Primer on funding trends for early-stage startups

Apr. 30 2011-11: 56 pm | 113 Views | 0 Recommendations | Image by Joi via Flickr

If you are new start ups in the entrepreneurial world, probably from the terminology of the seed stage, lean startups, micro-VCs and Super are confused angels. They have not, since professional investors often confused these days by the new terms as old terms with new meanings. In any case, it is time, once again look at the options that you really have.

I recently heard a talk by Dave McClure, a longtime angel investor, also known as one of the "new generation" of venture capitalists in Silicon Valley, as CEO of 500Startups, which is either announced a micro VC seed, or a startup incubator, or both. The good news is that he is all about helping early-stage startups to find out the hard part for entrepreneurs what it takes to play.

Here is only a selection of the latest terminology and Lingo, I put together by Dave and some additional research every entrepreneur should on the Internet, I think, know, who is looking for funding from now, or on the road can be:

Micro VCs. These result group professional investors (venture capitalists, ALA VCs) who invest in a fund from the money of other people, with particular emphasis on seed stage startup options. Seed stage means promising companies that you have a source of income and may not yet a proof of concept.Super Angel. These are counterparts to VCs that have traditionally only their own money invested, started more than a few deals per year to do procurement of funds from external investors, but now the angels. Most of the angels and micro-VCs they begin only $10,000 to $50,000 in the first increment but still relatively small sums of money, often invested.Series seed round. Since the start of the economic downturn, not angels or VCs have given much attention to startups without a product and a source of income. Left was that in the field of friends and family. Last year, it has a resurgence of interest, some say, to identify a bubble in a preliminary series of angels and VCs, kicker, much promising startups with seed capital, before important equity gave way.Early-Stage Startup. All come in motion is early-stage to someone. For a startup founder is this phase, if the "big idea" to a passion for him, but he still wrote something down. Early-stage means for angel investors it is a good business plan and perhaps a prototype, but no customer revenue. For VCs early means customer revenue is less than $10 M. Thus is the more accurate term today for early startups "seed stage."Business accelerator. This term is replaced "Startup Incubator", that is provided by an individual, to gather for almost no cost, with the hope, University or local community for each new startups each other to learn from a device. The business model of Accelerator is YCombinator and TechStars, select only the best applicants, have a demanding process, experienced coaching/mentoring, some seed capital, with a required exit in about six months. Incremental investment can follow.Lean start. This is a marked (and protected) by Eric Ries one some years ago, primarily for software and Web applications. Lean startups on minimum money, an open-source environment operate and participate in several iterations, with customer feedback, to get it right. To hear a phrase popular in this environment is "Rinsing and repeating." Today, if you do well in this mode, you are eligible get if you need it.

Overall, the biggest problem for early-stage startups still is the funding - how much should you expect, that offers it, and how much of your future company should you give up to get it? The trend for investors, including micro-VCs and Super Angel, is, "many small bets," ($ 10 to $50 K) set applied with milestones, which can lead to incremental and major financing tests.

Experts call this the "spraying and pray" approach to the financing. Although significant deal screening and filtering is done by the current some these seed programmes, in the fact they little bits of capital on how many good ideas as possible help investor team, spraying together, and pray finally it big strike.

Despite this sense experts I a fundamental change in the early-stage financing eco-system. With the Internet and other powerful but low-cost business tools the new startups lower than ever before is the cost of the development and implementation, so that the "Big Bang" theory of the financing is no longer makes sense. This a wake up call for traditional business owners and investors should equally.

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