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Semil Shah, Jonathon Triest and Renee Diresta chat about angel investing, party rounds, pro rata
Semil Shah, General Partner of Haystack, moderated the "Meet the active angels" panel at Vator Splash Oakland 2015. On the panel were Jonathon Triest, Managing Partner of Ludlow Ventures; and Renee Diresta, Vice President of Business Development at Haven, an active angel and lead investment manager of Gil Penchina's Internet of Things syndicate.
Here's some highlights:
On whether angels can help startups fundraise the subsequent rounds:
Diresta: Our value-add is the ability to connect a startup to a broader community, especially via the syndicate. But before we invest, we consider what our checks can really do to help the startup and whether we can help them get to the next round.
Triest: Ultimately, if it's not an impressive company, no angel will be able to help a startup get that next round for them.
On party rounds:
Triest: Most party rounds have fizzled. You get so many big names and none of them have time to talk to the entrepreneur. You have to make sure the round is filled up with enough people who can pick up your call.
Diresta: A lot of people are able to kick in small amounts of money, but not enough to drive the startup forward.
On ownership, equity, over-optimization and red flags:
Diresta: One of the responsibilities of a founder is to find the people who give them the best value for the price. I've seen deals lose momentum because startups over-optimize the terms. If you're still fundraising after six months, this is a red flag.
Triest: I see entrepreneurs get caught up in the fundraising process. Most important thing is find an angel and set terms and get moving. Get through the process as soon as you can. I’ve seen deals fizzle, because entrepreneurs try to over-optimize the price. Find someone you love, give up more of your company because you’ll acquire a friend for life.
On bridge, interim or "post-seed" rounds:
Triest: I've seen companies go from a seed round to a big A. Then there's this new round - the “bridge” round has become this new space. When a startup raises this "bridge", I think immediately, "Why?". In a lot of cases, they’re optimizing price. Some startup founders should be a little less "piggish."
Diresta: In hardware, we see a lot of bridges and that means you didn’t properly price the earlier round.
On pro rata rights:
Triest: A lot of founders get a lot of pressure to get rid of pro rata rights. I will invest without pro rata rights.
Diresta: Founders should be thinking strategically about their needs but also balance that with appreciation for the investors who helped them get to a certain point.
Diresta: Crowdfunding has been fantastic for hardware. But crowdfunding costs money now. In order to run a crowdfunding campaign, it can cost hundreds of thousands of dollars. Crowdfunding itself is not a story itself, so there's no press bump. We look at crowdfunding to vet consumer interest. It’s a great signal for investors. On the flipside, it oftens makes sense to raise an angel round before you do that because often companies will do a crowdfunding campaign and then they don't have enough money to manufacture their product.
On asking the moderator:
In the end, Triest turns to Shah, whom he affectionaly calls "Yoda", with some questions.
Triest: What do you look for in an entrepreneur?
Yoda (err, Shah): I think 18-24 months ahead. If a founder says they're going to do 1,2,3, and they can do that, I think about who I can match them with a larger fund. Can I introduce them to a larger investor.
Thank you KPMG, Kapor Center, Wendel Rosen, Javelin, Rackspace, The Port Workspaces, Alaska, Gensler, Parelius, and Bread & Butter for sponsoring!
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