I plan on attending Purpose Inc’s Poker tournament, which should be a good time and attended by a great group of people.

To attend, I get to select a charity. There are so many great charities I get to support, but since this is an angel investing blog, the one I choose is Kiva. I am sure you have heard of the organization, but if not, they do microloans to entrepreneurs in low income areas. The concept of microlending is amazing and Kiva has done a brilliant job of getting it to work.

I have made over 40 loans over the past few years and there has not been on instance of delinquency or default. The really cool thing is that once the money gets repaid, you get to keep lending it.

This Pubcon will also be a fun one for me and my crew as we are having the Growth Partner Assistant Contest in which we are giving away a personal assistant to one lucky winner.

Angel investment networks had a larger growth period a few years ago, whereas previously, individuals dominated angel funding and invested on their own (or with a small number of other people). It may be possible that many of these angel investors were more interested in the investing part than they were interested in other aspects of angel investing such as being “smart money” where the angel investors provide a large amount of advice and guidance. In addition, many angels would prefer to let others do the screening, due diligence, negotiations, and other work associated with getting a deal done.

It is great to hear stories about success since, at the very least, it can provide the inspiration to take action. Even if you don’t learn what it takes to succeed, hopefully you can discover ways to avoid failure or be reassured that nearly every entrepreneur struggles at some point.

The problem is that a lot of software targeted at consumers is starting to become cheaper and cheaper to the point of where people have access to an amazing amount of great, free software.

These entrepreneurs, along with countless others, only consider 2 main monetization options…

1) Charge the users per month
2) Use a freemium business model

However, many entrepreneurs get so focused on trying to be the next facebook (or insert the name any other site that has a large number of users) they only focus on going after the consumers.

Doing so not only requires the entrepreneur to figure out how to acquire customers, but also determine how to monetize the users.

The good news is that there is an often overlooked option that addresses both of these issues. Entrepreneurs can license software to larger companies. Larger companies will then provide the software to their customers (either for free or for a cost). This does a few things:

1) Comes with its own distribution channel
2) Allows you to make a few big sales as opposed to thousands (tens of thousands or even hundreds of thousands) of smaller ones
3) Will likely require much less start up capital.

A recent deal involved an entrepreneur that licensed his software to a company for $100,000. He is now looking for angel investments to raise money so he can take try to sell the software to consumers. My recommendation…. try to sell more $100,000 deals. Then, if you would like, you can take that capital and develop your direct to consumer offering.

The WSJ had an article today about personal finance tools.
Taking our monetization method of licensing the software, one of these financial software providers could license their technology to a bank or financial services firm who could provide it for free to their customers.

The bank or firm would then be providing a great tool and adding serious value to their services. Also, many print publications are trying to figure out how to adjust to the online business model. Maybe a publication like Smart Money could license the technology and provide all subscribers with a really valuable tool for being a member.

This is by no means a new idea, it just happens to be one that gets overlooked far too often by developers seeking 9 figure valuations.

—
DO YOU HAVE THE NEXT GREAT MONEYMAKING IDEA? We are currently on the search for entrepreneurs, inventors, businesspersons, dreamers, promoters, creators, innovators, etc. If you feel you have a lucrative business idea but just can’t seem to secure the financial backing to get it off the ground then Shark Tank is just the show for you. Each episode features aspiring entrepreneurs pitching their business ideas to moguls in hopes of landing investment funds. Apply now for your chance to enter the “Shark Tank” and see if your idea survives.

All interested parties should email David Polanzak at xxxx with the following information:

Name:
Age:
Hometown:
Phone:
Photo:
—

I removed his email to ensure David does not receive spam. If you would like to be considered and have your information passed on to David, fill out the contact form on this site.

I Plan to follow the Bill Clinch Trial

Basil talks about some reason why it may disadvantageous to receive large sums of VC money.

It includes 3 tips when looking for angel funding:

1) Focus. “Angels can concentrate on the individual strategy of your company, rather than the larger portfolio management strategy a VC must bear in mind.”

2) Deal Terms. Angels generally don’t demand as much in liquidation preferences and other deal terms.

3) Future Funding Rounds. You will generally have more control over future negotiations in getting additional funding.

4) Transactional Control. “You won’t have to seek permission from investors who aren’t on your board or worry about what a VC needs to have happen vis á vis managing his limited partners… Angels have no LPs, so their agendas tend to be far more transparent.”

5) Exit. “Angels aren’t compensated in ratios. Angels get 100 percent of the profit they generate with their investment in your company. A VC only gets a fraction of the ‘carry’ generated on your deal. This is one reason a VC might be motivated to urge you to sell bigger.”

Rob Conway, a well known “super angel”, follows up with 3 more reasons why Angel money is more attractive than VC money.

1) The due diligence process will be less rigorous since angels are acting in their own interest and not investing OPM (other people’s money).

2) Angels are generally more vertical specialists than compared to VC’s.

3) “Angels have one-degree of separation from people in their professional network — not two, or three, or four. But because angels tend to be operational types, the business relationships they bring to the table are personal, not transactional. ”

Finally, Allan Leinwand, follows up with a counterpoint on why Entrepreneurs should prefer VC money over angel money. He claims VC’s will be better able to stick with the startup over the long term, if things don’t work out quickly. However, Tom Perkins, of Kleiner Perkins Caufield & Byers, says they put companies in the “ICU” if they are not performing well. They either see if they can get out of it or they shut off everything right away.

Investors are likely to get more cautious as the market suffers since they are seeing their investments in the market decline. However, regardless of the economy, it is never a bad time to start a company. Markets are cyclical and it is unlikely you will achieve great success within a short time frame. There is a good chance that once things get going for your company, the markets will have shown some improvement. (I am not trying to predict the markets here, but throughout history after every down turn, there is at least some sort of up turn.)

Inc Magazine had an article a few months ago about this topic - Starting Up in a Down Economy. They mention several reasons for why a down market is a good time to start:

So market conditions should not deter entrepreneurs from making the decision to start a company. And even though some angel investors may be a but cautious, there are plenty of others that are always looking for good companies regardless of market conditions.