Posts Tagged ‘Angel investing’

In the previous post we looked at what seeds funds are and why they are important.

In a recent blog post, Paul Kredowsky voiced his disapproval of the seed funding phenomenon. However, his post is less about the entrepreneur, than the seed funding companies themselves.
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The debate about whether the seed funding phenomenon is a bubble waiting to burst, or whether it’s a viable means of funding pre-revenue/start-up businesses still continues. This is my take on the landscape.

There was a time when if you wanted to fund your company you had four options, approach:

1. A bank
2. An angel investor
3. A venture capitalist

4. OR …… have an asinine risk tolerance and fund the project yourself with your own money.

At a certain threshold of funding, there was a catch twenty-two because banks are notoriously risk averse, and don’t normally fund businesses that have yet to prove themselves. Meanwhile, traditional VC firms couldn’t justify investing less than $3M-$5M in a Series A round, mainly because ROI based on growth trajectory (when investing in small amounts) wasn’t worth their while, especially when holding $700M+ under management.

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The first time I met John I was really surprised.  He was introduced to me from an investor in my new company at the time and John was an old friend of his. What surprised me about John how human he was.  He was in his late sixties and somewhat stubborn and opinionated.  But not it an arrogant way.

John’s wealth started with his grandfather’s company.  The family ran and grew it into a conglomerate that was eventually sold.  John now managed the family’s assets of over a billion dollars. I was really nervous when I pitched him, knowing what he could mean to my company.  But after listening to me for a few minutes and asking a few questions, John politely rejected my request to invest.

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