Launch: StartupList — a new way to reach angels: ”

Yesterday, we launched AngelList, a curated list of angel investors, representing $80M going into early-stage startups this year.

Today, we’re launching a cool new way to get intros to these angels: StartupList. It’s a weekly email we send to AngelList, with 3 high-quality startups who want intros. Here’s how it works: you send us your pitch, we review it and, every Monday, we email the best 3 startups of the week to AngelList.

StartupList is already getting meetings for startups

I’m psyched because StartupList is already working. We released it on Twitter a few weeks ago and 9 investors like Mike Hirshland (Polaris), Matt Mullenweg (Founder of WordPress), and David Cohen (Techstars) have already asked for intros to 7 early-stage startups and counting. See the full list of investors who have gotten intros here. (We’re publishing these names with the permission of the investors.)

Startups: How to get on StartupList

If you’re a startup, apply for StartupList here. We welcome startups from all over the world. We look for the same things that early-stage investors look for: traction, social proof, and team. You don’t need all 3, but you need to kick ass in at least one of them.

Before you apply to StartupList, build a minimum viable product, put it in front of customers, and learn something about product/market fit. If you can’t get this far on your own, find some idea investors instead.

Then write a 150-word elevator pitch and apply to StartupList. Our elevator pitch template is a good place to start. Spend time writing and re-writing the pitch until it’s awesome. Get feedback from good writers and entrepreneurs who have raised money. You have 100% control over the quality of your pitch and there’s no reason not to kick its ass.

Runners-Up

If you’re not one of the 3 startups we highlight on StartupList each week, we may include you in the runners-up of the week. Investors have asked for intros to the runners-up, so it’s also a good place to be. One of the runners-up writes, ‘Where can we send you a small token of thanks? This added some social proof in itself with a couple of the folks we’re chatting with. I greatly appreciate it.’

Privacy

No one will review your pitch except the Venture Hacks team: Nivi and Naval. If we send your pitch to AngelList, it’s obviously out of our hands, but that’s no different than sending the pitch yourself. At your request, we can also send your pitch to specific angels instead of the whole list.

Angels: How to get StartupList

While AngelList is public, StartupList is only emailed to the investors on AngelList. If you’re an angel, apply to AngelList here. At a minimum, you should have made two $25K angel investments in 2009 and plan to make two more $25K investments in 2010.

Why we’re building StartupList and AngelList

Entrepreneurs are always asking us if we can introduce them to angel investors. It’s one of the most common questions in the startup world. And startups spend a lot of time trying to get these intros. Even the startups who end up raising money from Ron Conway, Fred Wilson, or Sequoia.

We think this is an unnecessary friction and we want to make it easy for qualified entrepreneurs to get intros to qualified investors.

Apply for StartupList and please help us spread the word! I’m looking forward to discussing your feedback in the comments.

”

(Via Venture Hacks.)

9 quick tips for raising venture capital: ”

(Editor’s note: Dharmesh Shah is a serial software entrepreneur and the founder and CTO of HubSpot, which provides marketing software for small businesses. This column originally appeared on his blog. )

As the market improves, many start-up owners are likely be thinking about raising funding.  With my latest startup, I’m now a venture-backed startup founder (I’ve raised $33 million in three rounds of capital for my marketing software company).  So, I’ve got some direct experience with the process.  Several of the companies I’m an angel investor in or otherwise involved with have also been in the fund-raising process.  So, along the way, I’ve learned a few things, and I’d like to share them with you.

There’s already lots of great content on the web about raising capital and understanding deal terms. But, I figured it wouldn’t hurt to share some of the ‘lessons learned’ from my own experiences.

1.  Get the first round right: The terms of your Series A deal are very important. Not just because of the impact on that first round, but because many of those same terms are likely to carry through to future rounds.  It’s tempting to concede on some important terms but try to resist that temptation.  When negotiating the term-sheet for your Series B or Series C round, the ‘base’ terms (the starting point of negotiations) is whatever terms were in your Series A.  So, if you agree to some non-favorable terms on the ‘A’ round, you’re likely going to continue to pay the price for that in future rounds as well.

2.  Avoid valuation infatuation: Entrepreneurs often become obsessed with the pre-money valuation on the deal.  Though this is certainly an important element of the transaction, there are other factors at play that have significant impact on the raw direct economics of the transaction including the employee stock option pool (and who pays for it). If you get close to finalizing a deal, it is imperative that you have a spreadsheet that helps you understand the economics of the deal.  (See Jeff Bussgang’s article on the topic.)

3.  Raise more than you need: Regardless of how much capital you raise, you’re probably going to have wished you had raised more.  Within reason, if you have access to capital and the terms are decent, raise more than you think you need.

To help overcome the fear of dilution, build a simple spreadsheet that models the actual financial impact to your personal bottom-line based on various outcome scenarios.  What you will likely find is that if things go really well, the extra dilution is not going to change things all that much.  And, if things go really poorly, it won’t matter either (because those extra common shares aren’t going to make you money).

While you might raise the additional capital in a future round at a much higher valuation, it’s easy to forget the transactional cost of the additional round.  Raising a venture-round is a very time consuming process and when your bank balance is getting low, you’re going to really want to just keep working on the business instead of shifting focus back to the funding game

4.  Know what ‘market’ is: It’s possible that you’ll encounter some not so favorable (and fairly uncommon) terms during your VC negotiation.  It’s also possible that your potential investor is just pushing on the edges a little bit to see what they can get away with.

