Bullish: Fund Your Business Or Get Started Investing In Startups, Part I

Jennifer Dziura writes Bullish, a career column, for The Grindstone on Fridays and Bullish Life, a life coaching column, for our sister site TheGloss on Tuesdays.

Today’s column is for two camps of ladies – those of you wondering how to fund a new business, and those of you whose careers are doing well enough that you’ve got some cash to invest, preferably in an exciting and satisfying way.

I’ve done a ton of research, so today’s part I will cover angel investing, microinvesting, and what it means to be a lady in investing, and next week’s will cover crowdfunding, peer-to-peer lending, microlending, and a few creative alternatives.

First, in case you are already in the 1%, in which case I would admire you for still being the kind of person who reads Bullish….

Angel Investing

If you have over a million dollars or make $200,000 a year for two years with a reasonable expectation of a similar income in the future, you are considered an accredited investor. (I’m assuming this isn’t most of us, of course.)

Accredited investors can become angels, those who invest in a startup (in exchange for equity) before venture capitalists get there. An angel investor typically invests at least $25,000 per deal.

Raising money from angels can be difficult, and is not an option for many slow-growing small businesses. Because of the high risk, angel investors are looking for investments that will return at least ten times the original investment within 5 years (some angels aim for more like a 20-30x return), which requires a defined exit strategy, such as an IPO or acquisition.

If you are looking to found just such a venture, a good place to start is angel investing groups, which tend to have defined processes for entrepreneurs applying for funding. In New York, New York Angels, the New York Investment Network, and Golden Seeds, which focuses on women-founded and women-led startups.

As I’ve often written (here and here, for instance), the first time you start a company, there’s no need to make it into a bigger deal than it needs to be, unless you are determined to go into pharmaceuticals or selling bombers to the government. And if you want to invest, but, you know … less … there are many other options.

Microinvesting

If you are not an accredited investor but are also not an old lady on a pension who is easily bilked out of her Social Security checks by attractive male con artists in their forties, you may be what is considered a sophisticated investor.

If you’re interested in investing in startups but aren’t an accredited investor and can’t swing $25K per investment, Microventures is kind of the only game in town. (GrowVC appears to be doing something similar, but is not a broker-dealer and instead is exempt from US law by operating outside the country.)

The minimums for various deals range from $1,000 to $5,000.

After a bit of research, I signed up for the site, gave all kinds of financial and employment details, and was approved about two weeks later.

Now, this was actually rather exciting, because I gained access to secret deals in which I can invest, but I cannot tell you about!

I spoke to founder and CEO of Microventures Bill Clark who explained a lot of really basic stuff to me (“solicitation” for investment is bad, so you can’t go Tweeting about deals) and answered some questions.