Sorry, haven’t posted in a few days. Things are getting really hairy from a development perspective and I ran into a bunch of issues that I finally worked through, for now.
Anyway, I wanted to talk a little bit about Angel funding. Angel funding is one of the main types of funding for startups – the other being Venture Capital. For those who don’t know, Angel funding is a type of funding that is sourced from wealthy individuals organized in groups or networks in exchange for equity in your company. Here’s a decent definition that I found on the web.
http://www.investordictionary.com/definition/angel+investors.aspx
There are a few big differences between Angel funding and VC. First and foremost, the size of the investment in Angel funding is typically much lower (< $1M) and most of the time falls in the realm of $250K – $500K. VC investments are into the millions and can get pretty high. Secondly, from what I understand VCs are more actively involved and desire a greater control over the company (e.g. kicking out the founders to get a real ceo). Angels usually provide more of an advisory role than active management. Keep in mind this is not always the case and there are exceptions.
So, this brings me to the point of the article. How does one decide on the type of funding and, more importantly, how does one obtain this funding? In my opinion, to much money is alot worse than to little money. Also, for me the direction and strategy of the company are very important and I wouldn’t want to relinquish that control just yet. So, naturally I’m leaning towards Angel funding which I think most startups are these days. It really doesn’t cost much to start a company – maybe a few thousand bucks. Most of the hit you take is in lost salary. Now, how do you obtain this Angel funding? Well, I don’t know. I’ve never personally received funding, but will be attempting so shortly. So, I’ll definitely post my experiences once I go through it.
For now, here’s what I think matters.
1) Experience – This always wins. If you’ve raised money before that will give you credibility (if you didn’t blow it all away).
2) Prototype – Build a prototype. Have something to show them. It will be hard to get a few hundred thousand dollars without this. Plus, you have all of the other startups to compete with.
3) Customers – This is important. Do people like your product? Do you have a site up and running with actual customers?
4) Money – Have you sunk any of your own money in the venture? If not, you probably should. Shows commitment.
5) Idea – Of course the idea matters. It needs to be feasible, have a good market size and some kind of competitive advantage for them to even consider investing in you.
If all else fails, go for it anyway if you believe in the idea! There have been many startups that were self-funded.
