Early stage funding – VC or Angel?
So where do you go for funding if you are a very early-stage company?
These days you may have more success going after an Angel investor than pursuing the traditional VC route unless you meet criteria such as:
- Revenue run rate of a $1 million per year
- 8-10 customers who will take reference phone calls
- Completed product
- A core management team
If you are a very early stage company – a business plan and a couple of founders – you are in for a challenge. Many of the classic "early stage" VC firms have moved to funding companies where there is tangible evidence of progress – in part driven by the demands of putting larger funds to work or because of the comfort level of the investment professionals who lack operating experience.
The amount of capital put to work in 2006 by VC's and Angel's should make you think:
- 2006 VC investments (all stages) - $26.09B – (PriceWaterhouseCoopers MoneyTree Report)
- … with $5.115B into seed/early stage (mostly early stage!)
- 2006 Angel Investments - $25.6B (Center for Venture Research)
- … with $11.8B into seed/early stage
Angel money may be a more direct path to funding but it has its issues - the challenge is getting help with your business and not just money. Select your investors carefully – not just on the availability of money but what they can do to help you.
Tell you what, I'm happy to have a 30 minute, no harm, no foul meeting and give you feedback on your idea. If I like the idea, I'll do what I can to help… funding, brainstorming, strategy…
As Charles Beeler of El Dorado Ventures puts it – "The reports of early-stage VC's death have, in fact been exaggerated." Charles may be right but there aren't as many as there used to be – but at least there are some of us still alive and investing in seed and early-stage!