A few questions to help understand the ANGEL / VC "game"


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Curious on thoughts about this topic. I will say for us it has been frustrating at times, we are sure it is for others.

From what we understand there are incubators, angels and early stage investors that like getting into a company almost at a conceptual level. These seem to be firms that either hold big "jamboree's" so to speak or start up weekends or events like these. But once you have a working prototype, clients and database structure are you a "start up" anymore?

Without intimate knowledge of the financial side of investment etiquette a typical group of techies tries to adapt in this unregulated investor network. It seems there are rules for the road and the investors sure like to put up hoops to jump through. Example, there is a whole "lingo" to be learned of terminology that in some cases to the outsider make no sense. Terms such as "social proof","traction" or "pivot" that drive us to continue and advance as if some magical pot of gold exists at the end of the rainbow.

With this said, now we have contracts, commitments from multi national corporations that we know in good faith we cannot support. Realizing deep down that our model cannot be executed unless we partner with a strong financial partner we continue to make commitments to appease investors. VC's "track" us as they do not invest in companies with sales less than a million or so and the same Angels say, wow, great job and incredible milestones! ..BUT you are too advanced for us now, maybe consider a VC??? WHAT???

Without specifics we see other companies getting money thrown at them..why? Because a former exec that had one trick pony came on board? OR ridiculous products with NO revenue stream getting MASSIVE money thrown at them.. How? The funniest thing we read recently was a report by some foul mouth investor type that has a gazillion micro investments..we found it humorous because it was a post to pitch a huge corporate investment arm on his groups investment "prowness".

Here's what we found humorous in one slide he shows his career "successes"...it was ONE massive exit in over 900 investments...so hold on, let me understand this...1 cannonball for lets say 200m but 899 losers makes a good fund manager? What are we missing here and moreover why should a startup even listen to the investment community? It seems they want to leverage Babe Ruth's information and expertise but then tell him how to swing the bat?

As founders in our own little private Idaho, are we TOO close to our project to go "kick tires" with this investor crowd? Should we find an objective third party to come join us and do the external marketing to the finance network? Is this finance angle all smoke and mirrors? Has the landscape of investors changed from investment in innovation to the hottest hippest gone tomorrow Apple mobile app?

http://www.youtube.com/watch?v=nKN-abRJMEw&feature=youtu.be&a How does one even get close to a guy like this to ask these questions? We see the questions on this board, we know many will also walk our road. We do not seek to come off like sour grapes as we do feel we will succeed regardless and NEVER give in to failure. But we ask is the dynamic flawed? Should we innovators be speculating the investor community better?
Thoughts Appreciated.

Funding Ecommerce

asked Nov 18 '10 at 21:02
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Xs Direct
275 points
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  • What is your question? It's a long rant, you definitely need help to understand fundraising, but try to make it easier for the community here to help you out. – Alain Raynaud 8 years ago
  • agreed ...it could be more concise.. – Xs Direct 8 years ago

2 Answers


2

A few comments:

  • Your post actually has more than one big question in it. Should have chopped it up.
  • You are a start-up. Start-ups are ventures that have no history, usually not posting a profit and have limited-to-no sales. (It doesn't necessarily have to do with IPO, since lots of startups never get investors and/or go public. Nor does employee count have anything to do with it, as established players with low employee counts abound.)
  • If you can sell your product already and have proved the concept somewhat, then you should entertain the idea of growing organically. It may be slower than the fuel-to-the-fire that a well-timed investor is, but you can still make your startup happen.
  • How many angel investors have you spoken to? Because your definition and my experience don't seem the same. Angels are precisely the type of person you need to speak to. However, like any other field of work, there are more idiots and fraudsters than solid partners.
  • Unless I misunderstand your quick generalized explanations, it looks like you may have committed a classic mistake of hunting down elephants and putting yourself in the awkward over-promised position and burning out early because of it. Without knowing more details, and assuming your product/service is selling well, I would see if the product/service can be phased into the current clients you signed, or if you can postpone them and target smaller clients that would allow you to build up to the larger ones.
answered Nov 19 '10 at 06:04
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Alphadogg
1,383 points
  • spot on...now that's productive remittance!...thank you Alphadogg... btw... elephants for sale! – Xs Direct 8 years ago

1

1 exit for 200M out of 1,000 is pretty rough.

Yes, you are absolutely a start-up, even after you have a database schema... In my mind you're a start-up until IPO, acquisition, or you're 500-1000 people and you lose the start-up feel.

It's very tough, but not impossible, to raise money with no start-up experience under your belt. It seems that you would benefit from someone with more experience in the start-up world if you're serious about bringing in serious money. Your geography is going to be tough; as someone in the Valley, it's easy for me to say 'move', but frankly, that's where the folks who have done this before are.

Experience, networking, reputation are key. You have to have credibility in your space or even traction that it's clear you know what you're doing. If you're doing something in the social space, which is what I glean from your post, the perception is that getting that traction is pretty easy.

If you're not willing to move and you are indeed doing something web/social-related, then I'd suggest forgetting about the VCs and incubators, focus on what local money you can pull together, and how you can get to revenue quickly on a dime. Raising money, even when you have credibility and you're in the Valley, is a long process--a fast raise is six months--and it's hugely distracting. If you can get some good things happening and some traction, the VCs will start calling you.

answered Nov 18 '10 at 21:18
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Mitch
659 points
  • Mitch, thanks for the input. We are actually a new trading floor with bundled protection services built for corporations..In laymans terms, we were open market traders that automated the "trade" process. Our clients are multi national corporations that range in 14-20b. – Xs Direct 8 years ago
  • do not understand the vote down, have seen this before and not to only our posts. If this board is to have spirit to 'HELP" some entrepreneurs and start ups then if the topic is not of interest move on.. I know we have similar feelings to other startup and some issues we have faced some will come to also. – Xs Direct 8 years ago
  • With this said, We saw one topic also voted down. In digging the innovator needed guidance. Isn't that what we all seek? – Xs Direct 8 years ago
  • Mitch, would like to speak sometime. Would you be up for that? – Xs Direct 8 years ago

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Funding Ecommerce