How to Get Financing: Venture Capitalists and Angels | Banking & Finance > Financial Markets & Investing from D&B Small Business Portal

Related Videos

» See All Videos

1. VIDEO: The Right Way to Raise Money from a Venture Capitalist
Betsy Flanagan of Startup Studio interviews venture capitalist David Hornik of August Capital and the ...
» Watch Video

3:08

2. VIDEO: When You Don't Need a Venture Capitalist
Betsy Flanagan of Startup Studio interviews venture capitalist David Hornik of August Capital and the ...
» Watch Video

2:27

3. VIDEO: Experience: The Real Value of Venture Capitalism
Betsy Flanagan of Startup Studio interviews venture capitalist David Hornik of August Capital and the ...
» Watch Video

2:57

4. VIDEO: What Personality Characteristics Do Entrepreneurs Need?
Betsy Flanagan of Startup Studio interviews venture capitalist David Hornik of August Capital and the ...
» Watch Video

3:07

5. VIDEO: Startup Lessons: Adventures in Venture Capital Funding
The pitch: Learn the right approach from our wacky resident entrepreneur.
» Watch Video

3:52

6. VIDEO: Angel Investors: What to Watch Out For
Betsy Flanagan of Startup Studio interviews venture capitalist David Hornik of August Capital and the ...
» Watch Video

2:07

7. VIDEO: Business Strategy: Make Sure Your Advisory Board Is Adding Value
Venture capitalist Paul McManus of Boston Millennia Partners discusses why it's important for your advisory ...
» Watch Video

:59

8. VIDEO: Entrepreneurs: Commit to Your Exit Strategy
Burt Swersey, a professor of design at Rensselaer Polytechnic Institute, discusses the importance of defining ...
» Watch Video

1:33

9. VIDEO: What Are the Risks in Entrepreneurship?
Aron Rosenberg, cofounder and chief technology officer for SightSpeed, a video conferencing service, outlines the ...
» Watch Video

1:05

10. VIDEO: Entrepreneurship and Risk
Entrepreneur and former franchise owner Earl Blank shares his thoughts on entrepreneurship and risk.
» Watch Video

2:17

How to Get Financing: Venture Capitalists and Angels

An indepth look at two types of equity financing: Venture capitalism and angel investments.

See Full Text Transcript

Hide Text Transcript

Joel: At some point or another, almost every entrepreneur needs to raise money. This could either be the worst experience of your life or the best. It really depends on how prepared you are. Before we get too deep into this topic, let’s have a little fun. Let’s take a look at someone who isn’t adequately prepared.

Video: I’ve got an ______00:00:19 for you. Do you have _____00:00:21 pants? Suit? No. The color purple, we sell it. Not the movie, just the actual color. No.

Joel: Okay, so that’s obviously not what you do but what do you do? Well, when it comes to financing, there are two types of funding, debt and equity. Debt financing is a loan. You must pay it back with interest over a certain period of time. With equity funding, you raise money by selling portions of your ownership in your company. Today, we’re going to be talking about equity funding, in particular two types, funding from angels and funding from venture capitalists.

Most angel investors are successful business leaders or professionals who make significant investments in other companies, usually early stage start ups. They typically invest in businesses within their particular area of expertise. They’re likely to invest in business ventures in their state or region of the country and in many cases, they focus on specific areas. Generally, they don’t want to be the only source of funding and they want to know where future investment capital is likely to come from. Where can you find angel investors? There are numerous websites that list angel investors such as Band of Angels and US Angel Investors. Okay, so you found an angel and now it’s time to meet them. How do you prepare? Well, a meeting with an angel investor should take place in person.

You should be ready with written material, business plans, projection, et cetera and be prepared to answer tough questions. Angel investors want to see that you have done your homework and research the industry thoroughly, stand firmly behind your business plan and goals, have thought through all aspects of the business from a practical aspect, have an experienced management team.

Let’s turn to the other type of equity funding, venture capital. Venture capital is a widely-used term that doesn’t have an exact meaning but it typically refers to investment funds or for partnerships that focus on up and coming businesses and promising startups. Let’s watch a conversation between Betsy Flanagan of Startup Studio and David Hornik of August Capital as they talk about the right way to raise money from a venture capitalist.

David: People, people, people. It’s all about the people so I’m sure that plenty of entrepreneurs who would really not get along with me and those people should not take my money and that’s just because when you have an investor and they put money in your company, they’re going to be involved in your company for as long as there’s a company essentially. Certainly that’s our model. Our model is I invest in a company, I invest early most often. I almost always sit on the board of directors and I try and be as helpful as possible and I’m certainly involved. And so, if you take money from someone who you don’t ultimately respect or like or trust or generally think is the right person, it’s a little bit like marrying someone you don’t trust and respect and like and think is the right person. Eventually, that probably won’t work out that well. I don’t think any entrepreneur should ever take money from an investor without having spent time talking with other people who have taken money from that investor. I just can’t imagine…when I’m looking at a company, and I’m talking with an entrepreneur, I then call their kindergarten teacher, I call the people for whom they’ve worked and people who’ve worked for them and I do all these reference calls. Why as an entrepreneur wouldn’t you do the same on your investor, I think and my experience is there’s an incredible correlation between the people who I think are really smart, really good entrepreneurs and the ones who have called without me, without asking me.

Joel: You should also be aware that most venture capitalists are only interested in companies that can grow to be large. So if you’re a small grocery store, a neighborhood sushi bar or a corner lemonade stand, don’t bother seeking venture capital unless you plan on building a lemonade or sushi empire. Thanks for watching. I’m Joel de Beth. We hope you learned something.

Related Topics

Related Content

Resources & Tools