Original post by Tim Berry via gust
Many local angel investment groups work with a local event that creates the illusion of a business pitch contest, awarding investment to the winner. There are multiple benefits to this type of arrangement. The event generates local buzz. Local media cover it. Startups and investors discover each other, and the community wins because the event becomes visible evidence of new business and new jobs locally. And new angel investors are trained and oriented.
In most of the events that I’ve participated in, that the appearance of a business plan contest is to some extent illusion. It’s not just a one-time pitch or plan contest. In fact, before the final event, the investors have already done due diligence. They’ve heard multiple pitches, poured over business plans, talked to customers, and looked at the legal work. Decisions are made before the actual event.
Good as this is when it works, I’ve also had a chance to see some of the pitfalls, and the problems that come up when it doesn’t work. I think most of these can be avoided.
- Some of these events mix angel investment with straight-out prize money with in-kind compensation like free consulting, legal work, or rent. That tactic has the advantage of increasing the perceived value of winning, and generating headlines like the $XX million prize money. But it also has the disadvantage of mixing apples and oranges and playing up prizes that don’t work out to real dollar value. For example, the winner is based somewhere else and doesn’t want to move. Or the in-kind winning includes legal work or management consulting, but the startup that wins has its own providers.
- Angel investment events where the group investment is supposed to go to the winner, but the winner ends up hating the term sheet. Usually these term sheets involve convertible notes, which are supposed to convert to equity at the next round of financing, like when the serious venture capitalists do a Series A. I’ve seen several of these fall apart. The worst was one where the startup founder took it as a prize for winning, and never saw the angel investors as partners, or, for that matter, anything except usurpers. Why did they want to act as if they owned a piece of her business?
- Angel investment events where the due diligence isn’t done before the event. The event takes place, the audience watches, the pitches happen, and a winner is announced. But before the term sheet is signed, problems come up. Investors and startup winner end up never agreeing on terms.
Are these kinds of problems avoidable? Are they worth the risk?
November 17, 2011 | Techmeetups
Original post by Alexia Tsotsis via THE SW BLOG
Viral startup launching platform LaunchRock is announcing a get of $800K in seed funding today, from investors 500 Startups, Venture51, Quotidian Ventures, Social Leverage, Lady Gaga’s manager Troy Carter, David Tisch, Diego Berdakin, Paul Bricault, Dharmesh Shah, Ryan Holmes, Paige Craig, Scott Becker, Eric Cantor, Mike Edwards, David Famolari, Stephen Gill, James Levine, Daniel Wolfson, Philip Reicherz, Adrian Stone and Lance White (What a mouthful!).
In addition to announcing financing, LaunchRock is also, um, launching to the public, so that anyone who wants can create their own startup launch page as of today can. Coming out of private beta, the startup has introduced a design revamp which includes new launch-page themes, additional social options like Tumblr and LinkedIn and a more streamlined email invite flow.
LaunchRock founder Jameson Detweiler tells me that he plans on using the funding to bolster the marketing and analytics part of the LaunchRock launch packages, “The thing that our customers are telling us (and the thing we see them struggle with) is what to do with the [email] list after they’ve built it,” Detweiler says.
November 16, 2011 | Techmeetups
On 8th November 2011 we hosted our second Startup Masterclass entitled “How to make sure you’re investment and Exit ready”.
The presentations were very informative and we’d also like to say a massive thanks to our presenters, Anastasia, Sean, Richard and Howard for sponsoring the networking drinks afterwards for everybody.
Here’s a run-through of the main takeaways from the session which draws on some of the discussions that took place over and above what is included in the slides. Click on the button to view the slides.
[button url="http://www.techstarthub.com/startup-classes/schedule/titledate/business-plans-dont-be-a-gnome/" ]Business planning for startups: Don’t be a gnome![/button]
Presenter: Anastasia Kovaleva, PwC.
Anastasia has seen hundreds of business plans and one thing that she notes is that people often forget just how difficult it is to sell and market a new product. Just because you believe you have the best thing out there and that completely trumps the competition, it doesn’t mean people are going to flock to buy it. Very good advice and something to be very realistic about when writing your business plan. Anastasia’s presentation also has an excellent slide which guides you to useful resources for business planning.
