Adapted from the Journal of the Heartland Angels By Michael Gardiner Chicago’s startup scene has grown dramatically in recent years. That includes a rapid increase in local accelerators, incubators, tech parks, and similar programs. The term accelerator is used somewhat loosely, but the prototypical accelerator involves cohorts of between 10 and 20 startups that spend three to four months in a common physical location. Accelerators are sponsoring organizations that provide startups with a combination of small cash investments, intense mentoring, formal and informal networking opportunities, and organized investor pitch events—all designed to dramatically “accelerate” a startup’s development. Typically, graduating companies immediately seek a significant angel investment or venture “A” round funding. . Continue reading
Software is slowly eating venture capital, and it’s making fundraising easier for startups.
In a not so long distant past, big ideas started on napkins, and made their way to powerpoint presentations. We used to e-mail business plans, pitch over the phone, stalk vc’s and superangels to simply get an opportunity to pitch. Raising a round, if successful could take anywhere from 3 to 9 months.
Business Angel Networks
My experience with Business Angel Networks (BAN’s) wasn’t too positive and mostly a waste of my time. I had to fill out archaic old-school forms, attaching business plans, include revenue projections for the coming 3-5 years and in most cases even think of possible exits. Once accepted I was “allowed” to pay a fee to present in front of a bunch of passive angels. I only remember being super-frustrated by the lack of responsiveness and interest in my space.
Most BAN’s haven’t changed all that much. And even though most started using Gust, they remain set in their old ways.
Traditional “Business Angel Networks” are too passive and docile for the fast-paced tech-entrepreneurs.
The Techcrunch effect
There used to be a time when getting a post on Techcrunch was enough to boost interest in a startup, and get instant introductions to many big-name vc’s. A few years ago I got 17 intro’s to big name vc’s/angels, including Lightbank, following a post by Robin Wauters on Techcrunch.
But as more quality tech-blogs (The Verge, Pandodaily, The Next Web, Gigaom, …) gained notoriety, the “fundraising” value of a post on Techcrunch (and any other), has diminished to almost zero.
These days most posts on Techcrunch are of the “X raised Y to do Z”-format, which doesn’t help fundraising at all.
Startup competitions and events
As many entrepreneurs, I’ve attended Techcrunch Disrupt and Leweb Paris/London, with the hope of meeting investors. That doesn’t work.
If you’re not on stage at Techcrunch Disrupt, you’re wasting your time and money.
Although stories about startups like Layer (which I love by the way), the winner of Techcrunch Disrupt SF in 2013, may seem like an overnight success, mainly thanks to Techcrunch, they aren’t. Tomaz, the co-founder of Layer, and his team worked non-stop for a year, and raised funding, before they even got on stage.
Building a startup takes guts, perseverance, hard work and most of all ultra-focus. Time is your most valuable resource. Don’t waste it going to events where you are not the main attraction.
If you do want to attend an event, don’t expect to close your round right there and then. Do it to grow your network, and meet as many new people as possible. Manage your expectations. Events are great to meet investors, you already know, and improve relationships, since they’re in one place. But you’ll need to set up meetings long in advance.
The value of influencers like Robert Scoble
Uber-startup evangelist/blogger Scoble has a huge following, including many a-tier vc’s, angels, startups and fellow-bloggers. And if he really likes a startup, he can become your best evangelist. Many may remember his efforts to push Highlight.
If you have a chance to meet and talk to Scoble, get him to use your product instead of talking about it. Again, manage your expectations.
If you have something cool, a post by Scoble may move mountains or may not. But it’s still fun to try.
The Accelerator “mafia” era
Accelerators are the new MBA programs on steroids. Fred Destin (Atlas Venture), an investor in my previous company, suggested I should try Seedcamp. I did, and never regretted it. I joined Seedcamp in 2011 in New York.
