Can anyone give me some advice on angel investing? I have an opportunity to invest in a startup which the founders claim will go IPO in a year or two. They project almost immediate profitability in the first years of operation even though it's a 'net venture and will be generating earnings of around $4-5 bucks a share in five years (quite a bit better than Amazon and Ebay, don't you think?). I like the product; it seems to work and they are in negotiations with a couple of big name VCs and web sites to partner with. I can't seem to shake, however, the feeling that these business plans are all pie-in-the-sky guesses at their own valuation. Are there any laws governing the truthfulness of business plans? Is there a general understanding among VCs that business plans aren't worth the paper they are printed on or can they be generally relied upon to be accurate? I went to college with one of the founders, so it's not that I think that they will rob me blind. (In fact, all of the employees, some of whom are veteran silicon valley types, are working for nothing but equity, so they're in deep too). But the way they make it sound, this is a riskless way to become a millionaire, which can't be right because they would have everyone throwing money at them (they only are a little better than half-way toward raising $1 million from angels like me). What is the failure rate of start-ups that are pre-VC? How many companies fail to get from VC to IPO? How many IPOs actually bomb? If anyone has any opinions or experiences, I would appreciate them.
TIA,
Doughboy. |
