We recently hosted a networking night organized by The Capital Network to help angels and VCs connect with entrepreneurs. Brian Halligan, Founder and CEO of HubSpot (www.hubspot.com), which recently completely a $33 Million round of financing gave a brief yet entertaining recap of his adventures down the founding path. Keeping in mind, Brian and his co-founder Dharmesh Shah, who has a great blog on startups (www.onstartups.com), were seasoned entrepreneurs, and already had fantastic connections within the VC and angel community in Boston, here is what I took away from his talk:

Funding for Start-ups - Bootstrap all you can, raise money from friends and family first. Go to angels before you think about VC’s. Angel financing is a good way to build a solid business and company. VC financing is the equivalent of swinging for the fences and it really does not make sense to try to hit a homerun before you have something that is off the ground.

Angels financing - Try to structure your angel round as convertible debt (this can be structured in many different ways – check the EEC glossary or stay tuned for a future blog post on the issue). Convertible debt helps you to stay away from the issue of putting a stake in the ground in terms of valuation. 

Connecting with Angels - In this respect, Hubspot had it easy. Dharmesh’s reputation preceded Hubspot and when the time was right Joe Caruso of Common Angels and the Bantam Group was ready to step in with angel financing for the new venture. However, if they had not been so lucky, their path would have involved reaching out to contacts and attending events like the ones the EEC. Brian made a point to repeat this….GO TO ANGELS FIRST. Angels are really your best bet in building a solid small company. I wish Senator Dodd, with his angel killer bill could have heard this.

VC funding: “It was FRIKKIN HARD” and took so much time! That’s after they had a solid team in place, had a rapidly growing customer base, and had solid angel backers! His rationale was - once you have a solid company and you want to be a superstar – that’s when you start thinking VC money.

Disclaimer - Brian did later acknowledge that the HubSpot choice of going to angels first, might not necessarily make sense for all start-ups. You might have a capital-intensive business, you might have a very small window of time where you need to expand rapidly and whole myriad of other factors. Talk to your start-up lawyer to see what options make the most sense for your company as you decide to go down the financing path.