I got instant access to hundreds of mentors, introductions to big names in venture capital and hands-on support (fundraising, product, marketing, positioning, pitching). It’s a rough experience, where your assumptions and beliefs are tested to the core, and much of the time you will hesitate, and doubt most of your assumptions. But in the end, this truly helps you become a better entrepreneur.
If you have a chance join an accelerator like Seedcamp, do it. You’ll meet great entrepreneurs. Even if you don’t succeed the first time, you’ll learn how and get access to a network which will catapult your next venture.
VC’s are more inclined to believe in you, if you have gone through an A-brand accelerator (Seedcamp, Techstars, 500startups, Angelpad, …).
AngelList : The Linkedin for Angels and Entrepreneurs
AngelList is a must-have for any startup. Even if you are just starting out, you should get an account and start building your entrepreneur footprint. Start early on creating a profile for yourself and your startup. But only publish it, once it’s ready. You need to stand out, and your profile should answer most questions an investor may ask. You only get one shot. My startup was “trending” on AngelList for 4 months. It got us +2.000 followers. Read here how we did it and learn from our experience.
AngelList is also great to check out the competition, meet fellow founders, apply to accelerators and start your fundraising effort.
Like with all good things, there is a back-draw. You can only send a message to someone, if that person follows you. That’s where Angie comes in.
Angie: Matching Angels and Entrepreneurs on Mobile — Tinder-style
Apart from being the leading mobile app for AngelList, Angie recently introduced investor/startup matching. Every day Angie will show startups a list of investors they should connect to, based on shared markets and interests.
Thanks to Angie’s startup discovery-engine, your startup’s profile ends up on investors mobile screen, and you can start getting followers.
99% of startups on AngelList are invisible to investors. Angie solves that by matching startups with investors.
Caveat: Public versus Private fundraising
Although it may seem a great idea at first, be aware that many of the people who may want to invest in your startup, after seeing a post on Facebook or a tweet, may not be eligible. Most of them won’t be accredited investors. Using public fundraising may provide more issues than benefits (for now at least). Once non-accredited investors can join, we’ll need to revisit this question.
By taking your fundraising public, you are actually limiting your changes to raise from friends, family and “fools”.
Consult your lawyer.
Stop wasting time traveling to overpriced events, attending pitch contests or demo-days, stalking vc’s and angels or begging for posts on tech-blogs. Join AngelList, install the Angie app and use Angie investor matching. And spend the time you save on building a better product.
You can raise smaller amounts, as many times as you want, or need. No one is forcing you to start raising $500K or $1M immediately. The pre-seed, seed, A, … rounds were the standard before, because you had to work within a framework built by traditional vc’s.
Times have changed, play by your own rules. Use all resources and instruments.
You can start by combining a $50K round via mobile invest on Angie, with a crowd-funding campaign, and do a follow-up investment, as you are growing and achieving new milestones.
And most of all, tell your story, engage with your customers and turn them into your ambassadors. Some may even become your first investors.
- Seedcamp Berlin winners announced: Get ready for a “Dropbox for email” and a “real-time story creator” (venturevillage.eu)
- AngelList: VCs in sheep’s clothing? (vcwithme.co)
- Recap of our 2nd US trip this year: http://t.co/DCVmtuuYLo apply to @Seedcamp London if you want to be part of the next one! (seedcamp.com)
- Guest Post: How I (finally) found a technical co-founder and got accepted to Seedcamp by Steven Renwick (seedcamp.com)
- Everyone Can Learn Angel Investing Using Kiva (adammcnamara.com)
- AngelList’s Naval Ravikant on His Syndicates Program, Two Months In (strictlyvc.com)
- The Great Unbundling of Venture Capital (davelerner.com)
- How to decide whether AngelList syndication is right for you | PandoDaily (pando.com)
- 4-Hour fundraising: Tim Ferriss, the JOBS Act, and why Miley Cyrus could be an instant VC (venturebeat.com)
- What You Need to Know to Become an Angel Investor (online.wsj.com)
There’s a rotating cast of bullshit artists encountered while building a company. Vendor New Biz Guy promises seamless API integration, but he doesn’t know what API stands for. SEO Expert Bot thought you might like to know some reasons why you are not getting enough Social Media and Organic search engine traffic, but … you’re not really replying to those emails, are you?