[button url="http://www.techstarthub.com/startup-classes/schedule/titledate/how-your-pitch-is-received/" ]How Your Pitch Is Received[/button]
Presenter: Sean Owen, Pentech Ventures
Sean took a novel approach and explained to the class what happens behind the scenes at a VC firm when you have pitched them. One interesting observation Shawn pointed out is that once you’re past the initial stages of pitching the VC and you go though to due diligence stage, it’s pretty much a done deal. So your aim is to really shine in the beginning stages and make sure that you have answered all the prospective VC’s questions and overcome their doubts completely. In particular, Sean advised to be proactive in asking questions of the VC you’re talking to ensure you’re on the same page and to really stand out from others.
[button url="http://www.techstarthub.com/startup-classes/schedule/titledate/10-things-you-need-to-know-if-you-employ-people/" ]10 things you must know if you employ people[/button]
Presenter: Richard Cummings, HR Insights
Richard took us through a presentation which made many people’s eyes open – it really is somewhat scary what a minefield employing someone can be! The main points raised included the fact that a job description is actually really important when you hire someone. It might be boring to do but if you get down the line and ask your employees to do something they really weren’t expecting, it really can cause massive problems for everyone. Richard’s main point was that you really must do your homework before hiring someone because the cost of making a mistake can be incredibly expensive.
[button url="http://www.techstarthub.com/startup-classes/schedule/titledate/business-structure-and-tax-efficiency/" ]Business Structure and Tax Efficiency[/button]
Presenter: Howard Weintrob, Jeffreys Henry LLP
Howard’s presentation outlined all the basic facts and figures you need to consider when you set up a company to be tax efficient. Throughout Howard’s presentation, and something which is not so evident in the slides, is the emphasis on thinking ahead when you plan. Your circumstances as a business will evolve so you need to consider how you’ll start out and what changes you can make to remain tax efficient as you grow.
We have more Startup Masterclasses coming soon, please visit us on and for more information. Our next Startup Masterclass, Want to build something of value? Think of Content, Community & Analytics, is on 28th November (Monday) at the Innovation Warehouse.
November 14, 2011 | Techmeetups
Original post by finextra
Credit card giant American Express has set up a $100 million fund to invest in digital commerce startups.
Amex, like rivals Visa and MasterCard, says it recognises that the payments industry is undergoing fundamental change as commerce moves online.
To help fend off competition from the likes of PayPal and Google, as well as a raft of new entrants, last year it acquired the Revolution Money platform and used it as the basis of a digital payment and commerce offering called Serve.
The firm has also made a number of other digital moves, cutting a deal with Facebook, filing a patent for a system and method for using loyalty rewards as a currency, investing in mobile outfit Payfone and buying Sometrics, a virtual currency vendor.
Now it is promising a “multi-year digital commerce initiative designed to help identify and develop innovative technologies that will help accelerate the company’s digital transformation and strengthen connections to a growing base of customers around the globe”.
As well as earmarking $100 million for investment, an office has been established in Silicon Valley from which the initiative will be managed by Harshul Sanghi, who was recently appointed as managing partner, enterprise growth group. Sanghi previously ran Motorola Mobility Ventures.
November 10, 2011 | Techmeetups
Original post by ANITA HAMILTON via Time
A look at the innovative ways small businesses are adapting and growing in a changing economic climate
The BodyMedia Fit CORE armband BODYMEDIA
How do you launch a consumer gadget that doesn’t fit into any established niche? While one of the biggest challenges for entrepreneurs breaking into mature markets is figuring out how to differentiate their wares, the problem with trying to pioneer a new niche is that your idea can seem too different. Venture capitalists are squeamish to back a wild card, retailers are worried that no one will buy, and consumers either don’t get it or write it off as a gimmick. A handful of startups in the emerging market of wireless fitness gadgets for non-athletes have all faced these challenges in the past few years and prevailed. Here’s how they did it:
When David Wang approached venture capitalist Ronald Chwang of iD Ventures America last fall to ask for an investment in his new startup, Chwang gave the same answer as the 15 other VCs Wang had hit up before him: No. “They all said it was too risky, and they didn’t fund us,” says Wang, who hoped to market a pocket-sized, keychain gadget embedded with motion sensors to track users’ daily activity levels. But unlike the other VCs Wang had pitched, Chwang held out a small carrot. “I said build the prototype so I can believe these things can do what you claim,” says Chwang.(See the 25 best financial blogs.)
