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0 points7Figures2Commas12y ago0 comments

> As for John Q. Public, that's about to get WAY more interesting, since general solicitation is now a thing.

It may not be as entertaining as the .com bubble, but there's potential here.

I mean, just look at http://www.wefunder.com/terrafugia. If that's too over the top, even http://www.wefunder.com/casetext is mind-boggling. 2% interest, an $8 million valuation cap and no discount on a $1.3 million convertible note for a startup that says it can't start acquiring paid customers until its "enterprise software is ready to the security standards that firms demand -- likely in six months"?

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5 comments · 2 top-level

nostrademons12y ago· 2 in thread

FWIW, DropBox took a helluva lot longer than 6 months to get to the "security standards enterprise firms expect" (they still had major security incidents several years after public launch), and look where they got to.

Casetext seems eminently reasonable. They have founders with solid domain knowledge, are solving a very painful problem for an industry with deep-pocketed players, seem to have an easy-to-use product, and have demonstrated measurable traction. I'm tempted to invest once I do a bit more due diligence on both WeFunder and CaseText.

7Figures2CommasOP12y ago

1. The median valuation for pre-revenue startups that raised angel investment in 2012 was south of $3 million, so an $8 million cap is quite generous based on where Casetext is at in terms of meaningful traction.

2. Historically, it has not been uncommon to see convertible note interest rates as high as 10%. Not surprisingly, rates have come down in recent years (I believe the median rate was 5.5% a couple of years ago), but 2% is really low.

Based on my knowledge of the legal market, I don't necessarily agree that Casetext presents a compelling investment, but even if you do, the reality is that successful angel investments are based on two things: a) investing in good startups and b) investing at the right price and on the right terms.

Finding the former without being able to do the latter is sort of like picking next week's winning lottery numbers this week. You'll have a great story to tell your friends but no money to show for your troubles.

nostrademons12y ago

I'd argue that successful angel investment is based almost entirely on a.) and negligibly on b.). These are not the public markets, where a startup has been growing for 5-10 years and largely tapped out its markets. These are very speculative markets where the vast majority of startups end up earning nothing and the one big hit can represent a 1000x return on your investment. Valuation at that stage is the difference between ponying up $1000 and ponying up $2000 for a seat at the table.

When you're investing at $100M rather than $8M the equation changes substantially. That's where we were during the last dot-com boom; we're pretty far from there, unless you're a Facebook investor.

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robg12y ago· 1 in thread

RE: Terrafugia

$30 million in pre-orders

2 production-ready prototypes built (i.e., actual, flyable planes that readily turn into road-worthy cars and back again)

I wouldn't call that over the top. I'd call that awesome.

7Figures2CommasOP12y ago

Did you actually read the history of the company and the Investor Q&A?

j / k navigate · click thread line to collapse

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5 comments · 2 top-level

nostrademons12y ago· 2 in thread

7Figures2CommasOP12y ago

nostrademons12y ago

When you're investing at $100M rather than $8M the equation changes substantially. That's where we were during the last dot-com boom; we're pretty far from there, unless you're a Facebook investor.

1 more reply

robg12y ago· 1 in thread

RE: Terrafugia

$30 million in pre-orders

2 production-ready prototypes built (i.e., actual, flyable planes that readily turn into road-worthy cars and back again)

I wouldn't call that over the top. I'd call that awesome.

7Figures2CommasOP12y ago

Did you actually read the history of the company and the Investor Q&A?

j / k navigate · click thread line to collapse