Looking for Funding? Listen Up.

Today's SVASE event was titled "Angel Investing Demystified." The event was moderated by Lili Balfour of Atelier Partners and included two panelists, Steve Dines representing the Sand Hill Angels group, and serial entrepreneur and angel investor Kevin Hartz.

The discussion ranged from valuations, deal structures, pitching tips and more. Steve and Kevin gave different examples of the do's and don't when approaching angels. One of the more memorable points that Steve emphasized was to avoid answering the "What valuation are you looking for?" question. Steve suggested it is better to gather competitive deals and see what valuation offers are proposed by the interested investors. Kevin focuses on the consumer internet space, and his deal preference is to invest only if the startup has a live product. Steve's background is in the semiconductor space, so he and Kevin had a few differences in investment strategy.

The one universal point that Steve and Kevin agreed upon was in regards to whether a person or team is "fundable". The deal breaker for both Steve and Kevin is an entrepreneur who does not listen. No matter the intelligence of the founders or the early success of the startup, if the founders and especially the CEO will not listen, these guys will NOT invest in the company. As is the case in most angel deals, Steve and Kevin are looking to add value and provide advice to their portfolio companies. They invest more for the joy and excitement of the deal, and will not waste time on a team that does not value their input. There are passive angels looking to put money into deals and let the team execute without getting involved. However, this passive investment or "dumb money" is more the exception than the rule (at least in the Bay Area). Founders need to wear a lot of hats in the formative stages of the company. An outsider such as an experienced angel can identify which hats do not fit well. The founder may already "know what they do not know" as Steve pointed out, which is good. Founders who believe that they are well equipped to wear all hats may live to wear them all, as getting an outside investment with this attitude will prove to be a challenge. That said, being a good listener does not guarantee funding, but the inability to listen will create a major barrier to a startup's fundability.