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Starlight Capital

Advice

The short answer is:  Stop Talking. 

Well, not totally.  But certainly stop monologing.


In five minutes, I can usually distinguish between an entrepreneur who has NEVER previously raised money from investors and one who has.  How?  The former seems to believe that if he just keeps talking as fast and long as he can that the listener will open the coffers to part with some well- earned cash.


I always wonder if that rapid fire approach worked to get a date or a job.  Doubtful.


By contrast, the person who HAS previously raised money for this or prior businesses:

a)       Demonstrates familiarity with the listener’s website and/or Linked In profile and/or Internet presence OR ASKS questions to find out whether the listener is an active investor and with what criteria (see below).

b)      Offers a succinct 30 – 60 second summary about the entrepreneurial venture, and links it to the investor’s investment criteria.  This brief overview is followed up by asking the investor questions to ascertain interest in hearing more or tailoring the ensuing discussion.  If there is no fit, ask if the person knows others who do invest in this sort of venture.   


The entrepreneur who has previously raised money behaves this way knowing that:

c)       Not every listener is an investor.  The listener might be at that networking event for other reasons – like finding clients for a consulting business.

d)      Not every investor is liquid at that time.  In fact an investor might be looking for other investors on behalf of portfolio companies that are embarking on a follow on round.

e)      Most investors have preferences and criteria for their money, such as geography, industry, stage of development, and, of course, revenue/EBITDA.  An entrepreneur in food products might not appeal to an investor who favors the transportation industry because of career experience in that sector.  If you are talking with a person who works for a large firm or family office, that company likely has specialists in various sectors.  You might ask your contact for a referral to the appropriate industry expert.  

f)       Some investors prefer equity positions and others offer debt, the latter perhaps collateralized by receivables or assets.  These two forms of funding are fundamentally different, so the entrepreneur should be prepared with pertinent responses.

g)      Finding the right investor is usually a long, slow slog of due diligence, research, and trust building on both sides.

 

 

If you are an entrepreneur seeking investment for the first time, I have a few suggestions that can save you lots of time:

1)       Develop 30 and 60 second targeted“elevator pitches” about your company for investors and for others, such as suppliers and customers (who could become investors). 

2)     Research companies in your sector that have received investment. Then research those firms that invest in your sector.  Find out what the investors value.  One great source for this is Starlight Capital’s “Investor Sector” section. Attendees at our Angel Network investment conferences run, manage and work for these firms. Click the logos in your sector for a link to the firms' websites. Look for a menu option with a title like, "Investment Criteria" or "Our Strategy." Also look for menu options to see logos of those firms' portfolio companies.

3) If you are talking with someone you whose investment interests you do not know, consider asking questions like these:

 

a)      Do you (or does your firm) invest in my industry?

b)      By what criteria do you evaluate companies?

c)       Do you prefer startups, expansion stage, or later?

d)      Do you prefer equity or debt financing?

e)      If my company is too early for you, what milestones would you want me to reach before contacting you in the future?  May I ask you for some advice now?

f)       Can you recommend any other people or firms that might be interested in what my company has to offer at this time? 

 

Raising capital is a time consuming job BECAUSE people who have money to invest hear from entrepreneurs every day. They have seen good and bad pitches. They have invested in companies that have and have not made them money. They are not going to hand over a wallet to someone unfamiliar with the basic rules of engagement.


To make a good first impression, do some homework first, be respectful of a listener’s time and interest, and DO NOT MONOLOG. With a 30 second elevator pitch and 3 or 4 judicious questions, you will know in 5 minutes if an investor is a possible fit for your company or not.

 

Best wishes. 

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  • Writer's pictureAlyssa Wang

In Q2 2023, San Francisco had a significant increase in venture capital deal value, capturing 42% of the national total. The Bay Area’s thriving niche included numerous generative AI startups and prominent unicorns like Stripe, which raised $6.8 billion in May, accounting for nearly 20% of the region’s total deal value of the year.


This year, two significant investment rounds occurred close together. Paris-based OpenAI rival Mistral AI raised €600 million in a round led by General Catalyst, and German AI translation startup DeepL secured a $300 million investment led by Index Ventures. At the same time, VC funding for AI visual media surged by nearly 90%, reaching $402.7 million in total.


Why has tech become a heated investing choice in recent years?


That’s because of its strong economic fundamentals. Despite market volatility and heightened interest rates, tech companies, especially the software sector have demonstrated continued growth in EBITDA margins. This sector‘s recurring revenue models and stable cash flows make it attractive to both private equity and venture capital investors.


For example, in 2023, software transactions contributed 57.3% of the global PE technology deal value. In Q4, Clearlake Capital Group and Insight Partners acquired Alteryx, an analytics company, for $4.4 billion, underscoring the continued investor confidence in software deals​.


At Starlight Capital, we feature aspiring entrepreneurs to participate in our online private equity forum. Please register for our event exclusively for expansion-stage companies on August 8 to meet interested investors. For more information, contact Bryan at emersonb@starlightcapital.co or 907.795.5586.


The tech surge is just the beginning. Let’s expect more to come during our election year.

 

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