This video comes from KMVT, which is the public access channel for the Mountain View, Cupertino and Los Altos, California area.

This specific video comes from what has recently become a favorite of ours here in terms of video series – the Silicon Valley Entrepreneur. This specific video we believe is interesting as it’s an interview with Jeff Clavier of Softech and John Cornwell of Sandhill Angels from mid October 2009, so fairly recent regarding the current Investment in Silicon Valley.

Overall it’s an excellent video and if you like it we highly advise watching the others in the “Silicon Valley Entrepreneur” series from KMTV

We attended the BiCE summit this week at ESADE and overall we would say the event was a successful one, some interesting talks, some interesting companies, one that we’ll be covering sooner than later in our Startup Saturday series even.

However what we believe was the most interesting part of the whole thing was the panel of Angel, VC (venture capital), and PE (private equity) investors into the clean tech space, as well as a discussion on the development of clean tech in the CEE region. The low point – a long winded forum of government officials talking about sustainability and efficiency and elaborating on the need to create overly complex programmes to work together with the private sector and banks. So let’s start there -

Government and Clean Tech

Clearly one of the more important roles if any of government is to set policy, and provide incentives for enterprise in it’s own market. This is all good and well, and in our most humble of opinions this is simply something that needs to be done via tax abatement. After all, the stakeholder mentality is undoubtedly focused on the bottom line.

So what’s the problem? There should be none, government should have instituted tax abatement programmes for clean-tech initiatives a long time ago, the same for energy efficiency etc… etc… not only to offset the cost of installation, but also to create incentives for non eco-knowledgeable business to implement eco-friendly methodologies and practices into its day-to-day operations.

But @ BiCE, these governmental entities failed at promoting just that, instead they discusses large bogged down in bureaucracy initiatives, that lacked any sort of clear vision. Notwithstanding what really stood out – in terms of the negative – were comments made by various government individuals that “each case is different” and that a “different programme needs to be established for different companies”. Socialist, sure, but worse that that it screams of 1. Inefficiency, and 2. Higher Taxes. After all someone’s got to pay for all these new programmes.

What’s the solution, simple, Ockham’s Razor – entities should not be multiplied unnecessarily. Create an initiative that fosters the implementation of Clean Tech and Enviro-Friendly practices, give tax breaks to those who participate in the programme, and that’s pretty much all you need.

Clean Tech & Energy in the CEE

Elena Yordanova an investor in the clean tech area with Astra Capital spoke on this topic and although it was brief, it was also very informative. The region as a whole has huge potential for clean tech implementation, specifically in the area of en energy generation.

The SEE is rich in sunshine, there are various opportunities for hydroelectric as well as the north, i.e. Poland, and the Baltics can capitalize on coastal wind farms. Barriers to entry are still fairly low, and the region has massive growth potential across the board, however certain markets such as Romania already have met 2020 targets and over 30% of their energy production coming from renewable sources.

Investment Outlook for Clean Tech

This is a tricky one, as we all well know – investors want a high margin quick return. Clean tech companies however are not suited for this model, time to market may often be ten years or more, and investments are typically very capital intensive.

At the same time, the industry or sector is as a whole very new, and there is very little if any PE activity within the clean-tech space.The good news however is that you’re starting to see VC’s grouping their funds together for truly large scale capital investments into new technologies that otherwise without this money could not be realized. This is a good thing, the bad thing is the lack to BA’s in the field and their reluctance to throw money at clean tech startups – after all, there needs to be a call to a social cause when investing 500k-2m and expecting generally lower returns over a longer period of time.

Turns out there are groups of Business Angels (BA’s) out there that charge entrepreneurs and startups to pitch. What? Yes you heard that right, Angels charge startups to pitch. These fees range anywhere from €1000 to €18.000 + 3% of the capital raised to pitch your company to a forum of Angels.

