EnablingAngels http://www.enablingangels.com/ Covering Angel Investors, Angel Investments, and the start-up companies that are enabled en Copyright 2008 Tue, 07 Nov 2006 16:55:00 -0700 http://www.sixapart.com/movabletype/?v=3.34 http://blogs.law.harvard.edu/tech/rss EnablingAngels "On Leave" We’re sorry, but EnablingAngels.com is currently “on leave” and inactive.Empty Office.jpg However, please enjoy the existing valuable articles about angel investing. Thank you!

]]> http://www.enablingangels.com/2006/11/enablingangels_on_leave.html http://www.enablingangels.com/2006/11/enablingangels_on_leave.html About EnablingAngelsAuthor Profile2.0Author Profile Tue, 07 Nov 2006 16:55:00 -0700 Valuation Panic, Part 2 -- For Angels In my previous post, I advised rookie entrepreneurs not to give their valuations to angel investors in elevator pitches because angels almost always jump ship when they hear a valuation that is too high.

On the flip-side, angels shouldn't immediately rule out a promising company just because the entrepreneur's valuation is a little high.

The entrepreneur's valuation of the company is the beginning of a conversation (a.k.a. negotiation), especially when they throw it out during an elevator pitch.

Be patient with first-time entrepreneurs and take the time to educate them.  I've seen too many angels miss out on smokin' deals because they shut their ears off way too early in the conversation.

What do you think?

]]> http://www.enablingangels.com/2006/08/valuation_panic_part_2_for_ang.html http://www.enablingangels.com/2006/08/valuation_panic_part_2_for_ang.html Best Practices2.0Best Practices Thu, 31 Aug 2006 23:34:45 -0700 Valuation Panic, Part 1 -- For Entrepreneurs I listened to ten entrepreneurs give ten 4-minute pitches ten times to ten tables of angel investors at a FundingUniverse.com Speedpitching Luncheon the other day.  (Feel free to go back and read that last sentence again.  It was the best I could do.)

Before the event, I had the opportunity to advise each entrepreneur and give them feedback on their presentations.  Several of them included their pre-money valuation in their pitch.  I advised them not to.

Here's why:


  1. Most of them were rookie capital-raisers with absolutely no idea how much their company was worth and no math to back up their assertions.  Angels see through that.

  2. You can ruin your chances of raising capital by throwing out a huge valuation when you're talking to angels who are used to writing $150K checks for 15% equity.

  3. It may put you at a disadvantage in your valuation negotiations.  In many cases, it's good to have the angel suggest the first valuation.

  4. When you only have four minutes to pitch, you're primary goal should be to get a follow-up meeting with the angel.   Rather than throwing out your valuation, say something like, "That's an important question that deserves a detailed answer, and right now I don't feel like we have adequate time to discuss it thoroughly.  Why don't we meet later this week to talk about it.  My office or yours?"


Several of the entrepreneurs didn't follow my advise and, based on my conversation with the angels, ended up turning off otherwise interested angels.
If you are an experienced entrepreneur who has raised capital, and you can come into meetings with angels with a little swagger, that's a different story.  Today my friend Paul Allen told me about an entrepreneur with a great track record who does just that every time he raises money.  With first-time entrepreneurs, his story is the exception to the rule.

So, if you're a first-time entrepreneur giving an angel your elevator pitch, hold back on the valuation.

]]> http://www.enablingangels.com/2006/08/valuation_panic_part_1_for_ent.html http://www.enablingangels.com/2006/08/valuation_panic_part_1_for_ent.html Best PracticesFundingUniverse.comRaising Money from Angels2.0Raising Money from Angels Thu, 31 Aug 2006 22:55:31 -0700 Desert Angels Heat Up; Devin Thorpe's Ten Tips Regrettably. a few major projects at FundingUniverse.com have kept me from "getting my blog on" lately.  I'm glad to be back in the saddle.

A couple of interesting links:



 

]]> http://www.enablingangels.com/2006/08/arizona_angels_heat_up_devin_t.html http://www.enablingangels.com/2006/08/arizona_angels_heat_up_devin_t.html Angel Investing2.0Angel Investing Wed, 23 Aug 2006 15:05:57 -0700 Piedmont Angel Network Drops $1.3 into Bioptigen
Newly appointed PAN interim managing director Troy Knauss got his feet wet this week, leading a $1.3 million dollar investment in Bioptigen, a company that "is developing a new class of optical imaging systems for biomedical applications that can see inside the body".

Troy sounds like a stud.  He was CEO of Knauss Foods from 2001-2005 and lead the company to $40 million in sales and enjoyed a fat exit.   Now he's leading one of the nation's top biotech angel groups.

