Angel Investor Internet Start-Ups
Angel Investors Losing Power Over Internet Start-Ups
Angel investors are facing an unnerving dilemma: internet start-ups don’t need their money. Internet start-ups require less and less capital to expand and operate, leaving venture capital firms and venture capitalists with less leverage over the small businesses than they once had.
Now, angel investors and venture capitalists like Yuri Milner are even investing capital in companies “sight-unseen”. This illustrates the extent to which the pendulum has swung in favor of digital entrepreneurs. As starting an internet company becomes less expensive with costs of servers and internet bandwidth falling in recent years, it makes sense that internet companies are less reliant on outside investors to launch.
The cost of everything from servers to software to Internet bandwidth keeps falling. And businesses can grow very quickly these days if an idea catches on. The result is that it’s cheap to give birth to online companies and they can command high valuations while still young. So there’s a push by investors to get into start-ups earlier in their life cycle, but at higher valuations.
That backdrop helps explain Milner’s decision. He and co-investor SV Angel are offering $150,000 in convertible debt to all 43 companies in a current batch of fledgling firms backed by seed fund Y Combinator. The terms are extremely generous. If a company completes a follow-on round of financing, the debt will convert to equity at the same valuation. Normally, convertible debt from angel investors includes a cap on a firm’s value and offers the holders a discount on equity pricing. Both work to increase the value of equity received by debt holders in a conversion. Source
Tags: angel investors, angel investor, angel investor valuations, angel investors Yuri Milner, Angel Investors Dot-Com Start-ups, Angel Investors Internet Start Ups, Digital Entrepreneurs



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The Angel Investors Database is being produced and will be available in the near future for purchase. The Angel Investors Database includes top angel investors, bios, and contact details for interested entrepreneurs. We will also include a feature in which angel investor groups can contact entrepreneurs and young businesses hoping to expand. The Angel Investor Database will be a great resource for anyone interested in angel investors. If you are interested in learning more about the Angel Investor Database please contact me.