What do you get in return? A fifteen minute slot in front of people that may, or may not invest in your company. Nothing more. Is the price tag worth it? Absolutely not, no angel should require the entrepreneur to pay a fee that will go into their own pocket. These people are after all supposed to be financiers, they are the ones that have the money, not the other way around. Notwithstanding 15 minutes of someone’s time, and especially if they were to have a vested interest in a company is not worth the money.

They will tell you, it’s for screening purposes, they will tell you it’s for x, y, z, but at the end they’re looking to take an equity stake in your enterprise – which according to normal investment criteria should bring them 30x return. Given not all will, but a well differentiated portfolio ought to at least bring in 10-15x return on investment.

Greed, Greed and More Greed?

So why are they charging? Long story short, it’s greed. But it’s not only the angel, there are groups out there that say they will put you in touch with BA’s for a few grand of your “lifeline support system” – basically those few grand that could mean life or death while your company traverses the valley of death. Nonsense. If a filter group wants to earn money through deal flow facilitation there are better ways of doing it than charging the entrepreneur for a fifteen minute slot.

A filter should be paid by all means, no work should go unrewarded, but how? Via percentage of the deal they set up, and a fee – paid for by the BA, and if the startup gets financed from the investment amount.

For example, Joe Filter, finds SuperSatrtup and introduces SuperStartup to BA – BA agrees to pay X for the introduction to Joe Filter, and then after some deliberation BA invests 300k in SuperStartup, due to the positive outcome Joe Filter takes 3% investment fee, or 9k. What do you have as an outcome, Super Startup is happy, as they now have 291k in cash for operational and growth activities, the BA is happy as the BA has a new high growth company in his/her portfolio, and Joe Filter is happy as he’s made some cash. BA = Expected 30x, Joe Filter = 9k+Intro Fee, SuperStartup = Investment, or Win, Win, Win.

If the startup has to pay Joe Filter, and no deal happens, It’s BA = 0, Joe Filter = 1, Startup = -1; or Null, Win, Loss, zero sum game. Or in layman’s terms – just bad economics.

So what’s this all boil down to? Greed. Once again, BA’s are more concerned about themselves than the nature of their business, and filtration systems target the wrong market segment. A “good” BA should have a vested interest in seeing the startups they want to see, as they will be investing in them, they should also then have a vested interest in helping these startups grow. So what does this all mean? Those BA networks that charge the entrepreneur a grand aren’t worth speaking to, especially since the “best possible outcome” is an equity stake in a company.

Any Value Added?

Is there any value added to the Entrepreneur? Nope. Typically, you pay, you pitch, you get rejected, or if you build interest, you’ll wind up covering additional fees. Then you have new funding initiatives such as Revolutionary Angels – that charge 5k to participate in what is effectively a business plan competition that results in two companies receiving 10% and 2% equity investments from the group.  But here’s the rub, that equity investment comes from the coffers of other entrepreneurs. An excerpt form their website reads “There is no obligation to submit a plan for review. Companies that are a selected to participate must pay a fee of of $4,995.” – Why do I have the feeling that if you’re willing to dish out 5k, you’ll get selected any way?

Dodgy business practices. By all means?

Value Added Service Fees?

This is different, if as a startup I can get some form of value added service – be it training, non equity mentoring, press, access to a new network, feedback on my business model, where it needs adjustment, how to extend my scalability, how to enter new markets, advice on joint ventures, learning and or education about the process. Then a fee is worthwhile, after all people putting these things together need to eat as well, and as we all know money does not grow on trees, but that value added has to be worth the fee in question. Is that fee worth €18.000 +3%, absolutely not, is it worth €1000, probably not. Is it worth €100, depends what the service is, and how it will help me as an entrepreneur, but then at the end of the day, it’s a service and not an intro fee, or a 15 minute slot in front of me and my network for a grand.

In summation any BA network charging you for 15 minutes of their time is not worth it. If your company has mettle, BA’s in their nature should be more than willing to speak to you about your enterprise.

To read more about the topic of BA networks charging, click here, here, and here.

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We want to know what you think?

