Tag Archives: Venture Capital

How Long Does It Take to Raise Capital?

How Long Does It Take to Raise Capital? from The Startup Garage

How Long Does It Take to Raise Capital?

Welcome to video Fridays
from The Start Up Garage

A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from viewers

Key Take Aways From Video:

1) The average time is somewhere between three to six months for both you Angel round and your Series A round.

2) It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

3) Preparation, this can take anywhere from one to three months on average

4)Pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

5) Negotiation and closing the deal. Getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Complete Transcript below:

Question= “How long does it take to raise capital?”

Tyler Jensen: That’s a great question, one that I get all the time. The answer is that it varies. The average time is somewhere between three to six months for both you Angel round and your Series A round. It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

In step one preparation, this can take anywhere from one to three months on average. This is where you put together your business plan, your pitch deck, your capital strategy, and achieve any business milestones that investors are going to want to see before you raise capital.

Once that is all done you go into pitching and due diligence. This is where you identify the potential investors, contact them, and then pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

And then if you get through that process and they’re still interested, then you move into negotiation and closing the deal. This si simply getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

7 Notable Investor Insights of the Month

7 Investor Insights of the Month from The Startup Garage

7 Notable Investor Insights of the Month

Straight from the investors mouth.


7 top insights from investors around the globe.

1. Marc Andreessen @pmarca
Twitter Investor

“The biggest misconception 1st time founders have is that they will always stay aligned with their the co-founders.”

 
2. Reid Hoffman @reidhoffman
Facebook Investor

“We’ve moved from the information age to the networked age. Are you network literate?”

 
3. Josh Kopelman @firstround
LinkedIn Investor

“Being a VC is like watching a car accident.”

 
4. Todd Chaffe @toddchaffee
Dropbox Investor

“Investing in high growth stocks both in private and public markets is a challenging game, just like hockey.”

 
5. Theresia Gouw @Tgr
Trulia Investor

“Diversity is more than gender and ethnicity. It’s about diversity of thoughts.”

 
6. Marc Cuban @Mcuban
Sharktank Investor

“Anything you text can & will be used against you.”

 
7. Jim Goetz @Jimgoetz
Whatsapp Investor

“We’re confident WhatsApp will flourish Facebook just like Instagram. On their way to a billion active users and just getting started.”

 
 

Whether you have a question about you investing or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

What Type of Funding is Best for My Company?

What type of funding is best for my company? From The Startup Garage

What Type of Funding is Best for My Company?

Welcome to video Fridays
from The Start Up Garage


A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from viewers

Key Take Aways From Video:

1) There are really three main sources of funding, and to determine which source is right for you, you need to know what stage your company is in and how much money you need.

2) Those 3 main sources for funding are:
– Friends, Family, and Founders
Angel Investors
– Venture Capitalists

3) Generally family, friends, and founders are the first one and they invest anywhere from $25,000-$250,000 and they do it right as the idea is getting started.

4) Angel investors typically invest $250,000 – $1,000,000 and they want to invest after you got a business plan going, a team, maybe you’ve got a prototype developed.
They want to see some traction with your business.

5) The last stage is a Venture Capitalist. It’s also called a Series A. Then you could have Series B, C, and so on.

Complete Transcript below:

Question= “What type of funding is best for my startup?”

Tyler Jensen: Yes, this is a very common question that we get all the time, and it can be totally overwhelming and there’s all this information out and it’s really hard to get through all the details of it, so I’m going to try and simplify it in the answer. There’s really three main sources of funding, and to determine which source is right for you, you need to know what stage your company is in and how much money you need. Those 3 main sources for funding are:

1. Friends, Family, and Founders

2. Angel Investors

3. Venture Capitalists

And they go in that order to determine your stage. Generally family, friends, and founders are the first one and they invest anywhere from $25,000-$250,000 and they do it right as the idea is getting started. The next one is angel investors and they typically invest $250,000 – $1,000,000 and they want to invest after you got a business plan going, a team, maybe you’ve got a prototype developed — They want to see some traction with your business. The last stage is a Venture Capitalist. It’s also called a Series A. Then you could have Series B, C, and so on. That comes along once you’ve taken that angel money and really gotten some customer traction and you’ve proved your model, you’ve proved your metrics, then the Venture Capitalists come in and that money’s really used to scale out, whether that be nationally or internationally it’s really for a large scale plan.

