Posts Tagged ‘Entrepreneurs’
Build Your Company Backwards: How to Align With Angel and VC Expectations
If you can’t explain why someone will pay 10x to buy your company, you’re not ready to raise a dime. When you’re raising outside capital — especially from angels or venture funds — you’re not just pitching your company. You’re implicitly making a promise: that their investment will turn into a significant return, typically a…
Read MoreWhen Your Capital Strategy Kills Your Commercial Value
How “licensing-only” businesses can get caught in the angel/venture minefield. Let’s walk through the math that every angel investor does. This company is raising money at a 15 million dollar post-money valuation. For us as early-stage investors to justify that investment, we expect a 10x return. That means this company needs to exit at 150…
Read MoreWhat Angel Investors Want to Hear vs What is Best for the Startup?
We looked at a company who had been more or less steady-state for several years but wanted an infusion of cash. They were operating in two smaller markets without fully capturing either of the two smaller, midwest cities, but were coming to investors asking for additional funds. The business was a local service company, where…
Read MoreBad Behavior By Angel Groups -“Due Diligence”
Due diligence is supposed to help investors and the entrepreneurs, but many times it is a charade. I am a member of several angel investor groups, and I am intimately familiar with many more. In general, angel investor groups can be a positive force for good: they teach entrepreneurs and angels how the investing system…
Read MoreGullible Angel Investors and Provisional Patent Applications
Last time, we discussed the provisional patent application hoax perpetuated by patent attorneys. In this post, we look at the scam from the inventor/entrepreneur side. Many so-called inventors/entrepreneurs like to file their own provisional patent applications, then shop these to gullible angel investors, hoping that the angel investors will bite. The “inventor” is hoping that…
Read MoreHow accelerators and angel groups lose their way.
Riding on the back of the entrepreneur. Ever drive by a construction site and see dozens of “supervisors” standing around, while one guy with a shovel is actually working? This is the perfect metaphor for the angel investment community, with the energetic, hard-working entrepreneur is deep down in the hole furiously shoveling, and everyone else…
Read MoreThe Endless Science Project
Serving two masters, and the enablement of investors. Some startups are the Endless Science Project. They start from a “cool” technological idea and work on endless science projects. They run one science project for a while, get tired of it, and move on to another one. Investors enable this to happen, and we, as investors,…
Read MoreThe Government is the Worst Customer – and the Worst Investor
The Invisible Hand versus the Regulator’s Pen. We will always invest where Adam Smith’s “Invisible Hand” is pushing things forward, and avoid businesses where the regulator’s pen can wipe it out. We avoid regulatory risk, and so should early stage companies. Governments, by accident or design, distort the market in many ways. For example, the…
Read MorePitching Investors is Not “One-and-Done”
Spend some time “riding the bus” in the Minors before getting to the Big Leagues. I have the enviable position of seeing lots of inventors who bootstrapped their companies along before they take outside investment (if they take any outside investment at all). This is – without question – the single best way to build…
Read MoreWaiting Room Inventors
“Moonshots” and Abdicating Responsibility as an Angel Investor. A friend who is an angel investor asked my opinion on a company. I did not like it for a number of reasons, not the least of which was their poor IP strategy. The real reason why I didn’t like the company was because the inventor was…
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