fundraising

Venture Capitalists vs. Angel Investors: Who Can Benefit Your Small Business Best?

Everyone knows the Cinderella story by heart. An intrepid protagonist with big dreams works tirelessly every day and meets a fairy godmother who offers her the opportunity to go to a ball, meet a dashing prince, and live happily ever after. There’s a similar rags to riches story in the small business community too. Just swap out the protagonist with an entrepreneur, the fairy godmother with a venture capitalist or angel investor, and the ball/prince/happily ever after ending with financial backing/an IPO/overnight success boom that turns your brand into a household name.  

Things could have turned out quite differently for Cinderella had her fairy godmother not understood exactly what she needed. For rising entrepreneurs that need funding, it’s important to determine whether your startup is better suited to work with a venture capitalist or angel investor. Take a closer look at the differences between these two types of professionals and what they have to offer your startup to ensure it receives its own fairytale ending. 

Venture Capitalist

What do they do? Venture capitalists, also known as VCs, back high-growth companies early into their startup journey with equity funding. Instead of paying VCs to get their backing, entrepreneurs provide these investors with a stake — typically shares — in the company or an equity position. The capital gives the startup the ability to succeed and gives the VC an active role in the business.

Which entrepreneurs/startups should work with them? The younger and more specialized the business, the better. VCs often invest in tech-based companies like apps and software startups. They also tend to favor businesses with strong management that show signs of steady growth in an emerging market. 

What do you do if they’re interested in funding your business? Being offered venture capital is a big deal. It means that your business has the potential to yield huge returns and/or to be quickly sold to public firms. Make sure you have a good idea for your business, that the market your startup is in is large enough for a strong return on capital, and give them something in return for their early investment. Additionally, inquire about the typical check size as this will determine the kind of VC you reach out to for funding. Entrepreneurs that need less than $1 million, for example, should reach out to micro VCs as they have funds with $10 to $50 million.

Angel Investor

What do they do? Angel investors come in a wide variety of professions, like doctors, lawyers, and existing entrepreneurs, and want to invest their wealth into your business. Much like VCs, they also want equity in your startup. Unlike VCs, they can’t invest millions into your business. Typical angel investments go from $25,000 to $100,000 per company.

Which entrepreneurs/startups should work with them? You don’t have to be a brand-new startup to work with an angel investor. If you’re fairly established with some revenue, but still need extra capital, it’s a good idea to reach out and introduce your business.

What do you do if they’re interested in funding your business? Angel investors want to see your business to succeed since they’re helping fund it out of their own pocket. Entrepreneurs that pique their interest are always ones that are passionate about their company and understand how it can succeed over time within its market. Be prepared to explain your business plan, elevator pitch, and executive summary. This shows that you’re thinking about the startup’s past, present, and future — and also shows angel investors the kind of valuable role they can play in your company’s success.

 

Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.

Please note that KPMG Spark’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of KPMG Spark.

Audio Interview With Fundraising Fiend—Jess Larsen

Jess Larsen Podcast

By Austin Miller, Content Marketing Manager

Last week we sat down with Jess Larsen, founder of the Ideation Collective and Child Rescue (an organization that helps save children from sex trafficking and slavery). He's raised millions of dollars in funds for  non-profits and for-profits alike, rubbed shoulders with NBA players, Hollywood Actors, Special Forces, and high powered CEO's. Throughout his journey he's picked up a thing or two about starting a business. Luckily for you, Jess was willing to share his wisdom with us. 

Side Note: The recording begins mid-stream as we've edited the conversation to contain only the meatiest parts. Bookly was also acquired by KPMG Spark in 2018.

This Entrepreneur is Turning Trash Into Beautiful Everyday Objects

cube

By Austin Miller, Content Marketing Manager

Meet Carter Zufelt, the Brain Behind Müll

Carter Zufelt is turning heads and garnering media attention with his latest creation Müll. With simple and elegant designs he's putting a new spin on everyday objects like stools, cubes, and organizers. But perhaps most impressive is the way he's doing it.

After years of trial and error Carter has created a way to change trash (like plastic bags) into useful objects. The impact this could have on the future of product design has yet to be seen, but the future looks bright—very bright. That's why this week we sat down with Carter and got to know a little bit more about what makes him tick, the creation process, and what he sees going forward.

How did you come up with the process of converting trash into art?

It began a couple years ago when I started my Senior Project in industrial design. During the research phase I discovered the excessive amount of plastic trash in the environment, so I set out to do something about it. It started with collecting trash on the streets and experimenting with it. I failed so many times. There were many late nights and lots of frustration. Finally I did something that worked and continued to refine it until I had an end result that I was happy with.

Do you have any design influences?

Yes, of course. I've always been inspired by Dieter Rams. His designs are clean and always functional. I love his "less but better" philosophy. Also, Benjamin Hubert. He explores materials and innovates like crazy. You can tell he enjoys what he does, his designs illustrate that perfectly.

What kind of reaction are you seeing from people since the announcement of your product?

I've received a lot of positive feedback from people. Everyone seems to be really excited about the process and endless possibilities. Random people are emailing me just to tell me that they appreciate the work I'm doing and innovation I'm creating. One little girl heard of the project and started running around her house collecting plastic to donate. It's fun to feel people's excitement, it's really cool to be apart of.

How do you avoid any dangers to you during the conversion process? i.e. Carbon monoxide, gases, toxics etc.?

HDPE is relatively safe to work with if it is prepped and handled appropriately. If it is melted at or below a certain temperature then it wont release toxins like other plastic. So, the trick is knowing the plastic you are using, how to get it ready to melt, and then melting appropriately. I take extra precaution though and work in a well ventilated room with an air respirator. It's probably overkill, but I like to be on the safe side.

In just a few days you’ve been able to raise over $12,000 dollars. What advice would you give to others trying to crowd fund their projects?

Given that this is my first crowd funded project, I don't know if I'm the best person to give advise. But I'll give it a shot. I'd say that the first thing is to have a neat idea; something new and innovative that will catch people's eye and peak their interest. You don't have to invent a new tool, maybe just figure out a way to refine it. Another huge part is trying to get press coverage. I spent many many hours researching companies and writing those companies who I thought might be interested in covering my story. It takes a lot of time, so make sure to plan for that. Also, just be yourself. Let your personality shine through your video, your pictures, your graphic design, everything. In essence people aren't just backing your product, they're backing you.

If Mull takes off, where would you like to see it go in the future?

The idea behind Mull is to start a movement and help others see the need for recycling. I enjoy the business side of things, but I like design more, so I'd be thrilled to have a business partner who has the resources and contacts to push this idea to it's limits. The possibilities of this process really are endless.

 

You can support Müll by contributing/sharing their Kickstarter project here

 

Please note that KPMG Spark’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of KPMG Spark.