This document provides an agenda and materials for an ERA workshop on seed stage fundraising and angels. The agenda includes introductions, an introduction to angel capital, and key success factors and advice. Tom Wisniewski will provide an introduction including his background in startups, investing, and advising. He will discuss sources of early stage investment including friends and family, angels, and venture capital. Key aspects of angels will be outlined including typical profiles, investment sizes, and focus areas. Success factors emphasized include pitching and getting feedback, finding advisors, effective communication, finding the right investors, and understanding the investment process.
Seed Fundraising and Angels; Entrepreneurs Roundtable Accelerator (ERA)
1. ERA Workshop on Seed Stage Fundraising
and Angels
Tom Wisniewski
2. Agenda
This session and the deck that follows are based on a
series of classes and events I have led at General
Assembly in NYC on Seed Stage Fundraising, Pitching,
Angels, etc.
I. Kick-off and Introductions
II.Intro to âAngelâ Capital
III.Key Success Factors & Advice
4. Tom Wisniewski: My background
ďŽ Born in NYC; grew-up in Montclair, NJ
ďŽ Physics and Philosophy major undergrad (Clark
University); MBA at Tuck School (Dartmouth)
ďŽ 1st Job: Programmer at Morgan Stanley then moved to
Investment Banking
ďŽ After B-school: joined a start-up management
consulting firm Mitchell Madison Group; focus on
Strategy/Operations/IT for financial services, tech,
outsourcing, private equity/VC clients (1993 to 2000)
ďŽ Walker Digital: helped set-up and run an early
âinternet incubatorâ (2000)
ďŽ Independent Advisor / Turn-arounds: Advised VC
and PE Firms on portfolio company strategy and new
investments; joined the management team of two
companies
ďŽ Currently:
⢠RosePaul Ventures: Early stage investor and advisor
⢠Investor and advisor to VC and PE funds
⢠Member and director at New York Angels
5. OK, Who are you then?
â Give me a brief intro on you/your company
â What has been your fundraising to date?
âŚ..What questions to you have about Angels and Seed-
stage Fundraising?
7. Sources of Investment: Seed, Angels and VCâs
Stage (Pre-Round):
⢠Expected to
have:
⢠An idea, initial/rough
b-plan
⢠Initial founders, key
advisors
⢠Path to ???
⢠Detailed b-plan,
⢠Key founders (bus & tech) full-time
⢠Prototype/alpha done and tested,
⢠Some piloting (paying?)
customers, some revenues?,
⢠All legal documentation in place,
board of directors
⢠Path to break-even or next funding
⢠Significant variation among firms
butâŚ. Angel req. +:
- Anchor clients on board, revenue
growth (B2B),
- Growing base of users, with strong
usage trends (B2C)
- âŚ..Growth potential! Credible
path to $100M Rev
⢠Donât Expect: ⢠$ Rev, Customers,
Minimum Viable
Product (MVP); full
legal documentation
⢠Income (e.g. cash flow positive);
all key management ; completely
developed business model (e.g.
understand it will change)
⢠Income (e.g. cash flow positive)
Who/what are
they?
⢠People you already
know, that trust
you, and (maybe)
understand your
venture
⢠Experienced early stage
investors (individuals or a group)
⢠Accredited Investors.
⢠Angel investing is not their âjobâ;
may not be F/T endeavor
⢠E.g.: NY Angels, GoldenSeeds
⢠Firm with multiple professionals that
raises, invests and manages
individual funds (other peopleâs $)
⢠Working F/T (this is their jobâŚ)
Angel Investment
Friends and
Family
Venture Capital
âYouâ
aka Bootstrapped
Earlier Stage Later Stage
Round Size $: ⢠$10âs of K
to $100K
⢠$100âs of K
to $1M+
⢠$500K to
$1.5M
Investment Size $: $5K â $10âs of K ⢠$25K â $75K ⢠$250K-$750K
Valuation (Pre-
Mon):
⢠< $1 M ⢠$1 â 5 M ⢠$5-10 M
âSeedâ VC âTraditional Series Aâ VC
⢠$5M-$15M
⢠$3M â $5M
⢠$10 â 25 M
âSeedâ
8. ďŽ Experienced, successful entrepreneurs: frequently multiple exits
⢠Some from âtech-start-upsâ some from other businesses
⢠Usually some link to
ďŽ Successful âcorporateâ business people: CEO or CxO-types
ďŽ Older: most are in the 40-60 age group. But there are also notable angels
in their 20âs and 30âs e.g. newly minted start-up millionaires
ďŽ 3 â 10+ Angel Investments
ďŽ ~10% of investible capital in Angel Investments
ďŽ Differ *widely* in: Industry/Functional Experience, Investment Expience,
Interests, Target Sectors/Stage, Investment $, Risk Tolerance, personal
doâs/donâts and hot buttons.
