Written By : By DANA MATTIOLI writer for StartupJournal

Learning How to Talk
To Angel Investors

For small firms looking to grow, angel investors can help provide needed financing. These affluent individuals typically fund companies seeking $250,000 to $2 million, usually in exchange for an ownership stake in the business. In addition to a capital infusion, angels may bring business acumen to their portfolio companies, says Bill Payne, an angel investor in Henderson, Nev.

Mr. Payne, who works as a consultant with the Ewing Marion Kauffman Foundation, a Kansas City, Mo., resource center for entrepreneurs, says before approaching angels, entrepreneurs should understand what motivates them and what they are seeking in a business plan. We asked Mr. Payne for a list of books and Web sites for entrepreneurs looking to familiarize themselves with angel investing. Here are his picks:

"Angel Financing for Entrepreneurs: Early-Stage Funding for Long-Term Success" by Susan L. Preston

"This book does a great job of providing entrepreneurs with a good understanding of who angel investors are, how to find them and what they're looking for in an investment plan. There is an appendix with over 200 pages of agreements, references, directories, checklists and Internet links that will be useful for entrepreneurs when they are preparing to present to angel investors."

"A Good Hard Kick in the Ass: Basic Training for Entrepreneurs" by Rob Adams

"Here's the mistake that Rob is addressing: Entrepreneurs focus on technology and product. Investors focus on the investment opportunity and growing a business, not selling a product. Rob says entrepreneurs must confirm that customers will actually buy a product before they write a business plan and spend money. He insists that entrepreneurs talk to 100 potential customers before finalizing product design. This is required reading before writing a business plan, completing product development or seeking capital investment."

"The Venture Capital Cycle" by Paul Gompers and Josh Lerner

"This book explains the whole cycle of professional investment from start-up to exit, including the investment by professionals in your company. It's a relatively academic, comprehensive look at the whole infrastructure of investing in early-stage companies, how investors grow the company and how they approach entrepreneurs. If you're trying to really understand how this whole process of making money by investing in entrepreneurs works, this is the bible for understanding venture capital and the operations of venture capitalists in investing in entrepreneurs."

"Attracting Capital from Angels: How Their Money -- and Their Experience -- Can Help You Build a Successful Company" by Brian E. Hill and Dee Power

"This book digs down into all the details entrepreneurs need to know before they go out and receive capital from angels. The authors do an excellent job covering due diligence, evaluation, how angels can help the company after the investment has been made and a segment on negotiating with angels. Read this before approaching angels."

"State of the Art: An Executive Briefing on Cutting-Edge Practices in American Angel Investing" edited by John May and Elizabeth F. O'Halloran

"This book is the result of a series of interviews and articles that were written by leaders of angel groups all over the country. This is an excellent book on angel groups and how entrepreneurs should approach angel groups. The editors interviewed all of the authors and they have a compact disk at the back of all of those audio interviews."

"Every Business Needs an Angel: Getting the Money You Need to Make Your Business Grow" by John May and Cal Simmons

"This book is a little old, but the tips are still relevant. Provides lots of tips to entrepreneurs on how they need to be prepared to pitch angel investors on their quest to raise outside capital and grow their companies. There's a chapter called 'Let's Make a Deal: Negotiating Investment Terms' that is valuable to entrepreneurs."

"Term Sheets & Valuations -- A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations" by Alex Wilmerding

"It's very difficult for entrepreneurs, especially first-time entrepreneurs, to grasp all of the lingo such as common stock, preferred stock, anti-dilution right and all of the terms and conditions that relate to doing a deal. This little book is a delightful reference. One of the reasons I like it the most is, not only does it give explanations of the terms, but it tells whether a specific example is investor friendly, middle of the road or company friendly, which is great for newbies."

"The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything" by Guy Kawasaki

"This is a great book to help entrepreneurs understand what investors are looking for in a company to invest in. He refers to the 10/20/30 rules. When you're making a PowerPoint presentation to a bunch of angel investors, don’t make more than 10 slides, don’t take more than 20 minutes, and since angel investors tend to be older, make the minimum font on your slide 30."

