Thursday, September 4, 2014

Missing the point: "Its not fair than SAC only invests in one company"

Some investors have queried me about an entrepreneur commented on the Seattle Angel Conference process saying: "it was not fair that only one of the teams got an investment in the process"

I told him that this entrepreneur did not understand his job at the conference and that he needed to be seeking these other values.

I just send a note to an entrepreneur trying to get their focus on the real value of the angel conference. In that note I said:

However, I want to point out that the real value of the event is not winning the investment.

the Real value come from several things:
1) by having a deadline, you move things forward faster.
2) by having a reason to practice your pitching, your pitching gets better
3) by having a dozen people review your materials, your materials get better
4) by making connecting with several dozen investors, your story gets spread
5) by seeing the pitches of other companies, you learn things you would not know otherwise
6) by engaging with other entrepreneurs, you build a support network
7) by getting into the finals, you get all of your investor documents together and polished.
8) by sitting with your quarter-finalist investor coffee, you get a chance to engage a new investor
9) by being at the conference with 100 angels in the room,you build out your investor network. 
10) by being in the room with engaged investors, your goal should be to come out with an investor who is a champion for you. 

And most importantly, if you find a champion, who cares about what you are doing, the chances of finding a side investment are significant. 

As a CEO of a new Startup, make sure you know what the key conversation in the room is. Sometimes it is not about being the winner on stage, but about building the foundation for your investment regardless of who is on stage. 


Monday, August 18, 2014

Succeeding at the Seattle Angel Conference -Guest Blog

Guest Post by Zach Simmons  Discuss.IO


For those that aren't already familiar with Seattle Angel Conference (SAC), it is an angel investment group with a unique investment process.  It connects promising entrepreneurs to a syndicate of local angel investors.  A "winner" is selected after a rigorous 2 month selection process which results in a six figure investment.

It was an honor to be selected from the great set of teams in SAV V. Discuss.IO received the $160,000 investment first prize, while another great finalist, SocialGlimpz, received over $80,000 from SAC investors.

I would highly recommend that Seattle entrepreneurs to participate in this great process.  The competition is tough.  Here are a few tips based upon our experience 




·         Nail your 1st pitch - 

 The first 3 minute pitch is the hardest.  You need to be memorable out of a crowd of 20+ pitches. Try and focus on the following high level points 1) quantify the size of the problem 2) briefly explain how you solve it 3) explain your progress/traction so far.  Don't worry about details.  Just say enough to pique the audience's interest.  There is plenty of time during the process to dig into the details.

·         Find A Champion - 

 It is really important to find an investor early in the process that believes in your vision.  The investors meet weekly during the selection process to eliminate teams.  You must find a least 1 person that is going to standup and argue that you are the best bet in a crowded field.  This requires actively soliciting feedback on your business during the process.   

 ·         Welcome Feedback -

 You will be posed with a lot of tough questions.  This is especially true if you make the finals.  Embrace it!  You aren't cut out to be an entrepreneur if you can't take critical feedback. The diligence process is the best reason to participate in SAC. Angel investors are often entrepreneurs themselves. Their experience, perspective and connections are often more valuable than the checks they can cut. 

·         Get Organized - 

Find time to draft your business plan and financial model.  The act of writing down your vision will help clarify your thinking and ready yourself for investor questions.  These docs don't have to be poetry and you can have unknowns.  We used Google Docs so that our diligence team could post questions and poke holes in our logic directly within our doc.  This iterative collaboration yielded a final doc that was easy to share with the other investors.  Remember, you need to get the most votes to win. A succinct business plan gives your diligence team an easy way to communicate your value with the other 80% of the investors that won't be very familiar with your business. 

·         Find Paying Customers -

 Traction is the single most important selection criteria.  Investors naturally want to see a clear path to profitability.  You will become dramatically more exciting if you can prove that consumers will pay money for your product or service.  Nothing proves the viability of your product like clients lined up and ready to pay for it, even an early "minimally viable product" (MVP).  Showing customer demand growth over the 2 month selection process is very helpful, even in your pre-revenue stage.



Don't lose hope. Keep Going!


My last suggestion is to not lose hope if you get eliminated.  Plenty of great businesses won't win SAC VI.  In fact, Discuss.IO came up short twice before winning in May 2014.  Good things come to those who exceed their consumer expectations. Good luck!



by: Zach Simmons @ Discuss.IO Winner of SAC V, after two prior attempts.

Register now for our final summer workshop - note new date!

SAC: The Startup Journey

with Bill Bryant

Moved to 8/28/2014

8/19/2014 at 6:00pm  at Impact Hub Kirkland

Bill Bryant is a partner with DFJ and has been part of many investments, both Angel Investments and Venture Capital. He will explore some of the issues that have come up as startups have moved along the path to IPO. This is an opportunity to have some of the twists and turns of the funding pathway illuminated.

Sponsored by: Seattle Angel Fund


Register Here: http://www.eventbrite.com/e/sac-the-startup-journey-with-bill-bryant-tickets-12495356949

Please spread the word to companies that you know who might benefit from these discussions.

