At this point, you have an idea or you have already started your company. To move things forward you realized you need equity capital (risk) to finish your development, build your team, mass produce your product or launch a marketing campaign.
Who can you turn to? The scenery is a bit confusing at times. First, you need to decide what type of investor you are looking for – angel or venture capital (VC).
VA Angels Fast Facts
- Presenting entrepreneurs have a 1 in 4 chance of raising capital
- Of the over 300 companies which have pitched to VA Angels over the past eleven years, an impressive 62% are still operating today. Compare this to recent studies that show only 35% of start-ups survive until age ten and only 37% of information technology start-ups survive past four years.
- VA Angels’ geographically agnostic mandate provides a great platform for any entrepreneurs doing an angel roadshow.
While in the beginning, friends and family and your credit cards are likely to be your first investors, eventually you will need to look elsewhere for funding. Few VCs invest in very early stage companies as these types of seed deals are often for companies still being formed. Whereas, many angels will mentor you as an early stage entrepreneur before they decide to invest in your company. By doing this they can assist in the shaping of the new company before they give you the cash flow injection you need.
Some angels invest in pre-revenue companies, yet prefer to work with seed fund deals when the product or service has been established. A few banks and VC funds specialize in seed and early stage deals, yet these are limited and the firms are very particular about their investment risk exposure.
To fill the gap between seed and early stage funding, some venture capitalists also act as angels when a deal does not fit their institutional fund criteria. It is a way for them to support a deal that they believe will be a success even though the company may be pre-revenue. Some angels also have investments in VC funds. Those typically have a higher starting level in the amount of money they will lend, but are also often more conservative in their lending habits.