DISQUS

DJHunt · 2 months ago

Mark, I just ran across this article and think it's great. Founder need to understand what VCs are looking for and know that VC funding's not the "usual" path for startups, despite what they think. One little nitpick: in 6B you state that angels would be happy with a 3x return. While there may be plenty of high net worth individuals who would be happy with 3x, my experience says that most "professional" angels are looking for returns more along the lines of VCs. The Kaufmann Foundation suggests that angels have 10 companies in their portfolio each with the possibility of 10-30x returns, because only 1 of those companies will likely have that kind of exit. Of the rest, 4 will fail and 5 will have negative or modest returns.

msuster · 2 months ago

Well ... here's my experience. An angel may want 10x but if presented with an opportunity to get a 3x in 6 months they'd take it. Many VCs would not want this result and you might find some that encourage you not to sell. That's what I see as the main difference. But you're right that most angels expect a higher return. Thanks for your comments.

BerislavLopac · 2 months ago

I've ran into problems with your very first item on the list. You say "Raise a very small round of capital – usually from the three F’s (friends, family & fools): $100-200k" -- but where I live (Croatia) this is the point where most startups fail. First of all, $100k is anything but "very small"; a startup can live on this money for a couple years with no revenue at all. But more importantly, FFF's with money are practically nonexistant here: although about 80% of population owns a house or an apartment, the cash available for investment is in very short supply. When we add a general lack of knowledge and distrust of entrepreneurs, we can simply forget about any seed stage funding whatsoever, and the only startups with any hope are those which can build a product on sweat equity only.

msuster · 2 months ago

Sorry to hear that. Are there no VCs or seed investors in Croatia or the surrounding areas? Might need to look to Germany, France or the UK which have more developed VC markets. Or Switzerland. Good luck!

BerislavLopac · 2 months ago

That's exactly the case -- one (government boosted) attempt at founding a local VC fund has failed twice so far (hopefully it will have more luck the third time), and another practically abandoned venture investment whatsoever... We're now trying to build a better connection with funds abroad, but pitching to them also takes money, so we have the proverbial chicken and egg game again.