Paul Graham, the entrepreneur-turned-investor behind the ground-breaking YCombinator, has written what may be the most useful, unvarnished, searingly-honest essay on raising money for startups. It should be mandatory reading for every early stage company, and indeed is so good, and so true, that we're considering making reading it a click-through pre-requisite for submitting a plan through Angelsoft.

His major points are that fundraising is hard, hard work that goes against just about everything that is inherent in being an entrepreneur. It takes longer, costs more, and is more fraught with difficulty than you could possibly imagine. Investors are indecisive, subject to peer pressure, and difficult to nail down.

The odds of getting funded are much, much more difficult than any entrepreneur realizes: Paul quotes David Hornik of VC August Capital as noting that the odds of his funding you are between 0.125% and 0.4%, which in our experience is absolutely typical for venture capital firms as a whole. The angel investing side is somewhat better, particularly for early stage deals, and our statistics here at Angelsoft (derived from tens of thousands of pitches delivered to over ten thousand investors) show that over the past several years organized angel groups have funded 1.32% of the deals that submit to them. But that still means the odds of your getting funded, even by an angel, are worse than a staggering 70:1 against.

Nevertheless, Paul's essay provides excellent advice for both the mindset and actions that will give you the best chance of succeeding with your startup. In particular, pay close attention to the concept of ramen profitability. Get to there, and the world will seem an entirely different, and more hospitable, place. 

David S. Rose :: Aug.10.2008 :: Entrepreneur, Industry Stats, Startup, VC :: Comments

The Houston Chronicle writes that even though overall angel investing has increased 15% to 12.6 billion in the first half of 2006, the percentage of that money that went into early stage companies has dropped from 48% to 40%. The funding gap continues to grow though they are optimistic "the funding environment for new entrepreneurs is unlikely to get any worse".

They give 2 reasons for this:

1. VC coming into the deals after angels are pushing into even more mature deals, and some of these ange groups are beginning to act more like VC funds.
2. Angel groups springing up all around the country allow angels to get beyond the sub $500,000 investment fairly easily

1. John May, from the Angel Capital association, disagrees stating that many of the smaller deals just don't get reported.

Evan Bartlett :: Oct.17.2006 :: Angel Investor, Industry Stats :: Comments

The Denver Business journal reports that Angels have invested 12.7 billion in funding through the first half of 2006.

Other interesting facts include:

• Healthcare services/medical equipment was the most popular sector.
• 40% of the investments where for seed/startup companies.
• The size of the average deal jumped up by 22%.

Evan Bartlett :: Oct.10.2006 :: Angel Investor, Industry Stats :: Comments

Here are some stats concerning Angel Investing from UNH Media Relations on Infectious Greed.

Evan Bartlett :: Oct.05.2006 :: Events, Industry Stats :: Comments