides a wealth of practical examples and advice on this subject. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
October 27th, 2014

Which books would you recommend to a VC analyst-associate?

The Business of Venture Capital
Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies

Raising Venture Capital for the Serious Entrepreneur

Mastering the VC Game
A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms

Term Sheets & Valuations
A Line by Line Look at the Intricacies of Term Sheets & Valuations

Venture Deals
Be Smarter Than Your Lawyer and Venture Capitalist

Venture Capital, Private Equity, and the Financing of Entrepreneurship

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

How can Australia kickstart the local startup community?

Sebastien Eckersley-Maslin makes some excellent points, most of which are ones that I would have made. In particular, getting to critical mass (of entrepreneurs, angel investors, engineers, et al) is perhaps the most important thing you can do. Whether this is by City (the most useful) or pan-Australian (perhaps a bit easier), it provides a host of benefits both in terms of availability of resources and visible success stories for new entrepreneurs.

Australia has some very active, organized, groups of angel investors, and they should be embraced and brought into the startup community as a resource.

An online central hub of the entire startup ecosystem would be a great way to bring all of the startup constituents and components together.

Celebration of entrepreneurship is also important, because fear of failure is one of the most debilitating things for an industry that needs to be nurtured. Here, Australia should take as its model we crazy Americans, rather than our delightful British cousins. In the US (particularly in tech centers such as Silicon Valley or New York), failure is almost a badge of honor, and is largely perceived to be a great learning experience. Across the sea, however, a single failure can often ruin reputations and social standing…which means that many great entrepreneurs never dare to start.

Finally, immigration policies are certainly an important subject for discussion. Here in the US we are having the same debate, for the same reasons. Although we have a lot more people than you do, every year there are tens of thousands of foreign-born great people who would do wonders for our tech community, but who are not allowed across our borders. You have the problem to an even greater extent, and I would suggest doing what you can to increase the number of qualified people who are able to enter the country and join your startup workforce.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *

The Good, The Bad, And The Ugly Of Software Patents

Image via Flickr by Joshua Gajownik for opensource.com

Image via Flickr by Joshua Gajownik for opensource.com

I always advise software startups to file patents to protect their “secret sauce” from competitors, and to increase their valuation. The good news is that a patent can scare off or at least delay competitors, and as a “rule of thumb” patents can add up to $1M to your startup valuation for investors or M&A exits (merger and acquisition).

The bad news is that patent trolls (non-producing companies that make their money from licensing patents) can squeeze the lifeblood out of unsuspecting entrepreneurs, as exemplified by the recent mess around Lodsys suing small Apple IOS developers. This patent holding company has charged infringement and demanded royalties from every app developer for the iPhone and Android, for a feature most agree has been in apps for many years. Read more

Martin Zwilling , Founder and CEO, Startup Professionals
October 19th, 2014

Should I give my seed investors anti-dilution protection?

What this investor is seeking is called “permanent, full-ratchet, anti-dilution protection”, and that is neither (a) in line with the market, nor (b) practical. Even if you were willing to give it to him, it is highly, highly unlikely to stand up beyond the next financing round, because there’s no way your next investor is going to take a dilution hit for this first one.  That’s why anti-dilution provisions are typically only applicable to the next financing.

So, no, you simply can’t give him what he wants. (Assuming that the next investor wouldn’t stomach it, there are only two possible outcomes: A: the new investor forces the original one to waive it, or B: the new investor walks away from the deal.)

Instead, let me suggest that you offer “weighted average anti-dilution protection” to the next equity round. That is fair and reasonable, and should provide an appropriate level of comfort to this investor.

*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *