With his amazing experience as an investor, Howard Hartenbaum gives precious advice on how to fund a startup.
When it comes to raising money for a startup, there are several options, and it can be very confusing. What are the differences between VC, Angels, and Super Angels? Which kind of investor should you go to?
As an investment professional for August Capital since 2008, Howard Hartenbaum gave a detailed presentation about funding your startup.
Hartenbaum defined the different kinds of private investors, and insisted on the importance of approaching the right one, with the right idea.
–Venture Capital firms: The VC firms only fund startups that will be very successful, at a very big scale (projected to make hundreds of million or billions of dollars) with a guarantee that they will make two, three, four, or more, times what they invested. Hartenbaum explains that about only 20 VC firms are making money, and they are the one that you should go for. If it doesn’t work with them, you should reconsider your project, or try another type of investors.
–Super Angels (or MicroCap VC): Usually, Super Angels try to obtain a very large portfolio, and they invest in a lot of startups. Hartenbaum defines two types of Super Angels: The ones that use the “spray and pray” technique, and the ones who invest at a smaller scale. If you want a private investor who give you the money and leaves you alone, then you should for the first option. If you are looking for investors who will help you more personally, then the second option is preferable.
–Angels: Angels don’t usually take any financial risks. They invest a small part of their capital into exciting projects that they want to be part of. Angels are experienced because they have worked for big companies, and they know the risks.
-Always try to get feedbacks from investors.
-Never try to raise money from friends, or family members. Hartenbaum calls this category the friends, family and fools.
-Always remember that an entrepreneur will always think, “This is going to work.” An investor will always think, “Thi, will never work.” You have to think that your business is worth millions of dollars.
Take a look at the complete presentation given by Howard Hartenbaum at Stanford.