On September 23rd, JOBS act came into an effect allowing early stage companies to advertise their fundraising efforts. Because this is still uncharted territory for both startups, angel investors and venture capitalists, I wanted to share few insightful articles on this topic.
- Summary of fundraising changes: “What Entrepreneurs Need to Know About the Historic Change in General Solicitation Law That Goes Into Effect September 23”
- “AngelList CEO Says Being Accredited Is Not Enough” There are close to nine million of millioners in the US, individuals who qualify to be accredited investors. On the other hand, being a high net worth individual does not mean that this person has an expertise in growing a startup. Very few people do, so make sure that your angel investor can contribute to your startups in a meaningful way.
- It is easier than ever to close on seed funding particularly with angel investors pooling their resources and syndicating a deal: “Understanding How Angel Investing is Changing”. In this case, a lead angel is leveraging his investment with other angels’ funds for 20% of the profits from the group.
- However, getting seed funding is rarely enough to high growth technology companies, so they will need to follow-up in Series A, averaging $5.3mm in 2012. Unfortunately, 61% of all seeded companies will not get follow-up investment: “Why the Series A Crunch Might Be a Good Thing”
Finally, we can learn from equity crowdfunding experience from Netherlands where individuals, not only accredited investors like in the US, can invest in startups. Most companies funded this way did really well because they passed intense due diligence of a large crowd of regular people: “What the U.S. Can Learn From the Netherlands About Equity Crowdfunding”