Thoughts on startups by investors that
fund them & entrepreneurs that run them

Blog Archives

Do venture capital firms or private equity funds offer debt financing for startups?

The direct answer to your question is NO, VC and PE funds do not provide debt financing for any companies. Their entire business model is based on investing in companies that can potentially offer very high returns. For venture capital, this is typically ten times the invested capital, and those returns can only be achieved through equity appreciation, not debt service.

What are some good ways to get to meet with VC’s without introductions?

Actively build, maintain and make use of the amazing social networking tools that are available. Right now, there are over 11 million people who can provide an introduction to me through LinkedIn (and I am far from an open networker.)

If you can’t figure out how to get one of those eleven MILLION people to recommend you to me, that’s

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How much time does it take for a VC to respond to a business plan?

Unfortunately, VCs do not typically review business plans. Instead, they look at a brief summary and then decide if they want to invite you in for a meeting.

If a startup has an unreasonably high valuation in its F&F round, would Angels and VCs be concerned?

Yes, absolutely. In my experience, that may well be the #1 killer of deals that should otherwise happen.

Consider the math: if the F&F round is $60K for 1%, that means the ‘post investment’ valuation of the company is $6 million. If the company now approaches a professional investor such as a VC, angel group or serious angel, let’s say

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What exactly is an API team?

I believe this question is conflating two completely separate concepts:

An API is an Application Programming Interface, a set of computer instructions that allow different programs or systems to communicate with each other. That’s how Quora can post your answers to Twitter, or allow you to log in to Quora with your LinkedIn account.

An API Team is simply the group of people (typically

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Should VCs and Angels take race and gender into consideration?

Absolutely…in a positive sense [doh!], in order to help proactively ensure that (a) not only white males become entrepreneurs in the first place, and (b) that as investors they are not inadvertently restricting their universe of potential investees.

That’s why in the past few months I have gone out of my way to participate in the Black Founders Ideas Are Worthless conference (http://www.blackfoundersconferen…), the Latinos

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How important is previous business experience to a VC or angel when investing in a start up?

It’s true, but…

Starting a company is NOT at all easy, and unfortunately there simply is no way to really learn about it other than by doing it. No book, school, mentoring, or even apprenticeship can substitute for hands-on experience. When you consider that doctors spend a minimum of two years in pre-med, four years in med school, one year in internship,

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What is the ratio of equity received for sweat equity vs. cash investment in a new venture?

There is no specific ratio between “sweat equity” and cash in a venture, and that’s actually not a good way to think about the issue. The bottom line is that cash is cash is cash, and everything else is “not cash”. The reason is that cash is fungible, which means it can be interchanged for everything else, from programming skills

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How many start-ups in the US get seed/VC funding per year?

In very general terms, roughly 1,500 startups get funded by venture capitalists in the US, and 50,000 by angel investors. VCs look at around 400 companies for every one in which they invest; angels look at 40.

There are several million “startups” that are formed each year, so one way of looking at it is that there are several million

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Why aren’t venture capitalists lean and scrappy like the startups they fund?

This isn’t a question of hypocrisy, because the two roles aren’t at all analogous. Plato’s definition of beauty was “fitness to the end in view”, and the skills and characteristics that make for a great VC are quite different from those that make for a great entrepreneur.

Think of it as the difference between the best spy working for the

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