VC Firms Increase Funding for Early Stage Startups

A report shows that early stage funding is increasing.
$1.3 billion in venture capital flowed into early stage companies in
the second quarter up from $830 million in the first quarter. I keep
hearing that VCs are doing more early stage deals, but this is the
first report I have seen that bears this out.

Still, the 750 companies funded by VCs are a tiny number compared to
probably 10-15,000 that are funded each quarter by angel investors
(including friends and family, doctors and dentists and first-time and
serial angels). That is why there is such a need for FundingUniverse.com to match local entrepreneurs with local angels.

According to Angel Investing (p. 146), a book published in 2000 by two Harvard
Business School professors, "In the United States, angels invest in
around 22 percent of the deals they seriously consider" while "venture
capitalists invest in only about 1-3 percent of proposals received."

Serious entrepreneurs should consider both avenues when trying to get a
company off the ground. But the odds are far greater than angels will
fund your company than that you will be one of the few who attract
professional venture capital — especially if you are a first-time
entrepreneur.

2 Comments

  1. Hi Paul,
    I have been a regular and silent reader of your blogposts. I have often been able to find some very useful stuff in them and some very fascinating insights.
    I run NetElixir, a cross border search advertising performance optimization firm. We started in Jan04 out of Hyderabad, India(currently,this is our operations center) and set up our US Office(headquarter) in Ann Arbor in Q1,2005. NetElixir has been built with the singular vision of helping online advertisers ELIMINATE WASTE and ENHANCE PRODUCTIVITY of their online advertising campaigns. We started with paid search advertising campaign optimization as the sector was booming. Over the past 15 months, after more than 1000 hours invested on research and testing, we were able to come up with the process that “generated a higher return than all other comparable processes” in PPC advertising, with the help of the computer science department of the top Engineering School in India and some great tech brains, we have developed a real time campaign optimization platform that beats anything comparable like EFrontier or AtlasOnepoint hands down by a good 20-25% greater efficiency, we validated our process’performance claims over 20 separate campaigns of varying campaign budgets. The concept and business model has helped us attract an elite Advisory Board with impeccable credentials – infact, some of them might transition from advisory role to senior managerial responsibilities in future. After being funded through my personal savings since inception, we are now seeking angel funds to help us get to the next stage of corporate evolution. Though, I have done mentionable quantum of quality internet and technology business (prior to starting NetElixir, I was a Director and Business Founder at PartyGaming, the egaming firm that recently was in news for a 10 billion pound sterling IPO), I don’t have much experience on raising angel investment in US, especially for a firm like us that extends beyond US.

    I have checked out the various online angel investor resources but still am not clear about the right approach plan and angel investors who might be interested in a space like our’s that combines advertising, technology and services.

    I seek your advice in this regard and would greatly appreciate your response.

    Best Wishes,

    Udayan Bose
    Chief Executive
    NetElixir Inc

  2. pooja

    Isn’t that the toughest part: giving up a cushy job, the security that comes with it to plunge into uncharted waters. As Indians aren’t we doubly conditioned to aim for security above all else? Or … is that mindset about to change?
    That set me thinking. How easy is it really to step out of the comfort zone and take the plunge? What does it take? Guts. Moolah. Persistence. More importantly, how much of each?
    Read more: http://diggindianews.com/IndiaBusiness/Businessworld__Entrepreneurship__Venture_Capital__Taking_the_Plunge/

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