Yesterday I attended the DreamIt Ventures funding day in Philadelphia.  Several things were refreshing about it.  First, there was a wide diversity of teams from kids still in college to a baby boomer.  Second, there was a wide spectrum of businesess from the playful phrazit to the down-to-business Tapinko.  Third, almost all of the companies were looking for small sums of money to get them to the next stage (and in at least one case no immediate funding at all).  These were sums that could and should be provided by angel investors and I was heartened to see that there were quite a few angel investors in the audience.

I believe that a crucial mistake for many startups is to try to raise VC funding when in fact they don’t need it or before it is clear that they need it.  There are two dangers in pursuing VC money when it’s not a fit.  The first danger is that you spend a lot of time on a process that ultimately comes to nothing – time that should have been spent on the business.  The second danger is even bigger.  That you do in fact raise VC money for something that could have made a great hobby, a great boot-strapped business or a wonderful angel investment.  In those cases you can easily find yourself in a constant set of conflicts over how to run the business (as described in this rant).