Nicole: If you have a question, feel free to post it below and we’ll see you next Friday.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Need To Raise Capital For Your Startup? Ask A Celebrity

Need to raise capital ? Ask a Celebrity from The Startup Garage

Need To Raise Capital For Your Startup? Ask A Celebrity

There’s a new breed of angel investors, taking over the tech-funding spotlight, Hollywood celebrities, or rather tech-ebrities.

Tech ventures are exciting, popular and trendy, making investing in startups a must have for the rich and famous.

The roster of celebrity tech investors include:
Justin Bieber, Lady Gaga, Bono, Ashton Kutcher, Leonardo DiCaprio, Kim Kardashian, Justin Timberlake, Will Ferrell, Dr. Dre, Kayne West, Mc Hammer, Jay-Z, Will Smith, Jessica Alba amongst others.

Collaborations between Hollywood and Silicon Valley, aren’t entirely new.
They’ve been have been around since the dot.com boom in 1997.

It was then that the “godfather” of the movement, William Shatner, partnered with Priceline.com to become the official spokesperson for the discount travel website. Rather than accepting money for his role in the company, Shatner decided to take stock equity.

Celebrities took heed when 10 years later, Shatner cashed out his Priceline equity, to a resounding $600 million.

Suddenly, being a spokesperson and/or investing funds into underground technology startups, become the fast track to creating long term wealth to those celebrities, willing to take the risk.

“Like everyone else, celebrities are now hyperaware of just how many billions of dollars an early stake in, say, Facebook, could be worth down the road.”said Alan Hock, a partner at the law firm Moritt Hock & Hamroff who specializes in endorsement contracts for entertainers.

According to Rolling Stone Magazine Bono, the lead singer from U2, did exactly that.
His private equity firm Elevation Partners, invested 90 million for a 1.5% stake in Facebook.
When Facebook went public in 2013 and sold for $100 billion, he walked away with crisp $1.5 billion. It’s been rumored that Bono made more money investing in Facebook than he has with U2.

However, unlike traditional Angel Investors , world class musicians, artists, actors, and athletes aren’t always investing simply for a big payoff. Afterall, their jobs are not fueled on acquisitions and exit strategies.

It’s fair to say, we’re referring to individuals that have built their careers out of emotional creativity, passion, and determination. Present a viable business plan, while pulling at their heart strings, and you might just find your business funded.

Avid tech investor Aston Kutcher told TechCrunch founder Michael Arrington
“I really think that, technology probably has the greatest potential to accelerate happiness. Everybody sort of looks at investing and, you know, for me, if I don’t make any money, but what we deliver people — love and happiness and connectivity and friendship and health and whatever it is that we can deliver that ultimately leads to people’s happiness — I’m fine losing my money, if that’s the case.”

Bono shared a similar perspective on MSNBC:
“I got interested in technology because I’m an artist, I’m interested in the forces that shape the world, politics, religion, the stuff we’ve been talking about today. Technology is huge. I wanted to learn about it. People say it’s odd, ‘you’re a musician, why are you doing all this.’ But I think it’s odd if artists aren’t more interested in the world around them.”
 
Whether you’re in favor of the tech bubble reaching Hollywood or not, there’s no denying world of investment capital continues to expand.

There has never been a time in our history, that funding sources are have so readily available. Whether from Mc Hammer’s pockets or from various crowdfunding platforms, raising investment capital is more accessible than ever.

Are you prepared to #GetFunded?

