Have you ever faced fear straight into the eyes and answered yourself or someone else’s hard questions? I think I’ve done that today.
Let’s start with David Rose. He is a prominent angel investor and the founder and CEO of Gust. He has personally invested in over 70 early stage companies and Gust is a global platform for the sourcing and management of early-stage investments. The platform is endorsed by the world’s leading business angel and venture capital associations, and powers over 1,000 investment organizations in 80+ countries. More than 200,000 startups have already used the platform to connect and collaborate with over 45,000 investors. In his blog post “The reality of returns on angel investment“, David Rose wrote that “A majority of all new, angel-backed companies fail completely, the odds are that you will LOSE ALL YOUR MONEY, not just “not make a profit”.” WhoAPI is profitable, and has Wikipedia, King.com, Sendgrid, Tellapart, and hundreds of users around the world. Just yesterday former CTO of Obama for America started paying $199 per month to use WhoAPI. To quote his Tweet – “He is using the shit out of WhoAPI”.
Another example that David Rose shared is that: “average holding period for an angel investment in the United States is NINE YEARS, after only five years it is quite likely that the value of the syndicate’s portfolio will still be underwater”. WhoAPI had its first angel investment and incorporation in Croatia in December 2011 and second angel investment and incorporation in US in December 2012. Since majority investors and me are Croatian, I still consider WhoAPI a Croatian startup, not a US startup. Also, it’s not even three years when we first started working.
The return for investors is not in question at all. So far the only thing that matters is that the company is providing value to the marketplace, and it’s growing in customer base, usage and revenue. Key metrics in my opinion. The return will come for investors if the company is sold (most likely to happen in today’s economy), goes IPO, or a VC fund enters with a huge investment, which is all very rare, and won’t happen soon. That’s the deal that the majority angel investors today do. I explain this very nicely in my new ebook “26 Fundraising Questions for Startups“.
I can’t really obsess about investor returns at this point, I am not Apple Inc. or Google Inc. I have to obsess about: online marketing, sales, infrastructure cost, bookkeeping, taxes, hiring, firing, R&D, customer support, the list goes on and on. It goes on when it’s 6 AM, and I have clients in India, it goes on when it’s 1 PM and I have users in Europe, it goes on when it’s 11 PM when I have users in the US.
Just because I wrote a book about fundraising it doesn’t mean I think it’s the most important thing. If you buy the book, you will see at the very beginning I explain that fundraising is only the first step.