ByJeff Draa, There’s certainly been a lot of uncertainty in the angel and venture capital arenas over the past decade, and understandably so. Add to that, the lure of crowdfunding—a nearly $3 billion business in 2012—and it’s led some angel groups to consider if there is a role for individual investors in crowdfunding their deals.
My advice to my colleagues: There could be, but stay on the sidelines for at least another year.
Why? For starters, it’s unclear how crowdfunding will affect company valuations. The Jumpstart Our Business Startups (JOBS) Act, requires startups to publically disclose a laundry list of items if they choose to raise capital by crowdfunding. These include entity formation, background checks, shareholder listings, financial statements, share valuation and a business plan. That might seem all well and good on the surface, but angels and VCs look at many other important metrics to determine the true potential worth of a newly formed venture. These include total available market, intellectual property, management team, and other key performance indicators that, from our perspective, are at least equally important in determining the fundability of a company.
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Jeff Draa is a senior executive with experience in technology equipment, enterprise-level software, Web-based e-commerce strategies, and venture funding. He also is president-elect of the San Diego chapter of the Tech Coast Angels, the largest angel investment organization in the United States, and a board member at Connect and the John G. Watson Foundation.