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

8 Tips that Could Get You That Venture Capitalist Job You Want

8 Tips for Venture Capital from The Startup Garage

8 Tips that Could Get You That Venture Capitalist Job You Want

8 Tips that Could Get You That Venture Capitalist Job You Want

Venture capitalists come in all types, but just why become one? What makes this type of investment interesting for so many people? Truth is most VCs are average, every day people. They have usually either been entrepreneurs themselves, or they were surrounded by entrepreneurs at some point in their professional lives.

Suffice it to say, that this professional usually has a diverse breadth of experience. A VC works with many startups, all at once, as opposed to being a single entrepreneur who only works in one industry. They gain experience in a variety of industries, even though they don’t usually deal with the ‘ins and outs’ of the operations.

Still finding a VC position is no piece of cake. It requires a lot of planning, work and a diverse set of skills (preferably in tech related industries.) Whatever the reason and no matter how educationally prepared you are, finding the right VC job opening can be challenging. But there are ways to do justice to your efforts:

Understand the Personal Traits of a VC

VCs come from many different backgrounds, but overall, they are professionals that have either been successful entrepreneurs themselves, have worked closely with other successful startups or worked their way up through the venture capital ranks.

On average, the general characteristics of a VC follow along these lines:

  • A person that is in his mid-thirties to forties
  • Someone that has extensive educational background. Most existing VCs have an MBA or PHD.
  • Someone with Prior experience in finance, past entrepreneurial organizations or financial consulting.

Understand What a VC Firm Looks For

Obviously, this is dependent on the firm, and each enterprise has different requirements, but as a general rule, successful candidates will have worked with other reputable VC firms in areas such as technology, investment banking, consulting, and media or as a key person in a successful startup. Most have either an undergraduate or MBA and have completed their studies within the last 5 years.

Why So Green?

VC firms want candidates that are familiar with cutting-edge high tech trends, and candidates who have recently received their degree are more likely to be familiar with these trends.  A VC firm wants to know the future of social media, digital television and mobile computing. This professional has to be strong in finances but also needs to know everything related to the newest technology trends.

Competition is Fierce

There aren’t many job openings at VC firms, and when these do come up, the competition is tough. In most cases, it helps to show you have experience and are knowledgeable in the investing process. You may even want to demonstrate your abilities as a successful angel investor.  Crowdfunding is a viable investment platform through which anyone can own a piece of a startup for as little as $15 to $20.

Build Up a Reputation

Start a blog and network through social media. Learn about great passion and put your ‘two cents’ in. Become active on LinkedIn, the preferred networking site for VCs. Firms want to see strong digital presence, and prefer this to the more conventional resume.

Learn Your Tech Products

You must build up a passion for great trending products. Test the new social network, that new digital product and know the difference between an outstanding product and a ‘blasé’ one.

Network

Help other VCs get their job done. Do this through your blog and your social media presence. Connect with people and make the right introductions. Give more than what you get.  Be generous with your time and help startups by teaching them for free. This not only helps you network but also keeps you learning. And in the world of the VC firm ‘constant learning’ is an essential element to being successful.

Stay Humble

Even if you’ve experienced some investment success, stay grounded. Don’t assume you are an expert. Venture Capital requires constant knowledge and it is a long-term endeavor. Respect the VCs and the entrepreneurs you come across.

Remember the Purpose

Don’t let the profession go to your head. Stay grounded. Remember the world needs startups. Where would we be without Google, Facebook or Twitter? These were once startups and think of the number of people that now depend on these operations.  Remember the next Startup that gets pitched to you could be the next greatest technological trend.

3 Best Kept Secrets about Venture Capital

Best Kept Secrets of Venture Capital from The Startup Garage

3 Best Kept Secrets about Venture Capital

Venture Capital (VC) firms evaluate countless pitches from ambitious startup founders. The stakes are high with entrusted money from a sophisticated collection of people and institutions.

“No” is by far the more frequently used word.

So what makes them say yes?

To a child, a magician is whimsical and beautiful, a mystical person that pulls fabulous objects out of thin air. And for many entrepreneurs, A VCs decision to invest can be just as magical. But there are secrets to venture capital just as there are secrets a magician keeps. But when you know the slight of hand, the little tricks that occur behind the VC firm’s closed doors you can better prepare your pitch and be ready for the glitches.

