In the Funding Life Cycle, once an idea has surpassed the concept stage the next stage of a new venture is known as the “Seed Stage”. During this early stage, entrepreneurs approach investors including friends, family, and angel investors to find financial support for their concept or product. These investors typically initiate a high-level investigation of the technical, market and economic feasibility of the opportunity. If the concept appears feasible, the investor may support the entrepreneur with time and financial resources. Once this occurs, entrepreneurs take the first steps in forming the company and developing the concept. If the entrepreneur finishes the seed stage, they progress into “Early Stage“. Following the early stage is the growth stage, then mezzanine being the last ultimate stage.
Angels are individuals who provide investment and intellectual capital to entrepreneurial startups. These resources are provided to startups in exchange for convertible debt and/or equity in the startup. In recent years, these investors began organizing into groups for the purpose of sharing the efforts related to identifying and assessing potential opportunities and pooling their investments.
Originating from the theatre industry, the term “angel” originally described wealth benefactors who provided funding for theatrical productions. Today it applies to high net worth individuals, (accredited investors under the definitions of such by the SEC) who provide seed capital for scalable, high growth companies. The Angel Capital Association and the Angel Fund, the major industry associations in the United States both promote membership rosters which exceed 200 groups.
There are two types of angel groups, angel networks and angel funds. Groups whose members participate actively in the identification, screening, and vetting of the investment opportunities, who make their own investment decisions for each investment opportunity, and who invest as a group through a shared investment vehicle, are generally described as angel networks. When the members of the group invest based on established criteria and guidelines and primarily utilize the support of third parties to identify, screen and complete the due diligence on the opportunity, they are generally identified as a fund. Under the fund structure, members commit capital and invest in all opportunities identified as appropriate based on the criteria established for the fund.
Angel investment carries with it a high degree of risk. As a result, angel investors usually seek returns of 10X within five years as most early stage investments fail, resulting in the angel losing their entire investment. These issues cause the angel investor to focus on developing a highly diversified portfolio, thereby reducing the risk of the overall investment. Analyses over time has revealed the typical stable angel group with diversified portfolio returns at a rate in the mid to upper teens to the low to mid-twenties on a percentage rate basis.
The statistics concerning angel groups and investment vary widely.
- Groups may have as few as 10 members or as many as 150.
- Some syndicate, some don’t.
- Some invest locally, regionally and nationally, even internationally, others invest only locally.
- Different groups invest in different industries and at differing levels.
- Smaller and newer groups may provide investments from $50K to $250K while large established groups may invest up to $1.5M or more.
It is therefore extremely important that the entrepreneur understand the angel groups structure, approach and criteria thoroughly. Otherwise, pursuing an investment from any given angel groups may be little more than a shot in the dark, wasting the entrepreneurs’ time and resources, something they have in extremely limited quantities.
Angel Capital Association
The Angel Capital Association, (ACA) is a “leading professional and trade association supporting the success of angel investors in high-growth, early-stage ventures.” With a membership of more than 200 angel groups and 12,000 angels / accredited investors, the ACA is a provider of professional development, industry representation, public policy advocacy and an array of benefits and resources to its membership.
ACA indicates its mission is “to fuel the success of angel groups and private investors that invest in high growth, early-stage ventures.”
AngelPool is one of the largest organization of angels and accelerators in the world. They have a membership of Over 200 angel groups including 5,000 angels which share knowledge, deals, best practices, and learnings with each other. They are comprised of over 500 volunteer leaders who graciously volunteer their time on our various boards, judging and mentoring. Their mission is to help angels, groups, accelerators, and funds profitably find and invest in the best tech disruptors and founders globally to drive jobs, innovation, and growth.
Alliance of Texas Angel Networks
The Alliance of Texas Angel Networks, (ATAN) is a non-profit organization established to facilitate cooperation between the angel investor groups in Texas. Over the last several years, these groups have worked together and shared investment opportunities and “know how”.
Appalachian Regional Commission
The Appalachian Regional Commission, (ARC) supports various activities in order to promote entrepreneurship and business development in the Appalachian Region. Their objective is to help diversify the region’s economic base and enhance entrepreneurial activity by developing and marketing strategic assets, increasing the competitiveness of existing regional businesses, and fostering the development and use of innovative technologies.
Angel Association New Zealand
The Angel Association New Zealand was established in 2008 to facilitate the efforts of business angel networks and early stage funds to work towards an agreed national vision. The Association desires to increase the quantity, quality and success rate of entrepreneurial investments in New Zealand facilitating the strengthening of the New Zealand entrepreneurial ecosystem.