Your strongest line of defense against weird, non-favorable terms is the following reply: ‘That’s not market’.  This is sophisticated VC-speak for ‘what you’re asking for isn’t very common in VC deals right now.’  This line of defense has two advantages:  1) it works and 2) it demonstrates your savviness.

5.  Orchestration is important: Try to keep the interested parties moving along at as close to the same pace as possible.  This isn’t easy, but it’s important – because to get great VC terms in a round, the single largest contributing factor is competition.

If you can get two or more VCs competing to invest in your company, you’ll get much better terms.  But to get credible competition going, you’re going to need to have several VCs at the ‘termsheet’ stage of the conversations.  If one VC delivers a termsheet to you, but you are still early in the process with others, it’s going to be tough to get a competing termsheet.  Meanwhile, the VC that gave you the first termsheet is going to be ‘anxious’ for you to accept.

The good news is that nothing accelerates VCs more than knowing that you’ve already gotten a termsheet.  Once you get that first one, you’re likely to get more as the VCs jostle for position.

6.  Beware deal fatigue: Even in good times, fund-raising is an arduous process.  Be prepared for yet another round of meetings, yet another level of due diligence and yet another round of negotiations.  Don’t try to sprint to the finish line — you may have another lap to go.  And, it might be the most important lap.  Much like any large negotiation, there are often relatively important deal terms that get finalized in the final stages of the deal.  You need to maintain your energy so that you don’t just give-in on some of these seemingly unimportant details.

7.  Don’t Use Your Uncle Larry As Your Lawyer: As entrepreneurs, it’s not often that we need to engage legal counsel.   But if you’re raising venture capital, you need a lawyer – and experience counts. This is a high stakes game.

VCs are super-smart and they negotiate financing deals all the time.  You don’t.  You need someone that has competency in this area.  A great lawyer understands the nuances of this game both from the perspective of which deal terms are important, what ‘market’ is (#4 above) and when to stay firm and when to concede. Don’t be penny wise and pound foolish on this.

8.  Partner personalities matter: Yes, ideally you’ll be raise funding from a top-tier fund that’s a great brand.  But, what’s more important is that you fundamentally like the VC partner that is investing in you.  This is a long-term relationship and life is short.  You might part ways with key team members along the way, but your venture investor will almost certainly be with you until the very, very end.

If you have the luxury of choice, you should put strong weight on the person you take money from, not just the firm and not just the deal-terms.  I followed my own advice on this in our funding rounds.  We had higher offers than the deal(s) we took, but we solved for the best overall deal and the best partner.

9.  Switching Partners Is Hard, Do Your Homework: It’s likely that in the early stages of your VC process, you’ll get introduced to a particular partner at a firm.  Usually, this is based on what area that partner invests in (i.e. which one you ‘fit’ with).  But, in many larger firms, there might be more than one partner that could conceivably do your deal.  Or, you might get bucketed wrong (because your startup straddles a couple of areas of interest for the firm).

If that’s the case, you need to work hard to figure out who the best partner would be (from your perspective) and try to connect with that partner as early in the process as possible.  Once conversations begin in earnest, it’s very, very hard to switch to a different partner within the firm.

”

(Via VentureBeat.)

Out of everything I write about, this is probably the most important piece of advice I am ever going to hand out. I have a pretty good way to keep you sane….Okhams Razor.

Okhams Razor is the premise that with all things being equal, the simplest answer is usually the right one. I have beat myself up so many times after I have met with someone and they don’t return my calls or don’t answer my emails. It drives you crazy thinking about all the things that could have happened; maybe I fluffed the presentation, maybe he didn’t like the handshake, maybe she has found a better deal; maybe my idea really isn’t that good; maybe maybe MAYBE …you get the idea.

Sometimes, they may just not have gotten round to you yet or they are on vacation or are traveling right now or are ill or one of their children is ill. There are a million and one simple yet highly plausible reasons besides all of the mad ones you conjure up in your mind why they haven’t got back to you.

Point here is this.

When you did everything right, you got good rapport, the information exchange was great, the handoff and follow up promise was in place, the calls are put in along with the ‘so good to meet you email’ and you hear nothing back, follow these three simple steps:

1. Take a breath and recall Okhams Razo

1. Wait just a little bit longer than where you are now (a day or so)
2. Give them a call and see if they received the info.

You will be surprised at how many times the reason is nothing to do with you. I have had people actually happy that I didn’t let the connection go and have been apologetic about not getting back to me.

There are caveats of course. You may have been grin fucked (see the post about Grin F*cking).

I would honestly say that applying Okhams Razor to my encounters has saved me sleepless nights and lots and lots of stress.

Want less stress? Try using the Razor.

I watch Entourage on HBO and there is one character that I love and identify with. Ari Gold is the efficacious entrepreneur. Driven, aggressive, persistent with that killer instinct and an ability to lead and inspire his team. He gets up at 5am, reads the papers whilst he does his cardio, is out the door before his family get up – much to their chagrin – and is then like dynamo all day and into the night to get Vince whatever he needs and to take his business to the next level. His company is one of the top agencies in Los Angeles and his partner is one of the most powerful women in town.

None if this was by accident. Ari has crystal clear goals and goes after them relentlessly day after day after day. If you want to take a look at a really good example of what it takes to be a successful entrepreneur then go and watch every episode of Entourage paying particular attention to the agent.

It is all fictional and fun but I can bet that the character was based on a real person. As I say the juice is worth the squeeze and is why the blog has the name it does. When it’s your business and you are going after it, you had better be going after it like a Dog On A Pork Chop.

You want to know how to be a winner, try being like gold.