VCs as Individuals are not that Diversified
While a VC firm could be very diversified, the average individual VC partner only participates in one or two deals a year. This means they need any deal they work on to really work. They want to risk as little as possible and want to be completely sure of who they back. That’s why you as an entrepreneur need to have everything organized. You must be sure of your startup and make sure the documentation meets all the requirements. You want all your ducks in a row when you make that special pitch.

All VCs Answer to Other Investors
Realize that every single VC has other investors to report to. Only the very top VCs don’t have to answer to their limited partners (LPs.) That means most individual VCs have to sell a project, just like you do. In fact, they may have more selling to do than you do because they have to convince about 15 other investors, whereas you only need to convince one.

Smaller VCs May See eye-to-eye but….
A small VC can see your needs, empathize with you, and it may even be easier to get funding from him, but what are the consequences? In most cases, the small VC is easier to convince but because they can’t write those large checks, they need to buy a lot for a small price. In contrast, a larger VC can fund a larger amount, but they care less about you the entrepreneur. Target the type of VC that best matches your growth needs.

How To Become A Venture Capitalist in 2014

How to Become a Venture Capitalist from The Startup Garage

How To Become A Venture Capitalist in 2014

So you’ve watched the show “Shark Tank” and think you have what it takes to be the next Kevin O’Leary, AKA Mr. Wonderful?

On TV, the career of a venture capitalist appears to be easily obtainable and positively thrilling. Power, prestige, and autonomy are ready and waiting for those bold enough to step forward. In reality, the aspiring venture capitalist (VC) has a better chance of becoming a professional athlete as he or she does becoming a VC professional.

The Startup Garage offers 3 key insights below to help those ambitious enough, enter this exclusive and highly competitive career.

Personality Traits

Please note the lists below are generalizations. Although these tend to be the norm, variations have been known to occur.

A) VCs have a business mind and are entrepreneurs to the soul. They have a raw intelligence for business opportunities, and an unwavering desire to make them come to fruition.

B) VCs are adrenaline junkies. They live for the thrill, whether jumping out of planes or financing a million dollar startup. The VCs life and business are founded on high risks and high rewards.

C) VCs are cyber prophets. They have keen insight on cutting edge technology trends, and know how to use all the latest gadgets.

D) VCs have stellar interpersonal skills. They’re social butterflies that thrive on interacting and communicating with others. Networking is 2nd nature to VCs, who are always on the prowl for the next business partnership.

Curious to dive deeper into the personality of a VC, and see if you fit the mold?

Technology evangelist, Guy Kawasaki developed an online test “The Venture Capital Aptitude Test” specifically for that purpose.

Take the free test here: electricpulp.com/vcat

Education

A) A VC has an undergraduate degree in business, finance, computer science, accounting, or engineering from a top university.

B) VCs typically have an MBA (Master of Business Administration) from a top business school; think Harvard, Stanford, Duke, Georgetown and Columbia.

C) Not only does a VC hold degrees from the above schools, more than likely they ranked at the top of their class.

Work/Life Experiences

A) VCs tend to be serial entrepreneurs, with real life experiences in working and/or launching high growth startups. They know the feeling of a successful startup, as well hardships of a failed startup.

B) VCs circle of influence includes entrepreneurs, tech savvy individuals, and business advisors.

C) VCs might have experience in working in and/or with large banks or credit unions.

D) A VC may have had their start as an angel investor, dipping into their own saving and investing in small businesses. Prior experience as an angel investor, allows for the deep understanding of responsibility that comes with investing other peoples money.

E) A VC may have done product development for large firms or has been a consultant for small businesses.

F) A VC may have been a CEO, one that demonstrated exceptional decision making skills.

G) A VC may have entered a Venture Capital Firm and worked their way up the ranks, from analyst to partner.

