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Sources of Seed-Stage Capital: A Framework

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  • 1. Sources of Investment: Seed, Angels and VC’s Stage (Pre-Round): • Expected to have: • An idea, initial/rough b-plan • Initial founders, key advisors • Path to ??? • Detailed b-plan, • Key founders (bus & tech) full-time • Prototype/alpha done and tested, • Some piloting (paying?) customers, some revenues?, • All legal documentation in place, board of directors • Path to break-even or next funding • Significant variation among firms but…. Angel req. +: - Anchor clients on board, revenue growth (B2B), - Growing base of users, with strong usage trends (B2C) - …..Growth potential! Credible path to $100M Rev • Don’t Expect: • $ Rev, Customers, Minimum Viable Product (MVP); full legal documentation • Income (e.g. cash flow positive); all key management ; completely developed business model (e.g. understand it will change) • Income (e.g. cash flow positive) Who/what are they? • People you already know, that trust you, and (maybe) understand your venture • Experienced early stage investors (individuals or a group) • Accredited Investors. • Angel investing is not their “job”; may not be F/T endeavor • E.g.: NY Angels, GoldenSeeds • Firm with multiple professionals that raises, invests and manages individual funds (other people’s $) • Working F/T (this is their job…) Angel Investment Friends and Family Venture Capital “You” aka Bootstrapped Earlier Stage Later Stage Round Size $: • $10’s of K to $100K • $100’s of K to $1M+ • $500K to $1.5M Investment Size $: $5K – $10’s of K • $25K – $75K • $250K-$750K Valuation (Pre- Mon): • < $1 M • $1 – 5 M • $5-10 M “Seed” VC “Traditional Series A” VC • $5M-$15M • $3M – $5M • $10 – 25 M “Seed”

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