Although both Venture Capital Funds and Angel Investors invest in businesses by acquiring a share, there are several distinctions between them.
- Start-up CG typically invest in the initial stages of a start-up, seeing potential for growth and complementing the funding from family and friends. On the other hand, venture capital funds usually invest in later stages of a company, beyond the proof-of-concept stage, and at levels beyond what angel investors would invest in. Even venture capitalists that focus on early-stage investments typically start at a minimum of $1.5 million, while angel investors may begin with as little as $10,000 and go up to $1 million.
- Investors in venture funds usually have specific areas or sectors they want their investments to target. In contrast,Start-up CG are more open to investing in diverse domains and may consider investing in any area where some of their members have expertise.
- Venture funds typically have a lifespan of seven years, and the majority of their investments are made within the first three years. After making their investments, venture capital funds provide guidance and seek to exit through methods such as an initial public offering (IPO), strategic sales, or mergers and acquisitions (M&A). Angel investing, on the other hand, is more open-ended, with individuals investing for as long as they want. However, they generally seek a two- to three-year exit, with the most common exit strategies being strategic buyouts or mergers and acquisitions.
- The process of VC funding is more intricate due to the statutory framework within which venture capital funds operate. In contrast, angel investing offers a simpler process, as it is an alternative asset class for individuals, and angels invest directly in the companies they are interested in.
- Start-up CG typically invest their own money and are often entrepreneurs themselves. Meanwhile, venture capital funds have started to employ individuals with domain expertise and thought leadership in specific sectors to advise them on deal flows and help nurture companies.
There are two options available for presenting to Startup CG.
- Approaching the Network Members: Startup CG’s network members are the main source of deal flow. These members evaluate funding proposals on an individual basis, and if they find a promising opportunity, they may recommend it to Startup CG for further consideration. If the recommendation is accepted, the opportunity will then be presented at a detailed monthly presentation, with no obligation to invest.
- Elevator Pitch: The Secretariat of Startup CG receives numerous proposals from all over the country. These plans may be referred to the Elevator Pitch meeting by network members, or they may be submitted directly to the Secretariat through the online submission process
The term “Elevator Pitch” refers to a short presentation made by an entrepreneur to the Startup CG vetting team, in which they introduce their idea or plan. Entrepreneurs who wish to apply for funding from The Network but do not have support or sponsorship from Network Members are required to go through the Elevator Pitch process.
The entrepreneur is required to create a concise presentation consisting of 5-7 slides covering all aspects of the business plan, including its objectives, value proposition, funding requirements, team, and other important details. The presentation will be reviewed by the secretariat and may undergo several rounds of iteration before it is finalized for presentation to the Startup CG vetting team. If the presentation is shortlisted by the vetting team, the entrepreneur will be invited to present in detail to the Startup CG members.
A meeting of Startup CG is arranged every 4 to 8 weeks, depending on the volume of deals in the pipeline, where all shortlisted and sponsored deals are given a chance to present in detail to the group. The presentation time is limited to 30 minutes, followed by 15 minutes for discussion and feedback. During the meeting, the members will also discuss and determine whether to proceed with the deal or not. If the deal is approved, assigned members should seek a sponsor for it.
During an Elevator Pitch, entrepreneurs are allocated 10 minutes to showcase their idea using 5 to 7 slides, and can choose to present either in person or via phone. After this initial stage, the selected entrepreneurs will be invited to participate in an in-depth, face-to-face presentation.
Startup CG Network focuses on investing in startups or early-stage companies with the potential for growth. Their investment range is up to USD 1 million, with the average investment ranging from USD 400K to 600K.
In addition to the business plan, there are certain key parameters that Startup CG considers.
- The Startup CG seeks businesses that possess significant growth potential and have high barriers to entry.
- Having a skilled management team is crucial for the Startup CG, as they seek a team with diverse skills, including technology, sales, finance, HR, and more, to bring value to the business. They consider the CEO’s leadership qualities to be essential.
- The Startup CG aims to offer value to its investments by providing not only financial support but also advice/mentoring and access to its network. Therefore, its members tend to invest in companies where they can contribute such value.
- Start-up founders who can present evidence of their idea’s validation, and especially those who have already started engaging with the market, have a stronger proposition for the investors.
- The Startup CG members encourage failed entrepreneurs as they believe that these individuals possess a higher level of ambition to succeed.
Startup CG does not agree to sign NDAs but they share all the plans they receive with their members. Additionally, the members and Secretariat team members are required to sign an NDA with Startup CG.
I often advise startups to follow a principle taught by Paul Buchheit: it’s preferable to make a few people extremely satisfied than to make numerous people only somewhat satisfied. During an interview with a journalist, I mentioned that if I were to offer startups only 10 pieces of advice, this principle would be one of them. Subsequently, I pondered over what the other 9 might be.
After creating the list, it was discovered that there were actually 13 items on it.