The primary objectives of the association are to:
- Promote the growth of angel investment by encouraging and educating entrepreneurs, new angel investors and angel groups.
- Ensure the ongoing industry success by developing an industry strategy, providing education and encouraging collaboration among its members.
Angel Resource Institute
The Angel Resource Institute, (ARI) is a non-profit organization focused on providing information on best practices and educational information related to the field of angel investing. ARI’s programs include educational workshops and seminars, research projects and reports, and information about angel investing for the general public. Their programs are available to those interested in the early-stage capital including investors, entrepreneurs, policy makers, entrepreneurial support professionals, and many others.
Australian Association of Angel Investors
The Australian Association of Angel Investors, (AAAI) is a not for profit company which serves as the national voice of the early stage investment community. Their objective is to provide a platform for the growth of the early stage investment capabilities of Australia. They provide information and resources, a platform for collaboration and internationally recognized professional development programs to the countries angel investors and entrepreneurs. AAAI also advocates on behalf of the participants in the entrepreneurial ecosystem to shape policy and uphold professional standards.
Business Angels Europe
Business Angels Europe, (BAE) is the European Confederation of Angel Investing. It represents the European Business Angels’ Federations and Trade Associations. Its objective is to bring together the most active and developed countries operating in the angel markets in Europe and serve as the voice of angel investing on the continent.
Council for Economic Development
Membership of the CED includes a wide range of startup companies, maturing entrepreneurial companies, corporate partners, investors, academics, service providers, and individuals interested in entrepreneurship. The organization, located in the North Carolina Research Triangle provides education, mentoring and capital formation resources to new and existing high-growth entrepreneurs.
European Business Angel Network
European Business Angel Network, (EBAN) fuels innovation and growth throughout EMEA. Representing the early stage investor community, EBAN membership includes over 145 member organizations from 46 countries throughout Europe, the Middle East and Africa. Their members include angel networks, early stage venture capital and seed funds, electronic funding platforms, individual angels, crowdfunding platforms and accelerators.
Launch Tennessee, (LaunchTN) is a public-private partnership focused on supporting the development of high-growth companies in Tennessee. Their objective is to make Tennessee the No. 1 place in the Southeast to start and grow a business. LaunchTN is funded in part under an agreement with the State of Tennessee.
National Angel Capital Association
National Angel Capital Association, (ACO) was established as a non-profit in 2002 to promote and support the creation of a vibrant Angel community in Canada. The ACO provides Angel investors with a secure environment to network and collaborate.
ACO has more than 2,000 members across Canada. Their members are a diverse group of individual investors, Angel groups, and other industry partners that provide support to early-stage companies.
Pipeline Fellowship is an angel investing bootcamp for women which works to increase the diversity in the U.S. angel investing community and create capital for female social entrepreneurs. Launched in NYC in April of 2011, the Pipeline Fellowship has expanded from NYC to Atlanta, Austin, Boston, Chicago, Los Angeles, Miami, San Francisco, Seattle, and Washington, D.C.
Wisconsin Angel Network
The Wisconsin Angel Network (WAN) fuels the growth of capital in Wisconsin by operating as an umbrella organization providing services and resources to the early stage investing and entrepreneurial communities. It is part of the Wisconsin Technology Council’s overall economic development and job creation efforts. WAN is a Wisconsin public-private initiative operated by the Technology Council.
Several of these Angel Funds and Networks are spotlighted on our FundingSage Startup Investor Spotlight. Learn more about potential Angel and VC investors there!
