Q1 of 2014 saw $9.9 billion fund 880 deals. It looks like the Venture Capital community has been digging deep.
What quite clearly appears to be the cause of this is the fact that companies are taking their time to go public, and therefore typically raise a few rounds of external capital. Often in astronomical quantities.
In many way this is great, but how sustainable is it?
I don’t really think I’m the best person to answer that question so I’ll push it to the side for a moment and discuss something I do know a little about, early risk capital and the lack thereof.
Now, the numbers above come straight from the US and were summarised nicely in this article by Inc.com. But I think this trend appears to have synergy with much of the world.
There’s a debate in Australia at the moment surrounding the lack of early stage risk capital available. The Series A market as an example appears to be relatively healthy, but ultimately early stage risk capital is what we need to assist the ever increasing local talent pool work on building companies that generate real value.
The first time I raised funds I definitely experienced this problem. I managed to secure a few meetings locally, delve into relatively high level negotiations and ultimately receive an offer. However the proposed deal, valuation and therefore dilution didn’t work in our favour and I didn’t believe it gave us the opportunity to raise more rounds and still keep founders and early employees motivated.
At the time I had zero experience raising capital, didn’t have a product and didn’t have customers. All I had was an idea. What could I do?
Turns out, like with most things, Google was a good place to start.
I assessed a number of ‘funding platforms’ and introduction networks before settling on VentureGiant.com.
Venture Giant (http://www.venturegiant.com) is UK based and they have a pretty interesting model. Basically they accept proposals for entrepreneurs and send those to investors. However it’s isn’t quite that simple and it’s much more targeted than you’d think.
For an entrepreneur it provides a great opportunity. The VG team pre-screen every proposal they receive, provide feedback and only allow a proposal to be sent throughout their network once it meets their minimum standards (many get turned down).
For angel investors and VC’s, VG screens all applicants quite diligently and only accepts a fraction of the invites they receive.
Put simply, they work really hard to ensure that there is a high quality of investors that receive very high quality and targeted proposals.
My experience was actually really smooth.
I found the platform via a Google search, created a proposal by following their guidelines and submitted it for approval.
They didn’t accept initially but after three rounds of amendments they graciously passed it through.
Here’s the best thing. Upon receiving my proposal they crawl their network to match the proposal’s investment readiness, industry and amount of capital with the most likely investors to be interested.
I only ended up getting one enquiry…
VentureGiant.com then notified me and I agreed to pay the listing fee of about $145 AUD (the best $145 I’ve ever spent! That’s all I had to pay. Zero commission and you only pay if they find you a solid connection)
The investor and I were then connected and the rest is history.
Two Skype calls were enough to get us on the same page regarding our vision, or why and agree to the terms of the investment.
My point; just because the risk capital sector in Australia is struggling doesn’t mean you’re doomed. There are people working diligently to try and make this better, however these things can’t always wait.
If you need to go offshore then take the leap and do it. VentureGiant.com is a great platform but there are others out there that you should look at too.
If you are truly inspired by your why and ‘need’ to make it work, then do whatever you have to and look at every possible avenue.
Sometimes an early seed investment can make all the difference, enable you to achieve some level of product market fit much faster and ultimately get you on track to achieve your grand vision. There are never any guarantees, but hey, this is the startup game.
You could always get a 9-5… ;)