Topic: Curious, where do these major services get their investors? (Read 947 times)
ycombinator (paul graham) is one of the companies backing coinbase.com
I *think* this is how places like techstars work. I had a friend get his business picked up by them and it seems to be working out well for him. From what he told me it sounded very similar. After getting through the screening process, he had some help from them to refine his product and then got a chance to present in front of a bunch of potential investors. From there, he met some people who were able to help him further and is now rolling out his product to clients.
I know how the investors make money and I know how he makes money, but I'm still not sure how the networks make money (in this case techstars). I'm guessing they must get a cut of profits from successful businesses, but I have no idea what that contract would look like. So, you could be looking at a substantial portion of your profits being taken (investors and network). But if you have a good idea and need the startup money, that is one way to get it.
I know how the investors make money and I know how he makes money, but I'm still not sure how the networks make money (in this case techstars). I'm guessing they must get a cut of profits from successful businesses, but I have no idea what that contract would look like. So, you could be looking at a substantial portion of your profits being taken (investors and network). But if you have a good idea and need the startup money, that is one way to get it.
Angel investors invest their own money. Of course they want a return, a big one, since its very high risk. Typically they will demand something like 50% of the company shares, although it depends of course entirely on the type of project. the investor and of course how much you can finance yourself.
As for the network, they dont have that many costs. They just rent some locations for the events, do the prescreening and marketing and give you some assistance. They get their money from the business angels who pay a yearly fee to be a member. As a candidate entrepreneur you also pay a fee, though when I did it, it was only like 50 euro or something, mostly symbolic, and not dependent on whether or not you got financing. IIRC the prescreening was even free.
Then again, different networks will use different rules Im sure.
I *think* this is how places like techstars work. I had a friend get his business picked up by them and it seems to be working out well for him. From what he told me it sounded very similar. After getting through the screening process, he had some help from them to refine his product and then got a chance to present in front of a bunch of potential investors. From there, he met some people who were able to help him further and is now rolling out his product to clients.
I know how the investors make money and I know how he makes money, but I'm still not sure how the networks make money (in this case techstars). I'm guessing they must get a cut of profits from successful businesses, but I have no idea what that contract would look like. So, you could be looking at a substantial portion of your profits being taken (investors and network). But if you have a good idea and need the startup money, that is one way to get it.
I know how the investors make money and I know how he makes money, but I'm still not sure how the networks make money (in this case techstars). I'm guessing they must get a cut of profits from successful businesses, but I have no idea what that contract would look like. So, you could be looking at a substantial portion of your profits being taken (investors and network). But if you have a good idea and need the startup money, that is one way to get it.
For relatively small amounts / high risk ventures, look for a business angel network.
Business angels are generally rich (ex-) entrepreneurs that like to help startups and make some money doing so. They are organised in networks, you pay a small fee, apply, if your application gets through the first screening, you get like 15 minutes to present your business case for a bunch of business angels and you hope one or more are impressed or curious enough to talk further to you.
If you need larger sums of money, they often provide preseed capital that might be needed to get the attention of venture capitalists or larger investment funds. Or they will introduce you to them (for a %) if you really convinced them.
Business angels are generally rich (ex-) entrepreneurs that like to help startups and make some money doing so. They are organised in networks, you pay a small fee, apply, if your application gets through the first screening, you get like 15 minutes to present your business case for a bunch of business angels and you hope one or more are impressed or curious enough to talk further to you.
If you need larger sums of money, they often provide preseed capital that might be needed to get the attention of venture capitalists or larger investment funds. Or they will introduce you to them (for a %) if you really convinced them.
Interesting, I have never heard of this.
For relatively small amounts / high risk ventures, look for a business angel network.
Business angels are generally rich (ex-) entrepreneurs that like to help startups and make some money doing so. They are organised in networks, you pay a small fee, apply, if your application gets through the first screening, you get like 15 minutes to present your business case for a bunch of business angels and you hope one or more are impressed or curious enough to talk further to you.
If you need larger sums of money, they often provide preseed capital that might be needed to get the attention of venture capitalists or larger investment funds. Or they will introduce you to them (for a %) if you really convinced them.
Business angels are generally rich (ex-) entrepreneurs that like to help startups and make some money doing so. They are organised in networks, you pay a small fee, apply, if your application gets through the first screening, you get like 15 minutes to present your business case for a bunch of business angels and you hope one or more are impressed or curious enough to talk further to you.
If you need larger sums of money, they often provide preseed capital that might be needed to get the attention of venture capitalists or larger investment funds. Or they will introduce you to them (for a %) if you really convinced them.
E) All of the above (except "if I build it, they will come")
I always see it mentioned but have never seen it in real life, but where do these investors come from that fund some of the new services coming out?
I understand the concept, you have an idea and you pitch it to "someone" and you get a bite and start rolling with it. But is it a matter of knowing a business banker who
lets you pitch your business plan in exchange for a business loan? Or is is going to conferences and handing out your card with a minute pitch allowing for a further non-disclosure agreement presentation?
Or is it just going through friends and friends' rich investor friends? Getting the word out there.
Or do you just set up a basic concept website and start to get traffic and the investors seek you out?
I mean, I have invested in a business myself. I dropped $50k into a bar and became 1/3rd silent partner but that came about just because a friend of mine said that his friend who owned a bar needed someone to buy him out. Is that how this tends to happen? Just put the word out?
Not asking for specifics, but just an overall idea of how it all goes down.
I understand the concept, you have an idea and you pitch it to "someone" and you get a bite and start rolling with it. But is it a matter of knowing a business banker who
lets you pitch your business plan in exchange for a business loan? Or is is going to conferences and handing out your card with a minute pitch allowing for a further non-disclosure agreement presentation?
Or is it just going through friends and friends' rich investor friends? Getting the word out there.
Or do you just set up a basic concept website and start to get traffic and the investors seek you out?
I mean, I have invested in a business myself. I dropped $50k into a bar and became 1/3rd silent partner but that came about just because a friend of mine said that his friend who owned a bar needed someone to buy him out. Is that how this tends to happen? Just put the word out?
Not asking for specifics, but just an overall idea of how it all goes down.
Jump to: