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Lessons From EntreFEST: Determining Investment Size

This post is the third in a three part series of my own creation, based upon a session with angel investors I attended at EntreFEST 2015 in Iowa City.

This one gets into the details of the angel investing relationship. The reader must keep in mind that this example is one of countless stories like this one that take place every day all over the world. Each one has its own set of circumstances. However, this one is our case study, so the focus will be on it, and I invite the reader to draw his or her own conclusions.

Lesson Three – Determining Investment Size

  1. From a founder – “Going the accelerator route definitely helped” – Some people in the startup community believe that the era of the business plan is over, because modeling is more relevant in an environment that changes as rapidly as a startup company in its early stages. The founder in Iowa mentioned that the experience in the accelerator helped with modeling and becoming familiar with investors.
  2. From an investor – “I want to see a resourceful entrepreneur” – two xamples of founder resourcefulness in this case study were stories of the entrepreneur taking a piece of advice and making it something greater, and the investor being impressed with a founder with metrics. The most valuable metric was our old friend customer acquisition cost, which the investor told us that he used to make decisions about whether or not a company can scale.
  3. From a founder – “It took me eight months to get an angel round of $750,000 and about 36 hours to get my next $1.15MM* Series A” – the founder secured his angel round after going through the accelerator, and kept a thirty page binder documenting his expenditures, what he learned, relevant metrics, and notes on what his competition was doing. After a high profile company with a similar model was acquired for hundreds of millions, the founder took his binder back to his investors and was able to secure a Series A round worth $1.15MM in about two days.

*MM = 1000 x 1000 = million

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