This topic is of very special interest to us at F3FUNDIT, why? Well we’re in the process of putting together a new concept event that will truly be focused on the entrepreneur, yet we plan on charging a nominal application fee along with it. Why? Well we need to pay our staff, we need to pay for parts of the event, speakers, training materials, and our time, as well as put together a winner take all cash prize.

We’re not ready quite yet to let the cat out of the bag, but every startup that applies will get something in return, we’re on the side of the entrepreneur and don’t believe that something for nothing should exist, but nonetheless, we’d like to hear your thoughts.

Fist there was Y Combinator, then there were copies and similar style initiatives that popped up all over the world, were they micro investments, business and tech incubators, business accelerators, hand holding initiatives for the business non-savvy, what have you. And with the multitude of them out there, it’s hard to keep a track of when and where all the deadlines are.

Jüri Kaljundi an Estonian blogger, technology and internet entrepreneur recently put together a list of the upcoming deadlines for these initiatives, and seeing as we’re here to help the entrepreneurship community at large as well, we figured we’d spread the love, you can find the original post here.

Technology Startup Incubator Deadlines Spring(ish) 2010

NYC Seedstart (New York City, USA): February 28

The Openfund (Athens, Greece): February 28

i/o ventures (San Francisco, CA, USA): March 1

SproutBox (Bloomington, IN, USA), March 1

Y Combinator Summer 2010 program (Mountain View, CA, USA): March 3

Morpheus (India): March 10

Startl (Philadelphia, PA, USA): March 15

Techstars Boulder (Boulder, CO, USA): March 22

DreamIt Ventures (Philadelphia, PA, USA): March 22

Betaspring (Providence, RI, USA): March 22

Tetuan Valley (Madrid & Barcelona, Spain): March 23

The Founder Institute (San Diego, CA, USA): March 26

Capital Factory (Austin, TX, USA): April 2

NextStart (Greenville, SC, USA): April 5

Seed Rocket (Barcelona, Spain): April 5

AlphaLab (Pittsburgh, PA, USA): April 8

Shotput Ventures (Atlanta, GA, USA): April 10

Startup Bootcamp (Copenhagen, Denmark): April 30

Bootup Labs (Vancouver, BC, Canada) May 1st Intake (Deadline Not Announced)

LaunchBox (Washington, DC, USA): May 31

Techstars Seattle (Seattle, WA, USA): June 1st

And if you know of any others please add them in the comments section and we’ll update this list accordingly. Thanks.

The 3F’s, Seed Capital, Angel Capital, Venture Capital, Series A, IPO’s sounds familiar or does it?

Many budding entreprenerus, and especially those without a background in finance, and even those with a background in finance won’t really understand how the startup financing process functions.

Or more adequately how you go from cracking open your piggy bank to issuing shares on the DAX, or any stock exchange for that matter.

But first thing’s first, your 3F’s are your Friends, Family and Fools, and they’re the only ones willing to donate some money to your cause, friends and family, cause they care, and fools, cause well only a fool would give someone they don’t know cash.

Next up you’ll get seed money, these are typically people who want to flip their equity within 6 months, quick in grow the company rapidly, and quick out strategy.

Next up, are the BA’s (Business Angels) – who invest on the basis of 30x expected ROI.

These three groups comprise the “Valley of Death” in your startups life, basically meaning, these are the moments when your company either 1. Does, or 2. Dies.

Once your company’s out the red, and has broken even, this is where early stage VC comes in, typically Series A, then Series B for early stage, C for early late stage, etc… etc… and if you’re lucky enough, you get the company to issue an IPO, or Initial Public Offering meaning that the shares of your company can be traded on stock markets such as NASDAQ, DAX, etc… but when you get here, you’ll have a Morgan Stanley underwriting your deal, you may be going through a M or A, and all sorts of crazy things can happen to you so for the basis of this site, our database, and resource we’ll stick to the early stuff. For a visual representation of this entire process check out the really amazing graph, thanks of Wikimedia, and a bit edited by us.

