their “bread and butter,” as one general partner put it to me recently. And for some VC firms, seed stage investing means funding an entrepreneur they know well who has made them money before.
Aside from money, I cannot underscore how important mentorship and learning from role models are in these early company creation phases. I loudly applaud David Cancel’s efforts to bring modern day mentors to Boston to help young local entrepreneurs. And at TechStars (where I am a mentor) the effort at energizing a terrific mentor base in Boston has been amazing.
Next Stage—Early Go-to-market
Okay, product built (alpha, beta). Consumer, SMB, enterprise app launched. Founding team in place. You might have some early customers (paying or not paying).
At this point, many IT companies, particularly Web-based startups, will still be in an experimentation phase that can be financed in an efficient manner. And by efficient, I mean with somewhere between $250k to $3M (typically $500k – $1.5M), not $5M or $6M (I’ll post at another time about capital efficiency). Your challenges and goals at this point are:
– Take the product/service out to the selected market(s)
– Refine the business model, sales/marketing strategy, service delivery model, etc.
– Continue to refine the product
– Undertake the next level of critical hires
– Figure out whether there is a scalable business with a big opportunity that you have a chance of winning at (current working assumption)…or is this a smaller business with a more modest exit scenario, and what do you need to do to position the company for this?
There isn’t necessarily a clear transition point between stages one and two—as with most issues in company creation, the lines are blurred. But if you have found yourself looking to raise more angel money as you move into the go-to-market phase, your options become wider (but not easier, unfortunately).
1. Individual angels. At this stage you’re still probably looking at your close network, perhaps extended by one or two degrees. There are lots of individual IT angel investors around town—some very prolific, such as Joe Caruso, John Landry, and Jean Hammond—who are well known and terrific investors/mentors. There are also a lot of mentors who, while not necessarily likely to invest, can be