Perhaps most dangerous though, is the Investor who boasts of big checks and high-level connections, but … you have to pony up if you want to talk. What follows is a peek at an actual encounter we had with one such investor while raising our seed round for Bombfell last year.
Quick context: we meet PayMeFirst Investor, who says he represents a club of wealthy investors and celebrities, at a trade show. On a call, he tells us that as part of their investment process, we would pay $2,500 to host a party for these wealthy investors and celebs so that we can talk to them. Wait, what?
We decide to end discussions there, sending what we think to be a pretty polite email:
Shortly thereafter, PayMeFirst replies:
“Everybody,” take “cover”!
- What I Learned from 10 Months of Starting Up: Social Media Isn’t Great for User Acquisition (nextbigwhat.com)
- Colorado Online Marketing Agency Boulder SEO Marketing Announces Another Record Year (prweb.com)
- Manalto Raises $1M to Launch Innovative Social ERP Software Solution and Premium Services for Content Management (sys-con.com)
- VC Firms Don’t Back You, VC Partners Do (hunterwalk.com)
- How Much Do Angel Investors Own After Future Funding Rounds? (seedchange.com)
- American Real Estate Investors Academy Creates Apprentice Program (prweb.com)
- Why Naming a Startup Funding Round Wrong Could Cost Millions (alleywatch.com)
- Is Seed Round Funding from VCs Good for Startups? (modeanalytics.com)
- What Does the Pinterest API Really Mean? (tailwindapp.com)
- Benjamin Weber: Typesafe database interaction with Java 8 (benjiweber.co.uk)
Impact Engine – Part 6
~ VERBATIM from a special correspondent ~
Loop Lonagan here. I’m at a place where my natural greed ‘n’ avarice can do some good fer dis poor worn-out world. This is the Chicago CleanTech Competition—what you might call a race between high-tech global janitorial services. Ten distinguished judges will pick the best o’ da best—companies that’re really doin’ somethin’ to deal with the mess we’re makin’ outa our little corner o’ God’s creation. What we got here is da last ten finalists in our great city and tonight that gets cut down to five.
Every one o’ these companies is a specialist with a different slant on how to get the job done. You know as well as I do—the only company that succeeds in this world is the one that makes good business sense. But are those the ones that’ll win? Probably not. But we’ll see.
The MC makes sure we know today is Earth Day, which gets a shrug all around. Then he explains how the winners move on to the big international GCCA event and compete with companies from Europe ‘n’ Asia. You heard all about that organization, right? If you didn’t, see the link and the video at da bottom. I got no time to explain.
A Strange Encounter
Lemme give you summa da local color. Things is movin’ along real nice when I hear this harsh voice all the way from the other side o’ the room. He’s yellin’ at an elderly gentleman for nodding off during the meeting. Then he turns his foghorn on me: “Hey Lonagan, are you going to be writing this up? Because I’m going to call you every hour on the hour till you do!”
Sheesh, I ain’t kiddin’. The guy blares that out right in the middle o’ da meeting in fronta all these gentle souls. I’m wonderin’ if any of them clean tech folks ever ran into anybody like Rong Mayhem before.
I know that Rong singled me out ‘cause of a simple misunderstanding. He thinks I’m some kinda reporter. Well, this ain’t no newspaper and nobody sticks me with no deadline. I’m lookin’ for companies to invest in. So’s I keep takin’ notes.
Then he howls. “Lonagan, what the hell are you doing?”
This time I answer. “Just writin’ down what you say, Rong.”
But he’s got a come-back to that: “You know what you are? You’re a legend in your own mind!” Then he repeats it a couple times.