They've Done It Again and Again

After having there site go down from crashing Godaddys web servers due to traffic. www.ThePortlander.com had to scramble to get there site back up. The site appears to be winning over Portlanders hearts faster than any other news source has in the past. I recently received a newsletter from the VP of Business development about the site going down and a hint at where they are going.

Portlanders-

You may have noticed that Portland's first and only web 2.0 news source was unavailable for a few days last week. We apologize for the inconvenience as higher than expected traffic from you and your friends meant we had to upgrade our servers to accommodate the growth. We are back online now and better than ever! We have some great new features planned for the site in the coming weeks so stay tuned!

Jeff
VP Business Development
http://www.theportlander.com

The Rise of ThePortlander.Com

Most websites when they first start barely have enough momentum to survive especially ones that have almost no funding . Apparently the exception to this rule has been www.theportlander.com . Within one month of launching there Web 2.0 news website they have garnered over 70,000 ad impressions and served over 1,000 unique views , to top this those 1,000 visitors have viewed over 20,000 pages. The founder of the site is now being mentioned on websites like www.technorati.com , www.Oregonlive.com ,www.northwestnoise.com, smallworldpodcast.com and countless others. It appears Portland that we have our first full fledged Star here in Portland. This blogger recommends that you check out there site as you will undoubtedly here more about it as time goes on.

Eyeballing the Value of Web 2.0 Startups

So how much is a Web 2.0 startup really worth? Everyone is wondering that these days, especially since there are so few acquisitions or IPOs by which to measure them. That's why I like the slide below created by eSnips CEO Yael Elish. It gives an approximate value for many high-profile Web 2.0 sites by correlating publicly available Alexa Web traffic numbers with the value of known deals like YouTube's. This slide is hardly accurate for many reasons (see below), but it does help you visualize how one company may be doing against another.

By her count, Wikipedia, YouTube*, and MySpace are in that rarefied realm of Web 2.0 sites worth more than $1 billion. Just below that are Flickr*, Facebook, and Hi5. In the $100 million to $500 million range are LinkedIn, Bebo*, Digg*, Feedburner, Last.fm*, and Technorati*. And just below the $100 million mark is StumbleUpon*, Slide*, and Netvibes*. She values eSnips on the chart at about $30 million. (The asterisked names made the Next Net 25 either in 2006 or 2007 ).

You need three things to create a successful startup

(This essay is derived from a talk at the Harvard Computer Society.)

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

And that's kind of exciting, when you think about it, because all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.

If there is one message I'd like to get across about startups, that's it. There is no magically difficult step that requires brilliance to solve.

Go For The Gold

Follow these 10 steps to impressing investors, and you'll be on your way to the big time.
By Guy Kawasaki
Entrepreneur Magazine - April 2007

Last month I told you what not to do if you're trying to get venture capital. Here are the top 10 things you should do.

1. Build a real business. This seems like a "duh"ism, but few entrepreneurs do it. Most focus on quick flips to an IPO or acquisition. But nothing is more seductive than a company they can easily imagine having a big impact on the world.

2. Get an intro. Venture capitalists are lazy. We want things handed to us on a silver platter, like when someone we know and trust tells us about a good deal. The best introductions come from corporate finance attorneys, college professors and CEOs of companies in our portfolio.

3. Obey the 10/20/30 rule. Your PowerPoint presentation should have approximately 10 slides, you should be able to give this presentation in 20 minutes and the smallest font should be 30 points. And yes, this means you with the patent-pending, curve-jumping, open-source, AdWords-optimized way to sell dog food online.

4. Show traction. The easiest way to prove you have a real business is to be generating revenue. It's one thing to believe your bull-shiitake Power-Point presentation; it's another to see cash flowing into your company. Show traction, and most venture capitalists will be willing to suspend their disbelief.