This Saturday we would like to introduce you to CFI Partners, a crowd financing platform recently started by a couple of IMD MBA’s. What we find specifically interesting in CFI is their alternative approach to financing startups, it’s new, novel, and it’s taking a risk, it’s what we believe any startup should be, so without further ado, this week’s Startup Saturday: CFI Partners

How did you come up with the idea to crowdfinance?

Imagine the number of missed opportunities that are overlooked or can’t be addressed by the more traditional mechanisms of financing such as private equity and venture capital.

We ourselves saw several cases where entrepreneurs had a great idea but were unable to get past the initial seed funding, or where there idea had a potential for generating strong revenue, but not on the scale that would interest venture capital.

There are several reasons for this, the difficulty of evaluating each opportunity, the cost of the transaction, and the fact that risk capital is not as well developed in Continental Europe, let’s say in comparison to the US. These factors create a threshold where investment opportunities under <$2 Million are uneconomical for traditional venture financing. Furthermore, with more and more of the funding for venture capital and private equity coming from big funds, there is an increasing trend for larger investments.

With crowd financing we democratize the process and make it more efficient. The amount of money that can be raised can be quite significant. If you look at the Obama Presidential Campaign, he rose over $400 million from individual contributions of $200 or less. So substantial amounts of money can be raised. But another aspect that makes crowd financing attractive is the fact that by decreasing the amount that needs to be invested, you open up the process to a whole new market. As this market is more efficient, smaller investments remain attractive. Thus crowd financing allows us to address an interesting part of the innovation market, the area of 50,000 € to 2 Million €, which is underserved at the moment.

Another factor that attracted us to crowd financing, was the chance to develop a community where the considerable power of sharing information can be leveraged. Members of our community will help develop entrepreneurial ideas with their feedback. Basically we will act to bring together the information latent in members of our community, leading to more efficient and we hope more successful investments.

Interestingly, we set out initially to design a platform with the classical technology innovation entrepreneur in mind. However, we have seen a strong demand from film makers, bands, and designers who feel that crowdfinancing could be the best approach for them to raise funds.

Any milestones that you’d like to share?

We started out developing this idea in November 2009, and have been working on refining and developing the concept. Understanding the market and who are our customers. At the beginning of 2010, we refined the website of our company to explain more our ideas and elicit some feedback.

We have been also working on getting feedback from both entrepreneurs and investors. These inputs are going into the development of our web platform for crowd financing, which we are scheduling for launch in Spring/early Summer 2010.

Another important aspect, of course, is raising funding for our own platform. A process which we have just begun.

Can you tell us a bit about the team?

Hervé and I met as classmates in the executive MBA program of IMD. We have rather different backgrounds, but high levels of experience. Hervé has a strong background in marketing and finance, having worked both in large corporations such as GE, but also for smaller startups. He not only has experience working for start-ups, but also has worked with private equity. Thus he has a good experience with both sides of the equation.

Myself, I have over 16 years of driving innovation in Biotechnology. Initially, leading research at top Universities (I have a PhD in Molecular Pharmacology from Stanford) and more recently working in start-ups driving the R&D program and supporting product development. I have a strong insight of the needs that start-ups have when it comes to innovation support. Hence, my excitement in supporting our project.

Any difficulties you’ve experienced in the startup process of your company?

I think what has been the most surprising thing for us is the speed at which the interest and demand has developed around this idea and our platform. Hence, the biggest difficulty we’ve had has been the lack of resources. Hervé and I are bootstrapping the company, while keeping our full time jobs, and still making time for our families. Luckily for us, we seem not to need a lot of sleep! ☺

But seriously, the lack of the time and limited financial resources has meant that we have difficulty keeping up with the pace of the project.

To make sure we capture this opportunity is why we are pushing to launch this spring.

Any advice to pass on to budding entrepreneurs?

Engage with other entrepreneurs about your ideas, they can help you develop your ideas and evolve them. To many times entrepreneurs keep their ideas to themselves and lose the power of other peoples input to convert their ideas into successful ones.