Here's the head-scratcher: Troy is an MBA candidate at Wake Forest.

Why would someone of Troy's accomplishment feel the need to get an MBA?

Look for an EnablingAngels interview with Troy in the near future.

]]> http://www.enablingangels.com/2006/08/piedmont_angel_network_drops_1.html http://www.enablingangels.com/2006/08/piedmont_angel_network_drops_1.html Angel-funded CompaniesLeading Entrepreneurs2.0Leading Entrepreneurs Sat, 12 Aug 2006 09:48:10 -0700 How to Listen to a Pitch
Marc Nathan  of the Houston Angel Network (Little known fact -- HAN is one of he nations three largest single branch angel groups.) sent me a great article on the art of watching a pitch.

I've sat through quite a few pitches with quite a few investors, and many, I'm afraid, need to pay attention to points 4 and 6 in the post: "Focus on the Problem and the Solution" and "Be Courteous an Polite".

I've seen too many angel investors use techniques to try and get the entrepreneur out of his or her comfort zone -- looking down at the floor, checking emails on the Crackberry, impatiently looking at their watches, interrupting with outlanding questions, etc. -- all in the name of finding out what the entrepreneur is made of and discovering how he or she reacts under pressure.

Sure, being cool under fire is important, but if you focus your energy trying to make some one fidget, you're obviously focusing on the wrong thing.

]]> http://www.enablingangels.com/2006/08/how_to_listen_to_a_pitch.html http://www.enablingangels.com/2006/08/how_to_listen_to_a_pitch.html Best Practices2.0Best Practices Thu, 10 Aug 2006 09:34:45 -0700 Chad and Brad say this is a Good Article Chad Blodgett emailed this story to me and Brad Feld blogged about it.  I'm guessing it's worth reading.

David Cohen writes a thoughtful article about how angel investors make decisions to invest.  The underlying theme is that many angels rely a great deal on impressions and connections to evaluate investment opportunities -- as opposed to venture capitalists who can't afford to spend other people's money based on gut feelings.

Quick warning: Even though angels aren't as rigorous with their due dillegence as other investors, don't fool yourself into thinking angel investors won't rip your business to pieces.  However if you follow the principles that David points out you'll be in a great position to impress angels when you meet.

Thanks for the tips fellas!

]]> http://www.enablingangels.com/2006/08/chad_and_brad_say_this_is_a_go.html http://www.enablingangels.com/2006/08/chad_and_brad_say_this_is_a_go.html Angel GroupsRaising Money from Angels2.0Raising Money from Angels Thu, 10 Aug 2006 00:27:18 -0700 Two Significant Events for Female Investors
Milwaukee-based Silicon Pastures named Theresa Esser its new executive director.  Theresa joins a small handful of women who are leading angel groups, a fact that she calls both "significant and interesting".  Congratulations Theresa!

In addition, the largest women's investment group in the U.S. made its first investment this week.  The Texas Women Ventures Fund dropped a cool million into KARLEE, Inc., "a woman-owned provider of customized integrated manufacturing services for diverse industry sectors, including medical, semi-conductor, telecommunications, nuclear and defense."

Nice work ladies! 

]]> http://www.enablingangels.com/2006/08/two_significant_events_for_fem.html http://www.enablingangels.com/2006/08/two_significant_events_for_fem.html Angel Groups2.0Angel Groups Wed, 09 Aug 2006 23:59:35 -0700 You might be an entrepreneur if ...
A little entrepreneur trivia ...

The Ewing Marion Kauffman Foundation has done some research on what makes an individual more likely to be entrepreneurial, and here's what they found:

You don't need to be a college grad, well-organized, or driven by money to be an entrepreneur.

You're more likely to be entrepreneurial if


  • You're left handed

  • You're an immigrant

  • You were self-employed by the time you were 20

  • One of your parents were self-employed for a long time

  • You're the oldest child in your family

  • You have two or more children

  • You have been fired more than once

]]> http://www.enablingangels.com/2006/08/you_might_be_an_entrepreneur_i.html http://www.enablingangels.com/2006/08/you_might_be_an_entrepreneur_i.html Entrepreneurship2.0Entrepreneurship Sat, 05 Aug 2006 07:42:08 -0700 The Angel Journal The Genesis Exchage is taking a stab at creating a regular publication for angel investors called The Angel Journal.

Are there any other angel publications/newsletters out there that we should know about?

]]> http://www.enablingangels.com/2006/08/the_angel_journal.html http://www.enablingangels.com/2006/08/the_angel_journal.html Angel InvestingResources for Angels2.0Angel Investing Sat, 05 Aug 2006 07:03:29 -0700 No Formula for VC Success The Texas Startup Blog has some sobering tips for entrepreneurs seeking seed capital.

