Equity-based crowdfunding (that is, providing regular people with the opportunity to purchase stock in private companies) will not be legal in the US until the first quarter of 2013 at the earliest. At that time, any company planning to operate as a “funding portal” will have to comply with an extensive set of rules and regulations established by the U.S. Securities and Exchange Commission, which have not yet been released.
Project-based crowdfunding (that is, providing individuals or companies with the opportunity to accept donations from supporters, or pre-sell their products) is currently legal, and is exemplified by sites like Kickstarter. Read more
Startups: Investors expect new marketing. The fundamentals still apply but tools and realities are different now. If you don’t understand the broader implications of social media, content marketing, curation, engagement, and relationships, then you desperately need a great reason why not. And don’t think you can just wave your hands at it. You have to really know it.
Here’s are some things I think every startup founder needs to keep in mind:
- You still need to deal with marketing. Investors will expect marketing to show up in your pitch, and if they like your pitch they’ll want your business plan and marketing better be there too. Be sure to include credible target market focus, matching and synchronized product-market focus. The fundamentals still apply.
- However, your marketing better make it clear that you really know what century and what decade we’re in; that you understand how much your customers, contacts, reviews, and relationships control your brand; that advertising is changing as quickly as anything; and that content is everywhere and curation the real power.
- There are exceptions of course. I’ve seen startups whose product is their marketing, and that’s hugely powerful. If that’s your case, own it. If your startup is an exception to the rule, make it clear that you understand the rule(s) you’re breaking.
- Don’t think for a second that a verbal wave at “social media” means anything anymore. I’ve seen startup founder annoy entire rooms of investors, instantly, by saying “we’re going to use social media to market this” as if that were enough. Knowing tools isn’t enough. Know why, when, and how they work, what they can do, and what they can’t do. Have strategy, tactics, and specific activities. And time and money to match.
To make this less abstract: Imagine a startup founder, standing up in a meeting room, surrounded by a couple dozen potential investors, with slides projected on the wall. When investors drill down into marketing, a wave of the hand and the simple phrase “social media” doesn’t work the way it might have five years ago. Saying “SEO” or “banner advertising” or “pay-per-click” isn’t enough, not even all these terms together. It takes a combination of focus, strategy, and tactics; a real plan.
Also: Just for the record, these various points I’m presenting here as fact, they’re really just my opinion, and I want you to know that I do know the difference. But I also know a lot of angel investors, most of those in my group, who would agree with what I’m saying.
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I still get business plans, looking for an investor, that say all too clearly that the primary “use of funds” will be to do research and development (R&D) on some promising new technology, like superconductivity or cancer cures. Entrepreneurs forget that investors are looking for commercial products to make money, rather than R&D sunk costs, so investment hopes are sunk as well.
In fact, the term ‘research and development’ covers a continuum of activities, so you need to use a more precise term to maximize your funding likelihood. There are opportunities all along the continuum, and they need to be mapped to the right academic environments and public- and private-sector development organizations before a funding source can be determined. Read more
Interestingly, the large majority of venture capitalists are very friendly. It’s for the same reason that as a group, orthodontists tend almost universally to be more friendly than surgeons.
["Whaaaa?!?"! I hear you ask. Think about it for a bit, and particularly if you've had personal experiences with either/both groups.]
The latter profession sees you by referral from another doctor, operates on you while you’re asleep, and rarely sees you again. They don’t NEED to be friendly! In contrast, you may visit several orthodontists before choosing one, and then for them to be successful (and you to keep paying) they need to cajole you into compliance over 2+ years of orthodontic treatment.
Similarly, while venture capitalists typically invest in only one out of every 400 companies they see, for them to have the *opportunity* to invest in that one, they need to convince all 400 that they would make great, long-term partners. And since, as the the old saying goes, “you’ll catch more flies with honey than with vinegar”, it’s simply a Best Practice for a VC to be friendly!
That said, based on my somewhat limited view of the industry (I certainly don’t know every VC), probably the “friendliest” group of venture capitalists I know are the team at First Round Capital, and the “friendliest” angel investor I know would be…me! (As my CFO once chided me when discussing the skill set necessary to be a professional investor, “David, your problem is that you’ve got 0% Asshole Factor!”)
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
Unfortunately, VCs do not typically review business plans. Instead they look at a brief summary, and then decide if they want to invite you in for a meeting. Read more
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Based on my experience as a mentor and an entrepreneur, if you fail on your first startup, you are about average. That’s not bad, but who wants to be average? Every young entrepreneur knows implicitly that startup success is a long hard road. Statistics show that the failure rate for new startups within the first 5 years is higher than 50 percent. How can you improve your odds?
Of course, a real entrepreneur always takes a failure as a milestone on the road to success. They count on learning from their mistakes, and use the experience to move to the next idea. But why not learn as well from the mistakes of others, without suffering their cost, time, and pain? In that context, I offer you my list of ten top startup failure causes, seen over and over again: Read more
Since equity crowdfunding under the recently passed JOBS Act will not be legal until some point next year, there is currently a great deal of smoke, although not necessarily a lot of fire, around new entrants into the space. But taking a look at some operating US-based companies that currently come to mind when thinking about the space (Kickstarter, Indiegogo, AngelList, Gust, CircleUp), some of the known angels who have invested in them include: Read more