ďŽ Lists? Not many. All are partial. AngelList? Gust? Other?
Who are these Angels?
9. RosePaul / Tom Wisniewski Investor Profile
⢠$25K-250K investments; Typical valuations: $1-5 Million,
⢠Typical Stage: at least some âproductâ done, some customer/sales traction
⢠Sector focus: Opportunistic generally within internet/software space: Software Enabled
Business
- Saas B2B, and consumer âmarketplaceâ models, ecommerce enablers.
- NOT (or not much?): hardware, heathcare/pharma, cleantech, education,
⢠NYC based: 50% investments in NYC; total of ~80% NE overall, 20% West Coast
10. NY Angels Profile
www.newyorkangels.com
ďŽ Member Profile: ~100 investor/members; several early-stage funds; Member
backgrounds are generally representative of the tech / entrepreneurs / industries in NYC:
software, e-commerce, ad-tech, finance, media
ďŽ Sector Focus: Internet, e-commerce, new-media, software; B2C and B2B. Mostly NYC
Area.
ďŽ Stage. Mostly early stage (with some customers/revs), some pre-revenue
ďŽ Valuations/ Investment Size: NYA pre-money valuations tend to range from $1M â 4M;
investments tend to range from $250K to $1M+;
⢠For larger rounds, NYA often leads the deal and helps find the rest of the capital by
sharing/syndicating the deal with other Angel Groups
ďŽ Group Structure / Investment Decisions. NYA core structure is as a group of individual
investors. Individual investors âopt inâ to deals and make their own investment decisions.
⢠Typical member invests $25-50K in a deal.
⢠In addition to the core âopt-inâ model, NYA has just closed a small seed fund that will
operate in parallel (using a âdemocratic modelâ for investment decisions)
ďŽ History/Background. NYA has invested $45M+ in 70+ companies.
⢠We are very active in the NYC entrepreneurial / early-stage ecosystem
11. Who are the ârightâ investors?
Where is there a âfitâ?
ďŽ Just do it? Just go pitch some investors? âŚ..Nope. Fit is critical.
⢠Wrong question: How do I pitch âinvestorsâ?
⢠Right question: Who are the ârightâ investors? âŚ.*then*âŚ. How do I pitch this
specific, individual investor?
ďŽ Reality Check. As a general rule, âpeople invest in things that they understand
and have experience withâ
⢠Find investors that come from industries, sectors, business models etc. that are
same/similar to your venture and the customer markets it serves.
⢠If I have never invested in Caribbean real estate, oil wellsâŚ.or communication
hardware, it is very unlikely that I will do it with you.
⢠For Angels/Angel Groups: use online bioâs / LinkedIn / AngelList to identify likely
âgood fitâ Angels
⢠For VCs: Find the right person at the fund; Individuals at the fund focus on
different sectors. The web site often spells it out.
ďŽ Thought Exercise:
⢠âWhat would the âperfectâ investor look like?â
⢠âŚhe/she probably doesnât exist but this will help you :
- target, prioritize, know one when you see themâ
- To be specific (and effective!) when asking for referrals
12. How to âgetâ the pitch meeting?
ďŽ FindâŚ.Fit? Does this investor have âfitâ? Do they invest in ventures like mine?
......if not, then move on. (or at least prioritize accordingly)
ďŽ Prep!
⢠Know your audience. What have they invested in? Recently? What can you
find out about their background? Interests? Hot buttons?