Frank Demmler writes that entrepreneurs sometimes fall into the trap of thinking that there is a 10-step process that will magically guarantee investment capital.

I really shouldn’t be telling you this, but there is actually a set of criteria that, if met, will guarantee a successful Series A round.


  • You are your parents’ favorite child and your last name is Gates or Buffett

  • You have bootstrapped your company to $50 million in annual sales  with 60% margins and/or you have actually captured that elusive 3% of the Chinese population as customers

  • You have recruited Jim Clark, John Doerr, Michael Moritz, and LarrySergei to your management team


Meet this criteria, and Frank's theory goes out the window.  You are guaranteed your multi-million-dollar A round.


If you haven't been able to do these things, Frank's post may be worth reading.


What other scenarios would guarantee a VC investment?  (Tounge in cheek, of course ...)

]]> http://www.enablingangels.com/2006/08/no_formula_for_vc_success.html http://www.enablingangels.com/2006/08/no_formula_for_vc_success.html Raising Money from AngelsTips for EntrepreneursVenture Capital2.0Venture Capital Thu, 03 Aug 2006 22:41:05 -0700 Angel Investor Tax Incentives Could be Very Bad I've written a written more than one post in the past about states that are passing legislation to incentivise angel investors by giving them tax breaks and guaranteeing large portions of their investments.  Legislation encouraging angel investing has got to be a good thing, right?

Perhaps not.

Some leading angels who do not wish to make their stance public at this point believe that incentivising angel investors may lead to big trouble for investors, entrepreneurs and the U.S. economy.

If angels are given incentives to invest they may not be as thorough and/or choosy regarding with companies they invest in.  This may lead to a bubble of sorts, wherein a ton of jobs are created at companies that are destined to failure, no matter how much startup capital they raise.  Basically, angel investment incentives will encourage careless investing.

I'm not including all of the details here, but that's the basic gist of it.

What do you think?  Is there more to the argument than this?

]]> http://www.enablingangels.com/2006/08/angel_investor_tax_incentives.html http://www.enablingangels.com/2006/08/angel_investor_tax_incentives.html Angel InvestingAngel Investor LegislationInvestment Trends2.0Angel Investing Wed, 02 Aug 2006 23:06:01 -0700 First-mover Articles
Chris Campbell has compiled handful of articles on the advantages and disadvantages of being first-mover in your space.

Here are a few highlights:



  • Too many first-movers put too much emphasis on marketing their product and not enough on making sure their business works.

  • "No advantage lasts forever, and the wise business knows that it is much harder to keep an advantage than it is to get it in the first place. First-mover status must never be a strategy in and of itself, only the prelude to a larger and longer strategic plan."

  • Seth Godin: "Yes, you must be first (and right) in that market or this market.
    But that doesn't mean you have to be first (and right) in the universe."


]]> http://www.enablingangels.com/2006/07/firstmover_articles.html http://www.enablingangels.com/2006/07/firstmover_articles.html Angel InvestingRaising Money from AngelsTips for Entrepreneurs2.0Tips for Entrepreneurs Mon, 31 Jul 2006 09:26:10 -0700 Brock Blake: Beware the Half-baked Deal Brock Blake, CEO at FundingUniverse.com, wrote a great post last week on the dangers of presenting a "half-baked deal" to an investor.

One way to avoid receiving the "half-baked" label is to be cautious in the early stages of pitching investors.

If you start the fund-raising process early (during the idea/team-building/alpha site stage), be sure to make it clear to every investor you speak to that you are not asking them for money in the first meeting.  Let them know that you will be seeking investment capital as soon as you reach certain milestones, and you would like to get their feedback on what those milestones should be.  It's a great way to gauge their interest and get an idea as to when you have the green light to start talking turkey.

]]> http://www.enablingangels.com/2006/07/brock_blake_beware_the_halfbak.html http://www.enablingangels.com/2006/07/brock_blake_beware_the_halfbak.html Raising Money from Angels2.0Raising Money from Angels Sun, 30 Jul 2006 22:12:48 -0700 It's RAINing in the Midwest Again Steve Mercil and RAIN Source Capital are at it again.

Last week, RAIN officially announced its 15th angel group in its corral: the Valley Angel Investment Fund.

Mercil's group aims to set up a new group once a month, providing new groups with legal paperwork, dealflow software, and expertise.  If you're in the midwest and you'd like to start an angel group, this may be a good option.

]]> http://www.enablingangels.com/2006/07/its_raining_in_the_midwest_aga.html http://www.enablingangels.com/2006/07/its_raining_in_the_midwest_aga.html Angel Groups2.0Angel Groups Sun, 30 Jul 2006 15:04:55 -0700