H) Success leaves clues. Remember to do your homework, research and mirror the success secrets of top investors. A great starting point is Forbes Magazine’s Midas List, The Top Ten in Venture Capital Today. The list includes top investors like Jim Breyer of Accel Partners, Marc Andreessen of Andreessen Horowitz, Peter Thiel of Founders Fund, Reid Hoffman of Greylock Partners, and David Sze of Greylock.

Finally, the last piece of advise we’d like to give is to be pro-Active, innovation and optimistic in your approach. The industry’s small size of 6,125 potential openings, can be daunting, don’t let figures dissuade you; it only takes 1 position to fulfill your VC legacy.

Best of luck!


 

Whether you have a question about Venture Capital, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Mistakes to Avoid When Pitching to a VC

Venture Capital Mistakes to Avoid from The Startup Garage

Mistakes to Avoid When Pitching to a VC

Avoid the “How Embarrassing!” Moment

No one wants to look dumb — especially while requesting a significant amount of money. As a growing business, it is important to have a firm grasp on the capital raising process — especially if your goal is expansion. The number one concept to understand about Venture Capital is that it is for businesses with established revenue looking to scale up.

If you are not to this point yet, seek angel investment or look into crowdfunding.

Regardless, the tips here of what to avoid will help you plan for the road ahead.

Not Enough Focus on the Financials

A VC firm will make the decision of whether or not to invest in your business primarily based on the numbers. There is an expectation of risk, but the assumptions and projections — as well as past revenue — will need to suggest a healthy return in order to be considered.

[pl_blockquote pull=”right” cite=”From ‘Pitching A VC Why Financials Matter’ by David Hornik”]
“It is almost assuredly the case that an early stage company’s projections are wrong. In the last decade I have only seen one company actually hit the numbers they pitched me on. The rest of the companies have missed by varying degrees of big time. But the real question when listening to a pitch isn’t whether the company will actually hit the numbers they are projecting, but rather what those projections say about the entrepreneur and the business? Is the entrepreneur focusing on the right things? Do the financials make reasonable assumptions? If the assumptions are anywhere close to right, is there a big interesting business to be built? Smart investors will dig into your financials to get a better sense of how you are thinking about your business.”
[/pl_blockquote]

 

Insufficient Market Validation

You will be expected to have accumulated some sort of customer base. Merely providing hopeful statistics on the market will not help prove the target’s willingness to adopt the product, or that there is even a viable business in discussion.

 

Requesting an NDA

Don’t ask an investor to sign a Non-Disclosure Agreement, even if it is just to protect your grandmother’s secret sauce recipe. An investor won’t sign an NDA… ever. And you will look like an idiot for asking.

 

Unconvincing Exit Strategy

What you’re selling the VC firm is a stake in your company over a given growth period. Their reason for buying in is to receive a large sum once the business has reached its growth goals. In order to be attractive, present a clearly defined exit strategy. Sell them on the opportunity.

 

Replacing Conventional Introductions with Digital Advances

With what has been said on the importance of the numbers, note that a VC firm is not investing in a product or even the business per se. They are investing in you, the founder. Maintaining a professional level of communication is extremely important. Introductions should first be made in person. If you’re not sure how to go about meeting these people, start networking. Local events and groups are a good way to start. Resourcefulness and the ability to network are traits an investor at any level would be interested to see.

Always remember your audience.

 


Whether you have a question about Venture Capital, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

What to Know about Venture Capital

What to Know about Venture Capital from The Startup Garage

What to Know about Venture Capital

What to Know about Venture Capital

Venture Capital (VC) firms collect money from a collection of wealthy individuals, insurance companies, educational endowments and pension funds.1 These assets are allocated over a portfolio of stocks, bonds, real estate, etc. Typically between 5% — 10% are assigned to “Alternative Investments.”

The alternative investments are the high-risk/high-reward class of assets and are what is available to fund startups.

VC firms are typically set up as limited partnerships with two types; limited and general partners. Limited partners provide the funding in the form of a Capital Commitment, or obligation to pay when called upon. It is the responsibility of the general partners to put together deals that are attractive to their counterpart, in exchange for a percentage of profit.

