STARTUP PAPERBOOK:

#01 FUNDERS

TYPES OF FUNDING :

• Personal funds
• Credit cards
• Friends and family
• Angel investors
• Crowdsourcing sites such as Indiegogo.com and Kickstarter.com
• Bank loans/SBA financings/online lenders
• Venture capitalists
• Equipment loan financing

WHAT VC's PROVIDE WITH :

• capital
• strategic assistance
• introductions to potential customers, partners, and employees

WHAT VC's LOOK FOR / WHICH VC TO APPROACH :

Before approaching a venture capitalist, try to learn whether his or her focus aligns with your company and its stage of development.

• Specific industry sectors (software, digital media, semiconductor, mobile, SaaS, biotech, mobile devices, etc.)
• Stage of company (early-stage seed or Series A rounds, or later-stage rounds with companies that have achieved meaningful revenues and traction)
• location
• DAU's (Daily active users)

HOW TO APPROACH VC :

The best way to get the attention of a VC is to have a warm introduction through a trusted colleague, entrepreneur, or lawyer friendly to the VC.

As VCs get inundated with investment opportunities, many through unsolicited emails—almost all of those unsolicited emails are ignored.

Startups should also understand that the venture process can be very time consuming—just getting a meeting with a principal of a VC firm can take weeks; followed up with more meetings and conversations; followed by a presentation to all of the partners of the venture capital fund; followed by the issuance and negotiation of a term sheet, with continued due diligence; and finally the drafting and negotiation by lawyers on both sides of numerous legal documents to evidence the investment.

VC will typically not fund a very early stage company or just an idea. For that, you are better off seeking Angel investors.

VC or ANGEL INVESTOR

BEFORE: private equity - where you give away shares of your company in exchange for capital. Both VC and Angel Investor will have the private equity of your company.

Let's start by discussing the difference between the two :-

• WHO IS WHO : Business angels are individuals, often successful business people, who are using their own funds to invest in businesses they like, whereas venture capitalists manage the pooled money of others in a professionally-managed fund. Angel investors and venture capital funds focus on businesses in different life cycles.

• WHO FUNDS WHICH BUSINESS TYPE : Angel investors and venture capital funds focus on businesses in different life cycles. Angel investors typically invest in early-stage business and startups, which also means that they face a higher risk than venture capitalists. The VC's are less interested in early-stage businesses and prefer more established businesses.

• WHO GIVES MORE MONEY : As mentioned before, business angels operate individually and sometimes in so called angel groups or angel networks. The amount they invest varies from €10K and €100K- or more when angels group together. Capital provided by venture capital funds often start from €1M. For early-stage businesses, this amount is often too much.

• WHO GET WHAT : Both groups receive shares of the company when investing. However, venture capitalists often require a seat on the board, where business angels will function more as a mentor, to coach and advice the entrepreneurs running the business. In general, venture capitalists will exercise more control over your business than angel investors.