10 May Angels step up
A fortnight ago, this column talked about the missing angels, those investors who provide the seed money that enable very early-stage companies to sprout. Predictably, I heard from lots of early start-ups who are looking for those angels. They confirmed what I wrote: It’s difficult today to find investors willing to take even a small risk on a big, but unproven idea. Yet I also heard from a few investors, who had some interesting points to share with you this week. These are points worth noting if you are an early-stage company trying to sort out just how and who you approach for early fundraising.
Standish H. O’Grady, senior managing director at Granite Ventures, reminded me that, as in all professions and people, VCs’ interests vary. Granite is a contrarian among investment firms. Where most firms these days look for track records and known market places, Granite seeks out first-time entrepreneurs and unproven markets with huge market potential.
In part, Granite runs counter to the tide because it believes it will find great deals that other investors might miss. But O’Grady points out another reason his firm is able to seek out the unknown entrepreneur: Granite runs a relatively small fund, with less of the pressures associated with the very large funds managed by bigger venture firms.
“First-time entrepreneurs usually have more to prove, and less to fall back on if they don’t succeed,” O’Grady wrote. “By the time markets are proven, competition is fierce, and leaders versus me- too’s are getting sorted out.”
If O’Grady makes it clear what seed investors are looking for, a second message last week points out that early-stage investing is not all about potential upside. Many angels, this correspondent reminded me, invest “for the joy of influencing innovation.”
Love of innovation needs to trump aspirations of financial return, this emailer went on to write, because these angels “run a high risk of getting washed out during the first institutional VC round. It takes strong conviction on the part of the founders and CEO to maintain adequate terms/ROI to early investors.”
It’s worth sharing these comments because so many first-time entrepreneurs struggle to understand who they should be talking to as they raise first money. In today’s market, especially, a start-up will burn precious time and energy knocking on the name- brand doors along Sand Hill Road. Instead, they are wise to seek out the unconventional investor who swims against the tide.
And when they find that investor, they are wiser still to view that angel as more than a source of money. The best angels are partners – partners who should be protected, as best they can be, as they make the leap of faith with you.
End notes
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Are you ready to launch at DEMOmobile 2004/
The search is under way to find the 50 products that will launch at DEMOmobile 2004, September 8-10, 2004, in La Jolla, California.
DEMOmobile is a high-visibility launch platform that will set your company on the path to success. It’s the best venue for positioning new mobile and wireless products and establishing strategic relationships with the players who will lead you to success. The conference’s stringent selection process and excellent reputation serves as an endorsement for your product as it comes to market. DEMO events have helped companies like Palm, Handspring, IBM Pervasive Computing, Logitech, Mirra, Tapwave, Macromedia – even Microsoft – launch their products, create critical business relationships, and sell to thought-leading early adopters.
DEMOmobile 2003 demonstrators benefited from more than 162 million media impressions before, during, and long after the event.
Visit: http://www.idgexecforums.com/demonstrate/tour/index-demo2.html to learn more and complete an online application.
DEMOmobile 2004 September 8-10, 2004 Hilton La Jolla Torrey Pines, La Jolla, CA http://www.demomobile.com/M4DL
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Chris Shipley is the executive producer of NetworkWorld’s DEMO Conferences, Editor of DEMOletter and a technology industry analyst for nearly 20 years. She can be reached at chris@demo.com. Shipley, has covered the personal technology business since 1984 and is regarded as one of the top analysts covering the technology industry today. Shipley has worked as a writer and editor for variety of technology consumer magazines, including PC Week, PC Magazine, PC/Computing, and InfoWorld, US Magazine and Working Woman. She has written two books on communications and Internet technology, has won numerous awards for journalistic excellence, and was named the #1 newsletter editor by Marketing Computers for two years in a row. To subscribe to DEMOletter please visit: http://www.idgexecforums.com/demoletter/index.html.
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