Angel Funds and Networks
3C Capital (RAIN FUND NETWORK)
Aggie Angels Network
AIM – Auburn Angel Network
AIM – Central Alabama (Birmingham) Angel Network
AIM – Central Gulf Coast Investor Network
AIM – Gulf Coast Angel Network
AIM – Shoals Angel Network
Akron ARCH Angels (Akron Regional Change Angels)
Alliance of Angels
Angel Capital Group
Angel Investment Forum
Angel Investor Forum
Angel Venture Forum
Angels on the Water
Angelvision Investors LLC
ARC Angel Fund
ArcView Angel Network
Ariel Southeast Angel Partners
Arizona Tech Investos
Astia Angels – NYC
Astia Angels – San Francisco
Atlanta Technology Angels
Band of Angels
Baylor Angel Network
BC Angel Forum
BELLE Michigan LP
Bellingham Angel Investors BAI)
Ben Franklin Central / North Angels
Biltmore Angel Group
Blu Venture Investors
Blue Water Angels
BlueTree Allied Angels
Boston Harbor Angels
Brightstar Wisconson Foundation
Buffalo Angel Network
Capital Community Angels
Catalyst Fund, LLC
Central Florida Technology Ventures
Central Illinois Angels
Central Texas Angel Network
Charleston Angel Partners
Chattanooga Renaissance Fund
Chemical Angel Network
Cherrystone Angel Group
Clean Energy Venture Group
Coachella Valley Angels
Crossroads Venture Group
Delaware Crossing Investor Group
Dingman Center Angels
East Central Ohio Tech Angels
Eastern New York Angels
Element 8 Angels – (Formerly Northwest Energy Angels)
Enterprise Angel Group LLC
Excelerate Health Ventures
Executive Forum Angels
Family Media Angels
First Angel Network
Florida Angel Investors
Fort Point Angels
Frontier Angel Fund
FSI Angel Network
Georgia Angel Network
Go Beyond Network
Golden Angels Investors
Golden Seeds LLC
Golden Triangle Angel Network
Granite State Angels
Great Lakes Angels
Hivers and Strivers
Houston Angel Network
Hyde Park Angel Network
Ignition Point Capital Group
Impact Angel Group
Inception Micro Angel Fund
Jumpstart New Jersey Angel Network
K Street Capital
Lancaster Angel Group
Launchpad Venture Group
Life Science Angels
Long Island Angel Network
Louisiana Angel Network
Louisville Enterprise Angels
Main Street Venture Fund
Maple Leaf Angels
Marquette University Golden Angels
Mass Medical Angels
Maximize Angel Investments
Michigan Angel Fund
Mid Atlantic Angel Network
Mid-Atlantic Bio Angels
Midwest Venture Alliance
Mississippi Angel Network
Nashville Capital Network
NCIC Capital Fund
New Dominion Angels
New Mexico Angels Inc
New Richmond Ventures
New World Angels
New York Angels
Newfoundland& Labador Angel Network
NJIT Highlander Angel Network
NO/LA Angel Network
North Coast Angel Fund
North Country Angles
North Dallas Investment Group
North Texas Angel Network
Northern Michigan Angels
Northern Ontario Angels
Ocean State Angels
Oregon Angel Fund
P3 Alliance (Purdue Angel Network)
Piedmont Angel Network
Pine to Prairie Fund
Pittsburgh Equity Partners
Point Positive Inc
Puget Sound Venture Club
Queen City Angels
RAIN Source Capital
REES Capital LLC
River Valley Investors
Robin Hood Ventures
Rochester Angel Network
Rockies Venture Club
RTP Capital Associates
SAGE – Shasta Angel Group for Entrepreneurs
Salt Lake Life Science Angels
San Joaquin Angels
Sand Hill Angels
Sand Hill Angels LLC
Saskatchewan Capital Network
Seed Capital Fund of CNY
Seraph Capital Forum
Show Me Angels
SLO Seed Ventures
SoundBoard Angel Fund
South Coast Angel Fund
Southern Willamette Angel Network
Southwestern Ontario Angel Group
Space Angels Network
St Louis Arch Angels
Sustainable Local Food Investment Group
Tacoma Angel Network
Tamiami Angel Fund
Tech Coast Angels
Tech Coast Angels
Tech Coast Angels
Tech Coast Angels
Technology Concept Fund, LLC
The Angel Food Network
The ArcView Angel Network
Third Coast Angels
Thunderbird Angel Network
TiE Angels – Boston
TiE Angels – Silicon Valley
Triangle Angel Partners
Tribe of Angels
Tri-State Private Investors Network
Twin Cities Angels
Tyler Texas Angel Network
Upstate Carolina Angel Network
Urbana-Champaign Angel Network
US Angel Investors
Valley Angel Investment Fund
Vancouver Angel Technology Network
Vegas Valley Angels
Virginia Active Angel Network
Walnut Venture Associates
West Suburban Angels
West Texas Angel Network
West Virginia Angel Network
Wilmington Investor Network
WINGS – The Medical Technology Angel Group
Wisconsin Investment Partners
Wisconsin Super Angel Fund
Women’s Capital Connection
York Angel Investors
York Angel Investors
The process of raising funds by obtaining small amounts of money from large groups of people, through the internet is known as crowdfunding. Following are information, resources, and tools, related to this financing methodology.
