Two recent posts on how web entrepreneurs are looking for quick, small amounts of capital instead of large dollops from the traditional venture capital sources. Both of these posts are based on a report by Dorsey & Whitney, a startup law firm. These reporters do a good job analyzing the data, so I’m not going to offer any additional opinions.
It’s not astonishing that consumer Web CEOs are in the driver’s seat when it comes to funding options right now. It also seems the case that an investor’s brand, proximity, and global presence matter less to startups that are eyeing an exit from the get-go….
Amid the criteria cited for taking money from a particular investor were valuation, dilution and liquidation preferences. Interestingly, brisk deal-making, and investors who don’t pressure startups to take more capital than is necessary, were among the mostly ranked criteria. In fact, the latter two criteria ranked as “somewhat important” to “very important” by 91 percent and 92 percent of respondents, respectfully. Meanwhile, fully one-third of the CEOs called valuation “somewhat important” or “not important.”
The 363 startup founders who responded to the survey said they were mainly looking for investors who will offer attractive deal terms and valuations, who can move quickly on deals, and who won’t push startups to take more money than they need. On all three counts, angels happen to have the perceived advantage. But the entrepreneurs indicated that they cared more about getting deals done than about whether there are big names on the other side of the table. Which means traditional venture firms who don’t want to be locked out of today’s smaller companies probably shouldn’t waste time worrying about super angels (who are arguably evolving into mini-VCs in any case).
My favorite chart from the report (click on the image to go to the report as a PDF.)