Will AngelList Help Or Hurt Startup Fundraising?

Fall 2013 will be looked back on as the turning point in fundraising for early stage startups.   The JOBS Act, along with the acceptance of  “General Solicitation” has indeed changed the game for founders looking for startup capital.

Although changes in government regulation will have an impact on startup funding, I believe the biggest impact will come from innovations in the private sector – more specifically the Seed/Angel community.

AngelList has emerged as a black swan in the investment community and is opening up funding channels founders never dreamed of even just a few short years ago.   It allows well known entrepreneurs, advisors, and angel investors a digital network to follow startup activity and quickly jump into investment deals with new hot companies.  This makes it quite a bit easier for startups to close a round of seed funding.   The days of hitting Sand Hill road in hopes of simply getting your project off the ground are over.

And more recently, AngelList announced a new feature called Syndicates, where Angels can basically become “leads” and pool capital from other Angels (or Syndicates) to quickly create their own mini-fund.  They then use this to deploy into early stage companies on AngelList, with the transaction happening all through the AngelList platform.

I will not dive into details of Syndicates, please go here if you want a full description of how it works.  I simply want to touch on where this is going and why AngelList’s innovations are game changing to the larger startup community, for better or for worse.

The big question is how will this affect founders and the overall startup community?  Is it all good?  Or will there be unforeseen consequences which inevitably come with drastic changes?

Since I am not the expert I looked around to others and researched their take on the changes happening with Syndicates.

The innovations around AngelList are clearly going to benefit founders – namely to speed up the fundraising process.  Mark Suster believes it’s a net positive for the industry.  “The most obvious, syndicates can move faster in early-stage deals than rounding up 40 individual investors.”  Good, we don’t need to heard cattle as much anymore!

But what about for the angel investors?  Although it might be better deal flow, it seems market dynamics and economic factors are going to come into play on the investor side.  Hunter Walk sees interesting changes coming for angels, “My guess is there are also some angels who were popular when they represented a $25k check but won’t be as sought after if they try to push $300k into a round.”  The nuances here are not obvious and only time will tell if this is good for the angel community or not.

 Fred Wilson also believes this is good for founders.  “Angel List Syndicates are turning angels who have traditionally been followers into leads. That’s a good thing in many ways. The more folks who can lead a round, the better, at least for the entrepreneurs.”   But he goes even further to describe how it will force the investment community to grow and work harder.  “It also means that they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done. Essentially they will have to work. That’s why they are getting carry from the syndicate, after all.”

So maybe it’s too early to tell how AngelList will affect the ecosystem but questions loom.

Is this actually going to flatten the playing field for all of us founders looking for seed capital?  Or is it just going to make it even easier for “highly connected” founders to close a deal even quicker than before?  You only get discovered on AngelList if you can float to the top by “trending” on the network.   What does “trending” mean on AngelList?  And how do you achieve that if you are not in in the Bay Area, in 500 Startups or a part of YCombinator?  Is AngelList inevitably the web 2.0 version of the Old Boys Club?  Or is it the fundraising mecca all of us founders have dreamed of when we say to ourselves “if only we had access to more angel investors!”

We shall see!

In the end,  AngelList is a new beast and we don’t know what the effect will be on the industry as a whole but I am fascinated with the direction things are going.  My hope – easier access to angels and seed capital for all qualified startups no matter their location.

In a recent Founders RAW conversation I asked Duxter founder Adam Lieb his thoughts on AngelList.

Great Founders Learn To Toe The Edge Without Falling Off The Cliff

19_20120115feet-cliff032That statement emerged from a conversation I was having recently with a founder friend of mine.

This individual is struggling in their current situation – not far enough along to support themselves with their endeavor but not wanting to let go (if only slightly) to do other work which would pay the bills.   They said it feels like being between a rock and a hard place, and it’s painful.  I felt it was more like a cliff.

I simply said:  “Great Founders Learn To Toe The Edge Without Falling Off The Cliff “

I know this spot really well because I was there for quite a while and I remember almost falling off more than a few times.

What I learned through the process was how to toe the line – balance on the edge if you will – without falling off the cliff.  I realized entrepreneurship is balancing the risk of great rewards with the risk of detrimental actions.

How do you know which is which and what to do when you find yourself getting weak knees as you get pushed towards the cliff?

You have to look deep inside yourself and ask “what do I gain from staying here?  Do I really only have one option, which is to stay here and not evaluate my other options?”

Notice I said “gain” not “lose”?  There’s a big difference between those two perspectives.  When you are standing on the edge looking far down the cliff, you have much to lose.  So much in fact it’s hard to pinpoint exactly what you are doing and why.  Founders face so much challenge and adversity they can easily lose their perspectives and clarity of thought.

I told my friend he needs to look inside and ask what he gains from staying there.  He needs to look out for himself first and foremost.  He needs to take care of his basic needs – be it money, food, shelter, stress relief, relationships – and only them will the company stuff  work itself out.

I said, “trust me, it won’t get any better if you don’t step away from the ledge.”

Stepping away from the ledge is exactly what I did and I am so much better for it.  Yes, I had to swallow the pill and realize my “first” attempt at building my company wasn’t going to end like I dreamed it would just a few short years ago.  But as I backed away from the ledge and got my priorities/basic needs back in order, things started happening I never thought possible.

You would be amazed what happens to your business life when you remove self inflicted pain and stress from your personal life.

