With its unique plan and vision to improve the student loan system, and now with new funding amounting to $3.5 million, CommonBond is definitely set for a stellar 2013. They have successfully put up a $2.5 million loan pool from alumni investors, and gained additional $1 million worth of equity round from an angel investor.
The company’s CEO, David Klein, shares more about their recent funding achievements in this e-interview with Lead411:
Not so long ago, startups were happy to get funding from anywhere, regardless of the VC’s interest or connections in the industry. These days, startups are more picky about who they get capital from.
1. You’re Buying into Experience, Not Just Money
Sure, you need funds to operate and grow, but more than that, startups need connections and mentors. If you’re looking at venture capitalists, choose ones that have helped others in your field, as they’ll be more likely to be able to make the introductions you need to get your foot in the door. It’s better to get funding and knowledge than to spend your funds on learning what the right VC could teach you.
2. You Want a Cheerleader with Deep Pockets
As a startup founder, you want someone who will be honest with you about your ideas and strategies, but overall, you want someone who’s as passionate about your business as you are. Don’t find a VC who just wants his hand in your industry as an idle pasttime; find someone who wants to take apart your business to see how it works, and who can contribute positively to its growth.
So your startup is thriving and bursting at the seams. Congrats. You’ve decided you’re ready to seek funding. While this article certainly won’t tell you everything you need to know about funding, it’ll teach you the differences between angel investors and venture capitalists. It’s up to you to decide which is right for you.
Angel Investors 101
Angel investors are private individuals looking for a strong, high growth investment. They want a better return than they’d get in a normal investment, so expect them to take 5-25% stake in your company. Funding varies, but tends to be on the smaller side.
Pros: Angels are often entrepreneurs interested in helping you get somewhere with your business. They can be great mentors as they’ve got the experience you need to succeed. If you want some advice, they’re ideal for that. And angel investors usually have great contacts, which can also be a boon for your startup. If your startup is still in the development phase (no product yet), angels may be more attracted to your business than VCs. Business deals tend to be more negotiable with angel investors.