From the question it sounds to me as though this is a case of both a novice investor and a novice entrepreneur, with neither one having much experience with or as an angel. I would therefore *strongly* advise you to get an experienced startup attorney to advise you during the negotiation/term sheet discussions. Read more
The days are gone when a techie or a genius could build things in his garage and customers would find and buy the product, based purely on the “wow factor” of the technology. New technologies are everywhere today. People have seen so much that they are blasé, or actually fear pure technology. They want a personable brand, before they will consider the product.
They are overloaded by the media with amazing advertising messages, and people now realize that you can’t believe anything you see in pictures, and even videos can be edited to deliver any message. In fact, we are all media companies now, with our cell phones, computers, and professional-looking publishing tools. Read more
Although that’s probably not the right question to be asking (because the right investor is one who is investing in you as a businessperson, not you as a minorityperson), some firms and groups specializing in this sector are NMAN, the National Minority Angel Network (http://www.nmanetwork.co
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
All investments by angels (and everyone else) in a company are made according to detailed legal documents that specify everything about the relationship among the various parties, the terms of the value exchange and the various rights and responsibilities of everyone involved. The paperwork can range from 5-10 pages for a pretty straightforward convertible note, up to 120 pages or more for a full Series A round. Because these are legal documents, both parties (the company and the investor(s)) have their own lawyers, who work together to develop the actual agreements signed by the principals. Typically one lawyer will be responsible for the base drafting, with the other making comments, although in virtually all cases the documents are based on standard models that have been developed for use by anyone who wants to use them. Read more
In the US, many entrepreneurs see grants as “free money,” since they are not loans and don’t have to be repaid. A grant is not an equity investment, so the entrepreneur doesn’t have to give up a stake in the company either. Typically they can be used to fund product development and commercialization that would otherwise require outside investors.
A good place to start looking is the Small Business Innovation Research (SBIR) program, which is a lifeline for high-tech startups. A more general approach is to check out Grants.gov, which is a searchable directory of more than 1,000 federal grant programs. An advanced search tool is provided to search for a grant by eligibility, by issuing agency, or category. Read more
The venture capital fund itself makes money…
…by investing early in a startup company’s life, when success is not at all assured. In exchange for investing capital to help the company grow, the fund receives an ownership interest in the company. Because in the early days a company will not be worth very much, the fund’s ownership interest will be worth exactly what it paid. But as the company grows and becomes more valuable, the value of the fund’s corresponding percentage grows as well. Read more
Entrepreneurs are all about firsts, and the most important is you making a great first impression – on investors, customers, new team members, and strategic partners. Poor first impressions can be avoided, but I’m amazed at the number of unnecessary mistakes I see at those critical first introductions, presentations, and meetings.
The key message here is “preparation.” People who think they can always “wing it,” bluff their way past tough questions, or expect the other party to bridge all the gaps, sadly often find that what they think is a win, is actually a loss which can never be regained. Read more