And Tthe next time you are considering fundraising, consider the power of using crowdfinancing. You can a get more details at our website. www.cfi-partners.eu and consider using our platform this Spring for your fundraising needs!

BY F3FUNDIT

Who pays the fees, should it be the startup? Most Investors will tell you yes. Or should it be the Investor, which most startups will simply expect. The story is however that is depends on a number of factors.

What are hose factors and how do you know who, when, how, why, what, where, and huh? Well that’s why we’re here to help navigate some of the murkier waters of your startupedness. With that, first thing’s first. You need a solicitor (attorney, lawyer), someone you can trust and who knows the corporate side of things, remember each country’s laws are different so if your an S.A. don’t get a lawyer do deals with Ltd.’s. In terms of getting one, network, network, and then network some more.

Now that you’ve got a solicitor, you can go and start talking about financing. If you were introduced to a BA by someone, chances are they’ll want a finders fee, this can range anywhere from 3% – 10% of deal size, and in some extreme examples has even hit 15%, mostly the % will be a +/- 1% of the market you’re in. Spain averages on the lower side of the spectrum, whereas the UK is on the higher side of it.

Aside from this you’ll have legal fees – issuance of new shares, dilution of your own, and even if you do have an MBA, all this will undoubtedly still be confusing at the onset, add to that a finders fee for a facilitation intermediary if there is one, hourly solicitor rates, administrative expenses, filing expenses, etc… etc… and with a seed investment of say €100.000, those bills can quickly add up to 10-20% of the total investment, and all of a sudden your 100k that was supposed to take your co. international looks like it just might flop on its bottom.

So who pays the fees? At the end of the whole fiasco it’s both of you. If the startup pays from invested capital, it’s really getting a fraction of that invested capital, and if an angel pays then that angel is throwing that money away ontop of the investment. Likewise, if the money comes out of company coffers it’s pretty silly as that cash is inherently dedicated towards operational expenses. In which case if you’re lucky enough to find yourself with a willing investor, we recommend the following.

When dealing with an angel be up front about the fees and additional costs, if you need 100k to get to operational business level 2, find out before hand what fees and additional costs will come into play.

Now, say you do need that investment of 100k into your company to bring it to the next level, fees will be 10% meaning a total 110k for the cash transaction. That 10k will go to lawyers, administrative expenses, what have you, and is a sunk cost, no ends or buts about it. But aside from the lawyers who can benefit from it? The truth is the investor more so than the startup. Why? Because many nations in the EU, (mind you not all, so be sure to look at your local laws) – offer a tax shield for business angels. Meaning, that if I as a business angel invest 100k into company X, I can write of 10-20-30% of that investment off of my taxes for the year of investment, additionally, if the company fails, I may be able to write off an additional say 20%, thus decreasing my risk and making my investment contribution a fraction of the actual sum.

In which case, if you can write off that 10% in year one per se, the investment on behalf of the angel would really be 99k instead of the equity for cash injection of 110k. That shield does not apply to the startup, and your law / admin fees will go on your books as just that, the are not depreciable, the are sunk costs that eat up your cash.

So the next time you find yourself at a round table with a few BA’s or are a BA yourself, just remember that there are numerous things you can do to lower your risk in any new venture. It’s not just about investing, it’s about doing it in an intelligent manner.

BY F3FINDIT

Let’s face it, getting money to finance your business is no easy task, and especially so when you’re talking about recessions where people’s pockets are harder and harder to get into, but say you’ve got a good idea for a business that in any other economy would work, but it just cant provide the 30x ROI that Business Angels (BAs) are looking for now. Nor do you have the capital yourself that you need to develop a prototype, or start selling, so what on earth can you do?

Small Business Loans

Small business loans are a great way to get yourself a prototype or a launch product, but the truth is in this climate banks are just about as stingy with their money as BA’s and most other investors. So the short story is, getting a loan may not be easy, but all the while bring in a biz plan, talk to your local banker, and see if you can’t squeeze any money out of them.