That’s when Wang, a former marketing director at the social gaming startup Booyah, learned that launching a one-of-a-kind, consumer hardware device was much tougher than getting a software startup off the ground. While buggy code can be tweaked in a matter of hours, hardware flaws need fixing weeks, if not months, before full production can begin, and manufacturers expect a hefty infusion of cash up front.
Wang’s challenge was made doubly tough by the fact that he was trying to crack a market that most people don’t even believe exists: portable fitness gadgets for people who don’t really exercise. “It was really, really risky. Everyone who got funded before was doing technology for athletes,” says Wang, who adds that he couldn’t even give would-be investors projections for the potential market size for such a device because the data simply wasn’t there.
November 9, 2011 | Techmeetups
Original post by YFS MAGAZINE
More than 70% of the nation’s startups use personal savings or assets as a primary source of funding when starting a business (WSJ Consumer Finances Study). Yet many are unaware of the potential pitfalls and mistakes they should avoid when using personal finances to launch a startup.
How can you avoid making huge financial mistakes when it comes to bootstrapping your small businesses? Here are ten tips to help you succeed when you’re ready to finance your next big idea
1.Don’t expect profits overnight.
The mistake it seems every young entrepreneur makes is expecting successful and profitable results to be attained more quickly than they can realistically be attained. Its everyone’s dream to start a successful business, but often, its under capitalized and must be bootstrapped; which, in all honesty, takes more time than any entrepreneur wants it to take
Alan Guinn, Managing Director and CEO at The Guinn Consultancy Group, Inc @AGuinn
2. Do show your profits.
The biggest mistake I see on a regular basis from businesses that are bootstrapping is that they attempt to lower their costs, including minimizing their taxes, which is a perfectly fine thing to do. But what happens as they grow is that their financials show losses or breaking even year after year. That makes their growing business less “bankable” when they need access to conventional sources of funding, likes lines of credit or term loans. Showing profits are a good thing when approaching a bank. It demonstrates that the business is viable and decreases the perceived risk.
Kon Theodoridis, Commercial Loan Officer at Wells Fargo:@ Ask_WellsFargo
READ 3 to 10 HERE
October 29, 2011 | Techmeetups
Original post by TechCity UK
The second of the Guardian Tech Weekly Podcast talks on Tech City took place on Monday evening, this time focusing on the issue of innovation and entrepreneurship and looking at ‘what government, investors and the people at the coalface believe is necessary to inspire innovation and to generate globally competitive enterprise’.
As with the recent debate on skills, the panel and the audience (and Twitter) engaged in a lively debate which covered off a variety of topics around the issue of how best to encourage and foster an environment in which innovation and entrepreneurship are second nature.The podcast is now live and available to listen to or download here, but in the meantime we’ve summarised some of the key points raised below. Please note that it is intended to be an indication of the lines of argument rather than a verbatim transcript – those seeking quotes should refer to the podcast itself.
This week’s panel consisted of:
The inherent individuality of businesses, particularly in the creative industries, and as such the difficulties involved in finding a strategy which can assist all of them within an area / cluster, regardless of size. Key to doing this is to establish a rapport / dialogue with local community businesses to establish their goals and needs. This has worked well in Brighton over the past decade, especially in terms of the gaming industry, which drove the development of the South Coast’s technology cluster by choosing the city as its home (Tara Solesbury)
October 29, 2011 | Techmeetups
On 24th October 2011 we hosted our first Startup Masterclass on Investment, Company Structure and Marketing. We started running these Masterclasses to bring together startups and professionals who help startups to grow in one room.
It looks like the first attempt was a great success. We’d like to thank our speakers for delivering excellent presentations which we had so much positive feedback about from attendees:
Simon Halberstam and Andrew Solomon from Kingsley Napley LLP
Chris Winstanley from Basekit
Also, our thanks go to the UCL Enterprise Society who kindly hosted the Masterclass in one of the university’s lecture theatres.
