I am not sure if you meant that in today's investing climate valuations are generally lower or that "we are able to squeeze the founders" to force them to give up more of their Company. The latter will assure you a disgruntled Founder or CEO. The real measurement of successful angel investing is not the valuation, but the ability to pick unique needed Companies serving a large enough market and nuture and possibly mentor (if needed) the CEO as a quasi partner to a successful liquidity event.

Loved the interview, guys. Sure wish such low valuations were the standard here...

Ed, just to be clear, I absolutely meant that valuations are lower as a function of the overall market, not that angels should be evil! In fact, if in the larger, global economy valuations of virtually every company are down by 30-50%, it would be positively bizarre if there was no corresponding reduction in valuation for startup companies.

At the same time, there is virtually universal agreement in both the angel and venture industries that a historical problem with angel investors has been that they have traditionally over-valued deals. (This is demonstrated by the number of follow-on 'down' rounds and flat rounds, or companies that were unable to get follow=on investments at ANY valuation). With the evaporation of follow-on rounds these days for even the best companies, the resulting 'flight to quality' for angel rounds has also caused everyone around the table to get very realistic about valuations in order to get deals done.

Since there is an inherent floor to valuations vs. investment (the last thing angels want is to end up owning the company with an un-incentivized...or even absent, CEO), these days negotiations, at least in my experience, are extremely co-operative, and turn much more on "how much does the company really need, and how can we all help them get it", rather than "how can we squeeze more from the company".

I was remiss in not introducing myself at the recent ACA Summit in Atlanta.

I am a relatively new angel investor so I have just now started to track your website after picking up your card at the ACA event. I can tell already that there is lots of good and topical information on your site.

Just recently I listened to a good part of your May 10 dialogue with David Rose of the New York Angels. Given my proximity to David's New York base, I was particularly interested in his comment that his group is focusing its current investment strategy on deals with a pre-money valuation of only $1,000,000 (or even less). Did I understand this correctly? Was David speaking to deals that have received only Friends & Family money? If this is the "new" valuation for a pre-revenue deal, does this mean David would value a deal with revenue in hand, or imminent, at say only $2,000,000?

While I understand the current climate has forced (or should force) downward pressure on valuations, I have not seen any deals either presented at (or negotiated down to) the level noted by David.

I would appreciate any clarifying thoughts you can pass along on this key issue.

I've been looking forward to this podcast since you announced he would be on the show because of this video I've watched of him on "10 things to know before you a pitch a VC". http://www.youtube.com/watch?v=lzDBrMisLm0

Since I'm a young first time entrepreneur who's never pitched a VC before, that video has helped direct my thought process of how to present. I've watched it around 10 times and each time, "my vision of me presenting" has been sharpened and critiqued. That video is David at his best I think.

This podcast was good but I think if you did another with him it would have a very good chance of being better. (Same with that recent Jim Armstrong interview)- I'm not saying this is a bad podcast of David, but because it's obvious that David and Jim Armstrong are at the status of "Great" when it comes to talking/giving opinions and advice, one could maybe expect a podcast from David that is considered one of your "best shows of all time" just like the first Jim Armstrong interview.

This shouldn't be compared to the 2nd Jim Armstrong podcast though, as I feel David sounds like he's not stressed out like Jim was in that 2nd podcast. The conclusion and truth of the matter is this, these high level investors are stressed because of the economy and the overall eco-system of Angel/VC investing that includes realistic valuations coming from entrepreneurs (AKA not wasting their time with outrageous claims that I think many VC's and Angels keep experiencing and sometimes feel they want to scream at the entrepreneur to be realistic). This is a very good link with the title "What Is An Acceptable Start-Up Term Sheet These Days?" from a WSJ blog post. http://blogs.wsj.com/venturecapital/2009/05/18/what-is-an-acceptable-term-sheet-these-days/?mod=rss_WSJBlog

I'm blown away by what some first time entrepreneurs are asking for... 250k salary on launch? ARE U JOKING? When I present to a VC (Intel Capital hopefully) with my vision of dominating the industry I've been apart of since it started (Professional Gaming or eSports), I'm going to give the friendliest investor terms that's ever been given which is 100% of the company until it reaches at least 10-100 times the initial investment along with a CEO salary of 40-50k. I feel the entrepreneur needs to share the risk with the investor and I want my company built on passion and not the blinding thought of getting rich after 7 years. This is what I'm going to be doing for the rest of my life and the valuation would be selling my vision short which is why I won't settle for anything less than giving 100% of the company and control of all the board seats to the investor. I used to be like every entrepreneur when it came to VCs but I realized something. My greatest strength is seeing and knowing talent, knowing the right people to hire, and I feel that if you have this, you should be able to pick an investor that brings a lot to the table in terms of mentoring and ensuring success, which means you should have confidence in giving them 100% of the company. It would be structured in a way that I would get back x% of the company every time I reached a mini-milestone. It keeps the entrepreneur hungry and not settling into these "life-style businesses" Frank has talked about before.

Hi Frank,

Hope you are well.

Great interview ... finally got to listen to it last night ...

David's frankness about what drives him why he invests is refreshing ... it's about the money.

After all, they are called Angel Investor Groups and not Angel Benefactor Groups.

Regards, Andrew

I want to thank both David Rose and Adam W. for their posted comments. And also thank David for his TED talks video.

Thanks David for clarifying your position on valuations. Listening to the podcast I had some similar thoughts as Ed.

Thanks Adam for posting the youtube link to David Rose explaining how to pitch, and thanks David for such a good explanation.

There are no shortage of pitching tips from both Angels and VCs, but the video from David is the first and only thing I've come across that explains so well what the substance of the content should be regarding introducing the entrepreneur.

Most of what is out their focuses on what the time/length should be, font size, layout, order, pitching/presentation skill, how to make it exciting, and other technical details.

Much of the advice says they look for experience, but David's video is the first advice I've come across that explains and prioritizes the characteristics, skillset, and experience of the entrepreneur and why. Such as when David says "experience" he explains they are looking for experience in creating an organization. David details 10 things the entrepreneur needs to convey about himself and why.

I don't see that the fast pitch follows David's advice on how to pitch. David's video has enabled me to see important things I've left out, due to following the advice from others, and has also explained to me what to select out of my resume that would be most relevant to an Angel or VC.

Thank you

One of the things I got out of David's video that is important to me is his explanation of "outside validation". We've heard others say that sells, and awards serve this purpose, but David is the first person I've heard say "some one has done it before".

For years I've been telling people that history proves what I am trying to do will happen. I've called it historical proof or historical evidence. Now I know from David that I need to call it "outside validation".

I'm not reinventing the business model. It's been done before to worldwide success. The same tried and true model just needs a new product so it can do it again; and I have that product.