Wednesday, January 28, 2009

The Rule of Thirds -- Where will my Angel Funding Come From?

One of the most common questions I am asked by entrepreneurs is "where will my angel funding come from?". Brad Feld, a VC with the Foundry Group, recently proposed a Rule of Thirds that I think accurately captures the macro funding structure typical for an emerging growth company.

He states that:

A third of your financing will come from one investor, the second third will come from a set of people following that investor and the last third will be random.

The gist of this is that your initial investor is crucial. If you can find an angel that is whole-heartedly behind you, it should ultimately take care of the first two/thirds of your financing needs. The final third can come from anywhere. So the early stage entrepreneur should be fully focused on finding his initial angel. For some ideas on places an entrepreneur could look for angel support, see my early blog post on Choosing between VC and Angel Financing.

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Dividends and Preferences by Hank Heyming is licensed under a Creative Commons Attribution 3.0 United States License.