Chapter 9 Grow with Angels You Control Flashcards
(43 cards)
What are angel investors?
Individuals who provide funding for startups, often in exchange for convertible debt or ownership equity.
Why is it advantageous to use a group of angel investors?
To maintain control of the venture by avoiding dependence on a single investor.
List the steps entrepreneurs hope to follow to build a big new business.
- Get a brilliant idea
- Write a business plan
- Get initial funding from friends and family
- Search for angels
- Contact VCs for the first round of VC
- Seek more rounds of VC financing
- Attract investment bankers for an IPO
- Become a billionaire
What is the estimated success rate of the angel financing strategy?
It works about fifteen to sixty times per year, primarily in Silicon Valley.
What are the four types of angels mentioned?
- Industry angels
- Area angels
- Rich investors
- Crowdfunding
What is a ‘bell cow’ in the context of angel investing?
A well-known angel with a good reputation who can attract other investors.
What is the median amount of funding per angel group per round?
$347,000.
How much do angels typically invest compared to VCs?
Angels invest in the tens of thousands, while VCs invest millions.
What percentage of entrepreneurs seeking angel funding actually receive it?
About 21 percent.
True or False: Angels primarily invest in fewer ventures than VCs.
False. Angels invest in significantly more ventures than VCs.
What percentage of angel-funded ventures receive VC funding?
About 10 percent.
What is the primary basis for angel investments according to Angels Den?
73 percent of angels invest based on their gut feeling.
What should entrepreneurs design their venture for when raising angel financing?
To grow to self-sufficiency with the amount of angel financing they can raise.
Why is Silicon Valley considered a favorable location for angel investors?
Because many successful angels are located there and have experience in building billion-dollar companies.
What is the significance of the term ‘Aha’ in venture capital?
It refers to a moment when a venture shows potential, attracting interest from VCs.
Fill in the blank: Most angels want their money back, hopefully with an attractive _______.
return.
What is the potential outcome for capital-intensive ventures that do not secure additional rounds of financing?
They may fail.
What does the term ‘capital efficiency’ refer to?
The ability to grow a business without relying heavily on external funding.
Who is Bill Gates an example of in the context of angel financing?
An entrepreneur who grew with capital efficiency.
What is crowdfunding?
A method of raising capital through small amounts from many investors, often via online platforms.
What was one of the notable successes of crowdfunding mentioned?
Oculus Rift.
What risks are associated with crowdfunding?
Higher chances of losses due to earlier-stage investments being riskier.
What is a major concern regarding the quality of crowdfunding investments?
The SEC cannot gauge quality or predict success.
What is the implication of having no sophisticated party in crowdfunding agreements?
It may lead to one-sided financing agreements.
