Angel Investing, Entrepreneurship & Learning

One of the things that I am most excited about with FundingUniverse.com is the new financial models that a good friend named Travis is putting together. Over the past month, Travis and I have been meeting on a weekly basis to discuss all of the FundingUniverse.com financial details. We’ve discussed revenue streams, expenses, hiring assumptions, forecasts, ROI, ROE, cash flow, balance sheets, PNLs, etc. etc. If it has to do with financials, we’ve discussed it.
To be honest, this could be one of the most important things that I have done as CEO. It is amazing to be able to see our past performance, measure future assumptions, and set goals accordingly. John Richards (one of the most active angel investors in Utah) has advised many times that the financial model is one of the most important pieces to raising money — and I agree.

If you are an entrepreneur seeking to raise money, (or build a successful business) please don’t underestimate the value of sound financial models.

(By the way…if you are interested in getting some help with your financials, let me know and I’ll put you in touch with Travis. And “no”…I’m not getting any sort of referral commission.)

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I just recently read an article from the Utah Business Magazine Newsletter entitled “Attorneys are Often Overlooked ‘Business Partners’.”  The article could be summarized with this quote:

Companies, both large and small, should integrate attorneys into their business teams, rather than simply relying on legal council to come to the rescue when problems arise. However, the process of selecting—and paying for—legal counsel can be intimidating for small businesses.

After having the chance to work more closely with a few attorneys, I really agree with the statement that attorneys need to be a part of your business (even from the beginning).  To me, it seems that most entrepreneurs avoid getting attorneys because they are afraid of the financial ramifications that will come from it.  To secure a well-experienced attorney, you will often have to fork out $200 - $350 per HOUR for their services.  The question then becomes…is it worth it?

I believe that some attorneys are starting to take more chances on early-stage companies by charging a cheaper fixed price for their services in hopes that it will pay off in the end.  While it is a risk because the company might fail, I really believe that it will produce results much quicker than anticipated because entrepreneurs are quick to talk to other entrepreneurs.

Bottom line:  attorneys are needed.  Most important question:  is there a way to make it affordable for start-ups?

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If you haven’t been able to tell, I LOVE TO LEARN (especially when it is something that I am passionate about). One of the coolest things that I have been studying lately are company histories. For example, I was reading the history of Google, Inc. last night and learned the details of how they initially received funding. And guess what — they received angel funding (this might be common knowledge, but I still think that it’s pretty cool to read). Check this out:

Unable to secure the financial support of the major portal players of the day, cofounders Page and Brin decided to make a go of it on their own. They wrote a business plan, put their graduate studies on hold, and searched for an investor. They first approached Andy Bechtolsheim, founder of Sun Microsystems, and friend of a Stanford faculty member. Impressed with their plans, Bechtolsheim wrote a check to Google Inc. for $100,000. The check, however, preceded the incorporation of the company, which followed in 1998.

There are more than 10,000 company histories to learn from. I’ve already noticed the histories of companies like Exxon Mobile, Sun Microsystems, Microsoft, and Apple. As you can tell, I still have a lot of reading in front of me!

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I am constantly fascinated to learn about angel investing. I suppose that one of the reasons that the space is so interesting is because it isn’t a very efficient market (There is very little information available on the deals that are done and who, in fact, is an angel investor).  I have read books, articles, blogs, and research on characteristics of angel investing and they all communicate a similar message…but the question is…does anyone really know?

One of the challenges that we have at FundingUniverse.com is tracking deals that happen through our services.  There are many other similar services that claim responsibility for huge amounts of funding deals, but I wonder how accurate they are.  We have intentionally avoided tracking because:

1. We provide services and tools to help entrepreneurs and investors connect with each other
2. Angels spend a lot of time and invest their personal funds to make a deal happen — because of that, we don’t want to take credit for something that is so personal to them, and
3. It is very hard to know when a deal is done

People have been looking for a solution to this problem for years without any success.  We have brainstormed ideas on how to gather the information… without much success.  To me, it’s almost like tracking the number of dates that college students go on…the only way to get the information is to ask.

But what if they don’t want to tell you?  What is in it for them?  They might wonder why you care.  The logical solution to the problem is to offer some sort of incentive, but even then it won’t be completely accurate.  Do you know anyone that is making headway in this area?  I’d love to hear your suggestions on how the market can solve this inefficiency.  For now, we’ll just be satisfied to know that entrepreneurs and angel investors are in fact connecting on FundingUniverse.com.

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Over the past month, I’ve had quite the discussion with a couple of my brothers. They have given me a hard time because I am in to blogging, podcasting, and other “Web 2.0″ things. The question that they kept asking me is…why? WHY do I blog? WHY do I listen to podcasts? WHY do you read blogs? WHY do people read your blog (that’s a very presumptuous question… maybe no one really does read my blog!).

Anyway, as I’ve thought about the reasons that I blog, I reviewed an entry that I created in September of last year entitled “What’s the point?”. I mentioned that blogging provides an opportunity to reflect upon the learning experiences that I have had. I also mentioned that other blogs help me to learn from their experiences so I may improve or avoid mistakes that others have made.

Recently, my thoughts have taken me one step further: I am a true believer that people do business with others that they know and trust. What better way to get to know someone than through their personal blog? A blog is much more specific, more recent, more personal, and more enlightening than a resume.

It’s also very enlightening and refreshing to read the blogs of those people that you think you know very well. As I have read the FundingUniverse.com blog, or the personal blogs from some of my partners, I have learned valuable things about their thoughts and ambitions that I wouldn’t have otherwise learned.

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As I mentioned in my last post… my wife and I ended up moving last week.  While we are stoked about the new opportunity, I’m not stoked about the increased commute time that I will be experiencing.

With all of this new time on the road, I’ve recently converted to podcast listening.  I usually download 3-5 new podcasts a day that provide a great hour of learning.  I also recently download the Book of Mormon in mp3 format for free from LDSaudio.com, and I hope to download other books so that I can listen to and from the office.

I wonder how many other people have also replaced their radio with mp3 players?  How long it will be before we will be able to search and listen to any podcast from our car stereos?

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