This is one option, but by no means should you stick to this one, and anyways, it’s old, outdated, adds additional risk to the entrepreneur and you may have to put down collateral, which quite frankly is not ideal.

Peer 2 Peer Lending Options

A great option to getting cash is P2P Lending – basically there are websites out there, usually two or three per country, that put lenders and borrowers in touch with one another. The website tends to manage risk, provide the lenders with the borrowers debt rating etc… one such site in the UK, and Italy is Zopa, Spain has Comuniate, and doing a Google search ought to point you in the right direction for the service in your country. Rates are typically fixed, and it’s much easier to get

Crowd Funding

This is by far the favorite, but also requires a bit more leg work than the others, and if time is on your side, we highly recommend trying to get Crowdfunded. What is it though, basically it’s getting the community at large to help fund your project, it’s worked well in the music industry, people have made movies based on crowd funding, as well as started all sorts of projects, businesses, etc… To see a few examples of what it does we recommend heading over to Kickstarter, and as for a quick portal where you can start your own fund we recommend Create A Fund.

When it comes down to funding a project though, we highly recommend offering something in return. After all people are giving up their own hard earned cash to help you reach for the sky, so give them something back, be it a page on your website, a personalized letter, inclusion in materials, adding them in the credits of a film, whatever you feel like.

Another good thing about crowd-funding is that it typically happens via PayPal, meaning if your entire project costs €2000, but the payment needs to be done in stages you can raise your first 500, start the project, etc… and develop it as the money comes in.

Did we miss anything? Let us know.

BY JACEK GREBSKI

You have to be thinking to yourself, what on earth does Burger King have to do with startups. Well, a few months back I was talking with a colleague regarding startups, projects, and someone wanting to buy a portal we had developed for a small sum, and the concept of the burger king opportunity cost came about.

In a nutshell it’s a way to quantify if the time spent working on your project is paying off, or if it’s an utter and complete waste of time, i.e. is my startup worth more than the money I could earn flipping burgers at Burger King.

Now, valuing a startup is no easy task, and most current tools are used to assess whether or not to invest in a company, not whether the entrepreneur’s time is worth the commitment to the idea and startup. However we need to understand and employ these methods in order to find out if you’re time is worth it. Depending on the stage of the startup, methods utilized by investors are

Anticipated Return on Investment (ROI) – which basically states that an Angel Investor should look to invest in companies that can yield 30x Return on Investment, i.e. 100k invested -> 3million return.

Why so high? Startups are RISKY investments and on average at least 50% will fail, as an investor, the portfolio of companies invested in should ideally bring in between 10x-50x ROI. Anything less, doesn’t justify the investment. Can your startup compete with this?

Venture Capital Method – which in its simplest form is

Post-Money Valuation = Discounted Terminal Value / Cash-on-Cash ROI

Post Money Valuation – is the valuation of a company immediately after a round of investment is closed.

Post-Money Valuation = Investment + Pre-Money Valuation

Terminal Value – the valuation of a company at exit, meaning the proceeds from the sale of the company via M&A, IPO where investor ownership is liquidated

Cash-on-Cash ROI – the cash-on-cash return on investment expected for said investment in the year of harvest (exit).

To calculate your BK Opportunity Cost, you have to get the value of your startup today. But how do you do that?

Fundamentally, we have to look at two things.
1. Is your startup able to bring in a ROI of 30x for an angel, and if it is
2. What is its Pre-Money Valuation in the Angel Round, meaning now.

Burger King Opportunity Cost

So for the sake of the exercise, let’s assume the following.

You and your partners own 100 shares of Startup Ltd, which is 100% of equity. And say you’re looking for investment into Startup, Ltd. of 100k in return for 20 newly issued shares, the implied post-money valuation is:

(€100k) * 120 / 20 = €600k

To calculate the pre-money valuation, the amount of the investment is subtracted from the post-money valuation. In this case, it is:

€600k – €100k = €500k

So you and your partner dilute your ownership to 100/120 = 83.33%.

