It's Easy to Raise Money Again

Is it easy to raise money for your next start up?

Angel round investing has taken on a life of its own lately. Incubators/mentorships/superangel groups are being set up everywhere except the pathetic State of Michigan. Angels competing fiercely for deals, unlike even a year ago when start-ups desperately chased a handful of angels or seed funds for money.

America is witnessing something equally fascinating in its early-stage funding scenario. The angel investor/incubator/mentorship model has been around for many years in many variants and forms the bedrock of the Silicon Valley start-up machine. What is different now is the ease with which a startup can raise angel money and the easy terms on which they are doing so.The debut of the Start Fund is a prime example. A new fund will loan you 150k if you have come out of the Y-Combinator program with terms tied to the next round of financing. No diligence, no seed stage valuation expectations - a fast, no collateral loan converts to an equity piece concurrent with the next round.

In a recent April Fool spoof article on Techcrunch, Dan McLure, who is part of a Silicon Valley startup fund called 500 Startups is quoted as saying, "We are at a unique point in history, where any two people can create a new startup and have a nearly certain chance of at least modest success. Even if the product fails completely, Google and Facebook will compete to acquire the team and investors will at least get their money back."Facetious as it is, I actually think there may be an element of truth to this. Doing research on Google's past acquisitions(Source: Wikipedia and company websites), and the numbers tell their own story:No matter how much of a bubble early-stage investing may be in the US, there are hundreds of tech companies that have a strong DNA of making acquisitions as part of their core growth strategy. This creates a safety net that buffers the hyper aggressive leaps of faith seed and early-stage investors are making in the US. According to a research report from a top school. 66% of angel exits happen through M&A.

One other exit strategy is a public financing. Investor, Peter Klamka who specialized in early stage public transactions commented, "I have seen the pricing for various public deals rise in the last six months. Buyers and dealmakers are from outside the US. Social networking will drive the next wave of interest."


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Mr. Webb is a writer who follows Silicon Valley, Hollywood, and Seattle business markets. He takes keen interest in creative financing and entrepreneurship. His website is http://www.twitter.com/dfwebb. Peter Klamka's website for early stage investing is http://www.peterklamka.biz