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Seed Capital From Angel Investors: Nova Spivak, West Coast (Part 4)

Posted on Friday, Sep 24th 2010

By guest author Irina Patterson

Irina: What do you think a single most important thing that angels could do to increase their chances of success?

Nova: I advise a bunch of entrepreneurs and help with some of their companies, and the biggest problem entrepreneurs have today with angel funding is actually getting angel funding because it’s so inefficient.

There’s a lot of angels, but it’s hard to meet them. It’s hard in any kind of of organized way to raise money from angels, and it’s inefficient.

You bounce around from angel to angel, they don’t commit, and then they introduce you to other people who don’t commit, and there’s a long period when nobody responds, and it’s very, very hard. So, for companies raising money — it could take them three months, it could take them two years.

It’s incredibly inefficient. I would like to see more services like AngelList or angel networks, where it’s easy to reach a large numbers of angels all at once because that’s the biggest problem.

Also, I think just having to meet with tons and tons of angels for small investments is annoying. It would be also nice to see angels pool their money, and maybe you can meet with one or two people who represent all these other angels. And, if they like it, then they put a little bit of all that money into your deal. It’s also inefficient for angels because they don’t easily get deal flow. It’s extremely fragmented right now.

Irina: What would be your advice to entrepreneurs?

Nova: I think it’s different in every case. Different founders and different teams have strengths and weaknesses.

I think one of the first areas that often they need help with is just making their ventures — their slide show, their deck, to make that effective, to address the key questions that most investors want to see addressed. That’s important.

Then, it’s really important for them to have a model that is realistic to show that they can reach break even with finite amount of money, and that with a conservative and carefully thought through. So, that’s a lot work to be done there, and usually I work with companies on that.

Product strategy is another a big area. Basically, a lot of people approach me and it’s as though they’re smoking crack. They have a lot of ideas that are crazy. And you have to help them be more realistic. Those are the things I see a lot in early-stage founders.

The other thing is a way to get things built or done cheaply or free. It’s really important when you’re in the early stages to not spend a lot of money — and make a decision about whether to do things in the U.S. or offshore.

What technology to use — that’s another big area. Choose the wrong technology and you may end up really destroying your business in the future because you built it on the wrong technology.

All of these different decisions are the things that need to be thought about in early stage companies. And usually, it’s not so simple like, say, “Okay, here’s what you need to do to be successful.” It’s usually more like a doctor. You have to see the patient, make a diagnosis, and then give them the medicine. So, I find it very hands-on. That’s why I don’t do so many projects, because when companies are in the very early stages like that, I’m a virtual co-founder.

Irina: If you could point out one major issue that all of them, the founders, face, what would it be?

Nova: I really think the biggest problem facing entrepreneurs today is how difficult it is to raise funding.

It used to be that you could go to venture capital firms, right? But now the venture capital firms are having problems, so they’re being much more careful about what they’re investing in. A lot of them are not doing early-stage investing at all. They want to see a product launch and revenues, so how do you get to your product launch and revenues if you can’t raise any money?

This segment is part 4 in the series : Seed Capital From Angel Investors: Nova Spivak, West Coast
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