Capital Chaos

Magnify.net (New York, NY) announced that it has secured its first round of funding which included investors from the New York Angels, Next Stage Capital, Rose Tech Ventures, Active Angel Investors, Ogden Capital, Gideon Gartner and Chris Anderson (Author of The Long Tail).

The company has developed a creative way to aggregate user generated videos and place them into channels making it easier for people to find related content.  So for example if you are looking for a Football channel - it will aggregate videos from YouTube, Yahoo, Google, blip.tv etc. and pull all videos which are tagged Football into a channel so you can look at them.

The company also recently added webcam broadcasting so I am sure we can expect web cam channels as well or they can embed them into the other generic titled channels.

5,000 channels is finally here, question remains though - is anything really on?

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New York Angels (New York, NY) is a very early stage venture group which is comprised of high net worth individuals who provide start-up capital in the range of $250k - $750k.   The Group has invested over $28M in more than 65 ventures over the past 10 years.   One thing that should be noted is that they do not do follow on investing and should only be relied upon for the initial seed capital.

However, many of the investors are individuals who are a part of either larger funds, banks, family trusts etc. so you can always pitch them after if you are fortunate enough to get money from these guys.

The Group comprises roughly 65 investors who are business leaders in various fields but it is not required for all of the investors to agree to make an initial investment. 

If you are interested in pitching the New York Angels, some criteria you should be aware of:

Stage: NYA prefers to invest in companies that have finished their product development and are in the process of commercializing their product.

Geography: The bulk of the companies considered by NYA are domiciled in the Boston to Washington DC corridor, although we will consider investment opportunities from other areas in extraordinary circumstances.

Growth Potential: NYA considers businesses that have a good chance of achieving more than $50 million in revenue within five years.

Size of Round: NYA prefers to participate in investment rounds where the overall cash raised is less than $2 million. It often leads the transactions in which it invests.

Pre-money Valuation: NYA invests in deals where the pre-money valuation is less than $4 million. It will only invest at higher pre-money valuations in very extraordinary circumstances.

If you still believe that you may qualify in pitching the New York Angels, consider the following investment criteria:

• Management team. We look for teams of high-quality entrepreneurs with a track record of leadership and performance - either in the company’s specific industry or in prior entrepreneurial ventures. We also look at your team’s passion for and commitment to the new business idea, and your ability to inspire confidence among future stakeholders, including employees, potential customers, and investors. As we will be working together as partners, your team’s credibility is essential. In addition, your team must be open to and comfortable with receiving input provided by angel investors.

• Market opportunity. We invest in solutions that address major problems for significantly large target markets (i.e. a $100+ million market). Your company must demonstrate a strategy to claim significant share of this market (i.e. 20%+). There are plenty of great business ideas - but not all businesses will generate returns that justify angel investor and venture capital financing. Therefore, providing a solution to a problem with a large potential market is essential.

• Use of proceeds. Funds must be used to accelerate your company’s achievement of key milestones that increase the company’s value. We often fund activities that include research and product development, building a sales and marketing infrastructure and hiring key executives.

• Growth potential. We look for companies that can grow quickly and manage the scale necessary to succeed. Your company must demonstrate a plan to generate significant profits beyond the initial product idea. Do you have a strategy to achieve multiple sources of revenue? We also require well-conceived financial projections, based on sound assumptions, demonstrating consistent profits and cash flow growth.

• Competitive advantage. Your company must have some proprietary features that distinguish you from potential competitors or provide barriers to entry that prevent other companies from capturing your customers with a similar offering. Attributes that convey competitive advantage include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials.
  Fit. Our group members - all accredited individual investors - have significant executive experience in a variety of fields. One of the benefits of working with angel investors is the active coaching and contact network that such investors can provide. As such, there must be a fit between members of our group and your idea.

• Technology. We prefer to invest in first-of-a-kind new ideas, rather than incremental enhancements to common products and services. Is this a nice-to-have, or a need-to-have product or service? However, we approach highly complex, esoteric technologies with caution. The concept behind the technology must be proven and verifiable. Further, we avoid science projects that don’t demonstrate a clear path to commercialization. Any breakthrough innovation must be accompanied by a strong business plan.

• Exit strategy. Our members typically seek returns of at least ten times their initial investment, within eight years. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy - how angel investors will extract such returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or will your exit be through subsequent rounds of financing - venture capital or the public markets? Angel investors are not just interested in the strategy you select, but more importantly in the how - the operational strategy that shows specific steps you will take to achieve the exit.

The funding process for the New York Angels is pretty clear and well thought out.  Having pitched them before on an idea (got to initial stages and they passed), I will say that there are many ways to reach out to these guys and they are very receptive to listening to your idea.

• Self assessment. Before submitting your business plan for our consideration, you must determine if angel capital - and specifically capital from our group - is right is for your company.

• Online application. Our business plan application is designed to extract the most important details about your business, so our internal review committee can decide if your company should: a) be invited for an initial screening presentation; b) be referred to one of our partners for help in evolving your business plan; or, c) be turned down as unlikely to receive funding from our members.

• Screening meeting. After reviewing your business plan, our internal committee will determine if your idea could be of interest to our members. If you succeed, you will be invited to present to the full membership. Be prepared to deliver a ten minute investor presentation and answer questions posed by this group for an additional ten minutes.

• Presentation to membership. Following the screening meeting, you will be invited to present to our full membership. You will have the opportunity to elaborate on your business plan. Prepare to deliver a 30 minute presentation and address questions for an additional 15 minutes.

• Due diligence. During due diligence, interested investors will verify the statements made in your business plan, presentation, and financial projections. They will thoroughly research your team’s background and track record. If you play an active role in facilitating this process, it will help to expedite a final investment decision.

• Term sheet negotiation. After successful completion of the due diligence process, interested angel group members will present a term sheet that defines the structure of the investment deal - including type of equity and board of directors representation, using industry standard terms and provisions.

• Funding & Beyond. When all parties are satisfied with the terms and language contained in the term sheet, the deal can be executed. But remember, closing the deal is only the beginning of the angel funding process. Now you have access to a network of value-added contacts and experienced professionals who can provide essential guidance for the growth and success of your venture. Adhering to the responsibilities at this stage will enable you to get the most from your angel relationship.

All in all, if you are looking for your initial funding and have a working product to show, this is a great Group to work with and one I personally recommend.

Contact:
599 Lexington Ave
New York, NY 10022
info@newyorkangels.com