What entrepreneurs should know about Angel/VC funding (Mesh08)

Mesh08, which wrapped up in Toronto yesterday, included a couple of brilliant sessions on getting Angel/VC funding, especially in Canada.

Angel funding

Austin Hill explained the angel funding process in detail. Some key takeaways from his talk were:

  • Angels are successful people who look to invest between $25k – $500k in start-ups. If they aren’t comfortable with the prospect of losing that money, then look elsewhere.
  • Look for angels who understand your market and someone whom you would be comfortable in talking to on a regular basis. It is ‘like a marriage, not dating’. So be choosy.
  • Solve an obvious problem in a huge market and have a clear and credible plan for your solution. Understand risk reduction and the associated milestones.
  • There is angel funding available in Canada and the best way to connect with angels is to connect with people they might know. Focus on building relationships. Get advisors who are well-informed and connected in the community. If you don’t know anybody, then at least submit your start-up to the Opendeals section of the Angelsoft software, which is used by most angel networks in North America.
  • Your pitch should be easy and straightforward enough for the investor to be able to explain to his/her spouse ! If not, then it is not good enough.
  • If you are not willing to take risks yourself, then how can you convince someone else to invest in your start-up?

He gave the example of Fred Ngo, one of the founders of StandoutJobs.com, a Montreal-based corporate recruiting startup which raised $2 million in Jan ’08. Fred had earlier told Austin that he was willing to apprentice with him for free for a year just to learn the startup chops. Austin instead connected Fred with another person, and the two of them together founded StandoutJobs.com and then Austin invested in it himself and as well as got a couple of other firms to invest in it. His main criteria as an angel investor was that he liked the team and he understood the problem and the team’s solution to it.

VC funding

Kevin Talbot, VP and Managing Partner of RBC Ventures and of the newly-launched Blackberry Partners Fund , gave a talk about getting VC funding. Some of his key points were:

  • Entrepreneurs should set a BHAG (Big Hairy Audacious Goal).
  • Don’t be consumed by ‘analysis paralysis’. If you have a good idea, just do it.
  • Idea ‘A’ is not what will make you successful and being able to quickly iterate is very important.
  • Work with people you like.
  • Build the simplest thing possible.
  • Test with real people.
  • Best pitch is plainspoken and entertaining.
  • Raise money when you don’t need it, that is, when you are looking to accelerate your growth vs keeping the lights on.

The most important idea which he wanted to convey to Canadian entrepreneurs was to ‘Think Big’. He said that he has often noted how Canadian entrepreneurs tend to become obsessed with the ‘size of the slice’, vs the US entrepreneurs who are more excited about the ‘size of the pie’ and going after a huge market.