Angel Funding

Convertible Debt – A Winning Funding Formula

Posted by on Oct 11, 2014 in Angel Funding, Convertible Debt, Funding

Everybody talks about VCs and Venture Capital as the holy grail of startup funding, and yes, multi-million dollar investment rounds make great headlines. But the reality is, Angel investors write 16 times more checks than VCs. And the preferred initial funding structure for many angel groups is convertible debt. With convertible debt, the investor makes a loan to the startup and that loan later converts to equity at some point in the future. Convertible debt is a win/win for startup founders and angel investors, offering several advantages over more complex equity funding structures: Speed. Convertible debt provides a faster way for founders and investors to close deals. In an equity funding deal, many details are negotiated—including valuation, equity percentages, preferred share rights, and more. These all take time to work out. Convertible debt deals are faster. Delayed Valuation. Convertible debt funding provides a method to raise money without putting a valuation on the company at the time when you issue the debt. Because the convertible debt deal starts out as a loan, there is no need to establish the pre-money valuation of the startup—that task is deferred to the next equity round. Lower Legal Fees. As compared to closing a full-blown equity deal, a convertible debt agreement typically requires...

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A Cure for That Blank Look

Posted by on Aug 18, 2014 in Angel Funding, Startups, Valuation

It was my first meeting with a seasoned angel investor—a lead member of the Bluegrass Angels in Kentucky. I had my implementation plan pasted to the wall so it was easy to review. I had a detailed budget prepared detailing the costs for each phase of our plan. I had a list of our paying customers. I was ready. The conversation was going really well, until the angel asked me the question: “So what’s your pre-money valuation?” My response was a loose combination of ums and wells, and let’s just say the meeting ended politely enough. The Founder’s Pocket Guide: Startup Valuation is what I wish I had back then—simple, quick answers, all in one place. Check it out here at Amazon: Founder’s Pocket Guide: Startup...

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Staying Alive – Know Your Burn Rate

Posted by on Jun 13, 2014 in Angel Funding, Investor Ready

“What is your burn rate?” When angel investors ask this question, founders of investor-ready startups have the answer ready to go. Cash is the lifeblood of any business, and investors ask about the burn rate metric because they can use it to make a simple calculation that tells them how long your startup has to live, and how far any new investment will take you. As a founder, you need to develop a clear understanding of your startup’s burn rate not only to be ready to answer potential investors, but also for planning purposes. Managing cash flow is one of the key success factors for any startup. Burn rate for a startup is defined as how much money you spend each month to keep the startup alive. A burn rate calculation should account for all costs, including: Direct Product/Service Costs. Direct costs associated with monthly sales, such as cost of goods sold, partner or affiliate fees, and so on. Sales and Marketing Expenses. Estimated sales and marketing costs, including travel to customer sites, trade show fees, marketing costs, pay-per-click advertising fees, and so on. Founder and Employee Pay. Salaries and wages to keep everybody showing up early and staying late. Keeping the Lights On. Other ongoing expenses such as...

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Fund Your Startup with Friends and Family Money

Posted by on May 6, 2014 in Angel Funding, Blog, Friends and Family Funding

We are super excited to announce that our next title,  Startup Crash Course: Friends and Family Funding, is now available on the Amazon Kindle store (here), and will soon be out for iBooks, Google Play, NookPress, and as a PDF. As you may know, many startup founders rely on friends and family funding to get their ventures off the ground. This Startup Crash Course details all of the common friends and family funding structures, including simple loans, profit sharing agreements, equity deals, and convertible notes. Getting the money in the bank is a big step, but doing it the right way matters even more. This book provides easy to follow guidance for choosing and documenting the best funding structures for both your startup and your funding partners. As an added bonus, a promissory loan walkthrough provides blow by blow details of each clause. Check it out, and as always, let us know your comments, feedback, and...

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SEED Challenge Pitch Competition a Success!

Posted by on Mar 6, 2014 in Angel Funding, Blog

Congratulations to the WNC SEED Challenge Pitch Competition Winners! Hi, Steve of 1×1 Media here. Stepping away from funding topics for this post, I wanted to share the results of a recent program that I had the pleasure of working with here in the Asheville area—the WNC SEED Challenge Pitch Competition. The multi-week program consisted of two training sessions covering topics such as startup fundamentals, customer discovery and development, and making your startup investor ready. Following the structured training, startup founders prepared their investor pitches and participated in several practice sessions designed to help them hone their presentations. The program culminated in an afternoon pitch competition, with six startups competing for a total $3000 in prize money. Three judges provided feedback and peppered the founders with hard questions about their ventures. Not quite Shark Tank, but close. The $1,500 first prize went to Adam Masters, founder of Bellyak ( The company designs, manufactures, and distributes a line of innovative lay-on-top kayaks, or Bellyaks. The easy-to-use watercraft can be mastered quickly with little or no training or extra gear. Watersports enthusiasts enjoy the Bellyak on all types of water, from exploring calm lakes and gentle rivers to surfing beachfronts and navigating whitewater rapids. Second prize ($1,000) went to Clark Harris,...

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