Are there angel investing trends you can share? Popular industries among D.C. area investors?
Sure. There are a lot of resources out there to give you data on angel investing, but one of the better sources is the Halo Report. This is a report put together by the Angel Capital Association and Angel Resource Institute.
The 2013 report just recently came out. The data shows that the average angel investment deal was $600K for angel investors and $1.7M when VC's and non-traditional investors were involved. The average company valuation was $2.5M while the top sectors were Internet, Healthcare and Mobile.
As far as D.C., I think the industries with the most promise are Security, Ed Tech and Ad Tech. We are seeing a great deal of start-up activity in those areas and this is generating a lot of interest from investors outside the area.
Hi Joel, I am a current MBA student, also running my startup on the side. I'm looking for some money to grow the business but I don't think I'm quite ready to pitch to investors. How else can I secure some quick funds? Thanks, Broke Student
As entrepreneurship continues to grow in this country and in universities, this is becoming a more frequent question. Fortunately because there has been such a nationwide focus on entrepreneurship there are more opportunties to get funding. I would look to scholarships, grants and business plan competitions. It seems like every university now has some sort of business competition or incubator program which often times provides funding.
Having said that, the best way to get funding is from your own customers. If you can provide the customer with value right from the start, then you should be able to monetize that customer. Self-funding is the best path possible because then you don't have to answer to investors or banks.
Hi Joel. Glad to finally get to chat with you! I'm aware that you run the Dingman Center Angels investment network. Where do you typically find the startups that present to the group? Do you search for them or do they come looking for you?
The answer is both. I source companies and companies come to us. I spend a lot of time on the road, which means going out into the start-up community to meet with entrepreneurs. Luckily there are many programs and events that attract start-ups such as incubators, pitch events, industry conferences.
Also the startup world is still a realtively small network. The power of referrals is huge in early-stage investing. This can be referrals from investors, other start-ups, or industry experts. The best way to get a meeting with any investor is from a referral.
I am ready to launch a Web site. Can you recommend some resources for how to publicize this? Many thanks -- this chat is awesome!
It depends a little on what kind of Web site you are planning to launch, but there are a number of resources. Wordpress is great and fairly easy tool for publishing Web sites. Creative Market provides wonderful design templates for Wordpress or in HTML if you are a little more technilogically advanced. PowToon is a nice resource for creating animated videos and presentations which might be a nice addition to your Web site.
Also, if you want to learn to build your own site there are some great teaching resources on Udacity, Udemy, CodeAcademy. AppSumo might also be helpful. This is a daily deals Web site for digitally distributed goods and online services.
Then there is always the ability to outsource the Web development. Elance and oDesk are the big players in the freelance Web development space. Check locally as well since there are a number of local web development which can provide great work.
Hi, love this chat. Am also a fan of Shark Tank. I'm 50 years old, have been dabbling in a service based business (health coaching) for a while. I'd love to grow it into something more but am clueless. I've tried SCORE - they tell me to hang fliers at the gym. Not helpful. I can't see getting an MBA at this point. Where do I turn so that I can, someday, present to a group such as yours?
Thanks for the question. I am also a big fan of "Shark Tank" and was fortunate enough to work with Daymond John looking at some of the deals from the show.
If you haven't already, I would recommend getting smart on the Lean Startup methodology (Eric Ries), Customer Development process (Steve Blank) and the Business Model Canvas. This is a common way that entrepreneurs are evaluating and developing their businesses. Going through this process will help you understand your business better and determine what it might take to really grow the business. You don't need an MBA if you go through this process.
What are some reasons you may turn a company away from pitching in front of your angel investors?
There are a lot of reasons why a company doesn't get to pitch to our investors. First is a question of business stage. Our investors don't fund ideas, they want to fund proven businesses. Therefore the company needs to have traction. This traction can come in 3 forms: Revenue traction, Customer traction (non-revenue generating), and Funding traction. Have all three is ideal, but having none is a difficult sell to our investors.
The other reason might be industry sector and location. Our investors lean more toward technology-related companies as opposed to life sciences and biotech. Also, we like to invest locally. That means our primary focus is on companies located in Maryland, Virginia and the District.
How do you feel about the show "Shark Tank?" Do you think it is a good representation of how investing really works? The show makes me really nervous to talk to investors.
I like the show a lot but make no mistake: This is reality TV and it's purely for entertainment value. It's not a great indication of how angel investing really works. Usually deals are struck over a much longer period.
What is accurate though is the types of questions that the Sharks will ask on the show. If you are a regular watcher then you'll start to pick up some common questions or concerns on such topics as customer acquisition costs, margins, lifetime value of the customer, scalability, marketing stategy, etc. These are all questions any smart investor will ask.
Hi Joel. My co-founder and I are entering the fundraising phase. We feel we need to hire a sales/marketing focused team member to help us pitch. What advice/resources can you offer for finding and hiring this new team member?
Hopefully you are hiring this person to help grow the business, not just to help with the fundraising. Remember fundraising is a non-recurring, non-revenue generating event. Yes it is important and time-consuming, but any new hire should be to benefit the company outside / beyond just fundraising.
The best place to find someone is within your own network. Research has shown that previous co-workers make great early employees from a fit standpoint. Also, get involved in the start-up ecosystem and get to know other companies. Many start-ups fail so there is always potentially great talent available. Co-founders Lab is another service that helps entrepreneurs find other entrepreneurs. The key to building an early team is more about fit than skills. You can always "coach up" an early employee but it's hard to change a person's attitude and work ethic.
My friend and I are both performers. I have been paid to do events alone, but my friend wants to put together a show where we will perform together. While not exactly forming a band, do we need to start a business to handle payments for performances? I don't think many people would want to pay everyone individually and there is also the issue of ticket sales. Everything I have done as an individual has been with my personal social security number. I have never had to deal with paying an employee or partner.
Sounds like you may want to set up a seperate business entity to handle your performances going forward. Forming an Limited Liability Corporation is very common for small businesses. This should allow the business to take payments rather than you personally. Disclaimer..defintitely consult a lawyer and banker.