Project Funding 1
from inception to exit strategy – part 1
There is a lot of technical jargon (specialized vocabulary) surrounding the Venture Capital (VC) world, from seed funding to successful exit strategies, and depending on the kind of company you are building, or the project you are working diligently to secure funding for, the roadmap to success for any 2 ventures is never identical. On top of that, with the SEC continuing to develop regulations, perpetuation of finance laws, and terms like 144a Bond Fund, convertible notes, dry powder, etc. one can become quickly overwhelmed when “venturing” into the VC world.
Sure, two ventures / projects may have many hundreds of commonalities, but just as no 2 people are completely identical (even identical twins), and just as no 2 snowflakes are identical, no 2 start-ups, inventions, ventures, or development projects are identical. Every venture, regardless of the industry, is completely unique and therefore deserves very unique, critical attention, including the right funding team.
While navigating your path to make your vision a reality, money still talks, and without it, seeds do not develop into profitable companies and favorable exit strategies. However, there are so many forms and masks that money can take during your journey. In this series, we will attempt to share some of the commonalities and jargon that you will likely see or learn about on your way toward your personal finish line.
There are several ways to outline the VC process, or roadmap, but here are 5 basic “stages” upon which you can impose a nearly infinite number of sub-steps, documents and collaborations depending on the nature of the business and the relationships within your company and your funding resources.
Seed – The seed stage is fairly typical of almost every startup. Every start up begins with an idea or an opportunity that presents itself, or a combination of both. During this stage, the venture, entrepreneur, or company approached and angel investor, friends and family, personal savings or investments etc. in order to get an idea to the next step of development. During this stage, the initiating team, executive team, the team with the “idea”, or whatever you want to call them, seeks and courts potential investors through a variety of avenues in order to find the right combination of funding, terms and relationship dynamics. The seed stage is also notoriously where the highest risk is realized for the investors, but it can also be where the most reward can be gained if the idea becomes wildly successful.
Angel Investor - The Angel investor(s) or syndicate (a combination or organized group of investors) will then begin the process to determine what the feasibility of a project is, sometimes called a “feasibility study”. Often, in the seed funding stage, a syndicate is not necessary because a single Angel Investor or Investment Bank / Company will have sufficient funds and / or expertise to finance a project comfortably. Syndicates, however, continue to grow in number and specializations. For example, one syndicate might have a group of 20 Angel Investors, all specializing in technology and IT start ups, while another syndicate might consist of 10 Angel Investors who specialize in Commercial Real Estate Development or Dental & Medical Inventions.
Syndicates are often an advantage on at least 2 levels – expertise and resources for funding start-ups or development projects. Syndicates are often sought after when funding reaches a higher level of funding, or when additional expertise is valued from the investor(s) and risk can be offset between the Angel Investors. Where they could be a disadvantage is when a start-up can do well in its first stage with a single Angel investor who takes special interest in helping the fledgling company off the ground, and the additional voices, votes, and influence might be more of an obstruction to getting the company started.
In the next issue, we will continue on to the Start-Up stage, the second and third stages (etc.), and the Bridge or Pre-Public Stage.
Your business, your venture, and your life are incredibly unique and have an intangible, but invaluable quality that cannot be summed in a dollar or currency value. While the old saying goes, “time is money”, we believe that another cliché could and should be penned that says, “your life and your ideas are beyond money”.
There is a line in all of our lives and our businesses where we must recognize that we must take off the “commodity lens” to realize those things in all of our lives that should not be categorized as a commodity. We all live in such an economically driven world, that there is the temptation to place everything, from relationships, time, even juggling work and play, into a P & L (profit and loss) sheet.
At 5th Avenue Acquisitions & Venture Capitalists, we value your time and your ideas, and realize the importance of your business success so that you can enjoy more of the things in life that are invaluable to you. In order to discover if we are a right fit for your start-up or development project, contact us for an informal introduction. We will know if we are a good fit with your team to take your idea to the next level.