Thursday, August 7, 2014

Convertible Note Training for Start Ups & Journey to IPO

SAC: The Convertible Note Structure

with Alex Modelski from Ater Wynne


8/12/2014 at 6:00 at the Impact Hub Kirkland

The Seattle Angel Conference will be using a convertible note as the default for the deal instrument. This is an opportunity to walk through the term sheet and to explore the details of how an early seed stage deal might be structured. This will be a chance to ask questions and explore the details for the SAC Convertible note.

Friday, August 1, 2014

When Should I incorporate my new Startup?

By Carter Mackley 


"When should we incorporate?" 

This is a question startup attorneys frequently hear and it came up again at the last legal documents workshop hosted by Seattle Angel Conference. Everyone knows that you want to run your business through a corporation or LLC to have the limited liability protections afforded by those entities. But before any business gets going there is always an exploratory phase. During this period, business plans are developed and tested, market research may be conducted, and software code might be written.

Many times it turns out the idea isn't worth pursuing, so it doesn't always make sense to incur the time and expense of incorporating, not to mention having to get a tax ID, a business license, and incurring reporting obligations with federal, state and local governments. On the other hand, problems result if you wait too long. Software, the business plan, contact lists, perhaps trademarks – all of these things are or should be assets of the business. If you don't have agreements among your collaborators, there can be confusion or disagreement about the ownership of these assets when the business gets going. Frequently collaborators haven't decided yet or they don't take time to work out the percentage ownership of the business. Often emails or other writings are exchanged that may be ambiguous or contradictory. I've seen at least one case where an early collaborator who did very little made a successful claim against the company when it had an exit a few years later. She received a healthy, and unearned, portion of the company sale price.

Personal Liability


Another very serious issue is your potential personal liability if you collaborate with others during the exploration phase. In an adequately capitalized corporation or LLC, an entrepreneur's risk is normally limited to the amount of his or her investment. A creditor suing the company could not reach, for example, the entrepreneur's personal assets such as car, home, or bank accounts. That liability limitation does not apply for partnerships. Partners are personally liable for the debts of the partnership. See RCW 25.05.120. And individual partners have the authority, absent an agreement otherwise, to incur debt and other obligations for the partnership.

DeFacto Partnership


Now take those two rules of law and couple it with a third principle – by just working on the project together you may have formed a de facto partnership. The explicit rule for Washington can be found at RCW 25.05.055:

"The association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership."

So, if you are not careful, you might think you are just helping out a friend on his business idea and later discover you formed a de facto partnership and are personally liable for a debt that one of your partners took on in behalf of the business.

So the takeaway is don't wait too long to incorporate. You should definitely incorporate before:

  • earning any revenues
  • entering into any material contracts
  • hiring any employees
  • receiving any funding

During the exploratory phase, if after considering the above factors you feel it is still early to incorporate, take precautions to maintain ownership of your business and assets. Make sure that anyone who works creates or works with any of your intellectual property signs an intellectual property assignment agreement. This includes volunteers and contractors, as well as all collaborators/partners. If you decide to hold off on incorporating, it is a really good idea to put in place a simple agreement between you and your collaborators. At a minimum this agreement should have the following elements:
  • statement of the partners' percentage ownership
  • contributions of individuals, including time, money, and assets (e.g., software, equipment)
  • limitation on authority of partners to sign contracts or incur debt without approval of other partners
  • assignment of all related intellectual property
  • agreement as to what happens to IP and other assets if the partnership dissolves

I have a simple template agreement at Startuplawtalk.com that covers these elements. It is no substitute for legal counsel and you use it at your own risk. So please, before you or your collaborators have risked significant time or money, consult an attorney.

Carter Mackley is an experienced securities lawyer in Seattle, Washington who primarily represents startup companies and angel investors. He conducts frequent clinics for entrepreneurs and publishes the informational website, Startuplawtalk.com.

Friday, July 18, 2014

What is Seattle Angel Conference in 60 Seconds!

Must Know for Angels & Entrepreneurs- Upcoming Events

The next round of workshops for the Seattle Angel Conference IV are coming together.

We have put together some workshops to talk about some of the areas where people have been asking questions.

As we learn more about different parts of the Angel Investing process, we work to spread the word. 
For example, there are some kinds of investments where an straight equity investment has some disadvantages. David Bangs has been exploring Revenue Based Funding to address some of those problems. Have a discussion with people who are active with Angel Investing and learn how it works well and when it doesn't at our Angel Investing Workshops: 

Link through to registration by clicking on the topic! 

DateNameTopic and registration
(click on topic to link to Eventbrite registration)
LocationTime
July 16David Bangs Revenue Based FundingImpact HUB Seattle6 PM
Jul 22 Geoff Harris, Keith Laepple and Paul LippertThe SAC experience for Angels



Impact HUB KIRKLAND!
6 PM
Jul 29Carter MackleyLegal Documents for FoundersImpact HUB
KIRKLAND
6 PM