5. Clean up your act. Remember, venture capitalists are lazy, so present a clean deal. Clean means no lawsuits challenging your ownership, no shifty stock deals, no disgruntled co-founders lurking in the background. The more crap a venture capitalist has to clean up, the less likely he'll be interested in your deal.

6. Disclose everything. If you have crap you can't clean up, then disclose it right away--not necessarily in the first meeting, but soon thereafter. The worst thing you can do to venture capitalists is surprise them with bad news.

7. Acknowledge, or create, an enemy. Venture capitalists like to see competition--it validates that a market exists.

8. Tell new lies. Please refer to last month's column. Every time you tell one of those lies, you decrease the likelihood of funding by 25 percent. Do the math: Tell four lies, and you won't get funding.

9. Don't fall for trick questions. Venture capitalists use two trick questions to assess your cluelessness: 1) Do you see yourself as the long-term CEO of this company? and 2) What is the path for your company? The right answer for the first one is, "My goal is to build a great company. If it means I need to step aside, I will gladly do so when the time is right." The right answer for the second one is, "Frankly, I haven't given a lot of thought to liquidity. My team and I are focusing on the product. If we build a great company, I'm confident liquidity will occur."

10. Underpromise and Overdeliver. In everything you say, ensure that your results exceed expectations. Deliver a prototype early. Deliver your list of references early. Close a partnership deal early. The only thing you shouldn't do earlier than expected is run out of money.

Guy Kawasaki's mantra is "Empower entrepreneurs." He is former chief evangelist for Apple Inc., co-founder of VC firm Garage Technology Ventures and author of eightbooks--most recently The Art of the Start. Visit his blog at http://blog.guykawasaki.com.

ThePortlander.Com From idea to a soul changing event

The story of theportlander.com is one of insight not only into how to start a business with nothing more than an idea.But also into ones soul. When the founders of theportlander first met to discuss ideas for what they thought would be the next big thing they never realized that what they were putting together would transform not only the news world in there city but also themselves. Sometime in November 2006 two men met to discuss a website idea for downloading free mp3's and generating revenue from the google adsense program. Little did they know google was about to buy YouTube and offer a way for anyone to grab some of there popularity with adsense. So needless to say after doing some research they found that there idea was already out there in the form of Reever.Com and other notable websites. What to do give up or push on with more brainstorming. Then New Years night roughly 10 minutes after the crystal ball dropped in times square one of the founders had an idea. Why not create a website where all of the news and information for Portland OR, flood into one main site and use Web 2.0 technology to run it all. how could it fail . Well it could and from that they ran with there idea.Over the next 6 months the idea of theportlander transformed from something akin to Myspace to what it is now and what it will become over the next few months. They had no money and very little programming knowledge.But they had a dream and would find any means possible to build it. Through this they gradually pieced together what is now theportlander. One founder told me that throughout the experience he gained more into who he was than he ever thought possible. here is a quote from one of the Co-Founders " Holding onto this idea and never losing site of it even when others were saying you'll never launch it pulled me down sometimes but it changed me in that I said no I will do this and I will make it successful, because of this my whole outlook on life changed and my life went from I hope I can do this to I will do this and every aspect of my life has changed because of it" . I think alot of startups don't always have a chance to go through this, as most go into it with funding or some type of guidance. From theportlanders point of view they had nothing and had to create something with nothing more than an idea and the perseverance to crawl and scratch there way to a successful launch. Because of this they now have pride and respect for the business they have created and will work harder to make it a success and to top it off they have no debt going into it. This blogger wishes all of the crew over at ThePortlander.Com all of the success that they wholeheartedly deserve. Congrats guys on a successful launch :)

Study: $850M Invested by VCs on Web 2.0 In 2006

Ernst & Young and Dow Jones VentureOne are reporting today that global venture capital investments in Web 2.0 companies totaled $844.4M in 2006, twice as many dollars invested in the space in 2005, and with nearly twice as many deals. According to the study, there were 167 Web 2.0 deals last year, with a median pre-money valuation of $6M worldwide. Pre-money valuation of Web 2.0 deals were smaller than the overall median pre-money valuation of venture backed companies, which is $18.5M. Ernst and Young and Dow Jones found that the most active investors in the space were Benchmark Capital, Draper Fisher Jurvetson, Sequoia Capital, and the Omidyar Network. The study classified Web 2.0 firms as companies that include user-created content, podcasting, blogging, social networking, as well as companies using AJAX and other rich Internet applications.

