Angel Groups

Posted by Dave Broadwin on September 15, 2008

Here is a link to a lengthy article on angel groups.  There are many angel groups in New England.  A list of most of them can be found at the EEC Web Site.   There is also a brief article by Ham Lord of LaunchPad in a recent EEC Perspectives publication.  He has these two things to say

" Angel financing is more than just seed round financing for future venture capital deals. In fact, angels fund 10 to 20 times more companies than venture firms do on an annual basis. This is because many angel deals will never need the type of large financing ($10M+) that is typical of most venture deals. "

 and

" At Launchpad and other angel groups in New England, there is a strong desire to finance companies all the way from their seed round to an exit. This leads to an environment where angel groups are syndicating deals between groups in a geographic region, such as New England. "

One thing is that it is very hard to get good information about angel investing because it is such a large and disaggregated category.  However, there is one Web site, the Center for Venture Research at the Whittemore School of Business and Economics of the University of New Hampshire, that does attempt to follow these investments.

Making a Pitch

Posted by Dave Broadwin on September 09, 2008

Sometimes it's worth being reminded of the basics.  I recently had occasion to send a start-up client exec summary to a very prominent VC who then asked the company in for a pitch.  The exec summary is strong -- strong enough to get  three VCs from a major fund to attend an hour or longer meeting.  Keep in mind, VCs are inundated with business plans, and these meetings are hard to get.  So, you want to put your best foot forward.

Anyway, the fund took a pass and I got some feedback.  The problem wasn't the plan or the market or the management's credentials; the problem was the presentation.  Apparently, the pitch was disorganized.  No one led the conversation.  The three entrepreneurs kept interrupting each other and correcting each other.  The VC's questions were dismissed as the "wrong" questions and so on.  Basically, the pitch created the impression that the team was unlikely to be able to work effectively together or with others.

You must look like you have it, and in fact have it, together.  You need to practice your pitch.  You need to know who is talking to what slides and issues.  And, it doesn't much matter what question you are asked, if it is important to the potential investor --  it is important.

In another case, I am aware of, the entrepreneur took three weeks to respond to questions raised by an investor at an initial meeting.   I think it is OK not to be able to answer every question, but when you undertake to get back to a potential investor, you need to be timely.  If you are not, you risk raising questions about yourself.

I feel as though I am stating the obvious, but I mentioned these pitch issues to a couple of our attorneys, and they each had a similar story.  It seems as if this lack of good basics is more prevalent than one would think.  If you want to practice your pitch, there are lots of people who are likely to be willing to listen and be helpful -- not the least of them being your lawyer.

Congratulations to Vanu

Posted by on September 09, 2008

Congratulations to our client Vanu, Inc., which recently announced the closing of a $32 million venture round led by Norwest Venture Partners. 

Knowing Current Market Terms for Venture Investments

Posted by Dave Broadwin on September 05, 2008

One area in which you might think that first-time entrepreneurs are at something of an information disadvantage to venture capitalists (or sophisticated angel investors) is knowledge of what are and what are not current market terms. 

You would think that these seasoned investors would know what is being agreed to at any given time in the market.  However, it turns out that some do and some don't, and some have strong opinions that are not supported by empirical evidence.  For this reason, if you are seeking funding, you need to check the facts for yourself.

I was recently told by one prominent VC that 99% of the deals his fund was doing did not have a participation feature.  Well, our research indicates that in New England about half of the Series B and later round deals that are done have some level of participation.

At the EEC, we publish a series of quarterly reports (which we call EEC Perspectives) covering Series A rounds and, separately, later round financings in the New England area.  We report on the numbers of deals by industry in the trailing quarter, as well as pre- and post-money valuations and the types of terms are being agreed to in these deals.