Slides are now available from the Masterclass here:
[button url="http://www.techstarthub.com/2011/10/27/tsh-startup-masterclass-10-things-you-must-consider-when-you-start-out-or-it-will-cost-you-later/" ]10 Things You Must Consider When You Start Out or It Will Cost You Later[/button]
[button url="http://www.techstarthub.com/2011/10/27/tsh-startup-masterclass-why-you-dont-need-investment/" ]Why You Don’t Need Investment[/button]
[button url="http://www.techstarthub.com/2011/10/27/tsh-startup-masterclass-introduction-to-marketing/" ]Introduction to Marketing[/button]
We’d also like to thank the attendees on the night – we were very impressed with how you were all very eager to learn as shown by the number of questions you asked our speakers!
Here are a few answers from our speakers to the questions from you:
Q: How do you value a business with zero revenue?
A: In one sense, your company is actually worth nothing. Remember that companies making no money being overvalued is what creates bubbles! On the other hand, a lot of investors these days might choose to invest in a startup because it has an impressive team. At the end of the day, though, it is *only* the valuation from your prospective investor that matters.
Q: We are a UK company with key interests in the USA. When we do email marketing to US-based leads, are we bound by UK or US law, or both?
A: You have to comply with the laws of where you are emailing to, not from (or we’d all be emailing from Brazil!)
Q: Would you advise doing a startup in the evening/weekends to start with? Are there examples of successful companies like this? What about if someone could spend 1 or 2 days a week if not full time?
A: It’s always advisable to do your research before you put all your eggs in one basket. Provided you concentrate on the correct activities during those 1 or 2 days and testing the waters in terms of the need for your idea, it should only be a good thing. However, if you spend that time building something that no one is going to buy, it’s obviously going to be time lost altogether.
Q: How do you decide on valuation and deal with valuation negotiation with friends/family angel investors?
A: A convertible loan is definitely best in such a situation especially if your startup is at such an early stage that it’s difficult to value.
We have more Startup Masterclasses coming soon, please visit us on and for more information.
What attendees said about our first Startup Masterclass:
October 27, 2011 | Techmeetups
TSH Startup Masterclass: Why You Don’t Need Investment
October 27, 2011 | Techmeetups
Key points and highlights from Andrew Lockley’s presentation “Why you shouldn’t raise investment seriously, it will kill your business!”
Take money from customers not investors for as long as you can.
Investment can really stifle your hunger for customer acquisition and, if that happens, are you really running a business?
Alternatives to raising funds: offer a service and develop your code base this way, build your product behind.
Alternatives to raising funds include managing cashflow better: pay slow, get paid quicker.
Cut your costs – £1 saved = £1 on the bottom line. This is unlike sales where you need to pay out a cost per acquisition so £3 of sales = £1 on the bottom line.
If you do raise investment choose investor first, investment second.
Very importantly: don’t waste money raising rubbish tech! Do your research.
Andrew’s presentation was part of TechStartHub Startup Masterclass: Investment, Company Structure and Marketing held last October 24 at University College London – Roberts Building. Another masterclass, How to Make Sure You’re Investment and Exit Ready, will be held at the same venue on November 8 (Tuesday).
[button url="http://www.meetup.com/london-silicon-roundabout/events/36989642/" ]RSVP HERE[/button]
TSH Startup Masterclass: Introduction to Marketing
October 27, 2011 | Techmeetups
Key points and highlights from Chris Winstanley’s presentation “Marketing your Startup, a very short introduction”.
Charging monthly recurring fees can work really well – makes the purchase less of a decision.
Try testing different price points and see what it does to conversions – work out the price elasticity of your offering.
Look seriously into the freemium model, it’s a very powerful business model when well implemented.
Get free advice from other businesses – test the user journeys of successful websites like BaseCampHQ.
If a new feature stays on Amazon.com for more than a week you can assume it is because their team found it works. If a new feature disappears within a week, there’s probably a good reason, so consider seriously before emulating it.
Chris’ presentation was part of TechStartHub Startup Masterclass: Investment, Company Structure and Marketing held last October 24 at University College London – Roberts Building. Another masterclass, How to Make Sure You’re Investment and Exit Ready, will be held at the same venue on November 8 (Tuesday).
[button url="http://www.meetup.com/london-silicon-roundabout/events/36989642/" ]RSVP HERE[/button]