Crowdfunding is a process of raising funds for an opportunity by obtaining small amounts of money from large groups of people, generally through internet sites designed specifically for this purpose. The internet facilitates crowdfunding through fundraising platforms, which, when leveraged with social media websites such as Facebook, Twitter and Linked-in are able to rapidly and efficiently attract vast numbers of potential investors resulting in successful fundraising campaigns for opportunities ranging from personal projects and social support to entrepreneurial ventures.
Crowdfunding, a recent phenomenon, has the potential to radically change the fundraising processes for individuals, non-profits and for profit entrepreneurial endeavors.
Crowdfunding can be utilized to obtain “Money for Goods”. Under this funding model donations are solicited for creative personal projects, social welfare projects/non-profits, scientific and research and to a lesser extent, “for-profit” projects. Monies obtained under this approach are generally categorized under one of the following three funding models:
- All or Nothing (AON)
Fund-raising pledges are pursued with a pre-determined minimum. If the minimum is not met, no money is collected.
- Keep it All (KIA)
Fund-raising is pursued without a pre-determined minimum. All of the funds collected (less commission) are provided to the entrepreneur. Even if the entrepreneur has insufficient funds to meet the objectives, he/she has the discretion as to whether or not to refund the funds.
Funds are raised for the purpose of creating a product or providing a solution to a particular problem (i.e.; a software bug). Funds are awarded when someone successfully provides the requested service.
Crowdfunding can raise equity or borrow money for entrepreneurial opportunities/business ventures. Under this model, crowdfunding platforms and social media websites are leveraged to expand the potential investor base providing significantly higher numbers of potential investors for entrepreneurial opportunities.
Currently, in the United States, the options here are somewhat limited as the processes generally continue to require “Accredited Investor” status and transparency. However, the regulators are reviewing current regulations based on the “Jobs Act” and some liberalization my result in expanding the pool of investors to include non-Accredited Investors use of the crowdfunding platforms and capabilities. The environment is dynamic and interested parties in all countries should monitor the environment on a continuing basis for change.
As described above, crowdfunding for equity and debt can be further defined as follows:
- Debt crowdfunding – The start-up borrows money which must be repaid, usually with interest.
- Equity crowdfunding – Equity is provided to investors for funds invested in start-ups raising funds.
- Property crowdfunding – Owners raising funds provide investors an interest in the underlying property.
- Other crowdfunding – Various structures generally unique to particular services, (i.e.; perqs, publication, or rewards).
Crowdfunding Professional Association
The Crowdfunding Professional Association (CfPA) is a 501 (c)(6) nonprofit trade organization that was established following the signing of the Jumpstart Our Business Startup Act (“JOBS Act”) in April of 2012. The association is dedicated to representing the Crowdfunding industry, engaging the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and providing the industry with education, a professional network, and tools that will accelerate the capital formation and ensure investor protection.
The Full Text of the America JOBS Act posted on the White House website.
SEC Press Release (SEC Issues Proposal on Crowdfunding)
The Securities and Exchange Commission, (SEC) press release related to the commissions proposed rules on crowdfunding.
Proposed SEC Rule on Crowdfunding
The Securities and Exchange Commission, (SEC) proposed rules on crowdfunding.
SMALL BUSINESS GRANT FUNDING
Grants are funds, provided by a party, (grantmaker) such as a governmental agency, foundation, corporation, trust or industry association to the benefit of the recipient, which are not required to be repaid. Such grants are usually based on an application or another form of written proposal or grant request. Grants are usually provided to fund specific projects or objectives and typically require certain compliance and reporting to the grant maker.
Despite media and internet marketing to the contrary, small businesses grants are few and far between.
Grants that are available tend to be focused on very specific areas, typically in technological research and innovation or technology transfer and development. Other limiting factors include types of companies (i.e., non-profits) or specific classifications like women or minority-owned businesses.
There are numerous websites that seek to lure the entrepreneur into believing they will guide them to grant funding. They tend to lead to either a sponsored loan program or to a fee for service program. The bottom line is that pursuing grants as a means of funding start-up businesses general has a low probability of return.
There are some unbiased government sources of information related to grant funding:
WEBSITES – GOVERNMENT GRANT FUNDING
Small Business Administration: The SBA has a good introduction and description of the limited grant programs available through the Federal Government.
There are two types of grants that are available:
- Small Business Innovation Research Program (SBIR)
SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization.
- Small Business Technology Transfer Program (STTR)
STTR is an important small business program that expands funding opportunities in the federal innovation research and development arena. Central to the program is expansion of the public/private sector partnership to include the joint venture opportunities for small business and the nation’s premier nonprofit research institutions.
