Investors — Sometimes less is more

There was an article in the New York Times a couple of weeks ago, “For Start-Ups, How Many Angels Is Too Many?” that highlights the recent surge in angel investors. The article explores the tradeoffs of having a number of individuals investing smaller amounts versus a small number of individuals or institutions investing larger amounts. The article also prominently featured Nancy Hua, the Founder and CEO of Apptimize, a Costanoa portfolio company. Nancy also wrote in detail about her experience seed fundraising on her blog.

Different companies have different needs, and there is no one right way to finance a startup. However, I thought it would also be interesting to also have Nancy discuss why — and how — she chose an institutional investor for her Series A. So I asked her.

Her response:

“Why I chose an institutional partner:

· Network: You Costanoa has theve experience with business-to-business SaaS, including working with an A/B testing company in the past. Your Costanoa’s network helps with hiring, advice, and sales.

· Future Funding: Angels can’t keep giving me increasingly large sums of funding, whereas venture capitalists can because they have larger, dedicated funds.

· Data and Advice: Venture investors see more deals and are more involved. They VCs have more information on what’s going on across different spaces and how companies tend to change and what might come up. Angels are there if you ping them, but otherwise they have their own lives to live, whereas VC’s are professional investors whose careers are on the line if their investments suck. You Costanoa can tell me how our numbers look compared to other companies at our stage, what’s important to raise a B, etc.

The criteria I had when I was fundraising (Series A):

· Someone who’s not on a ton of boards. I want attention from my board members so I don’t want someone on dozens of boards. and I want to be important to them.

· Expertise in B2B enterprise SaaS companies because that’s what we’re doing at Apptimize.

· Honesty & Trust: I want to work with people I like.

· No competitive investments.”

There is a lot of money available for startups right now, and that’s a great thing. There are many types of investors, and each one plays a different and valuable role. I always like hearing how Nancy thinks about things because she’s very analytical and painfully intelligent. I’m also proud that she seems to have found a lot of what she was looking for in Costanoa. In many ways, she’s describing the firm that we aspire to build, and that we think has its own valuable role to play.