8 Startups That will surface Soon

The Under the Radar: Why Office 2.0 Matters conference starts later today in Mountain View, CA. It’s a chance for lesser-known companies that provide web-based business solutions to strut their stuff. The 32 companies that will be presenting at the conference are promoting their ideas on how to make business more collaborative and productive. Here’s a roundup of those presenters that offer true social benefits with their services.

SlideAware - SlideAware provides online storage and collaboration solution for slideshows that’s fully integrated with PowerPoint. This provides transparency for the team. Presentations can be sent to clients, and metrics give details about who looked at the presentation, and how long they viewed a particular slide.

Big Contacts - Big Contacts serves up an online Rolodex, wiki-style. Keep track of meetings, anniversaries and clients’ spouses. One-click access to Word templates pre-populate letterheads and greeting cards for any contact. Added notes and assignments from multiple users are wiki-style to see the history on any client.

Koral - Koral is a private workspace for your docs that can be shared with a group. An improved search makes it easier to find the right document, and their sync function alerts other team members when a new version of your document has been added. Koral keeps everybody on the same page, at all times.

Spresent - Spresent provides a web-based alternative to PowerPoint. Their Adobe flash-based service is optimized to create feature-rich presentations that can incorporate YouTube videos and Flickr photos. Presentations are shared online, and prove to be far more engaging than a PowerPoint presentation.

Stikkit - Post-it meets wiki. Stikkit, a recent SXSW finalist, lets you type notes on your Stikkits, and they’ll be kept up to date. Shared Stikkits can be edited, making it a mobile wiki. Email yourself a Stikkit for it to be automatically converted into an email format for furthered sharing purposes.

Teqlo - Teqlo is an application that lets you mashup your widgets. It aims to provide a way for non-tech savvy people to create customized solutions, such as a drag-and-drop feature to place sales leads on a map and automatically provide a list of phone numbers every morning. Removing the need for coding and developer knowledge broadens access to the furthered democratization of business and social tools alike.

Worklight - Worklight uses ajax and RSS to offer better access for employees within the corporate structure. Other ways they update businesses are desktop and web-based widgets, bookmarks, and mashups. Businesses are usually slow to adopt new trends like these. So Worklight may not change the masses, but could usher in the next era of business communication.

Xcellery - Xcellery enables online collaboration of Excel sheets. Their service may seem to be very similar to other online document management systems such as Google Docs and Zoho Sheets. Xcellery’s main point of differentiation is the fact that revised documents aren’t replaced, but are extended. This is a useful feature that many of the established players have yet to take into account.

Starting With a Dream Ending with a Nightmare

When you first sit down and start dreaming about the website or product you want to release upon the world, you soon find that your dream has alot of flaws. A great example of this is CitySearch.Com when they first came to market they had a grand vision of becoming a hot bed of business listings for anyone who needed to find anything from a great place to eat to help from an attorney. One problem there dream became a bloated nightmare over time. They have now sunk into nothing more than a bloated online phonebook. What happened ? there dream was so clear yet they turned into something that there founders would have never imagined a few years ago. Two words Buy Out . When they sold there company to AOL a few years back they turned a corner and havent looked back since. They are now headed down a road that they cannot come back from. for most people citysearch is there only viable search engine for finding local businesses. When you start a business you have a dream but what happens to that dream when you walk away . Do you start another dream and forget about your past glory or do you hold onto it and transform it from a dream into an empire. Both are difficult at best. Googles founders have turned there dream into an empire based exactly on this philosophy. If you truly believe in your dream you can turn it into an empire. But if you dont it will turn into your nightmare.