Startup Investors?
Can a startup have too many investors?
A trend has recently developed in which quite a few startups are coming to the fore with 10-15 backers each throwing in around $100k-$250k.
Taking Milk Inc. as an example, Kevin Rose’s latest startup which has been covered before on here, on the left you can see all 25 Angel investors who collectively put in $1.5m or an average of $60k each.
From the perspective of the start-up it means that you have 15 people that have it in their best interest to promote and spread the word about the new product. Also specifically when talking about web startups and world of iPhone apps (in the case of Milk), a small sphere of very influential people could be the difference between hero and zero with all of them promoting it through social networks. Secondly, perhaps more importantly you have an important sphere of successful entrepreneurs who are there to give advice and feedback on the product (potentially a double edged sword).
It should also be noted that there are four VCs in Milk’s Angel Round (quite high by typical standards) – one VC being the most common scenario. Having only one puts heavy reliance upon that VC when it comes to the Series A financing round, if a VC who was an early seeder doesn’t participate in the next round it will raise a lot of questions about the startup and other investors may be reluctant to enter (even if it is just a cash flow problem on the VCs part).
From the investors perspective risk is decreased; whereas before they may have sunk $250k – $500k in one startup by investing smaller sums and diversifying their risk they get to be involved with a greater array of cool products.