There is a search tool that allows a search for Federal grants by keywords or more specific criteria. All discretionary grants offered by the 26 federal grant-making agencies can be found on Grants.gov. You do not have to register with Grants.gov to find grant opportunities.
The DARPA Small Business Programs Office has developed a tool to help small businesses define and prioritize the most important next steps in their path towards technology transition.
DARPA considers small business concerns as a primary source of innovative solutions. It seeks to expand small business relationships and training opportunities within DOD and other federal agencies and enable the small business community to create and transition radical, game-changing technologies that benefit the Warfighter, the federal government, and the commercial marketplace.
Accelerators, also known as seed accelerators, are organizations which support seed and early-stage startups through a formal, defined mentoring program from experts with experience across the startup spectrum. Typically organized as a cohort program lasting twelve to sixteen weeks, the programs end in a public pitch event or demo day presentation to investors.
Accelerators provide defined cohort programs, for entrepreneurs and startups. The programs typically last 12 to 16 weeks, although the duration may vary. They generally occur on-site at locations provided by the accelerator. Most include continuing mentorship during the course of the program led by multiple experienced mentors who have been trained for this purpose.
Most accelerators require attendees to be on-site and a few require the attendees to relocate their companies to the region in order to be accepted into the program. Most require a full-time effort by the entrepreneurial teams as opposed to the individual entrepreneur.
Accelerators are designed to address all the key issues from identification of the idea or concept, to building a prototype, conducting market surveys/tests/validating the market, building teams, creating and documenting the company infrastructure and ultimately obtaining third-party financing.
Other resources may include:
- Startup stipends which could range from $10K – $100K
- Office space during the program
- Special events and/or dinners with guest speakers
- Entertainment events
- Specified professional services from accounting, legal, marketing and other professionals are provided to participants free of charge by some accelerators and their professional partners
- Free access for defined periods to select web-hosting, software and SAAS tools supporting the development, growth, and operations of the startup
- Occasional housing for the cohort participants (but this is usually the exception)
- Post Demo-day mentoring
The culminating event is usually a Demo-day in which the entrepreneurs pitch their companies to the public and investors such as angel and VC groups. The value of the process for the entrepreneur includes a network of connections, the experience of participating in the cohort with peer companies, and recognition for having been chosen and participated in the program.
It is not typical for entrepreneurs or startups to be charged fees for these programs. Instead, the accelerators typically require equity in the startup, ranging from 6% – 10% depending on the accelerator.
A European based industry-led network that connects accelerators, entrepreneurs and policymakers to strengthen the support afforded to internet-based startups on the continent.
Business Innovation & Incubation Australia
Business Innovation & Incubation Australia, (BIIA) is an association of Australian business incubators which sets the practice standards for the incubator industry in Australia.
Canadian Association of Business Incubation
The Canadian Association of Business Incubation, (CABI) is a Canadian association dedicated to supporting the growth of new and early-stage businesses in Canada. Their mission is “to advance the success of business incubators and accelerators across Canada while enhancing the knowledge and skills of incubator and accelerator professionals and promoting a better understanding of business incubation/ acceleration’s role in economic development.”
National Business Incubation Association
The National Business Incubation Association, (NBIA) was established to advance business incubation and entrepreneurship in the United States. It is a provider of information, education, advocacy, and networking resources to its members and partners to bring excellence to the process of assisting early stage companies.
Many of these accelerators are spotlighted on our FundingSage Startup Accelerator Spotlight. Learn more about your favorite accelerator there!
Acceleration Business City
Accelerator of Merck KGaA
Blue Ridge Labs @ Robin Hood
BR Intelligence Innovation Accelerator (BRIIA)
Cherokee McDonough Challenge
Co Lab Gig Tank
Creww Japan Accelerator
F10 Fintech Incubator & Accelerator
Fintech Innovation Lab
Flat 6 Labs
Ice Lab Accelerator
Iowa Agritech Accelerator
Knoxville Entrepreneur Center
Next Media Accelerator
Northeast Indiana Innovation Center
PlayLabs @ MIT
Portland Incubator Experiment
Portland Seed Fund
Seed Fuel – Rowad
Spark labs Cultiv8
Start It @ KBC
The ARK Challenge
The Biz Foundry
The Idea Village
The Seeds Lab
The Startup Factory
Valley Venture Mentors Startup Accelerator
Vocus Upstart – Offbaorded