It’s That Time Again! The Seattle Startup Crawl 2013 Is Happening Oct 18th At 5pm

We are kicking off this year’s Seattle Startup Week festivities with a Startup Crawl on Friday October 18th in Pioneer Square. The Seattle Startup Crawl 2013 is part of Seattle Startup Week, Oct 18th-25th (www.seattlestartupweek.org).

Here’s your chance to mix some of the best things known to man – Beer, Technology, Entrepreneurship, and Seattle – all together in the same event.  The Seattle Startup Crawl 2013 will be a great opportunity to gather together the startup community in Seattle for an evening of socializing and learning a little more about each other as well as see inside the walls of a few staple companies in the tech community.

It will be in the form of a progressive party, with each host providing their choice of snack/beverages.  We will start at approximately 5pm.

RSVP Here!

Date: Friday October 18th

Time: 5pm and later

Cost: $5.00

5pm: EnergySavvy 

159 S Jackson St‎ #420
Seattle, WA 98104
 

6pm: BlueKai

720 3rd Ave suite 2300,
Seattle, WA ‎
 

7pm: SURF Incubator/Founders RAW

821 2nd ave,
Seattle WA 98104
 

Yes, Youth Can Be Entrepreneurs Too

Adam Lieb, founder and CEO of Duxter, started his entrepreneurial journey at a very early age.  He founded and sold his first company at the age of 11! Not too shabby, eh.

I sat down and talked with Adam during one of my recent Founders RAW conversations where we covered what it’s like to start a company so early in life, the value of Law School and how easy (or hard) it is to raise money for a growing startup.

What a great conversation!

Fear – It’s Just Part Of The Process

If you are a founder – or thinking about starting your own company – a really important lesson is to realize fear will always be present with you.  There’s no way around it.

You will question your ability.

You will wonder what is going to happen to your company tomorrow.

You will be scared to talk to investors, customers and potential new hires.

You will be worried as to what the media will write about you and your idea.

All this will be there, don’t fool yourself otherwise.  The best thing for an entrepreneur to do is come to grips with the fact that your fears will persist.  The next best thing to do is to find ways to deal with those fears, and to grow through them.  Finding advisors, talk with other CEO’s or founders, reading others thoughts about starting companies.  All these things help us get through the challenging times of starting our companies.

Or go to Founders RAW and watch what others are saying!

The 3 Most Important Skills An Entrepreneur Needs To Sharpen

I was asked a question recently send from a reader which centered around what I thought “was most important skills/qualities  beneficial when going out on your own?”  You can read my answer below.

In terms of skills for being an entrepreneur I think the 3 below are the most needed:

1) Courage/strength
You must have courage to make the decision to jump out on your own. Courage means acknowledging there is risk involved and you do have some trepidation, yet you still take action and make the move. It also means you are in it for the long haul. This takes strength and trust in yourself.  But you JUST DO IT.

2) Market Identification
This is the ability to look at certain markets and market segments to identify holes, or needs that are not met yet. This is where you get strategic and determine what you are going to build and why. It’s pretty hard to be a successful entrepreneur if you can’t find a market for your product or service.

This is a skill that develops over time but I would suggest starting by reading as much about business, technology and the changing dynamics of our world today as possible – and then make that a daily habit.  Also, once you figure out the general market you want to serve, you polish your market identification by talking to your (potential) customers to find out all you can about their problems.

3) Flexibility
Great entrepreneurs are very flexible and change direction similar to how a sail boat tacks back and forth. Nothing stays the same for very long and the ability to shift with the wind is a huge advantage over people who aren’t willing to change. Entrepreneurship is a tough road, but the ability to handle the hard knocks and go with the flow will allow you to remain relatively stress free, also it will help you to quickly pounce on unexpected but awesome new opportunities.

Although you can’t take classes for these, I think if you concentrate on the general ideas long enough you can really polish the skills.

Trust Yourself And Your Ability To Adapt

A few recent conversations with founders have brought a thought to my attention – Trust Yourself And Your Ability To Adapt.

I am noticing one of the most common issues with early stage founders, or people who are making the leap from employee to owner, is their lack of confidence in themselves.

Who am I to be CEO?

What if I fail?

I am not sure what I am really doing?

What if others find out I don’t know what I am doing?

News flash, we already know, because we also have no idea what we are doing.  The little secret no one wants to talk about is that we all are winging it, trying our hardest to fool others into thinking we know what we are doing all the while running around asking ourself “what the hell am I doing?”

Ok, so it’s a fools game.

If so, how do you win?

You need to actually fool yourself into thinking you know what you are doing.   You need to trust yourself, trusting your ability to adapt and make adjustments in real-time.  This requires confidence.  Maybe even a little stubbornness as well since you will often be finding yourself up against some hard places.

Confidence is achieved by quieting the inner voice you hear telling you things like “you can’t do that” and “who am I to think I can….” and replacing it with a calmness that accepts whatever result that inevitably comes your way.  Confidence is not caring what actually happens because you are at least doing something.

But if you lack confidence in yourself and doubt you are the right person to start your company, all is for not,  Nothing and no one will make up the difference if you lack faith in yourself and what is possible.

Get out of your own way by trusting you can make things happen, and by knowing deep down you ARE ABLE to do it, and then take those first few steps.

Trust me, no one has the answer to your problems and challenges.  Only you do.