Angel Investment Journal – Angel Investing and Entrepreneur Blog

8 Reasons why Angel money is better than VC

Posted in Funding/Investing by angel on the September 30th, 2008

Gigaom has a post discussing Lookery’s recent round of funding that was raised entirely from Angel’s. Lookery’s CEO, Scott Rafer (former CEO of MyBlogLog), talked about 5 reasons why getting angel investing is better than VC money:

1) Focus. “Angels can concentrate on the individual strategy of your company, rather than the larger portfolio management strategy a VC must bear in mind.”

2) Deal Terms. Angels generally don’t demand as much in liquidation preferences and other deal terms.

3) Future Funding Rounds. You will generally have more control over future negotiations in getting additional funding.

4) Transactional Control. “You won’t have to seek permission from investors who aren’t on your board or worry about what a VC needs to have happen vis á vis managing his limited partners… Angels have no LPs, so their agendas tend to be far more transparent.”

5) Exit. “Angels aren’t compensated in ratios. Angels get 100 percent of the profit they generate with their investment in your company. A VC only gets a fraction of the ‘carry’ generated on your deal. This is one reason a VC might be motivated to urge you to sell bigger.”

Rob Conway, a well known “super angel”, follows up with 3 more reasons why Angel money is more attractive than VC money.

1) The due diligence process will be less rigorous since angels are acting in their own interest and not investing OPM (other people’s money).

2) Angels are generally more vertical specialists than compared to VC’s.

3) “Angels have one-degree of separation from people in their professional network — not two, or three, or four. But because angels tend to be operational types, the business relationships they bring to the table are personal, not transactional. ”

Finally, Allan Leinwand, follows up with a counterpoint on why Entrepreneurs should prefer VC money over angel money. He claims VC’s will be better able to stick with the startup over the long term, if things don’t work out quickly. However, Tom Perkins, of Kleiner Perkins Caufield & Byers, says they put companies in the “ICU” if they are not performing well. They either see if they can get out of it or they shut off everything right away.

Market turmoil and it’s affect on Angel Investing and Startups

Posted in Funding/Investing by angel on the September 26th, 2008

The Seattle PI posts an article posing the question whether the market conditions will negatively affect angel investing.

Investors are likely to get more cautious as the market suffers since they are seeing their investments in the market decline. However, regardless of the economy, it is never a bad time to start a company. Markets are cyclical and it is unlikely you will achieve great success within a short time frame. There is a good chance that once things get going for your company, the markets will have shown some improvement. (I am not trying to predict the markets here, but throughout history after every down turn, there is at least some sort of up turn.)

Inc Magazine had an article a few months ago about this topic – Starting Up in a Down Economy. They mention several reasons for why a down market is a good time to start:

  • If your product/service offers a cheaper alternative, it could be easier to sign up customers looking to save money
  • With layoffs occurring, you have access to good talent.
  • You are likely able to cut down on expenses by getting discounts from vendors since they may be struggling
  • So market conditions should not deter entrepreneurs from making the decision to start a company. And even though some angel investors may be a but cautious, there are plenty of others that are always looking for good companies regardless of market conditions.

    Creative Myths about your Company

    Posted in Marketing,Startups by angel on the September 4th, 2008

    Trevor Blackwell has an interesting post on how some companies generate creative myths for how they started their companies in order to generate publicity.

    Ebay and the pez dispenser myth comes to mind as an example.