Category Archives: Venture Capital

Angel Investing – Books, Blogs & Bootcamps

IMG_0376Although long past are the days of racing up and down the aisles of Staples, kids in tow, to acquire all the school supplies on the “list” (probably these days best achieved with a one-click of Amazon Prime), the imminent arrival of the crisp weather of fall always turns my attention to “back to school” thoughts. These days, back to school means reviewing resources to help educate angel investors. Having had the privilege over the past six years to provide leadership to the Golden Seeds Knowledge Institute, I am always on the hunt for training resources to assist both new and seasoned angel investors under the assumption that learning is a lifelong process no matter the discipline. I like to segment investor training into three categories:

BOOKS, BLOGS, & BOOTCAMPS

BOOKS:

Although these are many great sources of information on angel investing, a few of the favorites on my bookshelf include:

Feld & Mendelson’s Venture Deals.  Filled with rich content covering topics such as term sheets and how to raise money, this is a fabulous resource for both investors and entrepreneurs.

David Rose’s Angel Investing – The Gust Guide to Making Money & Having Fun Investing in Startups. This book is one of the most comprehensive guides to angel investing I have read incorporating a wealth of knowledge from David’s incredible history of investing in this space.

Brian Cohen’s What Every Angel Investor Wants You To Know. This is a fun read filled with both advice and anecdotes from the Chair of New York Angels for both the investor and the entrepreneur seeking early stage funding.

Alex Wilmerding’s Term Sheets and Valuations. For those of you who want to understand the intricacies of Term Sheets, this a resource and that I recommend to all investors who take my courses at Golden Seeds.

Basil Peter’s Early Exits. This book covers many topics relevant to the exit process such as exit strategy and investor/entrepreneur alignment.

Richard Lambert’s Financial Literacy for Managers. Although geared more towards public company financial analysis, this resource from Wharton Professor Richard Lambert discusses many of the concepts such as benchmarking, DCF analysis and cost analysis which are important to a startup’s financial health.

Clearly, there are many other great publications out there, these are some of my picks.

BLOGS

Subscribing to Blogs from experts in the field is a great way to keep yourself informed as an angel investor. Here is my list of VCs whose blogs I follow and find informative:

Mark Suster’s Both Sides of the Table.

Fred Wilson’s Daily AVC Blog

The First Round Review

Jalak Jobanputra’s The Barefoot VC

Golden Seeds Blog

Ed Zimmerman, Chair of the Tech Group at Lowenstein Sandler, provides great insight into may topics including his recent post in the WSJ regarding SAFEs – LINK

BOOTCAMPS

I am often asked for a recommendation for courses, either online or in-person, that address angel investing topics. Here is my current list:

Golden Seeds Knowledge Institute:  Golden Seeds developed a series of investor training modules to help our members understand the basics of angel investing. Several of these modules are open to guests.

Angel Capital Association: through it’s Knowledge Center provides a variety of seminars and workshops on various topics.

First Round Capital runs a program Angel Track – a Masterclass for Emerging Angels.

Y Combinator  and Stanford also have courses for angel investors

In addition, for women investors  37 Angels Bootcamp and Pipeline Angels  have angel investor training programs.

Please use the comment section to add Books, Blogs or Bootcamps to the list!

Angel Investing – Burn Rate & Cash Runways

Businesswoman presenting her business ideas

One of my favorite First Round Capital Holiday Videos is the the 2014 release – “It’s All About Burn Rate”  set to the tune of Meghan Trainor’s “All About That Bass”.  I sometimes find myself humming that tune when I am reviewing an investment opportunity from an entrepreneur who does not fully appreciate the importance of understanding how burn rate and cash runway can impact the success/failure of their venture. When analyzing the financial structure of an investment opportunity, I try to evaluate both the amount of time the funding will last as well as the milestones/traction that the funding will enable the company to achieve. Will the proposed funding result in:

  • Achieving cash flow “break-even” which allows the company to have some measure of control over their financial destiny?
  • An inflection point of milestones/traction that will position the company to raise another round of funding at more attractive valuation levels?
  • Landing in the “dead zone” – not enough traction to attract the next round of funding and without further funding in need of cutting expenses.

Break-even:

If the current raise enables the company to generate enough recurring revenue to operate on a break-even basis, then the company can continue as an operating entity without having to lay-off staff, reduce marketing outlays or frankly shut the doors and cease operation. The company needs to have a clear understanding of their variable versus fixed costs – what expenditures are mandatory to allow the company to survive versus those that can be reduced or even eliminated for a period of time. Growth may be slower than desired, but may at least provide the company the time to pivot their strategy or hold out for a more attractive funding environment.

Traction reached for next round:

For most of the companies in which I am investing, there will be multiple rounds of financing required before the company is in a position to exit. It is critical to understand what are the milestones/traction that the next investor will require and how does the company plan to achieve these milestones within the runway provided by the current raise? On the expense side, does the company have a strong grasp of the resources required to execute on the plan? Do the assumptions for revenue recognition take into account a realistic sales cycle for the product/service being offered?

The “dead-zone”:

Unfortunately, many companies end up in this position either because they do not raise sufficient capital or do not have the ability to actually execute on the plan that would position them to be attractive to the next investor. I find this oftentimes with companies that utilize convertible notes and end up within sight of the maturity date without enough demonstrated progress. As an investor, I am usually faced with the decision to extend my note, invest more in the company to provide some life support, or hope that there is at least some asset value to be distributed to note holders in the event of liquidation.

Remember as the music states – “It’s All About Burn Rate” 

 

Angel Investing – Twelve Days of Christmas 2017

12 days of christmas: 12 Snowflakes

On the first day of Christmas
St. Nick sent to me:
A Membership at The Wing! Continue reading

Angel Investing – Ringing in the New Year 2017

2017 Capodanno Natale 1It’s that time once again to reflect on the prior year and make some resolutions for the next. In last year’s post, I suggested that you:

  • Take a critical look back at portfolio companies that didn’t make it and try to ascertain what really went wrong.
  • Expand your access to quality deal flow
  • Become a mentor to a young entrepreneur

Here are a few of my suggested resolutions for 2017: Continue reading

Angel Investing – A Note on Notes

Business Concept: Close-up the Funding button on the keyboard and have Lime, Green color button isolate black keyboardThere are a variety of funding options for entrepreneurs to consider as they explore taking in external capital. For investors, understanding the pros and cons of these various funding options and how they fit into a company’s overall funding plan is critical. One option, a Convertible Note, is a hybrid structure that is used as a bridge to a future equity round. In addition to a stated interest rate and maturity date, Convertible Notes will have conversion terms that outline how the notes will be repaid or converted into equity. The amount of equity that a company needs to raise to trigger the conversion of the notes is referred to as the qualified equity financing. Historically, I have seen this form of funding used primarily in pre-seed rounds where the company needs to raise a small amount of capital to get to proof of concept as well as a bridge financing between a Series A and B round in order to provide the company with a bit more runway to get to the metrics required by a Series B investor. Continue reading

Angel Investing – Twelve Days of Christmas 2015

12 days of christmas: 12 Snowflakes

On the first day of Christmas
a founder shared with me:
A Term Sheet for Series B Continue reading

Angel Investing – Financial Projections – “Cash is King”

Cash is King Shopping Money Vs Credit Buy Power CurrencyAs an angel investor, I see lots of financial models, which range from the very simple to the extremely complex. I am often asked why I insist on seeing the actual model ( yes the excel not the pdf version) as it all based on layers of assumptions. In response, the financial model is nothing more than a quantitative expression of the business model and in fact what is most important to me are the assumptions that underlie the numbers. Continue reading