- Choose your co-founders wisely
In a startup, cofounders are as important as the location is for real estate. While you can change almost anything about a house, you cannot change its location. Similarly, it is easy to change an idea in a startup, but changing cofounders is quite difficult. The success of a startup is usually dependent on its founders. - Release your product or service as soon as possible, rather than waiting for it to be perfect
The primary reason for launching a product quickly is not to get it to the market earlier, but to learn and improve it based on user feedback. Launching allows startups to understand what features they should have included in their product. Without user engagement, a startup might be wasting its time building a product that nobody wants. Thus, the initial version of the product serves as a starting point for learning and refining it based on customer input. - Allow your concept to develop over time
Iterate quickly after launch is crucial. Startups shouldn’t be treated as if they’re all about executing a brilliant initial idea. Like in an essay, most of the ideas actually come during the implementation process. - Gain a deep understanding of your users
One way to think about the wealth generated by a startup is to visualize it as a rectangle with two sides: the number of users and the degree to which their lives are improved. The latter dimension is within your control, and growth in the former is influenced by your success in the latter. Like in science, the challenge is not finding answers but asking the right questions – identifying something users need but don’t yet have. To improve the odds of success, it’s essential to have a deep understanding of your users. That’s why many prosperous startups create products that their founders themselves needed. - It is preferable for a startup to have a few devoted users than a large number of indifferent ones
It’s ideal to have a large number of users love your product, but achieving that immediately is not realistic. In the beginning, you must choose between fulfilling the needs of a specific group of potential users completely or partially fulfilling the needs of all potential users. It’s better to satisfy the needs of a specific group first because it’s easier to expand your user base than to improve user satisfaction. Additionally, it’s harder to deceive yourself about the number of users you have compared to the level of satisfaction your users have with your product. When you think you’re 85% there to achieving an excellent product, how do you know it’s not 70% or even 10%? - Provide excellent customer service that exceeds expectations
Many customers are accustomed to receiving poor service from quasi-monopolies. As a result, their expectations for good customer service may be low. Therefore, it’s important to aim for customer service that not only meets but exceeds expectations. Strive to go the extra mile to make your customers happy. In the early stages of a startup, it’s worth offering personalized customer service that may not be sustainable in the long run because it’s an opportunity to gain valuable insights about your users. - Provide excellent customer service that exceeds expectations
Many customers are accustomed to receiving poor service from quasi-monopolies. As a result, their expectations for good customer service may be low. Therefore, it’s important to aim for customer service that not only meets but exceeds expectations. Strive to go the extra mile to make your customers happy. In the early stages of a startup, it’s worth offering personalized customer service that may not be sustainable in the long run because it’s an opportunity to gain valuable insights about your users. - The things that you measure are what you will produce
Joe Kraus taught me this valuable lesson – measuring something tends to improve it. For instance, if you want to increase the number of users, create a visual representation of the number of users on a large sheet of paper and record it every day. As the number of users increases, you will be motivated, and if it decreases, you will be disappointed. Eventually, you will start to notice what drives user growth and concentrate on that. However, be cautious about what you measure. - Use minimal resources
It is crucial for a startup to be cost-effective, and I cannot stress this enough. Majority of startups fail even before developing a product that people desire, and running out of funds is the most frequent reason for such failures. Therefore, being economical is almost the same as quickly iterating. However, it’s not just about that. Promoting a cost-conscious work culture keeps organizations fresh, akin to how physical activity keeps individuals youthful. - Get ramen profitable
“Ramen profitable” refers to a startup that generates enough revenue to cover the founders’ living expenses. This approach is not solely about quickly prototyping business models, but rather a way to streamline the investment process. Achieving ramen profitability alters the founders’ relationship with investors and is beneficial for morale. - Minimize distractions
Startups can be easily derailed by distractions, especially those that bring in money, such as consulting work, day jobs, and profitable side-projects. These distractions can lure you away from focusing on the long-term potential of your startup. Even fundraising can be a distraction, so it’s essential to keep it to a minimum. - Stay motivated and don’t lose hope in the face of challenges or setbacks
Startups often fail due to a lack of focus, even though running out of money is the immediate reason. If the company is not run by incompetent individuals, then demoralization is the underlying reason. Starting a startup can be emotionally overwhelming, so it’s crucial to recognize this and take steps to avoid being demoralized. It’s similar to lifting a heavy box; you need to be cautious and bend at the knees to avoid getting hurt. - Don’t give up
You should not give up, even if you face demoralizing situations. The fact is that persistence can take you a long way. This might not be applicable in all fields, since some people may struggle to become proficient in specific areas regardless of the amount of effort they put in. However, the startup world is different. Typically, persistent effort is sufficient to succeed, provided that you keep evolving your concept. - Agreements can be canceled
A valuable skill that we acquired during our time at Via web was managing our expectations. We had experienced around 20 deals that didn’t work out in different ways. After the initial failures, we learned to view deals as background tasks and not to focus too much on them until they were finalized. Depending on the outcome of deals can negatively affect morale, not only because of the possibility of failure but also because it could decrease the chances of success.