After that, things quiet down for a while. And I’m smiling to myself, thinking about the poor MC tryin’ to control the meeting. So I glance over the program and get a jolt. Outa these ten companies, I see two graduates from Northwestern University’s Impact Engine. Lemme tell you about one o’ them:
George Page is the founder of Portapure and he’s da keynote speaker tonight. He’s also one o’ da judges, so maybe things’ll work out all right after all. He’s a chemical engineer that worked in Chicago water projects so he’s a practical guy. And he’s on a mission. He wants to make clean water available to anybody, anywhere, anytime. To do that, he makes water filtration affordable for the developing world.
Portapure won this event last year and ended up among the top 30 in the world. I first seen him at BNC Venture Capital when he invented a pocket size water purifier. I’ll tell you about that one first:
Picture this: Say yer goin’ into the jungles of Haiti to do disaster relief. Yer gonna be
there for weeks and the water is mostly muddy streams and swamps. This is da 3rd World. There ain’t no EPA out there to slap people with fines fer makin’ a mess. Still, you gotta get yer butt out there no matter what the conditions. So whaddaya do? Pack in lotsa fresh water, right? Think again. Got any idea how many pounds a few gallons o’ water weighs? It’s impossible to lug all that with you. Airdrop it, maybe? Not a practical solution.
As it turns out, you don’t even need to carry a canteen. Instead, you take along a little pocket-size device called PocketPure. It weighs next to nothin’. Any time you get thirsty, you stop at a convenient swamp and make yerself some clean drinking water—one cup at a time. You can stay in the field as long as you want ‘n’ you never run outa water.
Up till now, all anybody had was water purification tablets. Those take half an hour to work and you still gotta filter out the dirt somehow. But technology moves forward and you might as well take advantage of it. As you might’ve guessed, Portapure is sellin’ these things to NGOs by the boxful.
Drinking water is in short supply across the world. Lotsa people in all kindsa places die of E. coli and such. Kids even. That brings me to Portapure’s next product:
This one’s on a bigger scale. It’s a three-phase filter with a 5-gallon capacity—just right for yer typical grass hut. Hey—people in the developing world want clean water for their families, too.
This thing filters both bacteria and viruses outa real filthy water. I’m talking real nasty critters like cholera, typhoid, amoebic dysentery, E. coli, coliform bacteria, cryptosporidium, streptococcus, salmonella, giardia, and of course, yer ordinary dirt ‘n’ sediment—it’s enough t’ make yer flesh crawl. This device filters out 99.99% o’ that muck—the definition of clean water according to the World Health Organization. And the filter lasts for maybe 10,000 gallons! This thing was tested in an NSF certified lab and reduced the E. coli count from 5490 to less than 1.
This keeps getting better. He sells these things to NGOs, but there’s another angle. Clean water’s at a real premium. It’s like liquid gold in some places. And folks livin’ there wanna make a living just like anybody else. That gives Portapure a natural distribution network and a sustainable solution that pays for itself. At the same time, they’re putting people to work and boosting the economy in these far-flung places.
This company’s got its share of ‘em:
- Impact Engine graduate
- GCCA Global Top 30 company
- Chicago Innovation Awards 2011 Up & Comer
- Office of the Treasurer Small 2012 Business Plan finalist
- Tech Cocktail 2011 Finalist
Here’s a good video on Portapure:
I wanna tell you ‘bout the other companies and who won. But I ain’t got room to do it justice here, so I’ll be back with more.
LOOK FOR PART 7 – COMING SOON
Go back to Part 1
Meanwhile, here’s a video that explains the whole international competition:
Portapure – www.portapure.com
Contact – Info@PortAPure.com – 773 251 5779
Chicago, IL. 60615
Portapure on 5 NBC Chicago
PortAPure’s George Page is Saving the World
Portapure on Crain’s Chicago Business
Chicago Clean Energy Alliance
GCCA—Global Cleantech Cluster Association
Images and video courtesy Portapure, CCEA, GCCA, Impact Engine, and AP.
Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.
.Copyright © 2013 John Jonelis – All Rights Reserved