How To Deal With Angel Groups

Published: 10/31/2007 3:13:38 PM, comments: 0

As part of a continuing series on obtaining financing from angel groups, today's topic is about dealing with due diligence issues.

Once an angel group has indicated an interest in investing in your company, they will then start looking deeper.  Because there are usually several angels who are interested in a deal, they will need to decide who is going to perform the due diligence.  Sometimes it will be one person, sometimes they will divide it among several angels, based on their individual expertise.

It is critical to cooperate with them and show them everything.  It looks bad if they get to the end of the diligence process and find the proverbial "skeleton in the closet," so it really behooves you to show them everything up front.

If you have extremely sensitive technology, it would be appropriate to only show it to one angel and ask them to sign an NDA.  Assuming all goes well, the angel would report back to the group that there are no problems with the technology.

Anything you can do to make the due diligence process run more smoothly is greatly appreciated by your potential investors and business partners.  I've seen ver organized startups have non-proprietary documents converted to PDF files and available in a password-protected online for easy angel access.

Keeping the due diligence part of the process organized and well-run also indicates that you understand the investment process and is a good overall indicator of your level of organization.

Don Jones


How To Work With Angel Groups

Published: 10/25/2007 10:24:42 AM, comments: 0

As part of a continuing series on how to deal with angel groups, today's post is about what happens after the "Big Presentation" in front of the angel group and the group is interested in finding out more about your company.

At the Band of Angels where I'm a member, we schedule a follow-up working lunch that usually lasts about 2 hours.  It is structured so that the company presents a very brief summary of their opportunity and then the angels in attendance start peppering the presenters with specific questions.  The purpose of the "grilling" is to find out where the holes in the company are. 

Experienced angels know that very early stage companies are like swiss cheese - they have lots of holes - and in assessing their interest in investing they have to understand where the weaknesses are and where the strengths are.

As a presenter, it is entirely acceptable to say, "Here's where we're weak and here's where we're strong."  If the angels agree, then you've just banked some credibility.  If they still like your company after this meeting, it is on to some initial due diligence and discussions about deal terms.  I'll leave those topics for future posts.

Don Jones


The Rise Of The APIs

Published: 10/18/2007 11:09:12 AM, comments: 1

Facebook made headlines a few months ago by launching its Application Programming Interface (API) allowing outside developers to create applications to market to its audience of millions.  MySpace is getting ready to do the same thing.

Although there is bound to be some hype and excess associated with this trend, I see it continuing.  What's interesting is that a graph published by O'Reilly Media - I don't have the link for it - shows that only a very few applications have proven to be successful at generating large usage on Facebook.  The long tail appears to be at work.

My prediction is that the more business-oriented network-type sites such as Plaxo and LinkedIn will join the API trend.  Plaxo has already joined OpenID, which is a platform that allows consumers to create a single ID that grants access to numerous database.  APIs are on the rise.

Don Jones


Technology Bubbles Are Good

Published: 10/9/2007 8:25:00 PM, comments: 0

I read a recent interview of Bob Metcalfe where he says (paraphrasing) "Bubbles are good - they speed innovation by attracting lots of investment."

This concept sits well with me, harsh as it may seem because most of the participants (and their investors) in bubbles will lose. Look what it did to the nascent car industry decades ago, or to the Internet, or to the telecom industry, or to Web 2.0 companies, or what it will do to ethanol/energy sources here in the U.S.

My belief is that bubbles only hurt the economy in two areas where the result is not technology advancement - real estate and the stock market. Breaking bubbles in those two industries don't really leave pieces to be picked up and reassembled into something greater than before.

The U.S. has always been a boom and bust kind of place, taking two steps forward and one and a half back in whatever industry you want to name.

Don Jones


VentureDeal To Begin Offering Angel Group Transaction Data

Published: 10/4/2007 1:40:47 PM, comments: 0

As part of our ongoing effort to provide more value to subscribers of VentureDeal, we are previewing the availability of angel group transaction information "to the trade."

Who is "to the trade" you may ask?  Venture capitalists, angel investors, law firms and others who regularly invest or deal with financial transactions related to very early stage investing.

This offering is unique in that there is no other publicly-available site that is aggregating established angel group (Angel Capital Association member groups) transaction information in an easy-to-use database.  In addition, we will provide subscribers with a periodic report in PDF format that will enable them to quickly focus on angel deals in their area of interest.

If you are interested in finding out more about this new service, contact us directly.

Don Jones


Don Jones
CEO, VentureDeal

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