Angel Blog

I think that as long as shares are to identified people the securities laws are pretty lenient.

It's as soon as shares are traded publicly and 'to bearer' that you get in to the trouble zone.

more reading:

http://en.wikipedia.org/wiki/Accredited_investor

http://www.entrepreneur.com/money/financing/loansfromfriendsandfamily/article51542.html

http://www.angelblog.net/Startup_Funding_the_Friends_and_Family_Round.html

It's definitely possible I think, if the funding is structured as a loan then there is no problem at all, if it is in return for equity you have to be a bit more careful but I don't think that it is a requirement that every investor is an 'accredited investor', especially not if the individual amounts are small enough.

I'd certainly make sure that was 'non voting' stock, otherwise you have a real issue with share holder meetings right away, which (for instance) with 10 people supplying $1000 each would not be in relation to the investment.

Seen it referenced a few times, some digging around will get you there. Also an angel investor spoke at my university about how they invest, and mentioned returns of 23%/24% annualized if I recall - but this was asterisked with "your portfolio of companies must be greater then 20 - any less and you risk losing everything". And, your money is essentially "locked" for 5-10 years (can only get your cash when there is a liquidity event - if one happens at all)

Found this: http://www.industryventures.com/2017/02/07/the-venture-capital-risk-and-return-matrix/
And:
http://www.angelblog.net/Venture_Capital_Funds_How_the_Math_Works.html

But given there are many different flavors, sizes, vectors etc of VCs, and given many keep their numbers hush, hush - I wouldn't even know where to look for any kind of "official" numbers on it.

This post begs the question that going the VC rout is right for "you," which is rarely the case.

Most founders and startups are better off bootstrapping and positioning for an early exit than chasing VCs. If you don't know what an early exit is, why it's a good option to have, and why VC's will usually block it, see Basil Peter's blog, http://www.angelblog.net/ (he's compiled much of the info on his blog into a PDF called “Early Exits," which you can find there, too).

I'm digressing, but the point is, VCs are wrong for 99% of startups, and that's a good thing. You do not want them unless you don't need them, in which case they will be chasing you and pitching you, which is the way it should be. Bootstrap or get an angel investor.

Signed,
Former Venture Investor, now startup founder

I think Joe missed one of the crucial considerations in valuation... How many doors you close with a high valuation.

If you close $3m on a $10m post-money valuation, you're signing up to build a $100m company (see http://www.angelblog.net/VC_Mandatory_Moonshot_The_Unwritten_Terms.html ). If things aren't going great (i.e. growth has plateaued), you MIGHT be able to sell for $50m.

This is especially true if you take money from a BIG venture fund (who has $500m under management and needs to see BIG exits to move the needle).

Looking at the chart here ( http://redeye.firstround.com/2007/07/the-unintention.html ), the vast majority of exits are under $100m... Which means that committing yourself to be north of that means a long road and a lot of risk.