To get the Burger King Opportunity Cost of your business you follow the formula

Pre-Money Valuation – Investment in Project ≥ Possible Salary Received from Working at Burger King * Partners * Time

Using the above example, Startup Ltd. has three partners, you’ve been working on the project for a year each, your Pre-Money Valuation is at €500k and say you invested in the company €100k. And, assuming the annual salary of a burger king employee on a monthly basis is €1000, Your BK Opportunity Cost would then be.

€500k – €100k ≥ €1k * 3 * 12 = €400k ≥ 36k @ BK

Woohoo, it was better off for the guys Startup Ltd. to start the project than to flip burgers.

Why? Because the opportunity cost of starting Startup, Ltd. is greater than the minimum sustainable wage that you can have in order to survive, and for that specific reason we’ve used Burger King, and not the salary of an iBanker, Engineer, etc… however those salaries can be easily applied to the opportunity cost formula.

On the other hand. If Startiup, Ltd. is not able to get Business Angel Investment of a 100k, and instead are only  are able to sell their work for €20k, then the BK opportunity cost is €20k ≤ 36k @ BK, and it’s reversed, meaning their time would have been better spent flipping burgers.

Thougths?

F3FUNDIT

When it’s time to approach business angels there’s a few things to consider and a few other things to keep in mind, and a few even other things that for the most part are common sense yet entrepreneurs tend to forget about all the time.

But before you’re ready to look for someone that will assist you not only in the next round of financing for your company, but also extend a hand in helping to get the company off the ground, you should consider a few things.

For those who read this regularly, we may be repeating ourselves, but bear with us until we get to the meaty stuff.

Am I a functioning company, and do I have a product or service that I can offer for sale, or am I already selling? If the answer is yes, you can consider starting to contact business angels. If you are prior to this stage in your business development, then we highly recommend you save yourself and the business angels the time and not send anything out.

Now, since you’re ready to seek funding, you’re selling a product, and need a financial boost, here’s some very good, yet very simple best practices on….

Raising Angel Capital….

One: This may seem obvious, but apparently it’s not. Do not send your proposals to angels / angel networks that are not in your industry. If you’re a high tech company, a business angel network that deals with energy is not a good idea to send your summary to. Please stick to soliciting people to the industry that you’re in.

Two: Don’t bother sending proposals to “managed” angel funds. These fund managers are often that, just managers, they invest in companies but offer no outside help, and neither do the business angels. These types of funds tend to result in the following. 1. Companies going bust 2. Funds going bust due to poor investment decisions. 3. Angry investors.

Three: Two goes into three nicely, you want an Angel that can lend a helping hand, an industry expert on who you can count on and someone who will want to actively help in getting the company to the next level. That someone should mesh well with the current management, and aside from playing financier, should also want to mentor. This is VERY important.

Four: When sending out your proposal, executive summary, business plan – wait … actually don’t do the third one, never ever do the third one. “But why F3FundIt?” Because no one who is busy wants to read through 25-40 pages of your analysis, and I mean no one.

Send out proposals/exec summaries that are 2 pages maximum. Any more and it will probably wind up in the bin. It’s not that your sweat isn’t worth anything, your b-plan is in fact a guideline for you and your company, not for your investors. They’ll know if they like your concept in the first 3 minutes, and if something catches their eye, they’ll get in touch with you. At the same time, when you contact them, they can’t honestly say “No I haven’t had a chance to read your two page summary”, can they now?

Five: Something that we constantly hear form Angels are complaints about how poorly the company presents itself, how, after 15 minutes of speaking on the phone with an entrepreneur the Business Angels are lost as to what the hell the entrepreneur is doing. Know business terms, get accustomed to knowing your value proposition and pitching your company – practice in front of the mirror if public speaking isn’t your thing. Be clear, and be concise. Your startup will thank you for it, after all your selling it, and yourself.

Live by it, learn it, and do it. Chances are if you follow these tips and you have a good idea – you’ll wind up getting meetings, or at least phone calls.

And if any BA’s are out there, any other pet peeves you’d like to tell us about?