Tag Archives for Rahul Vohra

Let the good times roll again! Convertible debt for angels

Fred WilsonImage via Wikipedia

Fred Wilson write a great blog and not much needs to be added to it except that he is one person who got in early and will make a ton of money out of spotting the social network space.  Amazing to have the simple vision to use the tools and then be able to relate to entrepreneurs.  All so simple but he does hide away..  Ooops no he does not as one of his companies, Zemanta, has just popped his photo up!

In his post on convertible debt for angels in the first round, he puts the other case that he prefers agreeing a price and investing.  But he understates the great increase in value he brings to the new company when he says “I can negotiate a fair price with an entrepreneur in five minutes and have done that for a seed/angel round many times.”  We can all agree a price but most entrepreneurs do not bite off our hands!

Fred Wilson operates in a very different environment than Cambridge Enterprise, the arm of the University of Cambridge which “exists to help University of Cambridge inventors, innovators and entrepreneurs make their ideas and concepts more commercially successful for the benefit of society, UK economy, the inventors and the University“.   Their recent News and Events Bulletin states that “Sixteen Cambridge Enterprise portfolio companies are included in Business Weekly’s “Killer 50” list of the most disruptive technology companies in the East of England”.  Amazing companies that will change our lives in the years to come.

But in the mission statement of Cambridge Enterprise there is no mention of angel investors.  Are angels the best investors to start disruptive technology companies?  Do they have deep enough pockets?

Perhaps angels in Cambridge need to entice the entrepreneurs in Cambridge to follow the path of Fred Wilson as demonstrated so well by Rahul Vohra and Rapportive.  A very different business plan resource approach is required.  Perhaps Cambridge Enterprise should establish a new division to support the likes of Rahul Vohra – after all the experience, skills and opportunities given to Rahul Vohra served him well until he upped and offed to Silicon Valley.

The only worry to me as a low-grade angel is that the convertible debt stacks the cards too much in the favour of the entrepreneur and the second round investors.  The first round investors need a great big uplift to justify the huge risk we take.  We might not fund a company to revenue but we fund social network companies to their first major step of customer engagement with hundreds of thousands of users.

Will all this help The Entrepreneurs Graphic Novel when it is is published as an app?

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Will Rapportive change the Cambridge Cluster?

Image representing Rapportive as depicted in C...Image via CrunchBase

Great news that Rahul Vohra and his third venture, Rapportive, has gone viral with over 100,000 downloads.  Click here for the full story on Rapportive.  Briefly Rahul opted out of his PhD, helped start www.mo.jo, joined the start-ups at Redgate Software and toyed with a game based on a book and then came Rapportive.  Rahul left Cambridge to join Y Combinator and tap into the Silicon Valley scene.

Y Combinator invests an average of $17,000 in each start up – now over 280 companies – for around 10% of the equity.  Then Rapportive raised some $1 million from Silicon Valley angels.  I asked Rahul if he had given any of his early backers in Cambridge, UK, a chance to invest and he replied on Facebook “Rahul Vohra Philip: yup, there are investors from Cambridge. Neil Davidson, John Taysom, and one other who prefers to remain anonymous :)”.

Redgate appears to have a policy to go for growth and show that you can build a major technology company without offering equity to employees except a tightly controlled scheme.  If founder Neil Davidson sees Rahul grow fast, will this change his view?  Particularly if he sees them then grow new companies with their “winnings”.  As Redgate plays a major part in the Cambridge Cluster, including providing the chair of Cambridge Network, this could have a major impact on the Cambridge Cluster.

Silicon Valley keeps ringing the changes.  First companies were sold that made a profit, then the social network companies were sold which made no profits but had millions of users and now people are buying teams of geeks.  An example is Motorola buying 280 North for the geek team.  Up 280 is another success from the Y Combinator stable.  Up 280 raised less than Rapportive with a reported $250,000 in a 2008 angel round.  Interesting to try to guess at the final equity ownership.  The Equity Fingerprint was: two founders, then Y Combinator, an angel round and hopefully options for the team.

Guesstimates:

Round 1: Start -up:

Two founders – 50% each;

Round 2: Y Combinator arrives:

Two founders – 45% each, Y Combinator 10%

Rounds 3: Angels invest $250,000 and say 10% option pool:

Round 4: Two founders –  22.5% each, Y Combinator 5%, angels 40% and 10% option pool.

Guess that Y Combinator and angels would be paid out on completion with the founders and option pool vesting over a couple of years.  But a great deal for the geeks.  Congratulations.  Not as good as Xensource in Cambridge, UK, but not bad!

The world keeps spinning; will Rapportive make the Cambridge Cluster spin faster?  Will Rahul return to Cambridge with his winnings and tell us all about his business plan resource, become an angel and a serial entrepreneur?  How long will we have to wait?  The clock is ticking……..

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