- How? DuhâŚ.Google: Blogs, Quora, YouTube, CrunchBase; talk to
people they know, betterâŚtalk to those they have invested in.
⢠Create a good pitch:
- What would they want to know?
- How can I say whatâs unique/ compelling
- Make it easy. Think âexecutive summaryâ and KISS (Keep It Simple
Stupid)
- adapt pitch to fit the situation.
⢠Donât be lazy; invest some time.
ďŽ Connect. The hard part.
⢠Avoid âcold-callsâ; look for âwarm introductionsâ
⢠Networking. Who do you know that knows them?
⢠Find them at an event. (Email sucks!)
13. How to âgetâ a pitch meeting?
How do I build a relationship first?
Wrong QuestionâŚ
Right Question:
ďŽ Why?
⢠Pitching by its very nature can be awkward. âThis guy wants something from me.â
⢠Having a pitch be the first thing someone hears from you can be off-putting. âDo I
know you?â
⢠Most investors mean-well, and would like to helpâŚbut
- they are real busy
- its very challenging to understand new ventures quickly
- Its tough to say ânoâ (easy to avoid, or say maybe)
ďŽ Solution: Build a relationship before you need to pitch. OK, How?
⢠Give, donât Ask: what can you do for them?
⢠âAsk for advice, not moneyâ . Turn people into advisorsâŚ..then investors.
⢠Debate / Discuss a topic, Ask opinion about X.
⢠Find ways to âshowâ rather than âtellâ: show me your smart, donât tell me your
smart
15. Key Success Factors and Take-Aways
ďŽ Pitch, Get Feedback, Revise. Repeat. No venture idea was built in a
vacuum. The ONLY way to develop business ideas is to share them, solicit
feedback, make adjustments, develop/refine/add andâŚ..DO IT AGAIN!
⢠Many ventures fail to gain investor attention because there are too many gaps
(perceived and real).
ďŽ Find Good Advisors. To get good, detailed feedback and input you need to be
talking to right people, with the right experiences: Experienced entrepreneurs
and investors, prospective clients and partners.
⢠Networking, networking, networkingâŚ.
ďŽ Communication is Paramount. Potential investors (or potential employees,
customers, etc.) usually start out knowing nothing about you or you venture.
Getting someone up to speed: a challenge. Getting someone to write a check:
a big challenge. At the core is effective communication.
16. Key Success Factors and Take-Aways
âŚ.Continued
ďŽ Find Investors that Fit. People invest in things that they know, understand,
have experience with. Find ones that match.
ďŽ Find âLeadâ Investor(s). Its critical to get one or more investors on board
who can take the lead in driving the investment process: due diligence, term
sheet, investor commitments, closing documents/process
⢠Investors trustâŚ..other investors. Their interests are aligned. Lead
investors help attract additional âfollowersâ. With Angel Groups: use available
bios / LinkedIn to
ďŽ Understand (and Manage) the Process. You are more likely to succeed if you
really understand whatâs happening (or should be happening) For each step
(e.g. investor search, screening, presentation, due diligence, term sheets, etc.):
⢠What is happening or needs to?
⢠Why? Whatâs the rationale?
⢠Who is doing what? How do perspectives and motivations differ?
⢠âŚâŚnow, what can I do to make it work for me?
17. Key Success Factors and Take-Aways
âŚ.Continued
ďŽ Valuation (and Key Terms). Be realistic. Be Flexible. Realize this is a
professional (not personal) discussion ; there will be back and forth. Ultimately
the âmarketâ sets the price/terms.
⢠There is more to investment terms than valuationâŚ.Important to understand.
ďŽ Timing. Am I ready for Angel Investment?......A few probing questions:
⢠Have you covered the key success factors mentioned here? Do you have a
compiling business opportunity with huge growth potential?
⢠Do you really need the money? Now? The more that you can accomplish on
your own, the more compelling your case (and valuation) will beâŚ..
⢠Are you ready to work for a someone else? e.g. the investors, the board of
directors
⢠Fund raising is âbrain damageâ. It wastes valuable time that could be spent
growing the business. Avoid it, minimize it, delay it if you can.