VC firms knowingly make high-risk investments. The funding they provide is in exchange for equity in the company, and like all things when dealing in risk — the higher the risk, the more expensive it is. Your risk as a startup will be determined by the information and confidence you present. Ownership required by the VC firm can range between 15% — 25%.

The funds raised in a VC round for a tech startup serve one major purpose — scaling.

VC firms evaluate businesses that have a proven track record and product. Candidates must be able to present evidence to the market and sales potential and are interested in either growing up or out (geographically or for enterprise). This limits who this applies to primarily, but not exclusively, to tech businesses.

In order to be accepted by a firm, the numbers must work. VC firms work in the millions and billions, and will expect a model that has the capacity provide a large exit. While most VC recipients do not reach the numbers required for acceptance, confidence in the company’s potential is expected.

Of the millions of companies created every year, just a few thousand get VC funding. Nearly every tech company you recognize has been funded by VCs, including: Apple, Amazon, Google, Facebook, eBay and PayPal.


1 The Nuts and Bolts of Business Plans – MIT Course 15.S21. By Joe Hadzima (nutsandbolts.mit.edu)
 

Whether you have a question about Venture Capital, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How Does the VC Funding Process Work?

How Does The Venture Capital Process Work from The Startup Garage

How Does the VC Funding Process Work?

Venture capital is ideal for early-stage tech companies that have already acquired some seed capital, but are too small for a public offering. By the time you approach venture capitalists, you will have a working product and business model, a user base and market validation, all of your patents and legal requirements in place, as well as past revenue, if not profit. The goal at this level of funding is scalability.

A venture capital firm is comprised of investors, analysts and industry experts with the purpose of operating on behalf of many individual investors. While each situation is different, the general pattern for approaching VCs is as follows:

 

The Introduction

An introduction is always the first step. This can happen in a variety of ways: by phone, email or in person. This depends on where and how you make contact with the VC.

 

The Pre-Meeting Workup

Once you have a meeting scheduled, you should send the VC firm your pitch deck, an executive summary or one-page business plan. You will be expected to show evidence of a model ready for rapid scaling. It’s not necessary to send your full business plan at this point.

 

What to Expect at the First Meeting

This will most likely take place with several representatives from the firm. The firm is responsible for the collective capital of all of its investors. The recipients of your pitch will be far more critical of your business model and past operations than at any of the rounds up to this point.

 

The Partners

Following your presentation, the VC firm will have a partners’ meeting. The firm’s board will meet to review new companies up for consideration.

 

Additional Information

If your project goes further than the first partner meeting, more detailed information will be requested. If you have not done so yet, this is the opportunity to send your full business plan and supporting financial information. You will want to demonstrate your competency, so keep it tidy and professional.

 

The Face to Face

Once the firm reviews your project, the other partners will want to meet you to feel comfortable about the investment. There are numerous factors in evaluation, however it will come down to your potential to provide them a profitable exit. Know the numbers they expect and demonstrate your confidence in achieving them.

 

Additional Firm Meetings and Validation

The partners of the VC firm will want to hold a closed meeting again to decide on how they want to proceed with your project. The VC firm will look seriously into your company, investigate your data and study the technology. At this point they may draw up a term sheet with their general guidelines.

 

Term Sheet

It’s in your best interest to have an attorney to look over your legal documents. Understand all of your obligations — VC is not only expensive in terms of equity. These negotiations may make or break your deal. Stay flexible, and be wary of dealings that don’t feel right. VCs end up owning about 15% — 20% of each portfolio company.1 So, make sure your buying the right new boss for your business.

 

Signing the Deal

While this IS an accomplishment, your work has only begun.

 

Bottom Line

These are very busy people, handling lots of money. Be as prepared and concise in your dealings as possible and try not to get down if your business is not chosen. Learn as much as possible in the process.

 


1 AVC.com
 

Whether you have a question about Venture Capital, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!