One of the big debates in the venture capital industry lately has been the growing argument between so-called “super angels” and traditional VCs – the former being prone to mention how they feel the latter “sucks.” As one would expect, many voices in the industry have made themselves heard in the form of VC blog posts and passionate, profanity-laced shouting matches. But when the fog of war clears, what should startups take away from the debate? Should they seek investment from VCs or super angels? Or both? Thankfully, some level-headed perspectives have emerged that are aimed at helping young startups interpret the lessons to be learned.
“The financing sources that are appropriate if you need a total of $1 million are different than if you need $10 million or $100 million.”
– Chip Hazard, Flybridge Capital
Is there a benefit to one over the other? As
Eric Paley said in
on the topic earlier this week, “the world isn’t so black and white.” When it comes down to it, every startup is unique, just as every VC is unique and every angel is unique – so there is probably no blanket assumption that can be made about the industry. For startups setting their sights on the beast of the early-stage funding market, Chip Hazard, a partner at
, suggests to simply figure out what works best for
your
company.
“Put together an overall multiyear plan for your business, assume it takes longer and more money than what the plan suggests, and then determine what that means,” writes Hazard. “The simple point here is that the financing sources that are appropriate if you need a total of $1 million are different than if you need $10 million or $100 million.”
He also notes that while many would prefer to raise all of this capital at once, the smart decision is to raise it piece-be-piece.
“Funding through milestones such as these will allow you to raise subsequent rounds of capital at higher prices,” he says. “Reducing risk and demonstrating potential upside will always translate into higher valuations.”
Because every VC and angel is unique and has their own idea about where your company is headed and how involved they should be, picking one or another is not a decision to be made lightly, says Hazard. “One of the greatest sources of conflicts between entrepreneurs and investors happens when this alignment is not in place from day one,” says Hazard.
